Research Article
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Year 2024, Volume: 11 Issue: 1, 19 - 44, 15.01.2024

Nurudeen Yisau Adesoji Oke Modinat Odukoya

https://doi.org/10.55026/jobaf.1400273

Abstract

Project Number

YNS-OKE-ODU-12-23-01

References

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  • Ali, S., Rangone, A. & Farooq, M. (2022). Corporate Taxation and Firm-Specific Determinants of Capital Structure: Evidence from the UK and US Multinational Firms. Journal of Risk and Financial Management, 15: 55. https:// doi.org/10.3390/jrfm15020055
  • Alipour, M., Mohammadi, M. F. S. & Derakhshan, H. (2015). Determinants of Capital Structure: An Empirical Study of Firms in Iran. International. Journal of Law and Management, 57(1), 53-83.
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  • Herenia, G. P., Christian, M. M. & Ricardo, P. M. (2019). Determinants of Capital Structure: An Empirical study of the Manufacturing sector at Ecuador. 64(2), 0-0.
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Determinants of capital structure in Nigeria’s quoted consumer goods firms

Year 2024, Volume: 11 Issue: 1, 19 - 44, 15.01.2024

Nurudeen Yisau Adesoji Oke Modinat Odukoya

https://doi.org/10.55026/jobaf.1400273

Abstract

Although the factors that influence capital structure have been the subject of numerous prior studies, the topic of what determines the best financing combination to maximize a firm's value is still one of the most contentious in corporate finance. Furthermore, a large number of earlier research paid little attention to emerging countries and instead concentrated mostly on developed markets. To fill the gap, this study examined the factors that influence capital structure decisions in quoted Nigerian consumer goods companies that are publicly traded. The study used secondary data from the annual reports of 15 of the mentioned corporations, spanning ten years from 2011 to 2020. The association between the leverage ratio and the five explanatory variables in the model was investigated using the Panel Least Square regression approach. The study's findings showed that while growth is not statistically significant, firm size, non-debt tax shield, and firm growth all positively and significantly affect leverage. Furthermore, tangibility and profitability are negative and have a large impact on leverage. Based on the study's findings, it can be said that the capital structure of listed consumer products companies in Nigeria is significantly influenced by factors such as size, non-debt tax shield, profitability, and tangibility. The study then suggested that financial managers of listed firms in Nigeria should deploy effective measures to boost these important variables to have an optimum financing mix for their firms.

Keywords

Debt financing Tangibility Profitability Non-debt Tax shields leverage ratio

Ethical Statement

Hereby, we consciously assure that for the manuscript, the following is fulfilled: 1) This material is the authors' original work, which has not been previously published elsewhere. 2) The paper is not currently being considered for publication elsewhere. 3) The paper reflects the authors' research and analysis in a truthful and complete manner. 4) The paper properly credits the meaningful contributions of co-authors and co-researchers. 5) The results are appropriately placed in the context of prior and existing research. 6) All sources used are properly disclosed (correct citation). 7) All authors have been personally and actively involved in substantial work leading to the paper, and will take public responsibility for its content.

Supporting Institution

Nill

Project Number

YNS-OKE-ODU-12-23-01

Thanks

We thank the JOBAF editorial board in anticipation of its review of our research article

