Nexus Between Capital Structure and Financial Performance of Listed Manufacturing Firms in Nigeria

Abstract

The manufacturing sector in Nigeria faces significant challenges, including inadequate financing, high debt levels, and poor financial performance, which hinder its potential for economic growth. This study investigates the relationship between capital structure and financial performance of listed manufacturing firms in Nigeria, focusing on the impact of debt and equity financing. The study used regression analysis, correlation analysis, and descriptive statistics to examine the financial statements of ten chosen enterprises over ten years (2013– 2022) using secondary data from the Nigerian Exchange Group. The findings indicate that while total debt to total assets and long-term debt to total assets have a favorable influence on financial performance, total debt to total equity and short- term debt to total assets have a negative effect. According to the study's findings, improving capital structure management is essential for improving the financial performance of Nigerian manufacturing companies. Maintaining a balanced debt-to-equity ratio, giving equity financing first priority, leveraging total debt to assets, reducing short-term debt, and skillfully managing long-term debt are some of the recommendations. These findings contribute to a better understanding of the impact capital structure plays in financial performance and are of great use to Nigerian manufacturing companies, policymakers, and regulators.