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Firm Size, Asset Tangibility, Growth, Volatility, Dividends and the Capital Structure of Nigerian Quoted Firms

Received: 11 March 2021     Accepted: 23 March 2021     Published: 29 April 2021
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Abstract

Empirical work on capital structure in emerging markets like Nigeria has been sparse and met with low explanatory power. This study investigates the determinants of capital structure in Nigeria. The population of study comprises all non-financial corporations quoted on the Nigerian Stock Exchange (NSE) for the period 1999-2014 out of which 50 companies that met the minimum data criteria were utilized. Using panel data least squares regression, modified to weighted (cross section- and period-) models, the research documents the following findings. First, the factors that exert positive influence on corporate borrowing include firm age, intangible assets and expected inflation while those factors that exert negative influence on capital structure include tangible assets, growth, size, volatility of earnings, profitability, liquidity, dividend-paying status and uniqueness of industry. The results were, at best, mixed with respect to the portability of pecking order, target adjustment, trade-off, agency and market conditions models. The pecking order beats the trade-off model based on the signs of coefficients of firm-level attributes. In order words, asymmetric information explains why smaller, less profitable, less liquid firms with more risky intangible assets and which are low dividend-payers end up relying primarily on debt financing and vice versa. The study recommends the use of leases for financially- and collateral-constrained firms as well as instruments that facilitate information symmetry in financial markets.

Published in Journal of Finance and Accounting (Volume 9, Issue 2)
DOI 10.11648/j.jfa.20210902.13
Page(s) 36-52
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

Capital Structure, Firm-Specific Characteristics, Pecking Order, Trade-off

References
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    Oluseun Paseda. (2021). Firm Size, Asset Tangibility, Growth, Volatility, Dividends and the Capital Structure of Nigerian Quoted Firms. Journal of Finance and Accounting, 9(2), 36-52. https://doi.org/10.11648/j.jfa.20210902.13

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    Oluseun Paseda. Firm Size, Asset Tangibility, Growth, Volatility, Dividends and the Capital Structure of Nigerian Quoted Firms. J. Finance Account. 2021, 9(2), 36-52. doi: 10.11648/j.jfa.20210902.13

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    Oluseun Paseda. Firm Size, Asset Tangibility, Growth, Volatility, Dividends and the Capital Structure of Nigerian Quoted Firms. J Finance Account. 2021;9(2):36-52. doi: 10.11648/j.jfa.20210902.13

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  • @article{10.11648/j.jfa.20210902.13,
      author = {Oluseun Paseda},
      title = {Firm Size, Asset Tangibility, Growth, Volatility, Dividends and the Capital Structure of Nigerian Quoted Firms},
      journal = {Journal of Finance and Accounting},
      volume = {9},
      number = {2},
      pages = {36-52},
      doi = {10.11648/j.jfa.20210902.13},
      url = {https://doi.org/10.11648/j.jfa.20210902.13},
      eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.jfa.20210902.13},
      abstract = {Empirical work on capital structure in emerging markets like Nigeria has been sparse and met with low explanatory power. This study investigates the determinants of capital structure in Nigeria. The population of study comprises all non-financial corporations quoted on the Nigerian Stock Exchange (NSE) for the period 1999-2014 out of which 50 companies that met the minimum data criteria were utilized. Using panel data least squares regression, modified to weighted (cross section- and period-) models, the research documents the following findings. First, the factors that exert positive influence on corporate borrowing include firm age, intangible assets and expected inflation while those factors that exert negative influence on capital structure include tangible assets, growth, size, volatility of earnings, profitability, liquidity, dividend-paying status and uniqueness of industry. The results were, at best, mixed with respect to the portability of pecking order, target adjustment, trade-off, agency and market conditions models. The pecking order beats the trade-off model based on the signs of coefficients of firm-level attributes. In order words, asymmetric information explains why smaller, less profitable, less liquid firms with more risky intangible assets and which are low dividend-payers end up relying primarily on debt financing and vice versa. The study recommends the use of leases for financially- and collateral-constrained firms as well as instruments that facilitate information symmetry in financial markets.},
     year = {2021}
    }
    

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  • TY  - JOUR
    T1  - Firm Size, Asset Tangibility, Growth, Volatility, Dividends and the Capital Structure of Nigerian Quoted Firms
    AU  - Oluseun Paseda
    Y1  - 2021/04/29
    PY  - 2021
    N1  - https://doi.org/10.11648/j.jfa.20210902.13
    DO  - 10.11648/j.jfa.20210902.13
    T2  - Journal of Finance and Accounting
    JF  - Journal of Finance and Accounting
    JO  - Journal of Finance and Accounting
    SP  - 36
    EP  - 52
    PB  - Science Publishing Group
    SN  - 2330-7323
    UR  - https://doi.org/10.11648/j.jfa.20210902.13
    AB  - Empirical work on capital structure in emerging markets like Nigeria has been sparse and met with low explanatory power. This study investigates the determinants of capital structure in Nigeria. The population of study comprises all non-financial corporations quoted on the Nigerian Stock Exchange (NSE) for the period 1999-2014 out of which 50 companies that met the minimum data criteria were utilized. Using panel data least squares regression, modified to weighted (cross section- and period-) models, the research documents the following findings. First, the factors that exert positive influence on corporate borrowing include firm age, intangible assets and expected inflation while those factors that exert negative influence on capital structure include tangible assets, growth, size, volatility of earnings, profitability, liquidity, dividend-paying status and uniqueness of industry. The results were, at best, mixed with respect to the portability of pecking order, target adjustment, trade-off, agency and market conditions models. The pecking order beats the trade-off model based on the signs of coefficients of firm-level attributes. In order words, asymmetric information explains why smaller, less profitable, less liquid firms with more risky intangible assets and which are low dividend-payers end up relying primarily on debt financing and vice versa. The study recommends the use of leases for financially- and collateral-constrained firms as well as instruments that facilitate information symmetry in financial markets.
    VL  - 9
    IS  - 2
    ER  - 

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  • Department of Finance, Faculty of Economics and Management Sciences, University of Ibadan, Ibadan, Nigeria

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