The Impact of Financial Performance on Capital Structure Decisions of Selected Consumer Goods Companies Listed on the Nigerian Stock Exchange (2001-2019)

Abstract

The study examines the impact of financial performance on capital structure decisions of selected consumer goods companies listed on the Nigerian Stock Exchange (2000-2019), using panel data for both dependent and independent variables which were analyzed through fixed effect model and random effect model, pooled regression model, Hausman test and descriptive analysis. Pecking order theory was adopted as the bedrock of this study and the population of the study included ten consumer companies listed on the Nigeria stock exchange for nineteen years. Findings showed that financial performance has significant positive and negative effect on retaining earnings financing, but the possibility of greater ploughed back profit is higher when company’s financial performance increases. Similarly, financial performance has both significant positive and negative effect on equity finance decision of companies. The study recommended that decision on capital structure should be taken optimally by considering the cost of each capital structure since financial performance has significant effect on all the capital structure.