Firm size and corporate financial‐leverage choice in a developing economy

Abel Ebel Ezeoha

Journal of Risk Finance, 2008, vol. 9, issue 4, 351-364

Abstract: Purpose - The purpose of this paper is to investigate, from an undeveloped market perspective, the nature and significance of firm size as a determinant of corporate financial leverage. Design/methodology/approach - A panel data fixed‐effects regression model is used to estimate the relationship between financial leverage and firm size, while controlling also for the effects of other acclaimed determinants like asset tangibility, profitability and firm age. The dataset used covers 71 firms quoted in the Nigerian stock markets over a 17‐year period (1990‐2006). Findings - The study reveals that as much as 91.4 percent of the total finances of Nigerian‐quoted firms is of short‐term liabilities, with just 8.6 percent constituting long‐term liabilities. It finds that firm size is negatively and significantly related to financial leverage. Controlling for some other determinants, the arising results tend to confirm an over‐bearing influence of the pecking order theory in the financing patterns of Nigerian‐quoted firms – by revealing that the relationship between profitability and financial leverage is highly significant and negative; and that firm‐age is positively and significantly related to financial leverage. Originality/value - Using data from a country with undeveloped and inefficient financial markets, this paper provides an important insight on the international debate on the effects of size on corporate decisions.

Keywords: Business development; Gearing; Developing countries; Nigeria (search for similar items in EconPapers)
Date: 2008
References: Add references at CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (text/html)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (application/pdf)
Access to full text is restricted to subscribers

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eme:jrfpps:15265940810895016

DOI: 10.1108/15265940810895016

Access Statistics for this article

Journal of Risk Finance is currently edited by Nawazish Mirza

More articles in Journal of Risk Finance from Emerald Group Publishing Limited
Bibliographic data for series maintained by Emerald Support ().