Title: Capital Structure And Performance Of Nigeria Manufacturing Sector
Authors: EKPUKE, Dean Evwies and EHIEDU, Victor C Ph.D
Volume: 9
Issue: 5
Pages: 211-220
Publication Date: 2025/05/28
Abstract:
This study investigates the impact of capital structure on the performance of listed manufacturing firms in Nigeria over the period 2013 to 2023. The study proxies capital structure with Debt to Equity Ratio (DER), Debt to Asset Ratio (DAR), Return on Equity (ROE), and Leverage Ratio (RER), while firm performance is measured using Return on Investment (ROI). The manufacturing sector is vital to Nigeria's economic diversification, yet many firms continue to struggle with profitability and sustainability, largely due to suboptimal financing decisions. To empirically examine the relationship between capital structure and performance, the study employs panel data derived from the financial statements of ten listed manufacturing firms, as well as data from the Central Bank of Nigeria (CBN) statistical bulletins. The methodology adopts a quantitative approach, utilizing panel least squares regression analysis supported by robust diagnostic tests, including panel unit root tests and the Pedroni cointegration test to ascertain the long-run relationships among variables. The findings reveal that while DER, ROE, and RER do not have a statistically significant effect on ROI, DAR exhibits a significant and negative influence on performance, indicating that an excessive reliance on debt-financed assets can undermine returns in the manufacturing sector. The low R-squared value further suggests that capital structure alone does not explain much of the variability in ROI, implying the presence of other latent performance drivers. The study contributes to the ongoing discourse on optimal capital structure by offering practicalindication from aevolving economy perspective. It recommends a more balanced approach to financing, emphasizing the need for efficient debt management, diversified funding sources, and proactive policy support from regulatory institutions such as the CBN. Furthermore, the study underscores the essence of firm-specific strategic planning and macroeconomic stability in enhancing manufacturing performance. Despite certain limitations such as restricted firm sample size and sectoral scope, the study offers a foundation for further research into the dynamic interplay between financing and performance in emerging markets.