Application of Capital Structure in Creating Value for the Growth of Firms in Nigeria.

Abstract

The challenges before corporate organization are stemmed beyond the need to maximize profit through continues increase in capital financing of an organization and investment generation but to equally face the challenge of the ongoing global social insecurity that is presently reflected across the various facets of the nation’s economy. In the light of the above a study of the application of capital structure in creating value for the growth of firms in Nigeria was undertaken primarily to examine how the use of an effective capital structure and the concept of value creation in an organization can stimulate growth of the firm. Questionnaire method of data collection was applied and the responses therein were evaluated using inferential statistical tools of Chi Square and Correlation Coefficient. The result revealed that judicious use of capital financing are significant in creating value for the growth and survival of the firms and that a predictive model for determining the degree of relationship between capital structure and value creation can be evolved. The study finally recommended among others that stakeholders in business operation should endeavor to provide adequate security through collaborative processes and partnership as part of their social responsibility in order to guaranty safety of their investment in the short run and corporate value enhancement in the long run.

Key Words: Capital Structure, Valuation, Growth, Cost of Capital, Questionnaire, Enabling Environment.