References

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  • Aggarwal, D. & Padhan, P. C. (2017). Impact of Capital Structure on Firm Value: Evidence from Indian Hospitality Industry. Theoretical Economics Letters, 7(4), 982-1000.
  • Ahmad Mohammad, O. G. (2015). The Determinants of Capital Structure: Empirical Evidence from Kuwait. European Journal of Business, Economics and Accountancy, 3(6), 2056-6018.
  • Ajao, O. S. & Ema, U. (2012). Determinants of Capital Structure in Nigeria Firms. 2, 10-21.
  • Akintoye, I. R. (2008). Sensitivity of Performance to Capital Structure: A Consideration for Selected Food and Beverages Companies in Nigeria. Journal of Social Sciences, 7(1), 29-35.
  • Akinyomi, O. J. (2016). Effect of Capital Structure on Firms Performance: Evidence from Nigerian Manufacturing Company. International Journal of Innovative Research and Studies. 2(9), 2319-9725.
  • Akinyomi, O. J. & Olagunju, A. (2013). Determinants of Capital Structure in Nigeria. International Journal of Innovation and Applied Studies, 3(4) 999-1005.
  • Ali, S., Rangone, A. & Farooq, M. (2022). Corporate Taxation and Firm-Specific Determinants of Capital Structure: Evidence from the UK and US Multinational Firms. Journal of Risk and Financial Management, 15: 55. https:// doi.org/10.3390/jrfm15020055
  • Alipour, M., Mohammadi, M. F. S. & Derakhshan, H. (2015). Determinants of Capital Structure: An Empirical Study of Firms in Iran. International. Journal of Law and Management, 57(1), 53-83.
  • Amatya, K. (2020). Determinants Of Capital Structure in Canadian Non-Financial Firms: A Recent Study. Master of Science in Management Thesis, Toronto, Ontario, Canada.
  • Aryeetey, E. (1998). Informal Finance for Private Sector Development in Africa. The African Development Bank, Abidjan. (41).
  • Aryeetey, E. A., Baah-Nuakoh, T., Duggleby, H. Hettige & W.F. Steel. (1994). Supply and Demand for Finance of Small-Scale Enterprises in Ghana. The World Bank, Washington DC. (251).
  • Aremu, M. A., Ekpo, I. C., Mustapha, A. M. & Adedoyin, S. I. (2013). Determinants of Capital Structure in Nigeria Banking Sector. International Journal of Academic Research in Economics and Management, 2(4), 27-43.
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  • Brounen, S. & Eitchholtz, P. M. (2001). Capital Structure Theory: Evidence from European Properties Companies Capital Offerings. Real Estate Economics, 21(4).
  • Chechet, I. L., Garba, S. L. & Odudu, A. S. (2013). Determinants of Capital Structure in the Nigerian Chemical and Paint Sector. International Journal of Humanities and Social Sciences, 3(15): 247-263.
  • Chandrasekharan, C. V. (2012). Determinants of Capital Structure in the Nigerian Listed Firms. International Journal of Advanced Research in Management and Social Sciences, 1(2), 108-133
  • Chang, C., Lee, A. C. & Lee, C.F. (2009). Determinants of Capital Structure Choice: A Structural Equation Modeling Approach. The Quarterly Review of Economics and Finance, 49(2), 197-213.
  • Dada, A. O. & Ghazali, Z. B. (2016). The Impact of Capital Structure on Firm Performance: Empirical Evidence from Nigeria. Journal of Economics and finance, 7(4), 23-30.
  • Dahiru, I. (2016). Capital Structure and Financial Performance of Listed Manufacturing Firms in Nigeria. A Dissertation Submitted to the School of Postgraduate Studies, Ahmadu Bello University Zaria.
  • Drobetz, W. & Fix, R. (2003). What are the Determinants of the Capital Structure? Some Evidence for Switzerland, University of Basel. WWZ/ Department of Finance, 4/03.
  • Fanen, A.K. & Alematu, A. (2021). Determinants of Capital Structure in the Nigeria Manufacturing Sector. AE-Funai Journal of Accounting Business and Finance, 2635-392X.
  • Friend, I. & Larry H.P. Lang. (1988). An Empirical Test of the Impact of Managerial Self-interest on Corporate Capital Structure. The Journal of Finance, 43(2): 271-281.
  • Gajurel, D. P. (2006). Macroeconomic Influences on Corporate Capital Structure. Social Science Research Network, 1-8. http://dx.doi.org/10.2139/ssrn.899049
  • Gill, A., Nahum, B., Chenping, P. & Smita, B. (2009). The Determinants of Capital Structure in the Service Industry: Evidence from United States. The Open Business Journal, 2(1), 48-53.
  • Graham, J. R., Hazarika, S. & Narasimhan, K. (2011). Financial Distress in the Great Depression. Financial Management, 40(4), 821-844.
  • Guney, Y., Li, L. & Fairchild, R. (2011). The Relationship Between Product Market Competition and Capital Structure in Chinese Listed Firms. International review of financial analysis, 20(1), 41-51.
