EFFECTS OF CAPITAL STRUCTURE ON FINANCIAL PERFORMANCE OF COMPANIES LISTED ON THE NIGERIAN STOCK EXCHANGE

Inaya, Lucky Salubi

Abstract


This study sought to investigate the effect of capital structure on financial
performance of companies listed on the Nigerian Stock Exchange. Data of
tax liabilities, asset structure, firm size and profitability was sourced from the Annual Reports and Accounts of the listed companies during the period
2006-2015. The data obtained were analyzed using the Ordinary Least
Square estimation technique via the Statistical Package for Social Sciences
(SPSS, 21.0 Version). The result showed that capital structure does not affect profitability and tax liabilities of firms but has effect on asset structure and firm size. On the basis of the findings , the study recommends that managers of firms should use the model specified to capture their appropriate leverage when making financial decisions. In addition, managers should minimize financial costs and maximize shareholders equity by adjusting their capital structure in response to assets structure and firm size. Although, the study found no significant relationship between capital structure and profitability and tax liability, the study recommends that managers should be careful while using debt as a source of finance. They should finance their activities with retained earnings and use debt as a last option.

Keywords: Capital Structure; Financial Performance; Asset Structure; Firm Size; Liabilities and Profitability.

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International Journal of Management Science Research ISSN ISSN 2536 – 605X(Print)

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