Capital Structure Decisionson A Firm’s Value; A Study of Manufacturing Companies In Nigeria
Journal Title: IOSR Journal of Economics and Finance (IOSR-JEF) - Year 2018, Vol 9, Issue 3
Abstract
The capital structure decision of an entity enables it to have a capital mix which enhances maximization of the organisation’s value. The study aims at exploring the capital structure decision of manufacturing companies in Nigeria so as to establish the effect of capital structure decisionson maximum organisational value enhanement. The variables used as a proxy for capital structure include debt to; equaity ratio, total asset ratio, total asset ratio and total asset ratio while the variable used forfirms’ value is return on assets (ROA). The sample size used in this study includes 10 manufacturing listed firms in Nigeria and the analysis techniques used in the study is random sampling method. The data required is obtained from the financial statements of the listed manufacturing companies for the period of 2013-2017. The method of analysis in this study was multiple regression analysis model was used to estimate the relationship between capital structure and firm’s value. The result revealed that companies with debt and equity mix has higher value than companies with only equity as it significantly affect return on assets which support the traditional view of capital structure. Therefore, the study suggests that companies should ensure that there is a judicious mix of debt and equity in their capital structure which will reduce the weighted cost of capital (WACC) and on the long run enhance the organisations’ value.
Authors and Affiliations
Joshua A. A, Gbenedio A. E, Falola I. Y,, Oluwagbemi S. T, Lofinmakin B. A, Tams-Alasia O.
Keywords
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- EP ID EP414659
- DOI 10.9790/5933-0903016872.
- Views 219
- Downloads 0
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