Leverage Analysis and Corporate Earnings: A Study of Food and Beverage Firms in Nigeria
Authors:
OGUNDAJO GRACE
Publication Type: Journal article
Journal:
ISSN Number:
0
Downloads
20
Views
Abstract
This study examined the impact of leverage on earnings of manufacturing firms in Nigeria. Using multiple regression analysis, 500 firm year observations were analysed. Leverage was measured using Degree of Financial Leverage (DFL), Degree of Operating Leverage (DOL) and Degree of Combined Leverage (DCL) and two control variables were added namely Size and Age while Earnings was measured Earnings per Share (EPS). The findings of the study showed that there is a positive relationship between EPS and the independent variables (degree of financial leverage, degree of operating leverage, degree of combined leverage and size), while an inverse relationship exists between EPS and age. Therefore, we recommend that the firms under study should maintain their current leverage positions as they are appropriate. Also, firms should strive for increase in size and avoid organisational rigidity to maintain profitability.