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Moderating Effects of Cost of Capital on Equity Financing and Firm Value in Nigeria

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  • Auwalu Sani Ibrahim
  • Muazu Saidu Badara

Abstract

The study analyzes the moderating effects of cost of capital on equity financing and firm value. Whereas, micro panel analysis techniques was utilised for the companies under study spanning 2006-2016. Secondary data were obtained through the companies’ individual annual reports and data base of Nigerian Stock Exchange. The study utilizes a sample of 12 listed industrial goods companies in Nigeria. While, hierarchical moderated multiple regression was applied for the estimate. The outcome revealed a positive association among equity financing and value of listed industrial goods companies in Nigeria. While, cost of capital as a good moderator, it was emphasize that, equity financing and cost of capital are drivers of enhance value of the firm among listed industrial goods companies. It was recommended among others that, the finance manager should emphasize on the viable cost of capital for their firm operation. Hence, equity financing should be given greater priority than debt financing in order to enhance the value of firm.

Suggested Citation

  • Auwalu Sani Ibrahim & Muazu Saidu Badara, 2020. "Moderating Effects of Cost of Capital on Equity Financing and Firm Value in Nigeria," Academic Journal of Economic Studies, Faculty of Finance, Banking and Accountancy Bucharest,"Dimitrie Cantemir" Christian University Bucharest, vol. 6(3), pages 81-84, September.
    • Handle: RePEc:khe:scajes:v:6:y:2020:i:3:p:81-84
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    References listed on IDEAS

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    1. Huang, Guihai & Song, Frank M., 2006. "The determinants of capital structure: Evidence from China," China Economic Review, Elsevier, vol. 17(1), pages 14-36.
    2. Harris, Milton & Raviv, Artur, 1991. "The Theory of Capital Structure," Journal of Finance, American Finance Association, vol. 46(1), pages 297-355, March.
    3. Barth, Mary E. & Konchitchki, Yaniv & Landsman, Wayne R., 2013. "Cost of capital and earnings transparency," Journal of Accounting and Economics, Elsevier, vol. 55(2), pages 206-224.
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    Cited by:

    1. Farhana Rahman, 2022. "Impact of WACC on Firm Profitability: Evidence from Food and Allied Industry of Bangladesh," Papers 2210.07955, arXiv.org.

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    More about this item

    Keywords

    Cost of capital; equity financing; firms value; OLS; Nigeria;
    All these keywords.

    JEL classification:

    • M10 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - General
    • M11 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Production Management

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