Capital Structure and Financial Performance of Listed Manufacturing Goods Firms in Nigeria

Worlu, Christian Nweneda; Zorkpa, Charles Barinem

Worlu, Christian Nweneda Department of Accounting, Faculty of Management Science Ignatius Ajuru University of Education Port Harcourt
Zorkpa, Charles Barinem Department of Accounting, Faculty of Management Science Ignatius Ajuru University of Education Port Harcourt

Keywords: Capital Structure, Equity Capital, Debt Capital, Financial Performance, Return on Asset.

Abstract

This study investigated capital structure and financial performance of listed industrial goods firms in Nigeria. The dwindling rate of business operations which has affected the revenue base of the listed industrial goods firms in the Country necessitated this study. The sample size for the study consisted of thirteen (13) listed industrial goods firms in Nigeria. The study made use secondary data. The secondary data was obtained from the listed industrial goods firm’s annual reports and accounts. Data was analyzed using descriptive and Pearson correlation coefficient statistical tools with the aid of statistical package for social sciences. The findings reveal that equity capital has a positive strong relationship with return on asset in the listed industrial goods firms in Nigeria and also debt capital was found to have very strong relationship with return on asset. Based on the findings, it was concluded that capital structure significantly affects financial performance. Therefore, the study recommends that listed industrial goods firms in Nigeria should employ more equity finance in establishing optimal capital structure. Finally, when capital is raised through debt instrument, more attention should be channeled towards other areas for performance enhancement instead of relying on returns from equity capital alone.

References

1. Abor, J., & Biekpe, N. (2010). What determines the capital structure of listed firms in Ghana? African Finance Journal, 1(1), 37-48.
2. Al-Taani, K. (2013). The relationship between capital structure and firm performance: Evidence from Jordan. Journal of Finance and Accounting, 1(3) 41-45.
3. Bradley, C. M. (2004). The impact of foreign acquisition on labour. In Auerbach, A (Ed): Financial take-overs: Causes and consequences. University Of Chicago Press, Chicago.
4. Chukwu, G. J., Egbuhuzor, C. A., Namapele, A., Willy, N. O., Chukwu, A. N., Okoba, D., & Ebilaowei, P. (2022). Capital structure and financial performance of listed commercial banks in Nigeria: the moderating effect of board diligence. Current Journal of Applied Science and Technology, 41(32), 21-32.
5. Ezuma, S. C. (2022). Capital structure and financial performance of listed pharmaceutical companies in Nigeria. African Journal of Accounting and Financial Research, 5(2), 1-12.
6. Kenton, W. (2021). Financial performance. https://www.investopedia.com/terms/f financialperformance.asp
7. Sharma, C. (2012). R&D and productivity in the Indian pharmaceutical firms. Journal of the Asia Pacific Economy, 17(2), 332-342.
8. lshaya. L.C., & Abduijeleel, B.O. (2014). Capital structure and profitability of Nigerian quoted firms: The agency cost theory perspective. American International Journal of Social Science, 3 (1), 1-20.
9. Kalsoom, A., & Mubeen, M. (2014). Impact of capital structure on firms’ financial performance and shareholder’s wealth: textile sector of Pakistan, international. Journal of Learning & Development, 4, 2.
10. Kavita R. (2015). The impact of capital structure on financial performance of different sectors in India. International Journal in Management and Social Science, 03(06).
11. Khalifa, M. (2014). The effect of capital structure on profitability of energy American firms. International Journal of Business and Management Invention, 3(12), 54-61.
12. Ohaka, J., Edori, D. S., & Ekweozor, U. C. (2020). Debt financing and firms’ financial performance in Nigeria. Account and Financial Management Journal, 5(2), 2106-2113.
13. Olarewaju, O. R. (2019). Dynamic relationship between capital structure and quoted manufacturing firms’ performance in Nigeria. International Journal of Economics, Finance and Management Sciences, 7(3), 82-87.
14. Osuji, C., & Odita, A. (2012). Impact of capital structure on the financial performance of Nigerian firms, Arabian Journal of Business and Management Review (OMAN Chapter) I, 12.
15. Saad,N. M. (2010). Financial governance, compliance and the effects to capital structure. International Journal of Financial Economics, 2(1), 105-1 14.
16. Sebastian, G. (2010). A theory of financial decisions with liquidity and solvency concerns. Journal of Financial Economics, 99(2), 365-384
17. Yue, H.Y. (2011). Determinants of financial capital structure under different debt maturities. International Research Journal of Finance and Economics - 66.
18. Zorkpa, C.B. (2023). Financial management Dynamics, Celwil publishers port Harcourt