CAPITAL STRUCTURE ANALYSIS AND PERFORMANCE OF LISTED MANUFACTURING FIRMS IN NIGERIA

Authors

  • Emmanuel Onyewuchi Njoku Department of Financial Management Technology, School of Management Technology, Federal University of Technology, Owerri
  • O. T. Ebringa Department of Financial Management Technology, School of Management Technology, Federal University of Technology, Owerri
  • Erasmus Ejike Duru Department of Financial Management Technology, School of Management Technology, Federal University of Technology, Owerri

Keywords:

Capital structure, Debt-to-Equity Ratio, Performance, Return on Asset, Return on Equity, Manufacturing firms

Abstract

This research examines capital structure analysis and performance of Nigerian firms. Four (4) manufacturing firms in Nigeria were selected using judgmental sampling procedure over a twenty- five (25) year period with the aim of providing a critical analysis and the need for proper appraisal of funding/financing sources so as to enhance the wealth of the organizational constituencies. In achieving the above objective, multiple regression was employed as a test statistic to find out/analyze the effect and relationship of key variables such as long-term debt to equity (LTD/E), short-term debt to equity (STD/E) and two (2) control variables - size(S) and asset growth (AG) on Return on Equity(ROE) and Return on Asset (ROA). Secondary data was gotten from four (4) manufacturing firms namely Nestle Nigeria Plc, Vita Foam Plc, 7UP bottling company, and First Aluminum Plc over a period of 25 years (2000-2024). From the research results, we observed a positive relationship between return on equity (ROE) and short-term debt to equity ratio (STD/E) while adverse relationships were observed between long-term debt to equity ratio (LTD/E) and ROE, LTD/E and ROA and STD/E and ROA all taken individually. On a joint basis, the results confirmed that there is a positive and significant relationship between the components of capital structure and ROE and ROA respectively. The F-statistics (Model 1: Fcal. = 24.427 and Model 2: Fcal. = 70.811), as well as T-statistics (Model 1: Tcal.= -0.783 for LTD/E and Tcal.= 2.931 for STD/E; Model 2: Tcal.= -1.130 for LTD/E and Tcal.= 2.857 for STD/E) indicate the significance levels of the independent variables in explaining firm performance. The model’s explanatory power, as measured by the Adjusted R-Square (77.2% for Model 1 and 83.0% for Model 2), confirms the reliability of the findings. In conclusion, while capital structure decisions are critical to firm performance, their effects are not uniform across all components or firms. The study therefore recommends amongst others that Nigerian manufacturing firms are advised to strategically prioritize short-term debt in their financing mix; Firms should undertake rigorous cost-benefit analysis before assuming long-term liabilities, ensuring that such debt aligns with the firm’s investment horizon and revenue-generating potential.

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Published

2025-12-31

Issue

Vol. 11 No. 6 (2025): December

Section

Articles

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Copyright (c) 2025 Journal of Global Accounting

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How to Cite

CAPITAL STRUCTURE ANALYSIS AND PERFORMANCE OF LISTED MANUFACTURING FIRMS IN NIGERIA. (2025). Journal of Global Accounting, 11(6), 1 - 22. https://journals.unizik.edu.ng/joga/article/view/7396