European Journal of Accounting, Auditing and Finance Research (EJAAFR)

EA Journals

Capital Structure

Effect of Capital Structure on Financial Performance of Quoted Manufacturing Companies in Nigeria (Published)

Capital structure is a mixture of the financing options a company uses to finance its investments. However, deciding on an optimal capital mix has been a huge task for most manufacturing companies. This paper therefore examined the effect of capital structure on financial performance of quoted manufacturing companies in Nigeria. The study covered ten companies for a period of seven years from 2013 to 2019. Panel data analysis was used to test the hypothesis. The independent variables used are total debt to total asset ratio (TDTAR), long-term debt to total assets (LDTAR), short-term debt to total assets (SDTAR) and total debt to total equity (TDTER) while the dependent variables are return on asset (ROA) and return on equity (ROE). The results of the study showed that SDTAR and LDTAR have positive but insignificant effects on ROA, and TDTAR has a negative significant effect on ROA and ROE respectively. Also, TDTAR and TDTER have negative insignificant effect on ROE. The study concluded that SDTAR, LDTAR, TDTER have no significant effect on ROA and ROE but TDTAR have effect on ROA. This study therefore recommended that firms should be cautious in accumulating debt that could eventually have adverse effects on their value and financial performance.

Keywords: Capital Structure, Return on Assets, Return on Equity, Total Assets, total debts

CEO Characteristics and Capital Structure in Listed Sub-Saharan African Firms (Published)

The study focuses of five CEO characteristics with the aim of discovering the possible link between these characteristics and the capital structures of the firms they are attributed to. The study applied parametric or non-parametric test (depending on the outcome of the normality test) to determine the nature of relationship between CEO characteristics and capital structure. Data for this study was obtained from three sub-Saharan African countries: Kenya (twenty companies), Nigeria (twenty-three companies) and South Africa (twenty-one companies) for a period of five years (2012 to 2016). CEO nationality characteristic (which is a proxy for international experience/competence for the CEO) was found to be significant to the capital structure of companies.

Keywords: CEO gender, CEO nationality, CEO share ownership, CEO tenure, Capital Structure, sub-Saharan Africa

Capital Structure and Earnings per Shares in Listed Conglomerates in Nigeria (Published)

This research work studied the effect of capital structure on earnings per shares of listed conglomerate firms in Nigeria. The objective of the study was to examine the effect of between Capital Structure and Earnings per Share of Conglomerate Firms in Nigeria. The secondary data are obtained from annual reports of companies, relevant literatures and Nigerian Stock Exchange Fact Books. The multiple regression analysis i.e Ordinary least square (OLS) was used to test the relationship between Capital Structure Indicators; Ratio of Total Debt to Equity (TDE), Ratio of Short Term Debt to Total Assets (STDTA) and Ratio of Long term Debt to Total Assets (LTDTA) and Firms’ financial performance indicator; Earnings per Shares (EPS). The result shows that all Capital Structure indicators have significant impact on the performance of firms. The study concluded that a well configured capital structure management function plays a vital role on the level of profitability of the conglomerate firms. The study then recommends that Nigerian firms should try to match their high market performance with real activities that can help make the market performance reflect on their internal growth and accounting performance.

Keywords: Capital Structure, Earnings per share, Total Assets, conglomerates, total debt.

Capital Structure: Definitions, Determinants, Theories and Link with Performance Literature Review (Published)

The theory of capital structure and its relationship with a firm’s value and performance has been a puzzling issue in corporate finance and accounting literature since the Modigliani and Miller theory (MM) (1958) argue that under the perfect capital market condition which assume that, if without bankruptcy cost and capital markets are frictionless, if without taxes, and without asymmetric information the firm’s value is independent from capital structure. According to MM theory, the only variables that determined firm value was its future earnings power (expected cash flow) and hence the capital structure decision is irrelevant. Since that time, several theories have been developed to explain the capital structure of a firm including the Pecking Order Theory, Trade off theory, and the Agency Cost theory. This paper will shed light on the concept of capital structure, its theories and link with firms’ performance.

Keywords: Capital Structure, Performance

An Empirical Study on the Relationship between Capital Structure and Corporate Performance in China’s Food and Beverage Industry (Published)

The listed companies in China’s food and beverage industry have good profitability and low risk. They have the characteristics of stable performance growth and broad space for development. These companies have always attracted the attention of many investors and have become a unique sector in the stock market. This paper firstly sort out literature review on impact mechanism between capital structure and firm performance, and then use 58 listed companies in China’s food and beverage industry from 2011 to 2015 as sample, meanwhile dividing the companies into high-growth and low-growth companies. Finally, the empirical test was conducted with fixed effect regression respectively. The empirical results show that there is a weak degree of negative correlation between asset-liability ratio and performance of listed companies in China’s food and beverage industry. It concludes that: China’s food and beverage companies prefer equity financing, failing to make full use of financial leverage, meanwhile there is a structural imbalance in the development of capital markets.

