Acta Universitatis Danubius. Œconomica, Vol 13, No 6 (2017)

Capital Structure Decision and Firm Performance: Evidence from Non-Financial Firms in Nigeria

Richard Oreoluwa Akingunola, Luqman Samuel Olawale, Joshua Damilare Olaniyan


This paper investigates the effect of capital structure decisions on firm performance using a sample of 22listed Non-financial firms on the Nigerian Stock Exchange for a period of five years (2011 – 2015). The study examined the impact of STDTA, LTDTA, and TDTE (being the explanatory variables) on ROA and ROE, which represents the dependent variable while controlling for size, tangibility and Growth. The panel dataset were analysed using pooled, fixed effect and random effect models while Hausman’s test were used to select the appropriate model. On the ROA model (panel A), the ratio of short term debt to total asset (STDTA) and total debt to total equity (TD/TE) have significant negative effect on performance. The ROE model (panel B) revealed that short-term debt to total asset (STDTA) and long-term debt to total asset (LTDTA) have significant positive effect on ROE while total debt to total equity (TD/TE) has significant negative effect. Firm size has significant positive effect in both models (ROA and ROE). This implies that, the inclusion of debt (both short term and long term) in the capital structure of a firm positively affect the equity shareholders in terms of firm performance while debt holder might be affected negatively.


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