Capital Structure Composition and Financial Performance: Empirical Evidence From Quoted Deposit Money Banks in Nigeria (Published)
This study investigates the effect of capital structure composition on the financial performance of deposit money banks in Nigeria. This study employs the ex post facto research design, and data were obtained for the selected deposit money banks from factbook covering 2009-2018 financial year. Data estimation was done using the Ordinary Least Square (OLS) techniques. Descriptive statistic, correlation, and time-series regression analysis were further conducted. Some residual diagnostic test and model selection criteria were employed to ascertain the good fit of the model using E-views 9 econometric package. Findings from the empirical analysis show that debt-equity ratio, debt-capital employed ratio, and equity-capital employed ratio have significant and positive correlation with return on total assets which is the surrogate for firm performance for the study period. The study recommends that in the face of trade-off in capital structure decision, DMBs should have an optimal mix of capital structure, and should also monitor the dynamics and level of leverage that could eliminate the tax shield and reduce return on total assets.
Keywords: Capital Structure, DMBs, Financial Performance