ABSTRACT

The study assessed the effect of capital structure on financial performance of building material firms in Nigeria. An ex-post facto research design was employed and data gotten from 8 out of 9 listed building material firms on the Nigerian stock exchange using a judgmental sampling technique. The specific objectives to this study is to examine the effect of capital structure (EQT, LTD & STD) on return on assets of building material firms in Nigeria. Secondly to determine the effect of capital structure (EQT, LTD & STD) on return on equity of building material firms in Nigeria. Again is to examine the effect of capital structure (EQT, LTD & STD) on earnings per share of listed building material firms in Nigeria. The study employed the use of panel regression (OLS) for analysis of data. Findings revealed that equity capital structure has a significant effect on the return on assets, return on equity and earnings per share of listed building material firms in Nigeria. Also, long term debt capital structure has no significant effect on the return on assets, return on equity and earnings per share of listed building material firms in Nigeria. Finally, short term debt capital structure has no significant effect on return on assets, return on equity and earnings per share of listed building material firms in Nigeria. It was recommended that listed building material firms should consider the need to ensure more equity capital combination on their financing decision. This should be done with due consideration of the cost of capital so as to reduce the negative effect of equity capital on the financial performance of  firms which is believed to be as a result of high agency cost. More long term debt should be used for financing building material firms’ investments. By so doing, the firms can spread the interest on debt liabilities over a period that will not be of burden to the firms in turn bring about a positive significant effect on the firms’ financial performance. Furthermore, firms should go for short term debts with low repayment interest. This will enable them have enough reserves for reinvestment which will burst the firms’ financial performance.