Effect of Capital Structure on Financial Performance of Listed Consumer Goods Companies in Nigeria

Abstract

The broad objective of this study is to examine the effect of capital structure on financial performance of listed consumer goods companies in Nigeria. The study is anchored on the Pecking Order Theory. The study adopts the ex-post facto research design and draws on secondary data sourced from the annual reports and accounts for the period 2016-2025 of the fifteen (15) sampled firms out of the population of Nineteen (19) listed consumer goods companies in Nigeria. Data collected was analyzed using Multiple Panel regression model. Financial performance is measured using Return on Assets (ROA), while capital structure is proxied by equity ratio, short-term debt ratio, long-term debt ratio, and debt to total equity ratio. The findings showed that equity ratio has a positive and significant effect on return on assets, short term debt ratio has a negative and significant effect on return on asset, while both long-term debt ratio and debt to equity ratio has a negative and insignificant effect on return on asset of listed consumer goods companies in Nigeria. The study concludes amongst others that more use of equity positively impacts financial performance, which indicates its role in accelerating return on capital of consumer goods companies. The study recommends amongst others that companies should concentrate on maximizing their equity financing as this can go a long way in improving growth and financial steadiness through more investments in equity and improved retained earnings as it would lead to an upsurge in the financial performance of the listed consumer goods companies in Nigeria.