Capital Structure and Financial Performance of Listed Manufacturing Firms in Nigeria

Abstract

The study investigated the effect of capital structure on financial performance of listed manufacturing companies in Nigeria. The study adopted ex-post facto research design using panel data extracted from the 26 selected listed manufacturing companies in Nigeria out of 52 listed manufacturing companies in NEG as at 31st December, 2023. Purposive and stratified sampling techniques were used to select 26 listed manufacturing companies. Panel data were extracted from the annual reports of the selected listed manufacturing companies in Nigeria from 2014 to 2023. Descriptive statistics, correlation, Variance Inflation factors and inferential statistics were used to analyze panel data. The study found that: Debt-Equity Ratio, Debt Asset Ratio, Capital Gearing Ratio, Interest Coverage and Firm Size have insignificant influence on Asset Turnover ratio with t= 0.49 (pv=0.621); -1.08 (pv=0.278); -0.06 (pv=0.952), 0.24 (pv=0.807) and 0.81 (pv=0.419).Wald statistic value of 236.24 (pv =0.000) showed that all capital structure variables have joint significant effect on Asset Turnover ratio. DER, DAR and FS have significant impact on Earnings before Interest, Tax, Depreciation and Amortization with t-statistic of 1.96 (pv=0.050); 4.48 (pv= 0.000) and 9.15 (pv=0.000) while CGR and ICR have insignificant impact on EBITDA with t-statistic value of -0.51 (pv=0.613) and 1.46 (pv=0.144) respectively. The wald test showed statistic value of 103.11 (pv=0.000) indicated that all capital structure variables have significant impact on EBITDA. The study concluded that capital structure mix have significant influence on the financial performance of the selected listed manufacturing companies in Nigeria. The study therefore recommended that listed manufacturing firms should optimally utilize the capital structures mix in order to improve their financial performance.