Title: Financing Decisions And Financial Performance Of Listed Manufacturing Firms In Nigeria
Authors: AYEWUMI, Ezonfade Fredrick , OKOLIE, Joseph Obi , Prof. ONUORAH, Anastasia Chi-Chi (F, CIFIAN)
Volume: 10
Issue: 1
Pages: 175-185
Publication Date: 2026/01/28
Abstract:
This study explores the influence of financing decisions on the financial performance of listed manufacturing firms in Nigeria between 2015 and 2024. Adopting an ex-post facto research design, it analyzes panel data derived from the audited financial statements of 15 purposively selected firms listed on the Nigerian Exchange Group. Financing decisions are assessed using four key indicators: Debt Financing Ratio (DFR), Equity Financing Ratio (EFR), Debt-to-Equity Financing Ratio (DTEFR), and Interest Coverage Ratio (ICR). Firm performance is measured using Return on Assets (ROA). The analysis employs panel least squares regression with a random effects model, supported by descriptive and diagnostic tests. Findings show that both DFR and EFR have statistically significant and positive effects on ROA, indicating that thoughtful use of debt and strategic equity financing can enhance firm performance. While DTEFR also shows a positive relationship with ROA, it is statistically insignificant, suggesting that the debt-equity mix alone is not a strong predictor of profitability. ICR demonstrates a statistically significant but weak positive influence, highlighting the importance of maintaining solvency, though it does not majorly impact performance. The results lend support to both the Trade-Off Theory and the Pecking Order Theory, affirming that financing structure plays a vital role in shaping firm outcomes. The study recommends that Nigerian manufacturing firms adopt balanced capital structures, leveraging both debt and equity in a controlled manner to improve profitability. This research provides current empirical evidence relevant to the Nigerian context and offers practical insights for financial managers and policymakers.