This study examines the effect of capital structure moderated by inflation rate on firm value in Nigeria using panel data from 152 publicly listed firms over the period 2015-2024. Employing fixed effects regression analysis with robust standard errors, the study finds that capital structure has a significant negative effect on firm value (β = -0.5234, p < 0.01), while inflation rate also negatively impacts firm value (β = -0.0234, p < 0.01). Critically, the interaction term between capital structure and inflation is negative and highly significant (β = -0.0456, p < 0.01), indicating that inflation amplifies the detrimental effect of leverage on firm value. The moderated model explains 61.23% of variance in firm value, representing a significant improvement over the direct effects model. Control variables including firm size, profitability, asset tangibility, and growth opportunities all demonstrate expected positive relationships with firm value. Comprehensive post-estimation diagnostics confirm model robustness. The findings suggest that firms should adopt dynamic, inflation-contingent capital structure policies, prioritizing conservative leverage during inflationary periods to maximize shareholder value.
Onipe Adabenege Yahaya (Sat,) studied this question.