Entrepreneurial Financing Decisions and the Profitability of Listed Non-Financial Firms in Nigeria (2015–2024)
Abstract
This study investigates the impact of entrepreneurial financing decisions on the profitability of topperforming listed non-financial firms in Nigeria over the period 2015–2024. The population comprises 92 non-financial firms listed on the Nigerian Exchange (NGX), from which a purposive sample of 20 top-performing firms was selected based on a composite index of Return on Equity (ROE), market capitalization growth, and earnings stability. Using a balanced panel dataset of 200 firm-year observations, the study employs a fixed-effects regression model to analyze the relationship between key financing variables and firm profitability, proxied by Return on Assets (ROA). The independent variables are the Debt-to-Equity Ratio (leverage), Retention Ratio (internal financing intensity), and CAPEX Intensity (growth/innovation financing), with firm size (ln(Total Assets)) included as a control variable. The results reveal a significant negative relationship between leverage and ROA (β = -0.184, p < 0.05), indicating that high debt levels erode profitability in Nigeria's high-interest environment. Conversely, both the Retention Ratio (β = 0.371, p < 0.01) and CAPEX Intensity (β = 0.236, p < 0.05) exhibit a significant positive impact on profitability, underscoring the critical role of internal financing and strategic capital investment. Robustness checks using the system GMM estimator confirm the findings. Diagnostic tests validate the model's assumptions, with no evidence of multicollinearity, serial correlation, or endogeneity. The study concludes that financial prudence, characterized by a preference for retained earnings over debt and disciplined capital expenditure, is a key determinant of sustained profitability for leading non-financial firms in Nigeria. The findings support the pecking order theory and provide valuable insights for corporate managers and policymakers seeking to foster a more resilient and innovative corporate sector.