Current Volume 9
Effects of Capital Structure on the Financial Performance of Listed Consumer Goods Companies in Nigeria
Abstract
Nigerian consumer goods companies operate in a challenging macroeconomic environment characterized by inflationary pressures, exchange rate volatility, and rising operating costs, which often constrain access to affordable financing. As a result, many firms rely heavily on debt, particularly short-term borrowing, to sustain operations. While debt financing may provide tax advantages and support expansion, excessive leverage increases financial risk and may erode profitability. This study therefore examined the effect of capital structure on the financial performance of listed consumer goods companies in Nigeria over a ten-year period (2014–2023). Adopting a longitudinal panel research design, data were obtained from the audited annual reports of seven sampled firms out of twenty listed companies, generating seventy firm-year observations. Descriptive statistics, correlation analysis, and panel multiple regression using E-Views 9.0 were employed to analyze the relationship between capital structure indicators and Return on Assets (ROA). The findings revealed substantial variations in leverage practices, with firms relying more on short-term debt than long-term financing. Correlation results showed generally weak associations between ROA and leverage measures. However, the Random Effects regression results indicated that only the debt-to-equity ratio (TDTE) had a statistically significant and negative effect on ROA, while total debt to total assets (TDTA), short-term debt (STDTA), long-term debt (LTDTA), and firm size were statistically insignificant. The results suggest that excessive reliance on debt relative to equity undermines profitability in the sector. The study concludes that although capital structure components do not collectively exert strong explanatory power on performance, maintaining an optimal debt-equity balance is crucial for safeguarding profitability. Therefore, firm managers, investors, and policymakers should adopt prudent leverage strategies and pay attention to broader determinants of performance such as operational efficiency, innovation, and market competitiveness.
Keywords
Capital Structure, Financial Performance, Listed Consumer Goods Companies, Nigeria.
Citations
IRE Journals:
Adebukola Idris, Shittu O. Ibrahim, Lawan Yahaya "Effects of Capital Structure on the Financial Performance of Listed Consumer Goods Companies in Nigeria" Iconic Research And Engineering Journals Volume 9 Issue 10 2026 Page 3910-3930
IEEE:
Adebukola Idris, Shittu O. Ibrahim, Lawan Yahaya
"Effects of Capital Structure on the Financial Performance of Listed Consumer Goods Companies in Nigeria" Iconic Research And Engineering Journals, 9(10)
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IRE Journals is an open access online journals established with an aim to publish high quality of research work in various diciplines. We have more than 6 years in publications. Over 2500+ papers already published.
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