CAPITAL STRUCTURE AND FINANCIAL PERFORMANCE OF CONSUMER GOODS FIRMS LISTED IN NIGERIA

Authors

  • Victor C. Aghaebe Department of Accountancy, Nnamdi Azikiwe University, Awka, Nigeria
  • Patricia Chinyere Oranefo Department of Accountancy, Nnamdi Azikiwe University, Awka, Nigeria

Keywords:

Capital Structure, Firms’ Financial Performance, Long Term Debt to Equity, Return on Asset, Short Term Debt to Equity, Total Debt to Equity

Abstract

 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.

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Published

2024-04-26

How to Cite

Aghaebe, V. C., & Oranefo, P. C. (2024). CAPITAL STRUCTURE AND FINANCIAL PERFORMANCE OF CONSUMER GOODS FIRMS LISTED IN NIGERIA. Journal of Global Accounting, 10(1), 33–61. Retrieved from https://journals.unizik.edu.ng/joga/article/view/3626

Issue

Vol. 10 No. 1 (2024): April

Section

Articles

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Copyright (c) 2024 Journal of Global Accounting

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