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Firm Capital Structure and Financial Sector Performance in Nigeria

Published in Economics (Volume 10, Issue 4)
Received: 9 October 2021     Accepted: 9 November 2021     Published: 25 November 2021
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Abstract

This study employed the two-step systems GMM and fixed-effect model to examine the relative importance and explanatory power of six (6) variables in considering the capital structure of 36 non-financial companies listed on the Nigeria Stock Exchange from 2008-2019. The study also examined the effect of the rule of law, institutional quality, macroeconomic management, financial sector performance, and accountability and corruption on firm capital structure. The findings of the study affirm' the theoretical underpinnings of the pecking order theory in Nigeria. The study finds that profitability and Liquidity ratios are negatively associated with debt ratios among non-financial firms in Nigeria. Firm size and tangibility of firm assets positively affect the debt ratio of these firms. The study also concludes that the rule of law, macroeconomic management, financial sector performance, accountability, and corruption indeed matter in determining firm financing mix in Nigeria. Indeed, the rule of law, financial sector rating, accountability, and corruption forms the fundamental basis for the enforcement of contracts, registration, and protection rights. The study provides evidence to the effect that these variables are critical for both equity and debt financing. This study adds to the existing literature as all the determinants used in the study are statistically significant in determining the capital structure of non-financial firms in Nigeria.

Published in Economics (Volume 10, Issue 4)
DOI 10.11648/j.eco.20211004.12
Page(s) 112-124
Creative Commons

This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.

Copyright

Copyright © The Author(s), 2021. Published by Science Publishing Group

Keywords

Leverage Ratio, Profitability Ratio, Liquidity Ratio, Tangibility, Asset Turnover Ratio

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    Michael Asiedu. (2021). Firm Capital Structure and Financial Sector Performance in Nigeria. Economics, 10(4), 112-124. https://doi.org/10.11648/j.eco.20211004.12

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    Michael Asiedu. Firm Capital Structure and Financial Sector Performance in Nigeria. Economics. 2021, 10(4), 112-124. doi: 10.11648/j.eco.20211004.12

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  • @article{10.11648/j.eco.20211004.12,
      author = {Michael Asiedu},
      title = {Firm Capital Structure and Financial Sector Performance in Nigeria},
      journal = {Economics},
      volume = {10},
      number = {4},
      pages = {112-124},
      doi = {10.11648/j.eco.20211004.12},
      url = {https://doi.org/10.11648/j.eco.20211004.12},
      eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.eco.20211004.12},
      abstract = {This study employed the two-step systems GMM and fixed-effect model to examine the relative importance and explanatory power of six (6) variables in considering the capital structure of 36 non-financial companies listed on the Nigeria Stock Exchange from 2008-2019. The study also examined the effect of the rule of law, institutional quality, macroeconomic management, financial sector performance, and accountability and corruption on firm capital structure. The findings of the study affirm' the theoretical underpinnings of the pecking order theory in Nigeria. The study finds that profitability and Liquidity ratios are negatively associated with debt ratios among non-financial firms in Nigeria. Firm size and tangibility of firm assets positively affect the debt ratio of these firms. The study also concludes that the rule of law, macroeconomic management, financial sector performance, accountability, and corruption indeed matter in determining firm financing mix in Nigeria. Indeed, the rule of law, financial sector rating, accountability, and corruption forms the fundamental basis for the enforcement of contracts, registration, and protection rights. The study provides evidence to the effect that these variables are critical for both equity and debt financing. This study adds to the existing literature as all the determinants used in the study are statistically significant in determining the capital structure of non-financial firms in Nigeria.},
     year = {2021}
    }
    

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  • TY  - JOUR
    T1  - Firm Capital Structure and Financial Sector Performance in Nigeria
    AU  - Michael Asiedu
    Y1  - 2021/11/25
    PY  - 2021
    N1  - https://doi.org/10.11648/j.eco.20211004.12
    DO  - 10.11648/j.eco.20211004.12
    T2  - Economics
    JF  - Economics
    JO  - Economics
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    EP  - 124
    PB  - Science Publishing Group
    SN  - 2376-6603
    UR  - https://doi.org/10.11648/j.eco.20211004.12
    AB  - This study employed the two-step systems GMM and fixed-effect model to examine the relative importance and explanatory power of six (6) variables in considering the capital structure of 36 non-financial companies listed on the Nigeria Stock Exchange from 2008-2019. The study also examined the effect of the rule of law, institutional quality, macroeconomic management, financial sector performance, and accountability and corruption on firm capital structure. The findings of the study affirm' the theoretical underpinnings of the pecking order theory in Nigeria. The study finds that profitability and Liquidity ratios are negatively associated with debt ratios among non-financial firms in Nigeria. Firm size and tangibility of firm assets positively affect the debt ratio of these firms. The study also concludes that the rule of law, macroeconomic management, financial sector performance, accountability, and corruption indeed matter in determining firm financing mix in Nigeria. Indeed, the rule of law, financial sector rating, accountability, and corruption forms the fundamental basis for the enforcement of contracts, registration, and protection rights. The study provides evidence to the effect that these variables are critical for both equity and debt financing. This study adds to the existing literature as all the determinants used in the study are statistically significant in determining the capital structure of non-financial firms in Nigeria.
    VL  - 10
    IS  - 4
    ER  - 

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Author Information
  • School of Finance, Zhongnan University of Economics and Law, Wuhan, China

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