Effect of Capital Structure on Performance of Companies: Empirical Evidence from an Emerging Country


JIDEOFOR, Ngozi Annastacia, Odoh, Cletus Okwuchukwu, Nwekwo, Ngozi Mabel. (Phd), Dr Anisiuba, Chika Anastesia, Dr Edith, Ogoegbunam Onyeanu

DOI10.5110/77. 1101               Page:   123-141           Vol: 19    Issue: 01   Year: 2024

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This paper investigates whether capital structure affects the performance of quoted firms in Nigeria. The Panel econometric techniques, fixed effects, and random effects were used to examine the impact of capital structure on the performance of firms quoted on the Nigeria Exchange Group during 2010-2022. Empirical results indicate mixed findings of capital structure measures on the performance indicators. Why the negative impact is more on the net profit and earnings per share, the effect on return on assets is moderate. This suggests that the chosen companies are highly leveraged, relying on substantial debt to finance their investments. This may hamper their ability to fulfill their financial commitments to shareholders. Once more, this overleveraging may increase the influence of the lenders, restricting the managers’ capacity to operate the business effectively and adversely affecting the company’s performance. Based on the findings, it is recommended that financial managers, lenders, and investors should consider the significant policy ramifications of this study and consider the consequences of leverage on performance before modifying debt levels. As a matter of urgency, the financial management should also determine the best capital structure to increase the firm’s worth. Debt covenants should only be imposed after carefully considering their effect on business performance. Finally, investors should consider the firm’s debt level before investing.


Capital Structure, Performance, Emerging Countries, Panel Techniques

Received: 04 January 2024

Accepted: 16 January 2024

Published: 23 January 2024