IDEAS home Printed from https://ideas.repec.org/a/rnd/arimbr/v11y2019i3p27-34.html
   My bibliography  Save this article

Capital Structure and Profitability of Manufacturing Firms listed on the Nigerian Stock Exchange

Author

Listed:
  • Gideon Tayo AKINLEYE
  • LovethOluwatosin AKOMOLAFE

Abstract

This study examined capital structure and profitability of manufacturing firms listed on theNigerian stock exchange. Specifically the study analyzed the impact of disaggregated variables of debt finance(Short term debt and long term debt) and equity finance (share capital and share premium) on profit aftertax. Secondary data were gathered from annual reports of sampled firms over a period of ten years (2008-2017) and were analyzed using panel data estimators such as pooled OLS estimator, fixed effect estimator,random effect estimator, Hausman test, and Pesaran test of cross sectional dependence. The findings revealedthat short term debt has insignificant positive effect on profit after tax of manufacturing firms showing inspecific term a coefficient estimate of 0.114985 (p=0.5890> 0.05) long term debt exerts significant positiveimpact on profit after tax, with specific coefficient estimate of 0.578290 (p=0.0001< 0.05) share capital exertssignificant positive effect on profit after tax, with coefficient estimate of 0.784525 (p=0.0000< 0.05) sharepremium exerts insignificant negative effect on profit after tax, with coefficient estimate of -0.000395 (p=0.9924> 0.05). The study concluded that short term debt has declining effect on the profitability ofmanufacturing firms in the country, while the long term variable of debt finance of firms spurs the rate ofprofitability. In clear term disaggregated debt finance subsets exerts significant effect on the profitability offirms sampled in the study. On the other hand equity finance disaggregated into share capital and sharepremiums reflect that share capital has significant positive effect on profit after tax, while share premium hasinsignificant negative effect on profit after tax.

Suggested Citation

  • Gideon Tayo AKINLEYE & LovethOluwatosin AKOMOLAFE, 2019. "Capital Structure and Profitability of Manufacturing Firms listed on the Nigerian Stock Exchange," Information Management and Business Review, AMH International, vol. 11(3), pages 27-34.
    • Handle: RePEc:rnd:arimbr:v:11:y:2019:i:3:p:27-34
    DOI: 10.22610/imbr.v11i3(I).2944
    as

