Assessing the Impact of Size on the Capital Structure Choice for Listed Nigeria Firms

A.O. Olakunle and P.L. Jones

International Journal of Academic Research in Business and Social Sciences, 2014, vol. 4, issue 7, 184-202

Abstract: This paper seeks to examine the impact of size on the capital structure choice of listed Nigeria firms in influencing their corporate financing strategy and performance analysis. The research work examines the applicability of western capital structure theories (static trade-off, agency cost and pecking order theories) on listed firms on the Nigeria Stock Exchange. The research study analysed 47 listed firms on the Nigeria Stock Exchange over the period 1997 – 2007 using the OLS regression analysis of natural log of sales (size of the firm), against leverage (total debt to total asset and short-term debt to total asset)with the objective of size effect on leverage on observed firms. Results shows that listed firms on the Nigeria stock exchange have positive Beta value of 0.055 between total debt and size and 0.048 between short-term debt and size. The observed positive correlation between leverage of Nigerian firms in relation to size, however, is not statistically significant. This implies that size of the firm can be said to have a positive influence on the leverage ratio of listed Nigeria firms.

Keywords: Capital Structure; Trade-off Theory; Agency Cost Theory; Pecking Order Theory; Corporate Financing Strategy; Nigeria Stock Exchange (search for similar items in EconPapers)
Date: 2014
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