An Empirical Analysis of the Determinants of Corporate Debt Policy of Nigerian Firms

B. I. Ehikioya
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B. I. Ehikioya: Financial Studies Department, Faculty of Management Sciences, National Open University of Nigeria

International Journal of Economics and Financial Research, 2018, vol. 4, issue 6, 180-187

Abstract: Corporate debt policy remained a significant, but a challenging decision for managers entrusted with the responsibility to improve the value of the firm. Thus, this study examines the factors influencing the capital structure decisions of firms in Nigeria. The study employs a panel data regression model to analyze data from firms in Nigeria for the period 2011 to 2015. The result of the empirical analysis reveals that firms in Nigeria have a preference to finance economic operations from retained earnings and the use of short-term debt on rollover basis. The finding of this study confirms that debt decreases with profitability and growth opportunities. The findings show that asset tangibility and firm size have a positive and significant relationship with debt policy of firms in Nigeria. The analysis also reveals that managerial ownership has a negative and significant relationship with debt ratio of firms in Nigeria. The study shows a non-significant positive relationship between non-debt tax shields and debt. The study demonstrates that the trade-off and pecking order theories both explains the factors influencing capital structure decisions of firms in Nigeria. Therefore, this study suggests the need for stakeholders to develop the financial markets and make it accessible for firms to obtain long-term financing for economic growth and development.

Keywords: Capital structure; Nigeria stock exchange; Developing economies; Profitability; Growth; Debt; Trade-offs; Pecking order; Financial decisions, Ownership. (search for similar items in EconPapers)
Date: 2018
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