Universal Journal of Accounting and Finance Vol. 9(1), pp. 15 - 23
DOI: 10.13189/ujaf.2021.090102
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Effect of Capital Structure on Firms Performance in Nigeria


Asen Ayange 1, Nwude Chuke Emmanuel 1, Idamoyibo Hwerien Rosemary 2, Ufodiama Clifford Ndudi 1, Udo Emmanuel Samuel 1,*
1 Department of Banking and Finance, University of Nigeria Enugu Campus, Nigeria
2 Department of Accounting, Ignatius Ajuru University of Education, Port Harcourt, Nigeria

ABSTRACT

The lack of precise methodology to determine the capital structure mix on firm performance has generated a lot of mixed results. Empirical studies from emerging nations revealed a scarcity of empirical findings on the measures with a significant impact on firm performance. This paper examines capital structure measures on manufacturing firm’s performance in Nigeria. Using annualized panel data for a sample of 15 quoted firms from diverse sectoral classifications from 1999-2018. Excluding the financial firms due to the uniqueness of their capital structure and the strict legal requirements for their financing choices. This study focus on non-financial firms. Capital structure measures book value and market value of the firm. Results indicate that performance proxy by ROE, and Tobin’s Q, significantly influence SDTA, SIZE, LDTA, and TDTA while ROA negatively influences LDTA, D_E, and TDTA. Findings revealed a robust relationship between Tobin’s Q and financial performance compared to other book value. Tobin’s Q is a better measure of performance within the period under review. The study reveals that Nigerian firms are keenly financed by short‐term debt supporting the Pecking Order Theory. It’s vital to note that no single theory can sufficiently explain the capital structure effect on firm performance.

KEYWORDS
Capital Structure, Performance, Manufacturing Companies, Debt, Equity

Cite This Paper in IEEE or APA Citation Styles
(a). IEEE Format:
[1] Asen Ayange , Nwude Chuke Emmanuel , Idamoyibo Hwerien Rosemary , Ufodiama Clifford Ndudi , Udo Emmanuel Samuel , "Effect of Capital Structure on Firms Performance in Nigeria," Universal Journal of Accounting and Finance, Vol. 9, No. 1, pp. 15 - 23, 2021. DOI: 10.13189/ujaf.2021.090102.

(b). APA Format:
Asen Ayange , Nwude Chuke Emmanuel , Idamoyibo Hwerien Rosemary , Ufodiama Clifford Ndudi , Udo Emmanuel Samuel (2021). Effect of Capital Structure on Firms Performance in Nigeria. Universal Journal of Accounting and Finance, 9(1), 15 - 23. DOI: 10.13189/ujaf.2021.090102.