Capital Structure and Profitability of Listed Manufacturing Firms in Nigeria

Optimal capital structure mix that will enhance profitability remains a controversial issue among listed manufacturing firms in Nigeria. The study investigated the effect of capital structure mix on profitability of listed manufacturing firms in Nigeria. The study adopted an ex-post facto research design using panel data extracted from the 26 selected listed manufacturing companies in Nigeria out of 52 listed manufacturing companies in NEG as at 31st December, 2023. Purposive and stratified sampling techniques were used to select 26 listed manufacturing companies. Panel data were extracted from the annual reports of listed manufacturing companies in Nigeria from 2014 to 2023. Inferential statistics were used to analyze data. The study found that: Debt Equity Ratio, Capital Gearing Ratio, Interest Coverage Ratio and Firm Size have insignificant impact on Return on Asset with t-statistic of 1.21 (pv= 0.22), 0.07 (pv =0.942), 1.45(pv=0.148) and 1.14(pv=0.255) respectively. The debt-asset ratio has a significant influence on Return on Asset with t= -3.82 (pv=0.000). Wald statistic value of 20, 34 (pv =0.0011) showed that all capital structure variables have a joint effect on ROA. DER has a significant influence on ROE with t-statistic = -3.61 (p=0.000), whereas DAR, CGR, ICR and FS have an insignificant impact on ROE with t-statistic = 1.45 (pv=0.148); -0.06 (pv=0.953); 0, 74 (pv=0.461) and -1.41 (pv=0.158) respectively. The Wald test with a value of 15.97 (pv =0.000069) showed that all capital structure variables have a statistically significant influence on ROE. The study concluded that the capital structure mix has a significant influence on the profitability of the selected listed manufacturing firms in Nigeria. The study therefore recommended that cited manufacturing companies should optimally use the capital structure to improve their profitability.