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Does Debt Impact Equity Returns?

Author

Listed:
  • Alayemi Sunday Adebayo

    (Department of Accounting, Faculty of Business and Social Sciences, Adeleke University, Ede, Osun State, Nigeria.)

  • R. Ogunniyi Olajumoke

    (Department of Accounting, Babcock Business School, Babcock University, Ilishan-Remo, Ogun State, Nigeria.)

Abstract

The study examined whether or not debt impacts equity returns using Nestle Nigeria Plc as a case study because the company has the highest market value per share and capitalization index among the non-finance company quoted on the Nigerian Stock Exchange. The general objective of the study is to examine whether or not debt impacts equity return. Secondary method of data collection was adopted through the annual reports and accounts of the company studied. A quantitative approach was adopted which made the study a scientific one. The existing variables explained 96.6% of Nestle Nigeria Plc, it showed that debt equity is a driver of equity returns. The results of the regression analysis revealed that lowering the debt equity ratio will result in decrease of 0.31, 0.46, 0.18 and an increase of 0.96 on average in return on equity, earning per share,, net asset per share and dividend per share respectively. The results showed that debt equity relationship impact return on equity, earning per share and net asset per share at varying degree at significant level with the exception of dividend per share where the impact is not significant. Out of the four hypotheses only hypothesis three was accepted while the other three were rejected.

Suggested Citation

  • Alayemi Sunday Adebayo & R. Ogunniyi Olajumoke, 2015. "Does Debt Impact Equity Returns?," Post-Print hal-05364263, HAL.
    • Handle: RePEc:hal:journl:hal-05364263
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