Prior empirical studies have sought to establish whether financial leverage boosts or stifles a firm’s profitability. By stark contrast, we are unaware of an empirical study that has attempted to investigate the leverage–profitability nexus in the microfinance context. Thus, we study the effect of financial leverage on the profitability of microfinance institutions, domiciled in sub-Saharan Africa, by exploiting a Microfinance Information eXchange (MIX) data set consisting of 465 microfinance institutions, drawn from 37 countries, over the period 1996 to 2012. By employing the generalized method of moments (GMM) estimation technique, we found that financial leverage is negatively associated with the profitability of microfinance institutions in sub-Saharan Africa. The plausible explanation for our findings is the persistently high costs of debt finance among many African countries. More importantly, policy implications are drawn from these findings.

Abdallah, W., Goergen, M. and O’Sullivan, N. (2015) ‘Endogeneity: how failure to correct for it can cause wrong inferences and some remedies’, British Journal of Management 26(4): 791–804 <https://doi.org/10.1111/1467-8551.12113>.

Abor, J. (2005) ‘The effect of capital structure on profitability: an empirical analysis of listed firms in Ghana’, The Journal of Risk Finance 6(5): 438–45 <https://doi.org/10.1108/15265940510633505>.

Abor, J. (2007) ‘Debt policy and performance of SMEs: evidence from Ghanaian and South African firms’, The Journal of Risk Finance 8(4): 364–79 <https://doi.org/10.1108/15265940710777315>.

Allen, F., Carletti, E. and Marquez, R. (2015) ‘Deposits and bank capital structure’, Journal of Financial Economics 118(3): 601–19 <https://doi.org/10.1016/j.jfineco.2014.11.003>.

Altman, E.I. (1984) ‘A further empirical investigation of the bankruptcy cost question’, The Journal of Finance 39(4): 1067–89 <https://doi.org/10.1111/j.1540-6261.1984.tb03893.x>.

Anderson, R.W. and Carverhill, A. (2012) ‘Corporate liquidity and capital structure’, Review of Financial Studies 25(3): 797–837 <https://doi.org/10.1093/rfs/hhr103>.

Arellano, M. and Bover, O. (1995) ‘Another look at the instrumental variable estimation of error-components models’, Journal of Econometrics 68(1): 29–51 <https://doi.org/10.1016/0304-4076(94)01642-D>.

Baker, H.K. and Martin, G.S. (2011) Capital Structure and Corporate Financing Decisions: Theory, Evidence, and Practice, Vol. 15, Hoboken, NJ: John Wiley & Sons.

Beck, T. and Hesse, H. (2009) ‘Why are interest spreads so high in Uganda?’ Journal of Development Economics 88(2): 192–204 <https://doi.org/10.1016/j.jdeveco.2008.07.004>.

Blundell, R. and Bond, S. (1998) ‘Initial conditions and moment restrictions in dynamic panel data models’, Journal of Econometrics 87(1): 115–43 <https://doi.org/10.1016/S0304-4076(98)00009-8>.

Blundell, R. and Bond, S. (2000) ‘GMM estimation with persistent panel data: an application to production functions’, Econometric Reviews 19(3): 321–40 <https://doi.org/10.1080/07474930008800475>.

Bogan, V. (2012) ‘Capital structure and sustainability: an empirical study of microfinance institutions’, Review of Economics and Statistics 94(4): 1045–58 <https://doi.org/10.1162/REST_a_00223>.

Booth, L., Aivazian, V., Demirgüç-Kunt, A. and Maksimovic, V. (2001) ‘Capital structures in developing countries’, The Journal of Finance 56(1): 87–130 <https://doi.org/10.1111/0022-1082.00320>.

Campello, M. (2006) ‘Debt financing: does it boost or hurt firm performance in product markets?’ Journal of Financial Economics 82(1): 135–72 <https://doi.org/10.1016/j.jfineco.2005.04.001>.

Chikalipah, S. (2017a) ‘Financial sustainability of microfinance institutions in sub-Saharan Africa: evidence from GMM estimates’, Enterprise Development and Microfinance 28(3): 182–99 <https://doi.org/10.3362/1755-1986.16-00023>.

Chikalipah, S. (2017b) ‘Institutional environment and microfinance performance in sub-Saharan Africa’, African Development Review 29(1): 16–27 <https://doi.org/10.1111/1467-8268.12235>.

Chikalipah, S. (2017c) ‘What determines financial inclusion in sub-Saharan Africa?’ African Journal of Economic and Management Studies 8(1): 8–18 <https://doi.org/10.1108/AJEMS-01-2016-0007>.

Chikalipah, S. (2017d) ‘The nexus between microcredit nominal interest rates and inflation in sub-Saharan Africa: evidence from panel vector autoregression analysis’, Enterprise Development and Microfinance 28(4): 355–70 <https://doi.org/10.3362/1755-1986.00038>.

Cotler, P. and Almazan, D. (2013) ‘The lending interest rates in the microfinance sector: searching for its determinants’, Journal of Centrum Cathedra 6(1): 69–81 <https://ssrn.com/abstract=2236430>.

Cull, R., Demirgüç-Kunt, A. and Morduch, J. (2007) ‘Financial performance and outreach: a global analysis of leading microbanks’, The Economic Journal 117(517): 107–33 <https://doi.org/10.1111/j.1468-0297.2007.02017.x>.

Cull, R., Demirgüç-Kunt, A. and Morduch, J. (2011) ‘Does regulatory supervision curtail microfinance profitability and outreach?’ World Development 39(6): 949–65 <https://doi.org/10.1016/j.worlddev.2009.10.016>

Demirgüç-Kunt, A., Klapper, L. and van Oudheusden, P. (2015) ‘Financial inclusion in Africa’, in The Oxford Handbook of Africa and Economics: Volume 2: Policies and Practices, p. 388, Oxford: Oxford University Press.

