Impact of Capital Structure and Corporate Governance on Market Liquidity of Quoted Manufacturing Firms in Nigeria

This study contributes to the literature on financial economics by providing valuable insights into the growth implications of capital structure and corporate governance on the market liquidity of thirty (30) quoted manufacturing firms in the Nigerian Exchange Group. While the capital structure was measured by equity financing and debt capital, corporate governance was measured using board size, board representation and audit committee. On the other hand, the value of the shares traded formed the basis for measuring the market liquidity of the 30 quoted firms. The datasets for the variables were obtained from the Nigerian Exchange Group Firms Annual Reports and Accounts Statistics from 1990 to 2023. Descriptive statistics, panel unit root and one-way error component fixed effects model with heterogenous intercept due to the individual firms and homogenous slope parameters for the basis for data analysis. The fixed effects results showed that debt capital affected the value of shares traded positively. This finding is significant at the 5% level, indicating that an increase in debt capital creates an opportunity for improving the value of shares traded during the study period. On the other, there is a negative effect of equity capital and board size on the value of shares traded. The results further showed that board representation and audit committee contributed positively to the value of shares traded. This suggests that the audit committee significantly improved the value of shares traded. This highlights the importance of auditing in driving the market liquidity of the quoted manufacturing firms. Given the findings, this study recommends that the management of the quoted manufacturing firms should prioritise long-term debt to enhance the market liquidity of manufacturing firms. Again, the management firms should ensure that board representation is diversified to include various segments of the firms while prioritising expertise and integrity in the selection of the audit committee to ensure that quality decisions are achieved to improve the market liquidity of the firms.