Dynamic Relationship Between Capital Structure and Quoted Manufacturing Firms’ Performance in Nigeria
International Journal of Economics, Finance and Management Sciences
Volume 7, Issue 3, June 2019, Pages: 82-87
Received: May 15, 2019; Accepted: Jun. 18, 2019; Published: Jul. 1, 2019
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Author
Oyedeji Rasheed Olarewaju, Department of Management and Accounting, Faculty of Management Sciences, Ladoke Akintola University of Technology, Ogbomoso, Oyo State, Nigeria
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Abstract
For so long, and most recently, relationship between capital structure and manufacturing firm’s performance has been an issue in financial world. Financial analysts are controversial in advising the investors on the best capital structure to employ while undertaking investment decisions. This paper investigates dynamic relationship between capital structure and quoted manufacturing firms’ performance in Nigeria from 1990-2016. Using panel unit root test to verify the stationarity property of the data, Pedroni conitegration tests and Panel Vector Error Correction Method (PVECM) are employed to examine the equilibrium among the variables as well as analysing the data. There is evidence of long run relationship between capital structure and firms’ performance in Nigeria as revealed by Cointegration test results. Results from PVECM show that, throughout the period i.e. both in the long run and short run, except itself, none of the variables’ shocks in the system significantly accounts for variations in the returns on asset (ROA), given variance error decomposition’s statistics. Also, both in the short run and long run, innovations from only equity (EQU) explains, on average, 1.76% variations to profit margin. Arising from these findings, the study could not find dynamic relationship between capital structure and firms’ performance. The study, therefore, recommends that manufacturing firms should be pragmatic when choosing capital structure outlays to enhance performance in their activities.
Keywords
Dynamic, Capital, Manufacturing Firm, Performance
To cite this article
Oyedeji Rasheed Olarewaju, Dynamic Relationship Between Capital Structure and Quoted Manufacturing Firms’ Performance in Nigeria, International Journal of Economics, Finance and Management Sciences. Vol. 7, No. 3, 2019, pp. 82-87. doi: 10.11648/j.ijefm.20190703.11
Copyright
Copyright © 2019 Authors retain the copyright of this article.
This article is an open access article distributed under the Creative Commons Attribution License (http://creativecommons.org/licenses/by/4.0/) which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
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