Dietrich, A. and Wanzenried, G. (2011) ‘Determinants of bank profitability before and during the crisis: evidence from Switzerland’, Journal of International Financial Markets, Institutions and Money 21(3): 307–27 <https://doi.org/10.1016/j.intfin.2010.11.002>.

Doko Tchatoka, F. and Dufour, J. (2014) ‘Identification-robust inference for endogeneity parameters in linear structural models’, The Econometrics Journal 17(1): 165–87 <https://doi.org/10.1111/ectj.12021>.

Fosu, S. (2013) ‘Capital structure, product market competition and firm performance: evidence from South Africa’, The Quarterly Review of Economics and Finance 53(2): 140–51 <https://doi.org/10.1016/j.qref.2013.02.004>.

Frank, M.Z. and Goyal, V.K. (2003) ‘Testing the pecking order theory of capital structure’, Journal of Financial Economics 67(2): 217–48 <https://doi.org/10.1016/S0304-405X(02)00252-0>.

Hackbarth, D. and Mauer, D.C. (2011) ‘Optimal priority structure, capital structure, and investment’, The Review of Financial Studies 25(3): 747–96 <https://doi.org/10.1093/rfs/hhr129>.

Harris, M. and Raviv, A. (1991) ‘The theory of capital structure’, The Journal of Finance 46(1): 297–355 <https://doi.org/10.1111/j.1540-6261.1991.tb03753.x>.

Hartarska, V. and Nadolnyak, D. (2007) ‘Do regulated microfinance institutions achieve better sustainability and outreach? Cross-country evidence’, Applied Economics 39: 1207–22 <https://doi.org/10.1080/00036840500461840>.

Hsiao, C. (2014) Analysis of Panel Data, Vol. 54, Cambridge: Cambridge University Press.

Jensen, M.C. (1986) ‘Agency costs of free cash flow, corporate finance, and takeovers’, The American Economic Review 76(2): 323–9 <https://www.jstor.org/stable/1818789>.

Kar, A.K. (2012) ‘Does capital and financing structure have any relevance to the performance of microfinance institutions?’ International Review of Applied Economics 26(3): 329–48 <https://doi.org/10.1080/02692171.2011.580267>.

Kyereboah-Coleman, A. (2007) ‘The impact of capital structure on the performance of microfinance institutions’, The Journal of Risk Finance 8(1): 56–71 <https://doi.org/10.1108/15265940710721082>.

Kyereboah-Coleman, A. and Osei, K.A. (2008) ‘Outreach and profitability of microfinance institutions: the role of governance’, Journal of Economic Studies 35(3): 236–48 <https://doi.org/10.1108/01443580810887797>.

Madan, K. (2007) ‘An analysis of the debt-equity structure of leading hotel chains in India’, International Journal of Contemporary Hospitality Management 19(5): 397–414 <https://doi.org/10.1108/09596110710757561>.

Mersland, R. and Strøm, R.O. (2009) ‘Performance and governance in microfinance institutions’, Journal of Banking & Finance 33: 662–9 <https://doi.org/10.1016/j.jbankfin.2008.11.009>.

Mersland, R. and Strøm, R.O. (2010) ‘Microfinance mission drift?’ World Development 38(1): 28–36 <https://doi.org/10.1016/j.worlddev.2009.05.006>.

Modigliani, F. and Miller, M.H. (1958) ‘The cost of capital, corporation finance and the theory of investment’, The American Economic Review 48(3): 261–97 <https://www.jstor.org/stable/1809766>.

Modigliani, F. and Miller, M.H. (1963) ‘Corporate income taxes and the cost of capital: a correction’, The American Economic Review 53(3): 433–43 <https://www.jstor.org/stable/1809167>.

Myers, S.C. (1977) ‘Determinants of corporate borrowing’, Journal of Financial Economics 5(2): 147–75 <https://doi.org/10.1016/0304-405X(77)90015-0.>.

Myers, S.C. (1984) ‘The capital structure puzzle’, The Journal of Finance 39(3): 574–92 <https://doi.org/10.1111/j.1540-6261.1984.tb03646.x>.

Myers, S.C. (2001) ‘Capital structure’, The Journal of Economic Perspectives 15(2): 81–102.

Onaolapo, A.A. and Kajola, S.O. (2010) ‘Capital structure and firm performance: evidence from Nigeria’, European Journal of Economics, Finance and Administrative Sciences 25: 70–82.

Pouchous, A. (2012) The Regulation and Supervision of Microfinance: Main Issues and Progress [pdf], International Institute for Sustainable Development <http://www.iisd.org/sites/default/files/publications/regulation_supervision_microfinance.pdf> [accessed 15 October 2017].

Roodman, D. (2009) ‘A note on the theme of too many instruments’, Oxford Bulletin of Economics and Statistics 71(1): 135–58 <https://doi.org/10.1111/j.1468-0084.2008.00542.x>.

Ross, S. (1973) ‘The economic theory of agency: the principal’s problem’, The American Economic Review 63(2): 134–9 <https://www.jstor.org/stable/1817064>.

Simar, L., Vanhems, A. and Van Keilegom, I. (2015) ‘Unobserved heterogeneity and endogeneity in nonparametric frontier estimation’, Journal of Econometrics 190(2): 360–73 <https://doi.org/10.1016/j.jeconom.2015.06.015>.

Tchakoute Tchuigoua, H. (2014) ‘Institutional framework and capital structure of microfinance institutions’, Journal of Business Research 67(10): 2185–97 <https://doi.org/10.1016/j.jbusres.2014.01.008>.

