Effect of Financial Leverage on the Firm Value of Listed Consumer Goods Firms in Nigeria (Published)
The study investigated the effect of financial leverage on firm values of listed Consumer goods firms in Nigeria. The specific objectives of the study were to examine the effect of debt ratio, debt to equity ratio, interest coverage ratio, debt to EBITDA ratio, and debt to capital ratio (which are proxies for financial leverage) on firm values (proxied by market capitalization) of listed Consumer goods firms in Nigeria. The study adopted ex-post facto research design and secondary data were extracted from the annual reports of sampled Consumer goods firms in Nigeria for the period 2013 – 2022. The panel regression and correlation analysis were used for data analysis. Findings showed that debt ratio has a non-significant negative effect on the market capitalization of Consumer goods firms in Nigeria, Debt to equity ratio has a non-significant negative effect on the market capitalization of Consumer goods firms in Nigeria, interest coverage ratio has a non-significant positive effect on the market capitalization of Consumer goods firms in Nigeria. Debt to EBITDA ratio and Debt to capital ratio have a significant positive effect on the market capitalization of Consumer goods firms in Nigeria. The implication of the findings is that the financial leverage ratios studied have a significant effect on the firm value of the Consumer goods companies in Nigeria. The study concluded that financial leverage ratios have a significant effect on firm value in the sector. The study recommended that firms in the Consumer goods sector should ensure that the proportion of leverage to equity should be properly managed and controlled to prevent the result of diminishing effects on their firm’s value.
Keywords: Capital Structure, Debt Ratio, Financial Leverage, Market Value, Shareholders Wealth, debt to equity ratio, firm valuation.
An Empirical Analysis of Effect of Capital Structure on Firm Performance: Evidence from Microfinance Banks in Nigeria (Published)
Issues surrounding capital structure and performance which have been widely debated in the finance literature, yet there has not been consensus as to how composition of firm‘s capital impact on firm performance including Nigeria. Thus this study investigated the relationship between capital structure and firm performance in the microfinance banking subsector in Nigeria from 2009 to 2018. The study employed explained variables (debt to equity ratio, long term debt ratio and total debt ratio) representing capital structure and the explanatory variable (return on equity) representing firm performance. Descriptive statistics and regression technique were used for the analysis. The results revealed a negative and insignificant relationship between Debt to equity ratio and return on equity, a positive and insignificant relationship between Long term debt ratio and return on equity and a positive and significant relationship between Total debt ratio and return on equity. The results also indicated that F-statistic is 37.16701 with a probability of 0.026372 indicating that the combined effect of the explained variables on firm performance represented by return on equity is statistically significant. It is therefore recommended that microfinance banks in Nigeria and beyond should devise strategies that are effective to expand their debt profile in order to achieve better performance.
Keywords: Microfinance Banks, Return on Equity, Total debt ratio, debt to equity ratio, long term debt ratio