Capital Structure and Financial Performance of Consumer Goods Companies in Nigeria

Abstract

This study focused on the impact of capital structure on the performance of Nigerian consumer goods companies. The study considered the annual reports of fifteen consumer goods companies listed on the Nigerian stock exchange from 2011 to 2020. A fixed effect regression model was employed to examine the impact of capital structure on firms' performance. Therefore, company performance was measured using return on asset (ROA), return on equity (ROE), and earnings per share (EPS), while capital structure was measured using short term debt, equity shares ratio, and long term debt ratio. The findings show that two of the capital structure components studied (equity capital and long-term debt) had a positive substantial impact on selected Nigerian consumer goods companies' performance. The study recommends that consumer goods companies should adopt policies that encourage higher profit after tax, retained earnings, and low-interest long-term debt, because these factors can contribute to a positive significant improvement in the companys' performance and market capitalization value as revealed by the study.