Abstract
The instability and fluctuations in the financial performance of firms listed on the floor of the Nigerian Stock Exchange has continued to trigger researchers mind on the factors influencing it. In view of this, the study examined the impact of financial structure on financial performance of listed firms in Nigeria Stock Exchange. Data for the study were obtained from the audited annual report of the seventy-one sampled firms for a period of 10 years covering 2009 to 2018. Return on asset (ROA) was used as a measure of financial performance while long term debt to equity, long term debt and short term debt to total asset were used as financial structure variables. The study employed dynamic system generalized method moment (GMM) as technique of analysis and testing of hypotheses. The result shows that long term debt to equity ratio has positive and insignificant impact on ROA while short term debt to total assets ratio have negative and significant impact on return on assets. The study concludes that higher long term and short term debt in the financial structure influences the financial performance of listed firms in Nigeria Stock Exchange. The study recommends among others, managers of firms listed in the Nigeria Stock Exchanges in determination of optimal financial structure should seek for debt with less cost to the firms. Keywords : financial structure, financial performance, long term debt, short term debt, Nigeria Stock Exchange. DOI: 10.7176/RJFA/11-14-15 Publication date: July 31 st 2020
Highlights
Effective financial decision making requires an understanding of the goals and objectives of an organization
The investigation results indicated that short term debt has significant negative effect on the financial performance measured by return on assets (ROA), return on equity (ROE), and earning per share (EPS).The study focused on Malaysia firms which distinct from the current study that looked at listed firms in Nigeria
This study examined the impact of financial structure on financial performance of listed firms in the Nigeria Stock Exchange for the period 2009 to 2018
Summary
Effective financial decision making requires an understanding of the goals and objectives of an organization. The investigation results indicated that short term debt has significant negative effect on the financial performance measured by return on assets (ROA), return on equity (ROE), and earning per share (EPS).The study focused on Malaysia firms which distinct from the current study that looked at listed firms in Nigeria. The finding revealed that short term debt to assets has a positive effect on the financial performance improving the sample size could yield a different outcome.The study was carried out in Pakistan Securities Exchange which has a different Business economywith Nigeria Stock Exchange. Myers (1984), challenges the notion of an optimal financial structure based purely on the tradeoff of debt-related benefits and costs in a world of information asymmetry between corporate managers and investors He further observes that corporate financing practice does not conform to a simple trade off model and he suggests the existence of a pecking order among the financing sources used by firm.
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