Tsuruta, D. (2017) ‘Variance of firm performance and leverage of small businesses’, Journal of Small Business Management 55(3): 404–29 <https://doi.org/10.1111/jsbm.12243>.

Wagner, C.H. (1982) ‘Simpson’s paradox in real life’, The American Statistician 36(1): 46–8.

Welch, I. (2011) ‘Two common problems in capital structure research: the financial-debt-to-asset ratio and issuing activity versus leverage changes’, International Review of Finance 11(1): 1–17 <https://doi.org/10.1111/j.1468-2443.2010.01125.x>.

Windmeijer, F. (2005) ‘A finite sample correction for the variance of linear efficient two-step GMM estimators’, Journal of Econometrics 126(1): 25–51 <https://doi.org/10.1016/j.jeconom.2004.02.005>.

Wintoki, M.B., Linck, J.S., and Netter, J.M. (2012) ‘Endogeneity and the dynamics of internal corporate governance’, Journal of Financial Economics 105(3): 581–606 <https://doi.org/10.1016/j.jfineco.2012.03.005>.

Wooldridge, J.M. (2010) Econometric Analysis of Cross Section and Panel Data, Cambridge, MA: MIT Press.

Yinusa, O.G., Somoye, R.O.C., Alimi, O.Y. and Ilo, B.M. (2016) ‘Firm performance and capital structure choice of firms: evidence from Nigeria’, Journal of Knowledge Globalization 9(1): 1–16.

Abdallah, W., Goergen, M. and O’Sullivan, N. (2015) ‘Endogeneity: how failure to correct for it can cause wrong inferences and some remedies’, British Journal of Management 26(4): 791–804 <https://doi.org/10.1111/1467-8551.12113>.

Abor, J. (2005) ‘The effect of capital structure on profitability: an empirical analysis of listed firms in Ghana’, The Journal of Risk Finance 6(5): 438–45 <https://doi.org/10.1108/15265940510633505>.

Abor, J. (2007) ‘Debt policy and performance of SMEs: evidence from Ghanaian and South African firms’, The Journal of Risk Finance 8(4): 364–79 <https://doi.org/10.1108/15265940710777315>.

Allen, F., Carletti, E. and Marquez, R. (2015) ‘Deposits and bank capital structure’, Journal of Financial Economics 118(3): 601–19 <https://doi.org/10.1016/j.jfineco.2014.11.003>.

Altman, E.I. (1984) ‘A further empirical investigation of the bankruptcy cost question’, The Journal of Finance 39(4): 1067–89 <https://doi.org/10.1111/j.1540-6261.1984.tb03893.x>.

Anderson, R.W. and Carverhill, A. (2012) ‘Corporate liquidity and capital structure’, Review of Financial Studies 25(3): 797–837 <https://doi.org/10.1093/rfs/hhr103>.

Arellano, M. and Bover, O. (1995) ‘Another look at the instrumental variable estimation of error-components models’, Journal of Econometrics 68(1): 29–51 <https://doi.org/10.1016/0304-4076(94)01642-D>.

Baker, H.K. and Martin, G.S. (2011) Capital Structure and Corporate Financing Decisions: Theory, Evidence, and Practice, Vol. 15, Hoboken, NJ: John Wiley & Sons.

Beck, T. and Hesse, H. (2009) ‘Why are interest spreads so high in Uganda?’ Journal of Development Economics 88(2): 192–204 <https://doi.org/10.1016/j.jdeveco.2008.07.004>.

Blundell, R. and Bond, S. (1998) ‘Initial conditions and moment restrictions in dynamic panel data models’, Journal of Econometrics 87(1): 115–43 <https://doi.org/10.1016/S0304-4076(98)00009-8>.

Blundell, R. and Bond, S. (2000) ‘GMM estimation with persistent panel data: an application to production functions’, Econometric Reviews 19(3): 321–40 <https://doi.org/10.1080/07474930008800475>.

Bogan, V. (2012) ‘Capital structure and sustainability: an empirical study of microfinance institutions’, Review of Economics and Statistics 94(4): 1045–58 <https://doi.org/10.1162/REST_a_00223>.

Booth, L., Aivazian, V., Demirgüç-Kunt, A. and Maksimovic, V. (2001) ‘Capital structures in developing countries’, The Journal of Finance 56(1): 87–130 <https://doi.org/10.1111/0022-1082.00320>.

Campello, M. (2006) ‘Debt financing: does it boost or hurt firm performance in product markets?’ Journal of Financial Economics 82(1): 135–72 <https://doi.org/10.1016/j.jfineco.2005.04.001>.

Chikalipah, S. (2017a) ‘Financial sustainability of microfinance institutions in sub-Saharan Africa: evidence from GMM estimates’, Enterprise Development and Microfinance 28(3): 182–99 <https://doi.org/10.3362/1755-1986.16-00023>.

Chikalipah, S. (2017b) ‘Institutional environment and microfinance performance in sub-Saharan Africa’, African Development Review 29(1): 16–27 <https://doi.org/10.1111/1467-8268.12235>.

Chikalipah, S. (2017c) ‘What determines financial inclusion in sub-Saharan Africa?’ African Journal of Economic and Management Studies 8(1): 8–18 <https://doi.org/10.1108/AJEMS-01-2016-0007>.

Chikalipah, S. (2017d) ‘The nexus between microcredit nominal interest rates and inflation in sub-Saharan Africa: evidence from panel vector autoregression analysis’, Enterprise Development and Microfinance 28(4): 355–70 <https://doi.org/10.3362/1755-1986.00038>.

Cotler, P. and Almazan, D. (2013) ‘The lending interest rates in the microfinance sector: searching for its determinants’, Journal of Centrum Cathedra 6(1): 69–81 <https://ssrn.com/abstract=2236430>.

