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.
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