Journal of
Accounting and Taxation

  • Abbreviation: J. Account. Taxation
  • Language: English
  • ISSN: 2141-6664
  • DOI: 10.5897/JAT
  • Start Year: 2009
  • Published Articles: 158

Article in Press

Impact of Capital Structure on Financial Performance of Selected Quoted Food and Beverages Manufacturing Industries in Nigeria

Sunday David ADEOYE* and Samson Olusola OLOJEDE

  •  Received: 08 October 2019
  •  Accepted: 03 August 2020
The major financing decision is the capital mix employed by corporate entity. It affects the determination of the returns accrued to providers of capital as the primary objective of a corporate entity is anchored on the maximization of the wealth of its shareholders. In order to determine the blend of financial capitals that maximizes firm’s performance, this study therefore investigates the impact of capital structure on performance of food and beverages industries in Nigeria. To achieve our objective, we adopted an ex-post factor research design which involves the use of cross sectional time series data extracted from the audited annual accounts of ten food and beverages industries quoted in the Nigeria stock exchange covering the period of six years (2012 – 2017), granger causality to test for the causal relationship among the variables and the results reveals that a unidirectional relationship exists and runs from firms’ size to earnings per share; Equity to return on capital employed and debt to firms size. We found out from the panel regression results that Debt finance and Long term debt to total asset significantly impacted the performance of food and beverages industries negatively. This study therefore concluded that over dependence on external financing engender high cost of debt and decreases the value of firm while equity capital raised improve firm’s value. It is therefore, recommended that in order to minimize the negative impacts of huge debts employed on firm’s value, debt with lower cost of borrowing should be embraced and priority placed by the firms on increase in share prices than increase in accounting profits.

Keywords: Debt, Equity, Firms size, Profitability