Capital Structure and Financial Performance of Listed Consumer Goods Companies in Nigeria

Abstract

This study scrutinizes the influence of capital structure on the financial performance of publicly traded consumer goods corporations in Nigeria, with an emphasis on essential elements of capital structure including short-term debt (STD), long-term debt (LTD), and the debt-to-equity ratio (DER). A quantitative research methodology was employed, utilizing data sourced from ten publicly listed consumer goods enterprises in Nigeria over the timeframe of 2014 to 2023. Static panel regression analysis was used to assess the influence of these variables on financial performance metrics, specifically Return on Assets (ROA). The findings reveal that long-term debt (LTD) has a statistically significant negative effect on ROA, with a p-value of 0.0048 < 0.05, short-term debt and debt-to-equity ratio was found to have an insignificant effect on ROA, with p-values of 0.2113 and 0.5395 >0.05. Overall, the findings underscore the critical necessity for meticulous oversight of long-term debt to prevent the deterioration of profitability, whereas short-term debt and the Debt-to-Equity Ratio (DER) seem to be manageable for ensuring stable financial results. This research offers significant contributions to the understanding of capital structure strategies within the consumer goods sector, yielding practical implications for corporate executives, investors, and policymakers who aspire to refine capital structure in pursuit of improved financial performance within Nigeria’s consumer goods industry.