  • Hall, G.C., Hutchinson, P.J. & Nicos, M. (2004). Determinants of the Capital Structures of European SMEs. Journal of Business Finance and Accounting, 31(5 & 6), 711-728.
  • Harris, M. & Raviv, A. (1991). The Theory of Capital Structure. Journal of Finance, 46(1), 297-355.
  • Heshmati, A. (2001). The Dynamics of Capital Structure: Evidence from Swedish Micro and Small Firms. Research in Banking and Finance, 2, 199–241.
  • Herenia, G. P., Christian, M. M. & Ricardo, P. M. (2019). Determinants of Capital Structure: An Empirical study of the Manufacturing sector at Ecuador. 64(2), 0-0.
  • Hernandez, C. & Rios, H. (2012). Determinantes de la estructura financier en la industria manufacturera: la industria de alimentos. Analisis Economico, 27(65), Universidad Autonoma Metropolitana Azcapotzalco, 101-121. Huang S.G. H. & Song F.M. (2006). The Determinants of Capital Structure: Evidence from China. China Economic, 17, 14-35.
  • Huang, S. & Song, F. (2002). The Determinants of Capital Structure: Evidence from China, Working Paper, The University of Hong Kong. 25.
  • Ibrahim, M. (2017). Capital Structure and Firm Value in Nigerian Listed Manufacturing Companies: An Empirical Investigation using Tobin’s Q model. International Journal of Innovative Research in Social Sciences and Strategic Management Techniques, 4(2), 112-125.
  • Igbinosa, S. O. & Chijuka, I. M. (2014). The Determinants of Capital Structure of Listed Firms in Nigeria. European Journal of Accounting, Auditing and Finance Research; 2(10), 96-111.
  • Inanga, E. L. & Ajayi, C. A. (1999). Accountancy. Lagos: The CIBN Press limited.
  • Jacinta, C. P., Mahfuzur. R. & Selvam. S. (2017). The Determinants of Capital Structure: Evidence from Public Listed Companies in Malaysia, Singapore and Thailand.
  • Jensen, M. C. & Meckling, W. (1976). Theory of the Firm: Managerial Behavior, Agency Costs and Ownership Structure. Journal of Financial Economics, 3: 305-360.
  • Kalagbor, G. K., Okoba, D. & Amah, C. (2021). Capital Structure and Performance of Listed Manufacturing Firms in Nigeria. Journal of Social and Administrative Sciences Studies. (5) 112-120.
  • Kennon, J. (2010). An Introduction to Capital Structure; Why Capital Structure matters to your Investment.
  • Kennon, J. (2018). An Introduction to Capital Structure: Why Capital Structure matters to your Investments. [Online] Available: www.about.com.
  • Kibrom, M. F. (2010). The Determinants of Capital Structure. Evidence from Commercial Banks in Ethiopia.
  • Kilindo, A. L. (2019). Financial Development, Financial Structure and Economic Growth in Tanzania. International Journal of Management and Economics Invention, 5(8), 2088-2095
  • Köksal, B. & Orman, C. (2015). Determinants of Capital Structure: Evidence from a Major Developing Economy. Small Business Economics, 44(2), 255-282 URL: https://www.jstor.org/stable/43553049
  • Kraus, A. & Litzebnerger, R. (1973). A State-Preference Model of Optimal Financial Leverage. Journal of Finance, 28, 911-922.
  • Lawal, B. A., Edwin, T. K., Kiyanjui, M. W. & Adisa, M. K. (2014). Effects of Capital Structure on Firms Performance: Empirical Study of Manufacturing Companies in Nigeria. Journal of Finance and Investment Analysis, 3(4), 39-57.
  • Leary, M. T. & Roberts, M.R. (2010). The Pecking Order, Debt Capacity, and Information Asymmetry. Journal of Financial Economics, 95, 332-355.
  • Leland, H. & Pyle, D. (1977). Informational Asymmetries, Financial Structure and Financial Intermediation. Journal of Finance, 32, 371387.
  • Lim, T.C., (2012). Determinants of Capital Structure Empirical Evidence from Financial Services Listed Firms in China. International Journal of Economics and Finance, 4(3), 191-203.
  • Lindberg, F & Johansson, R. (2022). Determinants of Capital Structure. An International Business Degree Project, Umeå University, Sweden.
  • Magara, M. (2012). Capital Structure and its Determinants at the Nairobi Securities Exchange.
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There are 91 citations in total.

Details

Primary Language English
Subjects Financial Institutions
Journal Section Makaleler
Authors

Nurudeen Yisau 0000-0002-4131-6621

Adesoji Oke This is me 0000-0002-5558-7481

Modinat Odukoya This is me 0009-0003-3088-6607

Project Number YNS-OKE-ODU-12-23-01
Publication Date January 15, 2024
Submission Date December 6, 2023
Acceptance Date January 12, 2024
Published in Issue Year 2024 Volume: 11 Issue: 1

Cite

APA Yisau, N., Oke, A., & Odukoya, M. (2024). Determinants of capital structure in Nigeria’s quoted consumer goods firms. Journal of Banking and Financial Research, 11(1), 19-44. https://doi.org/10.55026/jobaf.1400273
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