Abstract
This study assesses the impact of capital structure on investment opportunity growth, using listed pharmaceutical firms in Nigeria. The main objective of the study is to ascertain the level to which capital structures influences the investment opportunity growth of listed pharmaceutical firms in Nigeria. The methodology employed is the use of secondary data and the ex-post facto research design. The population of the study is all 7 pharmaceutical firms listed on the Nigerian Stock Exchange as at 31st December, 2013. The study used regression as a tool of analysis. Findings show that Short term debt, total debt and performance were found to have significant, negative and strong effect on investment growth opportunity of Listed Pharmaceutical firms in Nigeria, while long term debt have no effect on investment growth opportunity of Listed Pharmaceutical firms in Nigeria, within the sturdy period. The study recommends that pharmaceutical firms should maintain a minimal level of short term debt because tying down too much of it current assets will reduce investment opportunity, also the management of listed Pharmaceutical firm should increase the level at which the organization uses long term debt to finance its business activities, as this may go a long way in increasing the investment opportunity potentials of the organizations, we also recommend that mmanagement should reduce the combination of its short term debt and long term debt and channel such to a highly profitable investment so that so that it will encourage them to invest more in other business opportunity that will bring more fortune to the business and shareholders at largemore room.
Highlights
Capital structure explains how a company has financed its overall operations and growth by using diverse sources of funds
This is followed by the presentation of result, analysis and interpretation of the data collected for the purpose of testing the model used in this study
Long term debt has no significant influence on investment growth opportunity of listed Pharmaceutical firms, it is concluded that any firm that is highly levered is likely to have no significance changes in their investment growth opportunity
Summary
Capital structure explains how a company has financed its overall operations and growth by using diverse sources of funds. The novel theories of financial structure were posed in late 1950s and precisely after the publication of the famous paper written by Modigliani & Miller (1958) and the presentation of irrelevance proposition. They presupposed in their theory that every company has a certain set of expected cash flows. When a company identifies a certain ratio of its liabilities and equities to finance its assets, it is trying to make decisions about how to divide cash flows mentioned among different investors. Modigliani & Miller (1958) concluded that the liabilities and capital structure of a company do not affect its market value (Alinezhad & Taghizadeh, 2012)
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