EFFECT OF ASSET STRUCTURE ON PROFITABILITY OF SELECTED NON-FINANCIAL INSTITUTIONS IN NIGERIA

Abstract

Firms’ ability to carry out their stakeholders’ requirements is closely related to capital structure. The vital issue confronting managers today is how to choose the mix of debt and equity to achieve optimum capital structure that would minimize the firm’s cost of capital and improves return to owners of the business. Therefore, this study examined the effect of asset structure on profitability of selected non-financial institutions in Nigeria. The study adopts expose facto research design whereby data was sourced mainly from the audited annual financial reports of selected non-financial institutions in Nigeria on the Nigerian Exchange Group for the period 2007-2022. The population of the study consists of ninety eight (98) non-financial institutions in Nigeria as at 2022. The sample size of ten (10) non-financial firms was arrived at using purposive sampling technique whereby non-financial firm which have their annual report and accounts readily accessible for the study period were selected. Analytical techniques used in the study consist of both descriptive and inferential statistics. Descriptive statistics employed include minimum, maximum, mean and standard deviation while panel regression analysis was used to test the study hypotheses. To analyse the effect of asset structure on profitability of selected non-financial institutions in Nigeria, panel regression analysis was used Findings from the result of panel regression analysis showed that three of the four explanatory variables are significant in explaining variation in Working Capital (WC). These are leverage (p=0.0002), Long Time Debt (p=0.0494) and Stock (p=0.0004). Based on the findings, the study therefore concluded that there is a significant relationship between asset structure decision and profitability of selected non-functional institution in Nigeria. The study recommends that management of Non-Financial Institutions should identify the optimal level of financial leverage that maximizes returns for shareholders while also minimizing financial risk. Regular evaluations and adjustments to the capital structure may be necessary to adapt to changing market conditions.