Cull, R., Demirgüç-Kunt, A. and Morduch, J. (2007) ‘Financial performance and outreach: a global analysis of leading microbanks’, The Economic Journal 117(517): 107–33 <https://doi.org/10.1111/j.1468-0297.2007.02017.x>.

Cull, R., Demirgüç-Kunt, A. and Morduch, J. (2011) ‘Does regulatory supervision curtail microfinance profitability and outreach?’ World Development 39(6): 949–65 <https://doi.org/10.1016/j.worlddev.2009.10.016>

Demirgüç-Kunt, A., Klapper, L. and van Oudheusden, P. (2015) ‘Financial inclusion in Africa’, in The Oxford Handbook of Africa and Economics: Volume 2: Policies and Practices, p. 388, Oxford: Oxford University Press.

Dietrich, A. and Wanzenried, G. (2011) ‘Determinants of bank profitability before and during the crisis: evidence from Switzerland’, Journal of International Financial Markets, Institutions and Money 21(3): 307–27 <https://doi.org/10.1016/j.intfin.2010.11.002>.

Doko Tchatoka, F. and Dufour, J. (2014) ‘Identification-robust inference for endogeneity parameters in linear structural models’, The Econometrics Journal 17(1): 165–87 <https://doi.org/10.1111/ectj.12021>.

Fosu, S. (2013) ‘Capital structure, product market competition and firm performance: evidence from South Africa’, The Quarterly Review of Economics and Finance 53(2): 140–51 <https://doi.org/10.1016/j.qref.2013.02.004>.

Frank, M.Z. and Goyal, V.K. (2003) ‘Testing the pecking order theory of capital structure’, Journal of Financial Economics 67(2): 217–48 <https://doi.org/10.1016/S0304-405X(02)00252-0>.

Hackbarth, D. and Mauer, D.C. (2011) ‘Optimal priority structure, capital structure, and investment’, The Review of Financial Studies 25(3): 747–96 <https://doi.org/10.1093/rfs/hhr129>.

Harris, M. and Raviv, A. (1991) ‘The theory of capital structure’, The Journal of Finance 46(1): 297–355 <https://doi.org/10.1111/j.1540-6261.1991.tb03753.x>.

Hartarska, V. and Nadolnyak, D. (2007) ‘Do regulated microfinance institutions achieve better sustainability and outreach? Cross-country evidence’, Applied Economics 39: 1207–22 <https://doi.org/10.1080/00036840500461840>.

Hsiao, C. (2014) Analysis of Panel Data, Vol. 54, Cambridge: Cambridge University Press.

Jensen, M.C. (1986) ‘Agency costs of free cash flow, corporate finance, and takeovers’, The American Economic Review 76(2): 323–9 <https://www.jstor.org/stable/1818789>.

Kar, A.K. (2012) ‘Does capital and financing structure have any relevance to the performance of microfinance institutions?’ International Review of Applied Economics 26(3): 329–48 <https://doi.org/10.1080/02692171.2011.580267>.

Kyereboah-Coleman, A. (2007) ‘The impact of capital structure on the performance of microfinance institutions’, The Journal of Risk Finance 8(1): 56–71 <https://doi.org/10.1108/15265940710721082>.

Kyereboah-Coleman, A. and Osei, K.A. (2008) ‘Outreach and profitability of microfinance institutions: the role of governance’, Journal of Economic Studies 35(3): 236–48 <https://doi.org/10.1108/01443580810887797>.

Madan, K. (2007) ‘An analysis of the debt-equity structure of leading hotel chains in India’, International Journal of Contemporary Hospitality Management 19(5): 397–414 <https://doi.org/10.1108/09596110710757561>.

Mersland, R. and Strøm, R.O. (2009) ‘Performance and governance in microfinance institutions’, Journal of Banking & Finance 33: 662–9 <https://doi.org/10.1016/j.jbankfin.2008.11.009>.

Mersland, R. and Strøm, R.O. (2010) ‘Microfinance mission drift?’ World Development 38(1): 28–36 <https://doi.org/10.1016/j.worlddev.2009.05.006>.

Modigliani, F. and Miller, M.H. (1958) ‘The cost of capital, corporation finance and the theory of investment’, The American Economic Review 48(3): 261–97 <https://www.jstor.org/stable/1809766>.

Modigliani, F. and Miller, M.H. (1963) ‘Corporate income taxes and the cost of capital: a correction’, The American Economic Review 53(3): 433–43 <https://www.jstor.org/stable/1809167>.

Myers, S.C. (1977) ‘Determinants of corporate borrowing’, Journal of Financial Economics 5(2): 147–75 <https://doi.org/10.1016/0304-405X(77)90015-0.>.

Myers, S.C. (1984) ‘The capital structure puzzle’, The Journal of Finance 39(3): 574–92 <https://doi.org/10.1111/j.1540-6261.1984.tb03646.x>.

Myers, S.C. (2001) ‘Capital structure’, The Journal of Economic Perspectives 15(2): 81–102.

Onaolapo, A.A. and Kajola, S.O. (2010) ‘Capital structure and firm performance: evidence from Nigeria’, European Journal of Economics, Finance and Administrative Sciences 25: 70–82.

Pouchous, A. (2012) The Regulation and Supervision of Microfinance: Main Issues and Progress [pdf], International Institute for Sustainable Development <http://www.iisd.org/sites/default/files/publications/regulation_supervision_microfinance.pdf> [accessed 15 October 2017].

Roodman, D. (2009) ‘A note on the theme of too many instruments’, Oxford Bulletin of Economics and Statistics 71(1): 135–58 <https://doi.org/10.1111/j.1468-0084.2008.00542.x>.

Ross, S. (1973) ‘The economic theory of agency: the principal’s problem’, The American Economic Review 63(2): 134–9 <https://www.jstor.org/stable/1817064>.

