Determinants of capital structure in Nigeria’s quoted consumer goods firms

Abstract

Although the factors that influence capital structure have been the subject of numerous prior studies, the topic of what determines the best financing combination to maximize a firm's value is still one of the most contentious in corporate finance. Furthermore, a large number of earlier research paid little attention to emerging countries and instead concentrated mostly on developed markets. To fill the gap, this study examined the factors that influence capital structure decisions in quoted Nigerian consumer goods companies that are publicly traded. The study used secondary data from the annual reports of 15 of the mentioned corporations, spanning ten years from 2011 to 2020. The association between the leverage ratio and the five explanatory variables in the model was investigated using the Panel Least Square regression approach. The study's findings showed that while growth is not statistically significant, firm size, non-debt tax shield, and firm growth all positively and significantly affect leverage. Furthermore, tangibility and profitability are negative and have a large impact on leverage. Based on the study's findings, it can be said that the capital structure of listed consumer products companies in Nigeria is significantly influenced by factors such as size, non-debt tax shield, profitability, and tangibility. The study then suggested that financial managers of listed firms in Nigeria should deploy effective measures to boost these important variables to have an optimum financing mix for their firms.