Capital Structure and Firm Performance of Quoted Companies in Nigeria

The study investigated the relationship of capital structure to financial performance of quoted firms in Nigeria. The study was based on a panel data set from 1995 to 2009 comprising sixty non – financial companies. The study specified five panel regression models. Five financial performance measures were taken as the dependent variables while the principal explanatory variable for each of the models was Debt Ratio (DR). A sixth model was also formulated to examine the influence of financial performance on capital structure. Here, DR was taken as the dependent variable while the financial performance proxies were taken as the explanatory variables. Results of the study indicated that there was a significant negative relationship between capital structure and financial performance of quoted non-financial firms in Nigeria. Indeed, the results support the pecking order theory. It was recommended that appropriate fiscal policies, relevant capital market institutional and legal framework, reliable infrastructural facilities especially electric power supply and improved security framework should be put in place.