Capital Structure and Corporate Performance of Selected Firms on the Nigerian Stock Exchange

Afolabi, Babatunde and Oyelakan, Bolade and Akinwale, Olasusi (2019) Capital Structure and Corporate Performance of Selected Firms on the Nigerian Stock Exchange. Journal of Economics and Business, 2 (3). pp. 1-10. ISSN 2615-3726

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Abstract

The capital structure of a firm is very important to the firm's successful operation. The objective of the study was to analyze the effects of Capital Structure on Corporate Performance of selected firms on the Nigerian Stock Exchange in Nigeria from 2011 to 2017. The study employed data from five multinational companies, using Micro Panel data as the estimated technique. Both the Random Effect Model and the Fixed Effect Model were estimated, and the Hausman effect was carried out to determine the appropriate model. The result shows that the effect of liquidity of the firms is negatively related to return on Asset (ROA). Hence, keeping funds in noninterest yielding form does not increase the ROA of the firms. Similarly, the short term debt financing (CLA) is negatively related to ROA. However, there is a positive relationship between long term debt financing and ROA. It noted that short term debt financing requires the payment of the debt in a short term, and this may not be convenient for the firms, and impair their performance. However, repaying long term debt may be convenient, and this may have a positive effect on the performance of the firms. Management of the quoted firms in Nigeria is strongly advised to increase the use of equity capital in financing to improve the earnings of their firms.

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