Effect of Capital Structure on Financial Performance of Listed Manufacturing Firms in Nigeria

There exists divergence of opinion in the literature on the nature and extent of relationship between capital structure and firms financial performance. Empirical studies on this have documented inconsistent and inclusive findings thereby providing an incentive for further studies to be conducted using different dataset and methodology of analysis to confirm or disprove some of the previous results. This study investigated the impact of capital structure on financial performance of listed manufacturing firms in Nigeria. The study formulated four hypotheses and used generalized least square multiple regression to analyse the panel data extracted from the annual reports and accounts of 31 sampled firms for the period 2009 to 2014. The study found that total debt, long-term debt and short-term debt have significant impact on the financial performance of listed manufacturing firms in Nigeria. The study also found that total debt to total equity has no significant effect on the financial performance of the firms. In view of the findings, the study recommended among others that the management of listed manufacturing firms should work very hard to increase the short term debt to total assets component of their capital structure, since it has positive impact on their financial performance. Also, the firms should reduce the level of total debt to total assets and long term debt to total assets in their capital structure components, because they affect their financial performance negatively