Simar, L., Vanhems, A. and Van Keilegom, I. (2015) ‘Unobserved heterogeneity and endogeneity in nonparametric frontier estimation’, Journal of Econometrics 190(2): 360–73 <https://doi.org/10.1016/j.jeconom.2015.06.015>.

Tchakoute Tchuigoua, H. (2014) ‘Institutional framework and capital structure of microfinance institutions’, Journal of Business Research 67(10): 2185–97 <https://doi.org/10.1016/j.jbusres.2014.01.008>.

Tsuruta, D. (2017) ‘Variance of firm performance and leverage of small businesses’, Journal of Small Business Management 55(3): 404–29 <https://doi.org/10.1111/jsbm.12243>.

Wagner, C.H. (1982) ‘Simpson’s paradox in real life’, The American Statistician 36(1): 46–8.

Welch, I. (2011) ‘Two common problems in capital structure research: the financial-debt-to-asset ratio and issuing activity versus leverage changes’, International Review of Finance 11(1): 1–17 <https://doi.org/10.1111/j.1468-2443.2010.01125.x>.

Windmeijer, F. (2005) ‘A finite sample correction for the variance of linear efficient two-step GMM estimators’, Journal of Econometrics 126(1): 25–51 <https://doi.org/10.1016/j.jeconom.2004.02.005>.

Wintoki, M.B., Linck, J.S., and Netter, J.M. (2012) ‘Endogeneity and the dynamics of internal corporate governance’, Journal of Financial Economics 105(3): 581–606 <https://doi.org/10.1016/j.jfineco.2012.03.005>.

Wooldridge, J.M. (2010) Econometric Analysis of Cross Section and Panel Data, Cambridge, MA: MIT Press.

Yinusa, O.G., Somoye, R.O.C., Alimi, O.Y. and Ilo, B.M. (2016) ‘Firm performance and capital structure choice of firms: evidence from Nigeria’, Journal of Knowledge Globalization 9(1): 1–16.

Abdallah, W., Goergen, M. and O’Sullivan, N. (2015) ‘Endogeneity: how failure to correct for it can cause wrong inferences and some remedies’, British Journal of Management 26(4): 791–804 <https://doi.org/10.1111/1467-8551.12113>.

Abor, J. (2005) ‘The effect of capital structure on profitability: an empirical analysis of listed firms in Ghana’, The Journal of Risk Finance 6(5): 438–45 <https://doi.org/10.1108/15265940510633505>.

Abor, J. (2007) ‘Debt policy and performance of SMEs: evidence from Ghanaian and South African firms’, The Journal of Risk Finance 8(4): 364–79 <https://doi.org/10.1108/15265940710777315>.

Allen, F., Carletti, E. and Marquez, R. (2015) ‘Deposits and bank capital structure’, Journal of Financial Economics 118(3): 601–19 <https://doi.org/10.1016/j.jfineco.2014.11.003>.

Altman, E.I. (1984) ‘A further empirical investigation of the bankruptcy cost question’, The Journal of Finance 39(4): 1067–89 <https://doi.org/10.1111/j.1540-6261.1984.tb03893.x>.

Anderson, R.W. and Carverhill, A. (2012) ‘Corporate liquidity and capital structure’, Review of Financial Studies 25(3): 797–837 <https://doi.org/10.1093/rfs/hhr103>.

Arellano, M. and Bover, O. (1995) ‘Another look at the instrumental variable estimation of error-components models’, Journal of Econometrics 68(1): 29–51 <https://doi.org/10.1016/0304-4076(94)01642-D>.

Baker, H.K. and Martin, G.S. (2011) Capital Structure and Corporate Financing Decisions: Theory, Evidence, and Practice, Vol. 15, Hoboken, NJ: John Wiley & Sons.

Beck, T. and Hesse, H. (2009) ‘Why are interest spreads so high in Uganda?’ Journal of Development Economics 88(2): 192–204 <https://doi.org/10.1016/j.jdeveco.2008.07.004>.

Blundell, R. and Bond, S. (1998) ‘Initial conditions and moment restrictions in dynamic panel data models’, Journal of Econometrics 87(1): 115–43 <https://doi.org/10.1016/S0304-4076(98)00009-8>.

Blundell, R. and Bond, S. (2000) ‘GMM estimation with persistent panel data: an application to production functions’, Econometric Reviews 19(3): 321–40 <https://doi.org/10.1080/07474930008800475>.

Bogan, V. (2012) ‘Capital structure and sustainability: an empirical study of microfinance institutions’, Review of Economics and Statistics 94(4): 1045–58 <https://doi.org/10.1162/REST_a_00223>.

Booth, L., Aivazian, V., Demirgüç-Kunt, A. and Maksimovic, V. (2001) ‘Capital structures in developing countries’, The Journal of Finance 56(1): 87–130 <https://doi.org/10.1111/0022-1082.00320>.

Campello, M. (2006) ‘Debt financing: does it boost or hurt firm performance in product markets?’ Journal of Financial Economics 82(1): 135–72 <https://doi.org/10.1016/j.jfineco.2005.04.001>.

Chikalipah, S. (2017a) ‘Financial sustainability of microfinance institutions in sub-Saharan Africa: evidence from GMM estimates’, Enterprise Development and Microfinance 28(3): 182–99 <https://doi.org/10.3362/1755-1986.16-00023>.

Chikalipah, S. (2017b) ‘Institutional environment and microfinance performance in sub-Saharan Africa’, African Development Review 29(1): 16–27 <https://doi.org/10.1111/1467-8268.12235>.

Chikalipah, S. (2017c) ‘What determines financial inclusion in sub-Saharan Africa?’ African Journal of Economic and Management Studies 8(1): 8–18 <https://doi.org/10.1108/AJEMS-01-2016-0007>.