    Download full text from publisher

    File URL: https://ojs.amhinternational.com/index.php/imbr/article/view/2944/1886
    Download Restriction: no
    File URL: https://ojs.amhinternational.com/index.php/imbr/article/view/2944
    Download Restriction: no
    File URL: https://libkey.io/10.22610/imbr.v11i3(I).2944?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Adedoyin Isola LAWAL, 2014. "Capital structure and the value of the firm: evidence from the Nigeria banking industry," The Journal of Accounting and Management, Danubius University of Galati, issue 1, pages 31-41, April.
    2. Joshua Abor, 2008. "Determinants of the Capital Structure of Ghanaian Firms," Working Papers 176, African Economic Research Consortium, Research Department.
    3. Myers, Stewart C. & Majluf, Nicholas S., 1984. "Corporate financing and investment decisions when firms have information that investors do not have," Journal of Financial Economics, Elsevier, vol. 13(2), pages 187-221, June.
    4. Stewart C. Myers & Nicholas S. Majluf, 1984. "Corporate Financing and Investment Decisions When Firms Have InformationThat Investors Do Not Have," NBER Working Papers 1396, National Bureau of Economic Research, Inc.
    5. Joshua Abor, 2005. "The effect of capital structure on profitability: an empirical analysis of listed firms in Ghana," Journal of Risk Finance, Emerald Group Publishing, vol. 6(5), pages 438-445, November.
    6. Julius B. Adesina & Barine M. Nwidobie & Oluwatosin O. Adesina, 2015. "Capital Structure and Financial Performance in Nigeria," International Journal of Business and Social Research, MIR Center for Socio-Economic Research, vol. 5(2), pages 21-31, February.
    7. Md. Nur Alam Siddik & Sajal Kabiraj & Shanmugan Joghee, 2017. "Impacts of Capital Structure on Performance of Banks in a Developing Economy: Evidence from Bangladesh," IJFS, MDPI, vol. 5(2), pages 1-18, May.
    8. Cyrille Schwellnus & Jens Matthias Arnold, 2008. "Do Corporate Taxes Reduce Productivity and Investment at the Firm Level?: Cross-Country Evidence from the Amadeus Dataset," OECD Economics Department Working Papers 641, OECD Publishing.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Joshua Adewale, ADEJUWON & Abisola Mutiat, LASISI & Adefisayo Oluwakemi, ADEJUWON, 2023. "Capital Structure and Financial Performance of Quoted Telecommunication Companies in Nigeria," Multidisciplinary Journal of Social Sciences, Association of Forensic Accounting Researchers (AFAR), vol. 3(1), pages 152-180, June.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Osaretin Kayode Omoregie & Sodik Adejonwo Olofin & Fredrick Ikpesu, 2019. "Capital Structure and the Profitability-Liquidity Trade-off," International Journal of Economics and Financial Issues, Econjournals, vol. 9(3), pages 105-115.
    2. Khémiri, Wafa & Noubbigh, Hédi, 2020. "Size-threshold effect in debt-firm performance nexus in the sub-Saharan region: A Panel Smooth Transition Regression approach," The Quarterly Review of Economics and Finance, Elsevier, vol. 76(C), pages 335-344.
    3. Prayagsing Chakeel Coomar & Jankee Kheswar, 2016. "Internal Financial Markets and Corporate Investment Strategies in Africa — A Case Study of Mauritius," The Review of Finance and Banking, Academia de Studii Economice din Bucuresti, Romania / Facultatea de Finante, Asigurari, Banci si Burse de Valori / Catedra de Finante, vol. 8(1), pages 007-020, June.
    4. Vo, Xuan Vinh & Ellis, Craig, 2017. "An empirical investigation of capital structure and firm value in Vietnam," Finance Research Letters, Elsevier, vol. 22(C), pages 90-94.
    5. Jason Stephen Kasozi, 2018. "Capital Structure and The Profitability of Listed Retail Firms," Journal of Economics and Behavioral Studies, AMH International, vol. 10(1), pages 171-181.
    6. Le, Thi Phuong Vy & Phan, Thi Bich Nguyet, 2017. "Capital structure and firm performance: Empirical evidence from a small transition country," Research in International Business and Finance, Elsevier, vol. 42(C), pages 710-726.
    7. Zarina Abdul Salam & Roghayeh Shourkashti, 2019. "Capital Structure and Firm Performance in Emerging Market: An Empirical Analysis of Malaysian Companies," International Journal of Academic Research in Accounting, Finance and Management Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Accounting, Finance and Management Sciences, vol. 9(3), pages 70-82, July.
    8. Matthew Adeolu Abata & Stephen Oseko Migiro & Joseph Olorunfemi Akande & Raredzo Layton, 2017. "Does Capital Structure Impact on the Performance of South African Listed Firms?," Acta Universitatis Danubius. OEconomica, Danubius University of Galati, issue 13(6), pages 334-350, DECEMBER.
    9. Samal Kokeyeva & Petr Hajek & Ainagul Adambekova, 2022. "Small Firms’ Capital Structure and Performance," Economic Studies journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 4, pages 128-144.
    10. David O. Obuya, 2017. "Debt Financing Option and Financial Performance of Micro and Small Enterprises: A Critical Literature Review," International Journal of Business and Management, Canadian Center of Science and Education, vol. 12(3), pages 221-221, February.
    11. Abdulkadir Ali Tifow & Ozlem Sayilir, 2015. "Capital Structure and Firm Performance: An Analysis of Manufacturing Firms in Turkey," Eurasian Journal of Business and Management, Eurasian Publications, vol. 3(4), pages 13-22.
    12. Bassey, Nsikan Edet & Arene, Chukwuemeka John & Akpaeti, Aniekan Jim, 2014. "Comparative Study Of The Determinants Of Capital Structure Of Quoted And Unquoted Agro-Based Firms In Nigeria," International Journal of Food and Agricultural Economics (IJFAEC), Alanya Alaaddin Keykubat University, Department of Economics and Finance, vol. 2(2), pages 1-14, April.
    13. Tak, Alina, 2016. "Impact of Capital Structure on Shareholder's Wealth," MPRA Paper 116421, University Library of Munich, Germany, revised 13 Oct 2022.
    14. Amin, Qazi Awais & Liu, Jia, 2020. "Shareholders' control rights, family ownership and the firm's leverage decisions," International Review of Financial Analysis, Elsevier, vol. 72(C).
    15. Sunday Nosa UGBOGBO (Ph.D) & Sunday Nosa UGBOGBO (Ph.D), 2023. "Capital Structure and Corporate Financial Distress of Quoted Non-Financial Firms in Nigeria," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 7(6), pages 1302-1314, June.
    16. Akdal, Sinan, 2010. "How do Firm Characteristics Affect Capital Structure? Some UK Evidence," MPRA Paper 29199, University Library of Munich, Germany.
    17. Narinder Pal Singh & Mahima Bagga, 2019. "The Effect of Capital Structure on Profitability: An Empirical Panel Data Study," Jindal Journal of Business Research, , vol. 8(1), pages 65-77, June.
    18. Cuong Nguyen Thanh, 2019. "Optimal Cash Holding Ratio for Non-Financial Firms in Vietnam Stock Exchange Market," JRFM, MDPI, vol. 12(2), pages 1-13, June.
    19. Hossain, Mohammed Sawkat, 2021. "A revisit of capital structure puzzle: Global evidence and analysis," International Review of Economics & Finance, Elsevier, vol. 75(C), pages 657-678.
    20. Nicoleta Bărbuță-Mișu & Mara Madaleno & Vasile Ilie, 2019. "Analysis of Risk Factors Affecting Firms’ Financial Performance—Support for Managerial Decision-Making," Sustainability, MDPI, vol. 11(18), pages 1-19, September.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:rnd:arimbr:v:11:y:2019:i:3:p:27-34. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Muhammad Tayyab (email available below). General contact details of provider: https://ojs.amhinternational.com/index.php/imbr .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.