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An Empirical Examination of the Relationship between Capital Structure and the Financial Performance of Firms in Nigeria

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  • Uwuigbe UWALOMWA, Olayinka Marte UADIALE

    (1Department of Accounting, Covenant University, Department of Accounting, University of Lagos)

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    Abstract

    This paper basically investigates the relationship between capital structure and the financial performance of listed firms in Nigeria. The study considered a total sample of 31 listed firms on the floor of the Nigerian stock exchange. The annual reports for the period 2005-2009 were analyzed using the Ordinary Least Squares (OLS) technique of model estimation to test the research propositions stated in this study. The study observed that two of the explanatory variables in this study (i.e. short-term debt and shareholders’ funds) have a significant positive impact on the financial performance of listed firms in Nigeria. In addition, the study observed that long-term debt has a significant negative impact on the financial performance of firms. To this end the study concludes that employing high proportion of long-term debt in firms’ capital structure will invariably result in a low financial performance of a firm.

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    File URL: http://journals.univ-danubius.ro/index.php/euroeconomica/article/view/1250/1070
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    Bibliographic Info

    Article provided by Danubius University of Galati in its journal Euroeconomica.

    Volume (Year): (2012)
    Issue (Month): 1(31) (February)
    Pages: 57-65

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    Handle: RePEc:dug:journl:y:2012:i:1:p:57-65

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    Web page: http://www.euroeconomica-danubius.ro/
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    Related research

    Keywords: Capital Structure; Financial Performance; Long-term debt; Short-term debt; shareholders’ funds;

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