Effect of Capital Structure on the Performance of Nigerian Listed Manufacturing Firms

Abstract

This research study investigated the effect of capital structure on the performance of Nigerian listed manufacturing firms from 2004-2013. This is to determine the overall impact of capital structure on corporate performance of Nigerian quoted firms by establishing the relationship that exists between the capital structure choices of firms in Nigeria and their return on assets, return on equity, sales growth and earnings per share (as proxies to measure corporate performance). For the purpose of this study, secondary data obtained from the Nigerian stock exchange fact book were utilized. Multiple regression were used as a tool of data analysis and result of the findings revealed that, capital structure has no significant effect on return on equity but has significant effect on return of assets, earnings per share and sales growth of listed manufacturing firms in Nigeria. It is therefore recommended that management of Nigerian quoted manufacturing firms should work very hard to optimize the capital structure of their quoted firms in order to increase the returns on equity, assets and earnings per share. They can do this through ensuring that their capital structure is optimal. It is also suggested that the Investors and stakeholders of quoted Manufacturing firms in Nigeria should also consider the leverage level of any firm before committing their hard earned money as the strength of a firm financing mix determine the quantum of their returns.

Keywords: Capital Structure, Manufacturing Firms, Nigeria