IDEAS home Printed from https://ideas.repec.org/a/bjc/journl/v7y2020i2p221-232.html
   My bibliography  Save this article

Leverage and Profitability of Quoted Health Care Firms in Nigeria

Author

Listed:
  • Olaifa Oluwafemi Olumuyiwa

    (Department of Accounting, Ahmadu Bello University, Zaria, Nigeria)

  • Yakubu Abubakar

    (Gbenga Olowe & Co Chartered Accountants Firm)

  • Dangana Umaru

    (College of Education, Gidan Waya, Nigeria)

Abstract

Capital structure and its influence on profitability has been a major point of argument among researchers, since different research come up with divergent views to explain how relevant or irrelevant it is. This study looks at the effect of Leverage on profitability of Quoted Healthcare firms in Nigeria for a period of 10 years (2003-2012). The study employed panel data analysis by using Ordinary Least Square regression model. It was found out that leverage has a significant effect on profitability of quoted healthcare firms in Nigeria. The study concludes that leverage impact return on asset, return on investment and earnings per share negatively while it affect return on equity positively. It is recommended that management should balance the use of equity and debt in a way that will impact positively on firms value, we also added that Central Bank of Nigeria (CBN) should review and lower interest rate on bank loan so that healthcare firms can have access to cheaper capital to develop standard healthcare facilities, create more wealth and employment opportunities which in turn will affect the economy in a positive way.

Suggested Citation

  • Olaifa Oluwafemi Olumuyiwa & Yakubu Abubakar & Dangana Umaru, 2020. "Leverage and Profitability of Quoted Health Care Firms in Nigeria," International Journal of Research and Scientific Innovation, International Journal of Research and Scientific Innovation (IJRSI), vol. 7(2), pages 221-232, February.
    • Handle: RePEc:bjc:journl:v:7:y:2020:i:2:p:221-232
    as

