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The arguments on the responsiveness of capital structure leverage to sets of its major determinants have dominated the corporate finance literature. There is however no consensus regarding the direction of effects of these determinants on debt to equity ratio. In contribution to existing literature, this study explored development of debt to equity ratio in capital structure in the Nigerian context, with aim of filling gaps in methodology which have been argued to undermine the credibility of previous findings. The method of estimation used is the Panel-Fully Modified Ordinary Least Squares (FMOLS). The Pedroni cointegration test was employed to test for long-run relationship. The descriptive statistics and the panel unit root test were the preliminary test. We ascertained that our data set are stable and normally distributed as precursor to determining if the variables are cointegrated. A more sophisticated method of panel estimation other than the traditional method was adopted which among other advantages purges the defects posed by heteroskendasticity prevalent in the conversional estimation method. We established that there is a long-run relationship between debt to equity ratio and tangibility, profitability, firm growth and firm size. The panel regression estimate confirmed the trade-off theory and the pecking order hypothesis in Nigeria as tangibility was found to have positive effect on corporate leverage. However, the finding with regards to growth and firm size supports the trade-off theory while discrediting the pecking order assumption. Profitability on the other hand confirmed the pecking order theory for Nigeria and shows that profitability has negative effect on debt to equity ratio. The robustness and reliability of the findings was embedded on the controls for residual weaknesses and disturbances. JEL: L60, O14, D24
2017 •
This paper assessed the effect of SMEs financing on manufacturing sector growth in Nigeria using annualised data from 1981 to 2014. A cointegrating relationship was determined using the Engel and Granger residual based approach which showed evidence of a long-run relationship between SMEs credit and manufacturing output growth in Nigeria. The results of the error correction model showed that SMEs financing had exerted positive influence on the manufacturing sector growth. The finding indicated that when credits to the SMEs increased by 1%, manufacturing output rose by 14.5%. The results also revealed that interest rate and inflation rate had negative effect on manufacturing sector growth. A unit change in interest rate led to 15.7% fall in output growth of the manufacturing sector. We conclude that while SMEs is an important sector that can drive the Nigerian economy, rising interest rate stifles their growth and overall economic impact. This sector needs nurturing hence the governm...
Research in International Business and Finance
The impact of profitability on capital structure and speed of adjustment: An empirical examination of selected firms in Nigerian Stock Exchange2014 •
The study investigated the effect of strategic content learning on mathematics achievement of students with learning disability. It employed a quasi experimental non-equivalent control group, pretestposttest research design. The population was all 864 senior secondary II students in the 14 public secondary schools and a sample of all 47 (males-23, females-24) senior secondary II students drawn from intact classes in four randomly sampled coeducation secondary schools in Uzo-uwani local government area of Nsukka education zone, Enugu State, Nigeria. Two instructional programmes were developed and used for the study; they are mathematics/strategic content learning instructional plan (MSCLIP) and Mathematics conventional teaching lesson plan (MCTLP). Two research questions and two null hypotheses guided the study. The findings revealed that intervention with strategic content learning significantly improved mathematics achievement of students with mathematics learning disability and th...
2018 •
The study examined the effect of contextual factors affecting Nigerian companies’ capital structure. These are companies' features that influence a choice of financing mix and the level of leverage. Unlike, previous studies this study makes distinct between visible and subtle companies’ contextual features in order to understand the most influential among them. A regression analysis of data from Nigerian companies for five years show a significant negative effect of profitability on the leverage. Whereas, a significant positive effect of assets tangibility and size on leverage is found. This provides evidence that larger Nigerian companies with more fixed assets have more levered capital structure. This aligns with the argument of the trade-off theory of more in capital structure brings more returns. The subtle factors (apart from growth), risk and non-debt tax shield are less noticeable and influential. This is because they are elusive and can be shaken by other factors, not un...
Business and Management Studies
Capital Structure and Firm Performance: A comparative Study of Oil Gas and Manufacturing Sectors in the United States of AmericaThis paper empirically examines the effects of capital structure on the performances of the Unites States’ Oil & Gas and Manufacturing sectors and investigates the differences in the dynamics of the two sectors. The study employs secondary data sourced from New York Stock Exchange (NYSE)/ NASDAQ for a period of ten (10) years, that is, 2010-2019. It utilized E-View 9.0 for generating the estimation results. The investigation has been performed using panel least square estimation technique and sectoral analysis on the data collected in order to test the set hypotheses. The result shows that although debt structure improved the performances of the firms, a sharp increase in such leverage tends to reduce firm performance for all the firms used. Coefficients namely asset tangibility, interest payment and dividend growth, directors’ shares/inside ownership and non-debt tax shield are quite significant in the result. They demonstrate positive relationships, indicating that these variables...
