Mediating Effect of Human Capital on the relation between Capital Structure and Firm Performance Evidence from Ethiopian Coffee Farmers Cooperatives

Abstract

This study investigates the consequence of human capital mediating on the association among capital structure and performance in the context of Ethiopian coffee farmers' cooperatives. The study collected data from a sample of 385 participants representing 33 coffee cooperatives. The data adequacy was evaluated by employing the Kaiser-Meyer-Olkin (KMO) test and Bartlett's Sphericity Test. Confirmatory Factor Analysis (CFA) was employed to establish the association among observed variables and their underlying latent constructs, while Discriminant Validity was assessed to ensure the distinctiveness of the constructs. The Structural Equation Modeling (SEM) was then utilized to test the hypothesized associations and evaluate model fitness. The p-value being less than 0.001 indicates a substantial association among Human Capital and Organizational Performance with a direct effect of 0.25 supported with a coefficient 0.457 with a standard error of 0.132. Indirect effect through human capital founded was 0.39. The results of the study indicate that human capital acts a partial mediating role in the association among capital structure and organizational performance by 0.64. This finding suggests that the effective management of human capital can enhance the impact of capital structure on performance of a firm within the coffee farmers' cooperatives. The findings of this study contribute to the existing literature on capital structure and performance of firm, particularly within the context of agricultural cooperatives.