Chikalipah, S. (2017d) ‘The nexus between microcredit nominal interest rates and inflation in sub-Saharan Africa: evidence from panel vector autoregression analysis’, Enterprise Development and Microfinance 28(4): 355–70 <https://doi.org/10.3362/1755-1986.00038>.

Cotler, P. and Almazan, D. (2013) ‘The lending interest rates in the microfinance sector: searching for its determinants’, Journal of Centrum Cathedra 6(1): 69–81 <https://ssrn.com/abstract=2236430>.

Cull, R., Demirgüç-Kunt, A. and Morduch, J. (2007) ‘Financial performance and outreach: a global analysis of leading microbanks’, The Economic Journal 117(517): 107–33 <https://doi.org/10.1111/j.1468-0297.2007.02017.x>.

Cull, R., Demirgüç-Kunt, A. and Morduch, J. (2011) ‘Does regulatory supervision curtail microfinance profitability and outreach?’ World Development 39(6): 949–65 <https://doi.org/10.1016/j.worlddev.2009.10.016>

Demirgüç-Kunt, A., Klapper, L. and van Oudheusden, P. (2015) ‘Financial inclusion in Africa’, in The Oxford Handbook of Africa and Economics: Volume 2: Policies and Practices, p. 388, Oxford: Oxford University Press.

Dietrich, A. and Wanzenried, G. (2011) ‘Determinants of bank profitability before and during the crisis: evidence from Switzerland’, Journal of International Financial Markets, Institutions and Money 21(3): 307–27 <https://doi.org/10.1016/j.intfin.2010.11.002>.

Doko Tchatoka, F. and Dufour, J. (2014) ‘Identification-robust inference for endogeneity parameters in linear structural models’, The Econometrics Journal 17(1): 165–87 <https://doi.org/10.1111/ectj.12021>.

Fosu, S. (2013) ‘Capital structure, product market competition and firm performance: evidence from South Africa’, The Quarterly Review of Economics and Finance 53(2): 140–51 <https://doi.org/10.1016/j.qref.2013.02.004>.

Frank, M.Z. and Goyal, V.K. (2003) ‘Testing the pecking order theory of capital structure’, Journal of Financial Economics 67(2): 217–48 <https://doi.org/10.1016/S0304-405X(02)00252-0>.

Hackbarth, D. and Mauer, D.C. (2011) ‘Optimal priority structure, capital structure, and investment’, The Review of Financial Studies 25(3): 747–96 <https://doi.org/10.1093/rfs/hhr129>.

Harris, M. and Raviv, A. (1991) ‘The theory of capital structure’, The Journal of Finance 46(1): 297–355 <https://doi.org/10.1111/j.1540-6261.1991.tb03753.x>.

Hartarska, V. and Nadolnyak, D. (2007) ‘Do regulated microfinance institutions achieve better sustainability and outreach? Cross-country evidence’, Applied Economics 39: 1207–22 <https://doi.org/10.1080/00036840500461840>.

Hsiao, C. (2014) Analysis of Panel Data, Vol. 54, Cambridge: Cambridge University Press.

Jensen, M.C. (1986) ‘Agency costs of free cash flow, corporate finance, and takeovers’, The American Economic Review 76(2): 323–9 <https://www.jstor.org/stable/1818789>.

Kar, A.K. (2012) ‘Does capital and financing structure have any relevance to the performance of microfinance institutions?’ International Review of Applied Economics 26(3): 329–48 <https://doi.org/10.1080/02692171.2011.580267>.

Kyereboah-Coleman, A. (2007) ‘The impact of capital structure on the performance of microfinance institutions’, The Journal of Risk Finance 8(1): 56–71 <https://doi.org/10.1108/15265940710721082>.

Kyereboah-Coleman, A. and Osei, K.A. (2008) ‘Outreach and profitability of microfinance institutions: the role of governance’, Journal of Economic Studies 35(3): 236–48 <https://doi.org/10.1108/01443580810887797>.

Madan, K. (2007) ‘An analysis of the debt-equity structure of leading hotel chains in India’, International Journal of Contemporary Hospitality Management 19(5): 397–414 <https://doi.org/10.1108/09596110710757561>.

Mersland, R. and Strøm, R.O. (2009) ‘Performance and governance in microfinance institutions’, Journal of Banking & Finance 33: 662–9 <https://doi.org/10.1016/j.jbankfin.2008.11.009>.

Mersland, R. and Strøm, R.O. (2010) ‘Microfinance mission drift?’ World Development 38(1): 28–36 <https://doi.org/10.1016/j.worlddev.2009.05.006>.

Modigliani, F. and Miller, M.H. (1958) ‘The cost of capital, corporation finance and the theory of investment’, The American Economic Review 48(3): 261–97 <https://www.jstor.org/stable/1809766>.

Modigliani, F. and Miller, M.H. (1963) ‘Corporate income taxes and the cost of capital: a correction’, The American Economic Review 53(3): 433–43 <https://www.jstor.org/stable/1809167>.

Myers, S.C. (1977) ‘Determinants of corporate borrowing’, Journal of Financial Economics 5(2): 147–75 <https://doi.org/10.1016/0304-405X(77)90015-0.>.

Myers, S.C. (1984) ‘The capital structure puzzle’, The Journal of Finance 39(3): 574–92 <https://doi.org/10.1111/j.1540-6261.1984.tb03646.x>.

Myers, S.C. (2001) ‘Capital structure’, The Journal of Economic Perspectives 15(2): 81–102.

Onaolapo, A.A. and Kajola, S.O. (2010) ‘Capital structure and firm performance: evidence from Nigeria’, European Journal of Economics, Finance and Administrative Sciences 25: 70–82.

