Effect of Capital Structure on Financial Performance of Listed Manufacturing Firms in Nigeria:- Eme Nwachukwu I

ABSTRACT

The study investigated effect of capital structure on financial performance of listed manufacturing firms in Nigeria. It adopted ex post facto research design and extracted data from annual reports of selected listed firms from 2014 to 2018. The study return on assets, return on equity and profit after tax as financial performance proxies while equity and long term debts were used as joint variables for capital structure. It engaged panel last squares regression technique of data analysis to ascertain the relationship ofthe variables. It was established that 50.7% of the total variation in return on assets, 72.5% of the total variation of return on equity and 85% of the total variation in profit after tax was attributable to capital structure. It also found that there is positive significant relationship between long term debts and return on assets, return on equity and profit after tax of listed manufacturing firms. Equity was found to have positive significant relationship profit after tax of listed manufacturing firms. The study further established that capital structure has significant effect on return on assets, return on equity and profit after tax in each of the hypothesis tested. The study therefore concludes that capital structure has significant effect on the financial performance of listed manufacturing firms in Nigeria and recommended that management of listed firms should utilize shareholders fund efficiently in order to generate sufficient returns on assets, management of listed firms should not rely more on borrowed funds at the expense of shareholders so as to equally provide returns to equity holders and they should maintain an appropriate mix of equity and debts to generate profit.