Research in International Business and Finance
Pecking order and market timing theory in emerging markets: The case of Egyptian firms2018 •
Journal of Economics and Business
Does Pecking Order Theory Hold Among Kenyan Firms?2017 •
Government-Linked Companies perhaps differ from other companies in terms of their capability to absorb socio- political benefit from the government interest. This allows the companies to take greater risk with respect to their capital structure decision. The paper seeks to identify if there are differences in capital structure between Malaysian Government-Linked Companies (GLCs) and Non-Government-Linked Companies (NGLCs). The sample consists of six companies each of the GLCs and the NGLCs, all from trading and services industry. The study uses 21 years of unbalanced panel data from 1993 to 2013. Leverage acts as dependent variable, while profitability, asset tangibility, firm size, and growth are the independent variables. The model uses group dummy to distinguish the sample of GLCs and NGLCs. Within the scope of the study, the paper is unable to proof any differences in capital structure between the two groups of companies. The random effects estimation identify profitability as n...
2017 •
A research proposal submitted to the school of economics in partial fulfillment of the requirements for the award of masters of arts in Economics, University of Nairobi.
Journal of Management Information and Decision Sciences
Relationship between capital structure and profitability: Evidence from Four Asian Tigers2019 •
Purpose: Capital structure is one of the hot topics in corporate finance. To meet the needs of stakeholders, firms need to build a capital structure that is desirable for shareholders by decrease financial risk and expand their profitability. Thus, the aim of this study is to investigate the relationship between capital structure and profitability. Methods: In examining the relationship between capital structure and profitability, we apply correlation and regression analysis on dataset from 2003 to 2016 for the firms in the Four Asian Tiger economies. The data are collected from the Compustat Global Vantage database and include 46,301 observations. Findings: This study finds a significantly negative relationship between leverage and profitability, a significantly positive relationship between growth and leverage in Taiwan, Korea and Hong Kong and a significantly positive relationship between size and leverage in each country. Significance of the study: This study empirically examines the impacts of capital structure on the profitability in the case of firms of Four Asian Tiger economies, which appears to be main contribution to the literature of corporate finance. Keywords: Capital Structure, Financial Leverage, Profitability, Four Asian Tigers.
Research in International Business and Finance
Does top managers' experience affect firms' capital structure2018 •
European Journal of Business and Management
Determinants of Capital Structure of African Firms: A Categorical Analysis2018 •
business management review
Determinants of Capital Structure of Oil and Gas Companies in Tanzania2019 •
2021 •
IAEME PUBLICATION
EFFECT OF CAPITAL STRUCTURE ON FINANCIAL PERFORMANCE OF AGRO-ALLIED COMPANIES IN NIGERIA2021 •
2017 •
Banks and Bank Systems
The Determinants of Capital Structure in a Regulatory Industry: The Case of Kenyan Banks2013 •
2018 •
2017 •
IAEME PUBLICATION
DO CORPORATE GOVERNANCE, FIRM AGE, AND TOP MANAGEMENT EXPERIENCE DETERMINE THE CAPITAL STRUCTURE OF THE FIRM? AN EMPIRICAL STUDY2021 •
Asian Journal of Economics, Business and Accounting
The Impact of Debt on Capital Structure: Empirical Evidence from NigeriaInternational Journal of Financial Research
Impact of Foreign Direct Investment on the Financial Performance of Listed Deposit Banks in NigeriaJournal of Reviews on Global Economics
Parametric, Non-Parametric and Multivariate Analysis of Capital Structure During the Financial Crises in Jordanian Banks2019 •
Horizon Research Publishing(HRPUB)
Effect of Capital Structure on Firms Performance in Nigeria2021 •
Investment Management and Financial Innovations
A reassessment of the relationship between working capital management and firm performance: evidence from non-financial companies in NigeriaWorking Capital Management and Business Performance.
Working Capital Management and Business Performance2021 •
The Journal of Risk Finance
Firm size and corporate financial-leverage choice in a developing economy: Evidence from Nigeria2008 •
South African Journal of Economic and Management Sciences
Determinants of the capital structure of Portuguese firms with investments in AngolaJournal of Risk and Financial Management
The Impact of Working Capital Management on Firm Profitability: Empirical Evidence from the Polish Listed Firms2014 •