Keywords: Beverage Industry, Capital Structure, Corporate performance, Food

The Relationship of the Capital Structure and Financial Performance: Empirical Evidence of Listed Banks in Thailand (Published)

This paper aims to determine the relationship between capital structure and banks’ performance in Thailand. We utilize the quarterly data set containing firm-specific characteristics and profitability from 1997 to 2016. By employing the random effect model and robustness check to tackle the endogeneity problem, the result proves that capital structure is significant and negatively correlated with profitability which implies that pecking order theory is valid in data set used. Moreover, credit risk and liquidity risk significantly decrease the financial performance. Based on the result and the theoretical background, this paper would like to suggest that governments and banks should focus on controlling the credit process to reduce the non-performing loans. Moreover, they should pay attention to the fund allocation to avoid the shortage of funding which may be costly to banks. Also, while improving banks’ financial performance, banks’ managers should be aware of over utilizing debt which reduces banks’ profitability.

Keywords: Capital Structure, Financial Performance, Thai Banks

Good Corporate Governance, Capital Structure, and Firm’s Values : Empirical Studies Food and Beverage Companies In Indonesia (Published)

This study aims to determine the effect of good corporate governance and capital structure to the firm’s value on food and beverage companies listed on the Indonesia Stock Exchange. This study used a sample of 7 food and beverage companies listed in Indonesia Stock Exchange 2010-2014. Data type of research is secondary data obtained from the annual financial statements of the company. The analysis technique used is multiple linear regression methods using panel data random effect model approach. The results showed that simultaneous two independent variables, namely good corporate governance which is proxied by an independent commissioner, institutional ownership, managerial ownership and quality auditors, and the company’s capital structure together affect the value of the firm. Partially show that institutional ownership, managerial ownership and quality auditor affect the value of the firm. While independent and its capital structure does not affect the value of the firm.

Keywords: Capital Structure, Good corporate governance, firm’s value

The Effect of Capital Structure on the Financial Performance of Nigerian Quoted Conglomerates (Published)

This study investigated the effect of Nigerian banks’ capital structure on the performance of conglomerates quoted on the floor of the Nigerian stock exchange from 2011 to 2015. The paper identified four levels of dependent variables such as return on assets, ratio (ROA), return on equity ratio (ROE), assets turnover ratio (AT) and earnings per share whereas the independent variable is financial leverage. Essentially the paper sets out to determine the effect of capital structure on the above dependable variables hence return on assets of quoted conglomerates, return on equity of quoted conglomerates, asset turnover of the quoted conglomerates and on the earnings per share of quoted conglomerates. Descriptive statistics and the pooled ordinary least square (POLS) regression analytical method were used for data analysis. The study finds that capital structure has effect on both return on assets and asset turnover of the conglomerates but no effect on return on equity and earnings per share of the conglomerate. It is then concluded that an in-depth analysis of business factors which affect a particular industry should be considered so as to obtain the benefits of the debt-equity mix. The result of the study is in agreement with most previous studies on other sectors that discovered mixed results on the effect of capital structure on financial performance. It is therefore necessary to employ a critical analysis of the appropriate debt-equity mix suitable for the company.

Keywords: Capital Structure, Financial Leverage, POLS, ROA, ROE, conglomerates


The study is focused on the analysis of the determinants of capital structure of Nigeria companies for 2013. The cross-sectional least squares regression is applied to determine the impact of two independent variables on debt ratio. The independent variables are represented by company size and profitability. It is found that profitability is not a significant determinant and has a negative impact on leverage while the impact of company size was not confirmed in the model. The analysis of the determinants of corporate capital structure has valuable implications for finance managers who can make better capital structure decisions to maximise the wealth of the shareholders.

Keywords: Capital Structure, Firms in Nigeria


The main objectives of this empirical study are: to investigate which factors affect the textile firms of Pakistan and which type of capital structure theory does more prevail in textile sector of Pakistan. This empirical study is done by applying the panel data techniques in analyzing sample of 68 textile firms of Pakistan listed on Karachi Stock Exchange during 2006-2012. The determinants of this study like liquidity of firms, non debt tax shields like depreciation, more collateral net fixed assets, earnings volatility, size of firms, net commercial trade position and firms’ profits have impact on the capital structure choice.

Keywords: Capital Structure, Stock exchange and Pakistan, Textile firms

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