CAPITAL STRUCTURE AND FINANCIAL PERFORMANCE OF CONSUMER GOODS FIRMS LISTED IN NIGERIA
Keywords:
Capital Structure, Firms’ Financial Performance, Long Term Debt to Equity, Return on Asset, Short Term Debt to Equity, Total Debt to EquityAbstract
This study examined the effect of capital structure on the firms’ financial performance of consumer goods firms listed in Nigeria. The specific objective was to assess the effect of short term debt to equity, long term debt to equity and total debt to equity on return on asset of consumer goods firms listed in Nigeria. The study adopted the ex-post facto research design and the population comprised of twenty-one listed consumer goods firms in Nigeria. The sample was purposively selected a sample size of 16 firms from the consumer goods sector of the Nigerian Exchange Group (NGX), from 2012-2022. The data were obtained from annual reports of the firms included in the sample. The data were analyzed using descriptive tools, correlational and regression analyses. The pooled ordinary least square regression technique was used in testing the hypotheses of the study. The results showed that: short term debt to equity ratio has a significant negative effect on the return on assets of consumer goods firms listed in Nigeria in Nigeria (p-value = 0.0003); long term debt to equity ratio has a non-significant positive effect on return on assets of consumer goods firms listed in Nigeria in Nigeria (p-value = 0.6002); total debt to equity ratio has a non-significant negative effect on return on assets of consumer goods firms listed in Nigeria in Nigeria (p-value = 0.4628). In conclusion, a high leverage ratio indicates a mismatch between short-term obligations and the firm's inability to generate sufficient cash flows. The study recommends that the finance department of consumer goods firms, particularly the Chief Financial Officer (CFO) and financial managers, prioritize the prudent management of short-term debt levels through careful monitoring of short-term borrowing activities, exploring alternative sources of financing with lower interest rates, and implementing effective working capital management practices to reduce reliance on short-term debt, thereby enhancing overall financial performance.
Downloads
Published
Issue
Section
License
Copyright (c) 2024 Journal of Global Accounting
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.
Articles submitted to JOGA should not have been published or are currently under review by another Journal. Kindly see the guide for the preparation of the manuscript for details. Successful submission of articles by author(s) for publication clearly implies that the work is not an infringement of any existing copyright warranty as JOGA reserves the right to be indemnified by the author(s) where any breach of such warranty is proven. For ease of dissemination and to ensure proper policing of use, papers and contributions become the legal copyright of JOGA once published unless otherwise agreed.
Permission clearance should be obtained by the author(s) where applicable for the use of any content of interest not originally created by them. This must be done before the submission of the article to JOGA. Failure to do so may lead to a lengthy delay in publication, as JOGA is unable to publish any article which has permissions pending. Thus, the rights JOGA requires are:
- Non-exclusive right to reproduce the material in the article or book chapters.
- Print and electronic rights.
- To use the material for the life of the work (for instance, there should be no time restrictions on the re-use of material).
Where tables, figures or excerpts of more than 250 words are reproduced from another source, it is expected that:
- Author(s) should obtain the necessary written permission in advance from any third-party owner of the copyright for the use in print and electronic formats of any of their text, illustrations, graphics, or other material in their manuscript. Permission must also be cleared for any minor adaptations of any work not originally created by the author(s). The author (s) should not assume that any content freely available on the web is free to use.
- Where the author adapts a significant number of any material, the author(s) must inform the copyright holder of the original work.
- Author obtains any proof of consent statements
- The author must acknowledge figure(s) and content adopted or adapted in work utilizing source(s) and further capture them in the list of references.