    Download full text from publisher

    File URL: https://www.rsisinternational.org/journals/ijrsi/digital-library/volume-7-issue-2/221-232.pdf
    Download Restriction: no
    File URL: https://www.rsisinternational.org/virtual-library/papers/leverage-and-profitability-of-quoted-health-care-firms-in-nigeria/?utm_source=Netcore&utm_medium=Email&utm_content=sscollections25oct&utm_campaign=First
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Kinga Mazur, 2007. "The Determinants of Capital Structure Choice: Evidence from Polish Companies," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 13(4), pages 495-514, November.
    2. Rajan, Raghuram G & Zingales, Luigi, 1995. "What Do We Know about Capital Structure? Some Evidence from International Data," Journal of Finance, American Finance Association, vol. 50(5), pages 1421-1460, December.
    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. Thomas H. Noe, 1988. "Capital Structure and Signaling Game Equilibria," The Review of Financial Studies, Society for Financial Studies, vol. 1(4), pages 331-355.
    5. Joshua Abor & Nicholas Biekpe, 2005. "What Determines the Capital Structure of Listed Firms in Ghana?," The African Finance Journal, Africagrowth Institute, vol. 7(1), pages 37-48.
    6. de Jong, Abe & Kabir, Rezaul & Nguyen, Thuy Thu, 2008. "Capital structure around the world: The roles of firm- and country-specific determinants," Journal of Banking & Finance, Elsevier, vol. 32(9), pages 1954-1969, September.
    7. Huang, Guihai & Song, Frank M., 2006. "The determinants of capital structure: Evidence from China," China Economic Review, Elsevier, vol. 17(1), pages 14-36.
    8. Stulz, ReneM., 1988. "Managerial control of voting rights : Financing policies and the market for corporate control," Journal of Financial Economics, Elsevier, vol. 20(1-2), pages 25-54, January.
    9. Lööf, Hans, 2003. "Dynamic Optimal Capital Structure and Technological Change," ZEW Discussion Papers 03-06, ZEW - Leibniz Centre for European Economic Research.
    10. Margaritis, Dimitris & Psillaki, Maria, 2010. "Capital structure, equity ownership and firm performance," Journal of Banking & Finance, Elsevier, vol. 34(3), pages 621-632, March.
    11. Gerald T. Garvey & Gordon Hanka, 1999. "Capital Structure and Corporate Control: The Effect of Antitakeover Statutes on Firm Leverage," Journal of Finance, American Finance Association, vol. 54(2), pages 519-546, April.
    12. Stulz, ReneM. & Johnson, Herb, 1985. "An analysis of secured debt," Journal of Financial Economics, Elsevier, vol. 14(4), pages 501-521, December.
    13. Chakraborty, Indrani, 2010. "Capital structure in an emerging stock market: The case of India," Research in International Business and Finance, Elsevier, vol. 24(3), pages 295-314, September.
    14. Gaud, Philippe & Hoesli, Martin & Bender, Andre, 2007. "Debt-equity choice in Europe," International Review of Financial Analysis, Elsevier, vol. 16(3), pages 201-222.
    15. Cheng, Shuenn-Ren & Shiu, Cheng-Yi, 2007. "Investor protection and capital structure: International evidence," Journal of Multinational Financial Management, Elsevier, vol. 17(1), pages 30-44, February.
    16. Joshua Abor, 2007. "Debt policy and performance of SMEs: Evidence from Ghanaian and South African firms," Journal of Risk Finance, Emerald Group Publishing, vol. 8(4), pages 364-379, August.
    17. Stulz, ReneM., 1990. "Managerial discretion and optimal financing policies," Journal of Financial Economics, Elsevier, vol. 26(1), pages 3-27, July.
    18. Mandelker, Gershon N. & Rhee, S. Ghon, 1984. "The Impact of the Degrees of Operating and Financial Leverage on Systematic Risk of Common Stock," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 19(1), pages 45-57, March.
    19. Ibrahim El‐Sayed Ebaid, 2009. "The impact of capital‐structure choice on firm performance: empirical evidence from Egypt," Journal of Risk Finance, Emerald Group Publishing Limited, vol. 10(5), pages 477-487, November.
    20. repec:kap:iaecre:v:13:y:2007:i:4:p:495-514 is not listed on IDEAS
    21. Mehran, Hamid, 1995. "Executive compensation structure, ownership, and firm performance," Journal of Financial Economics, Elsevier, vol. 38(2), pages 163-184, June.
    22. Smith, Clifford Jr. & Warner, Jerold B., 1979. "On financial contracting : An analysis of bond covenants," Journal of Financial Economics, Elsevier, vol. 7(2), pages 117-161, June.
    23. Majumdar, Sumit K & Chhibber, Pradeep, 1999. "Capital Structure and Performance: Evidence from a Transition Economy on an Aspect of Corporate Governance," Public Choice, Springer, vol. 98(3-4), pages 287-305, March.
    24. Myers, Stewart C., 1977. "Determinants of corporate borrowing," Journal of Financial Economics, Elsevier, vol. 5(2), pages 147-175, November.
    Full references (including those not matched with items on IDEAS)

