DEBT TO EQUITY RATIO AND CORPORATE PERFORMANCE OF LISTED COMMERCIAL BANKS IN NIGERIA
Keywords:
Corporate Performance, Debt to Equity Ratio, Earnings Before Tax Margin, Equity Ratio, Short-Term Debt to Equity RatioAbstract
The study examined the effect of debt to equity ratio on the corporate performance of listed commercial banks in Nigeria. The specific objective was to ascertain the effect of long-term debt to equity ratio and short-term debt to equity ratio on the earnings before tax margin of listed commercial banks in Nigeria. Ex-post facto research design was used in the study. From a population of thirteen (13) listed commercial banks in Nigeria, a sample size of nine (9) was obtained using purposive sampling technique. Secondary data for the study were gotten from the financial statements of the banks for a period of twelve years which spanned across 2012 to 2023. Data analyses were done in three phases: descriptive test, robustness analysis and test of hypotheses. The Panel Estimated Generalised Least Square method which was conducted for hypotheses testing revealed that: long-term debt to equity ratio has a non-significant negative effect on earnings before tax margin of listed commercial banks in Nigeria (β = -0.000967; p-value = 0.7617); short-term debt to equity ratio has a non-significant positive effect on earnings before tax margin of listed commercial banks in Nigeria (β = 0.005427; p-value = 0.5606). In conclusion, the study found that debt to equity ratio does not significantly affect the corporate performance of commercial banks in Nigeria. The study recommended that the Treasury Department in Nigerian commercial banks should however focus on maintaining an optimal debt ratio by improving equity liquidity and reducing the dependence on borrowings in order to enable the banks have more consistent profitability and reduce the risk of financial instability.
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.
