Capital Structure Choices and Shareholder Value Creation in High-Cost Borrowing Environments: Evidence from Listed Manufacturing Firms in Nigeria

Chika Celestine, Onyinyechi Edeh, Ovbe Akpadaka and Innocent Enekwe
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Chika Celestine: Financial Management Department, College of Private Sector Accounting, ANAN University, Kwall, Plateau State, Nigeria.
Innocent Enekwe: Financial Management Department, College of Private Sector Accounting, ANAN University, Kwall, Plateau State, Nigeria.

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Abstract: This paper examines how capital structure choices relate to shareholders' wealth in a high-cost borrowing environment, using panel data for 43 listed Nigerian manufacturing firms over 2013 to 2023 (473 firm-year observations). Shareholders' wealth is proxied by market capitalisation, with short-term and long-term interest-bearing debt as the principal regressors, cost of debt as a conditioning variable, and profitability and firm size as controls. The empirical strategy relies on pooled Ordinary Least Squares with year effects and firm fixed effects with year effects, with standard errors clustered at the firm level. Interaction terms are constructed from mean-centred debt ratios to aid interpretation and reduce collinearity. The results show that short-term debt is positively and significantly associated with shareholders' wealth in both estimators, whereas long-term debt is negatively and significantly associated with shareholders' wealth. The direct effect of the cost of debt is negative and statistically significant in the pooled specification but not in fixed effects. In the fixed-effects framework, the cost of debt significantly moderates the debt–wealth relationship, with a positive interaction with short-term debt and a negative interaction with long-term debt. Overall explanatory power is high in OLS with year effects and, as expected, more modest for within-firm variation. The findings highlight the joint importance of tenor mix and borrowing costs for value creation, with practical implications for treasury policy, investor screening, and credit-market interventions in emerging economies.

Date: 2026-01-06
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Published in Asian Journal of Economics, Finance and Management , 2026, 8 (1), pp.16 - 27

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