American Journal of Economics, Finance and Management
Articles Information
American Journal of Economics, Finance and Management, Vol.1, No.5, Oct. 2015, Pub. Date: Jun. 24, 2015
Capital Structure and Profitability: A Critical Analysis of Quoted Manufacturing Companies in Nigeria
Pages: 369-376 Views: 2575 Downloads: 3137
Authors
[01] Aransiola Solomon Yinka, Department of Accounting and Finance, Crawford University, Faith City, Igbesa, Ogun State, Nigeria.
[02] Aransiola Oluwadetan, Department of Accounting and Finance, Crawford University, Faith City, Igbesa, Ogun State, Nigeria.
Abstract
Capital structure decision is a vital one in any organisation that is striving to achieve profitability. Therefore, the main objective of this study is to examine the effect of capital structure on performance of quoted manufacturing companies in Nigeria. In achieving this, Secondary data source was employed; data was collected from the Nigerian stock exchange factbook and the annual report of the selected companies. Due to the nature of the study, Panel data analysis was used. Both descriptive and inferential methods were used to analyse the data collected. Correlation analysis was used to determine the relationship between the variables while regression analysis was used to determine how the independent variable affects the dependent variable. The study established that there is a negative relationship between capital structure and profitability performance of quoted manufacturing companies in Nigeria. Recommendations were made that: Performance standards should be established and communicated to the investors (members of the companies), the optimal capital structure which lowers cost of capital and reduce risk associated with debt finance should be pursued, and inadequate capital to achieve firm’s financial performance might also pose a challenge. Therefore, banks, other financial institutions and government should promote facilities to increase companies’ profitability performance.
Keywords
Capital Structure, Profitability, Performance, Quoted, and Manufacturing Companies
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