Profitability Implications Of Capital Structure: A Study Of Consumer Goods Companies Quoted In This Nigerian Stock Market From 2006-2015

ABSTRACT

This study examined the profitability implications of capital structure; with emphasis on consumer goods companies quoted on the Nigerian Stock market for a period of ten years from 2006-2015 . The objective of the study was to find the effect of profitability on capital structure using performance proxies such as ROA and ROE. For this study, ex-post facto research design was adopted. The method of analysis was the use of ordinary least square regression model. Panel data regression analysis was adopted using the fixed effects model to test the hypotheses. The sample sue consisted of 15 companies with a total of 150 observations. The independent variables used for the study were total debt to total asset (TDTA), long term debt to total asset (LTDTA), short term debt to total asset (STDTA), degree of financial leverage (DFL) and equity share capital (ESC). A key finding of this study was that debts which are long term in nature have contributed positively to the growth of the industry in the last ten years. The implication of the finding was that any debt which is not of long term should not be considered as capital structure for consumer goods in Nigeria. The study concluded that short term debts had negatively affected the industry. The study recommended that long term debts conditions should be made more attractive to consumer goods companies in Nigeria. This will provide higher returns.