The Impact of Capital Structure on Corporate
Performance in Nigeria: A Quantitative Study of
Consumer Goods Sector
Volume 5 - Issue 4
Sebastain Ofumba Uremadu* and Onuegbu Onyekachi
-
Author Information
Open or Close
- Department of Banking and Finance, MOUAU, Nigeria
*Corresponding author:
Sebastain Ofumba Uremadu, Department of Banking and Finance, MOUAU, Nigeria
Received: November 19, 2018; Published:November 30, 2018
DOI: 10.32474/CIACR.2018.05.000217
Full Text
PDF
To view the Full Article Peer-reviewed Article PDF
Summary
This study examined the impact of capital structure on corporate performance in Nigeria with special focus on consumer goods
firm sector of the economy. Multiple regression of ordinary least square (OLS) analytical technique was used to analyse the data. The
results from the study showed a negative and insignificant impact of capital structure on corporate performance of the consumer
goods firm sector of Nigeria. That long-term debt ratio to total asset had a negative and insignificant impact on returns on assets,
while total debt ratio to equity also had a negative and insignificant impact on returns on assets. The study, therefore, concluded
that capital structure is not a major determinant of firm performance. Hence, the study recommends that managers should be
careful while using debt as a source of finance since a negative impact exist between the capital structure and corporate firm’s
performance. Also, that corporate firms should try to finance their activities with retained earnings and use debt as a last option as
this is consistent with the pecking order theory. This implies that, the study strongly recommends that corporate firms should use
more of equity than debt in financing their business activities, this is because in spite of the fact that the value of a business can be
enhanced with debt capital, it gets to a point that it becomes detrimental (negative) or unfavourable to the business.
Keywords: Capital Structure; Corporate performance; Consumer goods sector; Nigeria
Abstract|
Introduction|
Review of Related Empirical Literature|
Hypotheses|
Discussion of Findings|
Conclusion|
Recommendations|
Contribution to Knowledge|
References|