Determinants of capital structure in Nigeria’s quoted consumer goods firms

Year 2024, , 19 - 44, 15.01.2024

Nurudeen Yisau , Adesoji Oke Modinat Odukoya

https://doi.org/10.55026/jobaf.1400273

Abstract

Although the factors that influence capital structure have been the subject of numerous prior studies, the topic of what determines the best financing combination to maximize a firm's value is still one of the most contentious in corporate finance. Furthermore, a large number of earlier research paid little attention to emerging countries and instead concentrated mostly on developed markets. To fill the gap, this study examined the factors that influence capital structure decisions in quoted Nigerian consumer goods companies that are publicly traded. The study used secondary data from the annual reports of 15 of the mentioned corporations, spanning ten years from 2011 to 2020. The association between the leverage ratio and the five explanatory variables in the model was investigated using the Panel Least Square regression approach. The study's findings showed that while growth is not statistically significant, firm size, non-debt tax shield, and firm growth all positively and significantly affect leverage. Furthermore, tangibility and profitability are negative and have a large impact on leverage. Based on the study's findings, it can be said that the capital structure of listed consumer products companies in Nigeria is significantly influenced by factors such as size, non-debt tax shield, profitability, and tangibility. The study then suggested that financial managers of listed firms in Nigeria should deploy effective measures to boost these important variables to have an optimum financing mix for their firms.

Keywords

Debt financing, Tangibility, Profitability, Non-debt Tax shields, leverage ratio

Ethical Statement

Hereby, we consciously assure that for the manuscript, the following is fulfilled: 1) This material is the authors' original work, which has not been previously published elsewhere. 2) The paper is not currently being considered for publication elsewhere. 3) The paper reflects the authors' research and analysis in a truthful and complete manner. 4) The paper properly credits the meaningful contributions of co-authors and co-researchers. 5) The results are appropriately placed in the context of prior and existing research. 6) All sources used are properly disclosed (correct citation). 7) All authors have been personally and actively involved in substantial work leading to the paper, and will take public responsibility for its content.

Supporting Institution

Nill

Project Number

YNS-OKE-ODU-12-23-01

Thanks

We thank the JOBAF editorial board in anticipation of its review of our research article

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