Pouchous, A. (2012) The Regulation and Supervision of Microfinance: Main Issues and Progress [pdf], International Institute for Sustainable Development <http://www.iisd.org/sites/default/files/publications/regulation_supervision_microfinance.pdf> [accessed 15 October 2017].

Roodman, D. (2009) ‘A note on the theme of too many instruments’, Oxford Bulletin of Economics and Statistics 71(1): 135–58 <https://doi.org/10.1111/j.1468-0084.2008.00542.x>.

Ross, S. (1973) ‘The economic theory of agency: the principal’s problem’, The American Economic Review 63(2): 134–9 <https://www.jstor.org/stable/1817064>.

Simar, L., Vanhems, A. and Van Keilegom, I. (2015) ‘Unobserved heterogeneity and endogeneity in nonparametric frontier estimation’, Journal of Econometrics 190(2): 360–73 <https://doi.org/10.1016/j.jeconom.2015.06.015>.

Tchakoute Tchuigoua, H. (2014) ‘Institutional framework and capital structure of microfinance institutions’, Journal of Business Research 67(10): 2185–97 <https://doi.org/10.1016/j.jbusres.2014.01.008>.

Tsuruta, D. (2017) ‘Variance of firm performance and leverage of small businesses’, Journal of Small Business Management 55(3): 404–29 <https://doi.org/10.1111/jsbm.12243>.

Wagner, C.H. (1982) ‘Simpson’s paradox in real life’, The American Statistician 36(1): 46–8.

Welch, I. (2011) ‘Two common problems in capital structure research: the financial-debt-to-asset ratio and issuing activity versus leverage changes’, International Review of Finance 11(1): 1–17 <https://doi.org/10.1111/j.1468-2443.2010.01125.x>.

Windmeijer, F. (2005) ‘A finite sample correction for the variance of linear efficient two-step GMM estimators’, Journal of Econometrics 126(1): 25–51 <https://doi.org/10.1016/j.jeconom.2004.02.005>.

Wintoki, M.B., Linck, J.S., and Netter, J.M. (2012) ‘Endogeneity and the dynamics of internal corporate governance’, Journal of Financial Economics 105(3): 581–606 <https://doi.org/10.1016/j.jfineco.2012.03.005>.

Wooldridge, J.M. (2010) Econometric Analysis of Cross Section and Panel Data, Cambridge, MA: MIT Press.

Yinusa, O.G., Somoye, R.O.C., Alimi, O.Y. and Ilo, B.M. (2016) ‘Firm performance and capital structure choice of firms: evidence from Nigeria’, Journal of Knowledge Globalization 9(1): 1–16.

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Chikalipah, S. (2017a) ‘Financial sustainability of microfinance institutions in sub-Saharan Africa: evidence from GMM estimates’, Enterprise Development and Microfinance 28(3): 182–99 <https://doi.org/10.3362/1755-1986.16-00023>.

Chikalipah, S. (2017b) ‘Institutional environment and microfinance performance in sub-Saharan Africa’, African Development Review 29(1): 16–27 <https://doi.org/10.1111/1467-8268.12235>.

Chikalipah, S. (2017c) ‘What determines financial inclusion in sub-Saharan Africa?’ African Journal of Economic and Management Studies 8(1): 8–18 <https://doi.org/10.1108/AJEMS-01-2016-0007>.

Chikalipah, S. (2017d) ‘The nexus between microcredit nominal interest rates and inflation in sub-Saharan Africa: evidence from panel vector autoregression analysis’, Enterprise Development and Microfinance 28(4): 355–70 <https://doi.org/10.3362/1755-1986.00038>.

Cotler, P. and Almazan, D. (2013) ‘The lending interest rates in the microfinance sector: searching for its determinants’, Journal of Centrum Cathedra 6(1): 69–81 <https://ssrn.com/abstract=2236430>.

Cull, R., Demirgüç-Kunt, A. and Morduch, J. (2007) ‘Financial performance and outreach: a global analysis of leading microbanks’, The Economic Journal 117(517): 107–33 <https://doi.org/10.1111/j.1468-0297.2007.02017.x>.

Cull, R., Demirgüç-Kunt, A. and Morduch, J. (2011) ‘Does regulatory supervision curtail microfinance profitability and outreach?’ World Development 39(6): 949–65 <https://doi.org/10.1016/j.worlddev.2009.10.016>

Demirgüç-Kunt, A., Klapper, L. and van Oudheusden, P. (2015) ‘Financial inclusion in Africa’, in The Oxford Handbook of Africa and Economics: Volume 2: Policies and Practices, p. 388, Oxford: Oxford University Press.

Dietrich, A. and Wanzenried, G. (2011) ‘Determinants of bank profitability before and during the crisis: evidence from Switzerland’, Journal of International Financial Markets, Institutions and Money 21(3): 307–27 <https://doi.org/10.1016/j.intfin.2010.11.002>.

Doko Tchatoka, F. and Dufour, J. (2014) ‘Identification-robust inference for endogeneity parameters in linear structural models’, The Econometrics Journal 17(1): 165–87 <https://doi.org/10.1111/ectj.12021>.

Fosu, S. (2013) ‘Capital structure, product market competition and firm performance: evidence from South Africa’, The Quarterly Review of Economics and Finance 53(2): 140–51 <https://doi.org/10.1016/j.qref.2013.02.004>.

Frank, M.Z. and Goyal, V.K. (2003) ‘Testing the pecking order theory of capital structure’, Journal of Financial Economics 67(2): 217–48 <https://doi.org/10.1016/S0304-405X(02)00252-0>.

Hackbarth, D. and Mauer, D.C. (2011) ‘Optimal priority structure, capital structure, and investment’, The Review of Financial Studies 25(3): 747–96 <https://doi.org/10.1093/rfs/hhr129>.

