Effect of capital structure on the performance of corporate firms in Nigeria (a study of financial sector):- Nwanja, Chinyere J.

ABSTRACT

The aim of this study is to examine the effect of capital structure on the financial performance of First City Monument Bank Plc. However, the major objective of the study is so ascertain the effect of debt financing on profit after tax, to ascertain the effect of equity financing on profit after tax and to ascertain the effect of debt/equity ratio on the profit after tax. To achieve the above objective of the study, ex-post facto research design was adopted. The researcher adopted secondary data in getting the required information. In testing the hypotheses simple regression was used. The findings shows that debt financing, equity financing, debt-equity ratios are significant factors that determine the profit after tax used as a proxy for performance of the bank. So, it was deduced that equity financing played a better role than debt financing, secondly the contribution of both variables have a significant effect on financial performance of the firm under review. The researcher therefore recommends that in improving bank performance and shares of equity financing in the capital structure should be increased and finally, to avoid conflict of managers with shareholders interest, managers go for long run value maximization of the firm which satisfies both managers and shareholders interest.