Capital structure and financial performance of listed manufacturing companies in Nigeria

Capital structure and financial performance of listed manufacturing companies in Nigeria

Author by Oluwasegun Adeoye

Journal/Publisher: Academy Of Accounting And Financial Studies Journal

Volume/Edition: 25

Language: English

Pages: 1 - 9

Abstract

Optimality of the financing structure adopted by firms is germane in attaining its profit and wealth maximization goals. It has been discovered in literature that most Nigerian firms rarely balance their capital mix rather they are more of equity financed than debt, and thus not optimizing the profit due to eroded tax shield opportunity. An ex-post facto study was conducted on selected ten (10) consumers and industrial goods producing firms in Nigeria using a regression estimate between 1997 and 2017, resulting to 210 firm-year observations of balanced panel data. The study found that capital structure significantly influenced Tobin’s Q; debt-equity ratio and short term debt-total asset ratio significantly and positively affected Tobin’s Q. It was concluded that capital structure influenced profitability and value of firms. The managers are to strike a balance in the financing mix of the firm towards optimality, as this will speed up the overall profit and value maximization of the companies


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