Harris, M. and Raviv, A. (1991) ‘The theory of capital structure’, The Journal of Finance 46(1): 297–355 <https://doi.org/10.1111/j.1540-6261.1991.tb03753.x>.

Hartarska, V. and Nadolnyak, D. (2007) ‘Do regulated microfinance institutions achieve better sustainability and outreach? Cross-country evidence’, Applied Economics 39: 1207–22 <https://doi.org/10.1080/00036840500461840>.

Hsiao, C. (2014) Analysis of Panel Data, Vol. 54, Cambridge: Cambridge University Press.

Jensen, M.C. (1986) ‘Agency costs of free cash flow, corporate finance, and takeovers’, The American Economic Review 76(2): 323–9 <https://www.jstor.org/stable/1818789>.

Kar, A.K. (2012) ‘Does capital and financing structure have any relevance to the performance of microfinance institutions?’ International Review of Applied Economics 26(3): 329–48 <https://doi.org/10.1080/02692171.2011.580267>.

Kyereboah-Coleman, A. (2007) ‘The impact of capital structure on the performance of microfinance institutions’, The Journal of Risk Finance 8(1): 56–71 <https://doi.org/10.1108/15265940710721082>.

Kyereboah-Coleman, A. and Osei, K.A. (2008) ‘Outreach and profitability of microfinance institutions: the role of governance’, Journal of Economic Studies 35(3): 236–48 <https://doi.org/10.1108/01443580810887797>.

Madan, K. (2007) ‘An analysis of the debt-equity structure of leading hotel chains in India’, International Journal of Contemporary Hospitality Management 19(5): 397–414 <https://doi.org/10.1108/09596110710757561>.

Mersland, R. and Strøm, R.O. (2009) ‘Performance and governance in microfinance institutions’, Journal of Banking & Finance 33: 662–9 <https://doi.org/10.1016/j.jbankfin.2008.11.009>.

Mersland, R. and Strøm, R.O. (2010) ‘Microfinance mission drift?’ World Development 38(1): 28–36 <https://doi.org/10.1016/j.worlddev.2009.05.006>.

Modigliani, F. and Miller, M.H. (1958) ‘The cost of capital, corporation finance and the theory of investment’, The American Economic Review 48(3): 261–97 <https://www.jstor.org/stable/1809766>.

Modigliani, F. and Miller, M.H. (1963) ‘Corporate income taxes and the cost of capital: a correction’, The American Economic Review 53(3): 433–43 <https://www.jstor.org/stable/1809167>.

Myers, S.C. (1977) ‘Determinants of corporate borrowing’, Journal of Financial Economics 5(2): 147–75 <https://doi.org/10.1016/0304-405X(77)90015-0.>.

Myers, S.C. (1984) ‘The capital structure puzzle’, The Journal of Finance 39(3): 574–92 <https://doi.org/10.1111/j.1540-6261.1984.tb03646.x>.

Myers, S.C. (2001) ‘Capital structure’, The Journal of Economic Perspectives 15(2): 81–102.

Onaolapo, A.A. and Kajola, S.O. (2010) ‘Capital structure and firm performance: evidence from Nigeria’, European Journal of Economics, Finance and Administrative Sciences 25: 70–82.

Pouchous, A. (2012) The Regulation and Supervision of Microfinance: Main Issues and Progress [pdf], International Institute for Sustainable Development <http://www.iisd.org/sites/default/files/publications/regulation_supervision_microfinance.pdf> [accessed 15 October 2017].

Roodman, D. (2009) ‘A note on the theme of too many instruments’, Oxford Bulletin of Economics and Statistics 71(1): 135–58 <https://doi.org/10.1111/j.1468-0084.2008.00542.x>.

Ross, S. (1973) ‘The economic theory of agency: the principal’s problem’, The American Economic Review 63(2): 134–9 <https://www.jstor.org/stable/1817064>.

Simar, L., Vanhems, A. and Van Keilegom, I. (2015) ‘Unobserved heterogeneity and endogeneity in nonparametric frontier estimation’, Journal of Econometrics 190(2): 360–73 <https://doi.org/10.1016/j.jeconom.2015.06.015>.

Tchakoute Tchuigoua, H. (2014) ‘Institutional framework and capital structure of microfinance institutions’, Journal of Business Research 67(10): 2185–97 <https://doi.org/10.1016/j.jbusres.2014.01.008>.

Tsuruta, D. (2017) ‘Variance of firm performance and leverage of small businesses’, Journal of Small Business Management 55(3): 404–29 <https://doi.org/10.1111/jsbm.12243>.

Wagner, C.H. (1982) ‘Simpson’s paradox in real life’, The American Statistician 36(1): 46–8.

Welch, I. (2011) ‘Two common problems in capital structure research: the financial-debt-to-asset ratio and issuing activity versus leverage changes’, International Review of Finance 11(1): 1–17 <https://doi.org/10.1111/j.1468-2443.2010.01125.x>.

Windmeijer, F. (2005) ‘A finite sample correction for the variance of linear efficient two-step GMM estimators’, Journal of Econometrics 126(1): 25–51 <https://doi.org/10.1016/j.jeconom.2004.02.005>.

Wintoki, M.B., Linck, J.S., and Netter, J.M. (2012) ‘Endogeneity and the dynamics of internal corporate governance’, Journal of Financial Economics 105(3): 581–606 <https://doi.org/10.1016/j.jfineco.2012.03.005>.

Wooldridge, J.M. (2010) Econometric Analysis of Cross Section and Panel Data, Cambridge, MA: MIT Press.

Yinusa, O.G., Somoye, R.O.C., Alimi, O.Y. and Ilo, B.M. (2016) ‘Firm performance and capital structure choice of firms: evidence from Nigeria’, Journal of Knowledge Globalization 9(1): 1–16.