The Effect of Capital Structure on Financial Performance: Evidence of Listed Manufacturing Companies in Nigeria

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JAMES AYOOLA ENIOLA

Abstract

Capital structure decision is important for every business organization because of the need to maximize returns to various organizational stakeholders and also ensure positive financial performance. Therefore, this study investigated the effect of capital structure on the financial performance of listed Manufacturing companies in Nigeria. To do so, five (5) listed manufacturing companies were selected and studied during the period 2006-2015. Debt to equity ratio, debt ratio and long term debt to asset ratio were considered as capital structure attributes while return on assets was used as a measure of financial performance. Secondary data was obtained from the financial statements of the listed companies. Data collected was analyzed using linear regression to test the research hypotheses so as to determine the relationship of each of the independent variables on financial performance. The findings reveal that debt to equity ratio and debt ratio have positive and significant relationship with financial performance while long term debt to asset ratio has a positive and no significant relationship with financial performance. The study found that a unit increase in any of the independent variable would lead to a unit increase in financial performance. It was recommended that firm should use a mixture of debt and equity to finance their assets.

Article Details

How to Cite
ENIOLA, JAMES AYOOLA. The Effect of Capital Structure on Financial Performance: Evidence of Listed Manufacturing Companies in Nigeria. International Sciences of Management Journal, [S.l.], v. 2, n. 2, aug. 2017. Available at: <http://ojs.mediu.edu.my/index.php/ISMJ/article/view/831>. Date accessed: 25 nov. 2017.
Section
Managment