EFFECT OF CAPITAL STRUCTURE ON THE VALUE OF LISTED SERVICE FIRMS IN NIGERIA
Keywords:
Capital market, Capital Structure, Debt, Equity.Abstract
The study examined effect of capital structure on the value of firm with evidence from the Nigerian capital market. This study was prompted by the need to undertake a quantitative examination of capital structure and the capital market in Nigeria’s service sector. Two research questions and a corresponding two research hypotheses were formulated for the study. Ex-post facto research design was employed in the study. The independent variable: capital structure was decomposed into equity ratio and debt_to_equity ratio while the dependent variable was proxied using enterprise value. The sample was restricted to only 16 quoted service companies on the Nigerian exchange group for the period, 2009 to 2023. Data were analyzed using Ordinary least square (OLS) regression with the aid of STATA 14.2. The study found that Equity Ratio (ER) significantly affect the Enterprise value of selected service firms listed on the Nigerian Exchange Group. The study also found no significant effect of debt_to_equity ratio on the Enterprise Value of selected service firms listed on the Nigerian Exchange Group. Consequent on the findings, the study recommends amongst others that Service firms should prioritize optimizing their equity ratio to enhance enterprise value, as higher equity contributions significantly impact firm valuation.
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