    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. Anwar, Sajid & Sun, Sizhong, 2015. "Can the presence of foreign investment affect the capital structure of domestic firms?," Journal of Corporate Finance, Elsevier, vol. 30(C), pages 32-43.
    2. Mário Santos & António Moreira & Elisabete Vieira, 2014. "Ownership concentration, contestability, family firms, and capital structure," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 18(4), pages 1063-1107, November.
    3. Mai, Nhat Chi, 2012. "Market timing, taxes and capital structure: evidence from Vietnam," OSF Preprints t3mvs, Center for Open Science.
    4. 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.
    5. Drobetz, Wolfgang & Pensa, Pascal & Wöhle, Claudia B., 2004. "Kapitalstrukturtheorie in Theorie und Praxis: Ergebnisse einer Fragebogenuntersuchung," Working papers 2004/09, Faculty of Business and Economics - University of Basel.
    6. Yildirim, Ramazan & Masih, Mansur & Bacha, Obiyathulla Ismath, 2018. "Determinants of capital structure: evidence from Shari'ah compliant and non-compliant firms," Pacific-Basin Finance Journal, Elsevier, vol. 51(C), pages 198-219.
    7. Alves, Paulo & Couto, Eduardo Barbosa & Francisco, Paulo Morais, 2015. "Board of directors’ composition and capital structure," Research in International Business and Finance, Elsevier, vol. 35(C), pages 1-32.
    8. Niloufar Rezaie Nejad & Shaista Wasiuzzaman, 2015. "Multilevel Determinants of Capital Structure: Evidence from Malaysia," Global Business Review, International Management Institute, vol. 16(2), pages 199-212, April.
    9. İbrahim Yarba & Z. Nuray Güner, 2020. "Leverage dynamics: Do financial development and government leverage matter? Evidence from a major developing economy," Empirical Economics, Springer, vol. 59(5), pages 2473-2507, November.
    10. Vintilă Georgeta & Nenu Elena Alexandra & Gherghina Ştefan Cristian, 2014. "Empirical Research Towards the Factors Influencing Corporate Financial Performance on the Bucharest Stock Exchange," Scientific Annals of Economics and Business, Sciendo, vol. 61(2), pages 219-233, December.
    11. Antonczyk, Ron Christian & Salzmann, Astrid Juliane, 2014. "Overconfidence and optimism: The effect of national culture on capital structure," Research in International Business and Finance, Elsevier, vol. 31(C), pages 132-151.
    12. Surbhi Gupta & Surendra S. Yadav & P. K. Jain, 2024. "Impact of Foreign Ownership on Leverage: A Study of Indian Firms," Global Business Review, International Management Institute, vol. 25(1), pages 51-67, February.
    13. ElBannan, Mona A., 2017. "Stock market liquidity, family ownership, and capital structure choices in an emerging country," Emerging Markets Review, Elsevier, vol. 33(C), pages 201-231.
    14. Aleksandra Stoiljković & Slavica Tomić & Bojan Leković & Milenko Matić, 2022. "Determinants of Capital Structure: Empirical Evidence of Manufacturing Companies in the Republic of Serbia," Sustainability, MDPI, vol. 15(1), pages 1-19, December.
    15. Omer Bagais & Khaled Aljaaidi & Abdulaziz Alothman, 2021. "An Empirical Investigation of the Associations of Short and Long Debt Policies with Economic Values of Energy Sector," International Journal of Energy Economics and Policy, Econjournals, vol. 11(1), pages 249-254.
    16. Raja Zekri Ben Hamouda & Nessrine Hamzaoui & Faouzi Jilani, 2023. "Capital Structure Determinants: New Evidence from the MENA Region Countries," International Journal of Economics and Financial Issues, Econjournals, vol. 13(1), pages 144-163, January.
    17. Mohamed, Hisham Hanifa & Masih, Mansur & Bacha, Obiyathulla I., 2015. "Why do issuers issue Sukuk or conventional bond? Evidence from Malaysian listed firms using partial adjustment models," Pacific-Basin Finance Journal, Elsevier, vol. 34(C), pages 233-252.
    18. Duru, Augustine & Iyengar, Raghavan J. & Zampelli, Ernest M., 2012. "Performance choice, executive bonuses and corporate leverage," Journal of Corporate Finance, Elsevier, vol. 18(5), pages 1286-1305.
    19. Muhammad Akhtar & Kong Yusheng & Muhammad Haris & Qurat Ul Ain & Hafiz Mustansar Javaid, 2022. "Impact of financial leverage on sustainable growth, market performance, and profitability," Economic Change and Restructuring, Springer, vol. 55(2), pages 737-774, May.
    20. Rizov, Marian, 2008. "Corporate capital structure and how soft budget constraints may affect it," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 22(4), pages 648-684.

    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:bjc:journl:v:7:y:2020:i:2:p:221-232. 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: Dr. Renu Malsaria (email available below). General contact details of provider: https://rsisinternational.org/journals/ijrsi/ .

    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.