The debt-to-equity ratio of a firm determines how cash flows will be shared between debt holders and equity holders. In reality, capital structure of a firm is difficult to determine. Financial managers are difficult to exactly determine the optimal structure. The main objective of this study is to determine the effect of capital structure on the performance of quoted Manufacturing firms in Nigeria. The study used multiple regression analysis of the ordinary least square analysis in testing the hypothesis considered in this study, and the statistical analysis was done using SPSS. The result reveal that, Leverage has significant effect on the performance of quoted Manufacturing firms in Nigeria showing that firm that has high profitability and good performance have less debt. It is therefore recommended that, management of quoted manufacturing firms should work very hard to improve the leverage of their quoted Manufacturing firms in order to increase the returns on equity, return on assets and investment. They can do that by ensuring that capital structure is optimal.
TABLE OF CONTENTS
Title Page i
Certification ii
Dedication iii
Acknowledgement iv
Abstract v
CHAPTER ONE
INTRODUCTION
1.1 Background of the study 1
1.2 Statement of the problem 6
1.3 Objectives of the study 7
1.4 Justification of the study 7
1.5 Research questions 9
1.6 Statement of hypothesis 10
1.7 Scope of the study 10
1.8 Definition of terms 11
CHAPTER TWO
LITERATURE REVIEW
2.0 Introduction 13
2.1 Conceptual review 14
2.1.1.1 Concept of capital structure 14
2.1.1.2 Importance of capital structure 16
2.1.1.3 Factors influencing the choice of capital structure 17
2.1.2 Capital structure and cost of capital 19
2.1.3 Concept of firm performance 20
2.1.3.1 Measurement of firm performance 21
2.1.4 Capital structure and financial gearing 24
2.1.5 Types of leverage 26
2.1.6 Capital structure and firm performance 29
2.2 Theoretical review of the study 33
2.2.1 Exogenous growth theory 33
2.2.2 Capital structure theory 34
2.2.3 Trade-off theory of capital structure 34
2.2.4 Pecking order Theory 35
2.2.5 Agency cost theory 35
2.3 Empirical review of the study 36
CHAPTER THREE
RESEARCH METHODOLOGY
3.1 Research design 43
3.2 Population of the study 43
3.3 Sample technique and Sample Size 43
3.4 Sources of data 44
3.5 Model Specification 44
3.6 Measurement of Variables 45
3.7 Method of Analysis 45
CHAPTER FOUR
DATA PRESENTATION AND ANALYSIS
4.1 Introduction 46
4.2 Data presentation 47
4.2.1 Determinants of effect of leverage on the performance of Nigeria quoted manufacturing firms 51
4.3 Effect of leverage on return on equity of Nigeria quoted manufacturing firms 52
4.4 Discussions of findings 53
CHAPTER FIVE
SUMMARY, CONCLUSION AND RECOMMENDATIONS
5.1 Summary 56
5.2 Conclusion 57
5.3 Recommendations 57
BIBLIOGRAPHY 59
APPENDIX 66
