Capital Structure Performance and the Determinant Factors in Nigeria 1985-2015

Anastasia Chi-Chi Onuorah and Ogbonna Gabriel Nkwazema

International Journal of Empirical Finance, 2016, vol. 5, issue 2, 69-77

Abstract: The study focused on empirical investigation of the determinants of Capital Structure and how it affects the firm performance in Nigeria using variables such as return on equity, return on asset and total return on asset on firms; net profit margin between the period of 30years. Financial statements of 59 non financial firms listed in the Nigeria stock exchange covering a period of 1985 to 2015 data were extracted from the financial statements of the individual firms of the sample data and also the fact books and Nigerian stock Exchange reports in order to ensure accuracy of the sample data. Econometric statistical tools were employed in testing the variable properties and models estimation. Statistical tests carried out to ascertain the compliance of the models to the assumptions of the Ordinary Least Square estimate procedure fail. Unit root test, Co integration and VAR Estimation were used in the data analysis. Results revealed that time series properties of the variables were stationary and co integrated at none indicating at least 1 integrating order of equation. The study empirical result showed that return on asset (ROA) and total return on asset (TOA) are useful to firm financial managers to determining the performance of capital structure of firm based on the net profit margin (PRF). The variables impacted positively on the firms’ net profit margin. Return on equity (ROE) has not been a major player in the determinant of capital structure performance of firms in Nigeria. In addition, the measured parameters are statistically significant at 5%. It recommended that government and regulatory bodies should gather insight on how cost of capital and value of a firm vary with the variation of the leverage ratio to be able to effectively management capital structure base on return on asset and total return on asset.

Keywords: Capital structure; performance; return on Assets; Return on Equity. (search for similar items in EconPapers)
Date: 2016
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