CAPITAL STRUCTURE AND COST OF CAPITAL OF MULTINATIONAL FAST GROWING CONSUMER GOODS COMPANIES IN NIGERIA
Keywords:
capital structure, multinational, FMCGs, WACCAbstract
This study examined the capital structure and cost of capital of multinational fast-moving consumer goods (FMCGs) companies in Nigeria. The six multinational fast-moving consumer goods (FMCGs) companies listed on the Nigerian Stock Exchange for a period of 10 years (from 2011-2020) was selected. Secondary method of data collection was adopted; data was sourced from the audited financial statements of the companies. This study applied the ex post facto research design. The study was anchored on agency theory and pecking order theory and data was analyzed using ordinary least square regression and descriptive statistics. The results showed that total debt to total asset ratio and long term debt to total assets ratio has a downward negative effect on the weighted average cost of capital (WACC), total debt to capital employed ratio has a positive significant effect on WACC and long term debt to shareholders’ equity ratio has a positive insignificant effect on the WACC of the multinational FMCGs. The study concludes that the mix of equity capital and debt capital in the capital structure could have both positive and negative effect depending on the nature and source of debt capital and the financial leverage of the multinational FMCGs and recommends that the companies should strive towards the alignment of interests between shareholders and agents to reduce agency costs. The companies should also pursue an optimal capital structure by concentrating on capital types that have a lesser impact on the cost of capital.
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