DETERMINANTS OF CAPITAL STRUCTURE IN NIGERIAN FIRMS:A THEORETICAL REVIEW

DETERMINANTS OF CAPITAL STRUCTURE IN NIGERIAN FIRMS:A THEORETICAL REVIEW

Author by Prof. Sunday Owolabi

Journal/Publisher: 152

Volume/Edition: 2

Language: English

Pages: 7 - 11

Abstract

This paper examines the determinants of capital structure decisions of firms in the manufacturing industry in Nigeria. The capital structure of a firm consists of a particular  combination  of  debt  and  equity  issues  to relieve  potential  pressures  on  its  long-term  financing.  To  examine  such  issues,  many  theories have  been developed  in  the  literature  and  they  generally  focus  upon  what  determinants  are  likely  to  influence  the  leverage  decisions  of  the  firms. This  paper  examined directly detailed background information of manufacturing sector in Nigeria with the aim of discovering major determinants of its capital structure. And the basic determinants of capital structure in the firms identified by various studies are tangibility, size, growth opportunities, profitability and non-debt tax shields. In addition to these, issues such as corruption, political atmosphere, nature of financial markets, have also been identified as influencing seriously  the capital structure of firms in Nigeria. The paper also highlighted issues such as financial distress, bankruptcy threats, solvency problem, risk of default etc dueto unstable economic and political situations as possible dangers that may plague firms whose capital structure may tilt more towards debt financing.


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