FINANCIAL LEVERAGE AND ECONOMIC SUSTAINABILITY OF LISTED INDUSTRIAL GOODS FIRMS IN NIGERIA
Keywords:
Economic Sustainability, Financial Leverage, Total Debt to Capital Ratio, Total Debt to Equity Ratio, Total Debt to Asset RatioAbstract
The study examined the effect of financial leverage on the economic sustainability of listed industrial goods firms in Nigeria. The specific objective was to ascertain the effect of total debt to capital ratio, total debt to equity ratio, and total debt to asset ratio on the operating cashflow margin of listed industrial goods firms in Nigeria. Ex-post facto research design was used in the study. Thirteen listed industrial goods firms made up the population of the study from which a sample size of thirteen was selected using purposive sampling technique. Secondary data were sourced from the annual reports of the firms for thirteen, spanning 2012-2024. The descriptive analysis was done using measures of central tendency and dispersion. Test of hypotheses was carried out using panel estimated generalised least squares, which revealed the following: Total debt to capital ratio has a positive and significant effect on operating cashflow margin (β = 0.105262; p = 0.0334); Total debt to equity ratio has a positive and significant effect on operating cashflow margin (β = 0.045571; p = 0.0109); Total debt to asset ratio has a negative and significant effect on operating cashflow margin (β = -0.563339; p = 0.0021). In conclusion, when firms align their capital structure strategically, debt can become a tool for boosting operational performance and maintaining long-term viability. The study recommends that boards should approve financing policies that balance debt and equity in a way that sustains healthy leverage, enabling the firm to take advantage of the operational and tax benefits of debt without undermining shareholders’ equity interests.
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