Journal of Economics and Financial Analysis, 5 (1), pp. 81-95, [2021]

Capital Structure and Value of Nigerian Manufacturing Companies



This study provides current evidence on long term controversies surrounding the relevance of capital structure to the value of firms as desideratum for effective debt policy decisions by corporate organisations. Ex-post Facto design was employed for random selection of 10 manufacturing firms across 6 real sectors of Nigerian manufacturing industry. The study estimated balanced panel data with Panel (OLS) Regression techniques using 180 observations. From findings, the results of preferred Random Effect estimation at 5% level of significance show that measures of capital structure such as debt-to-equity and debt-to-total assets have insignificant effects on value of firms when proxy by Tobin’s Q. Thus, the study re-affirms the claim of M-M Approach that capital structure does not matter when it comes to firm’s performance in term of stock market efficiency. In practice, therefore, management should consider the use of debt as last option for financing profitable projects.


Capital Structure; Debt; Equity; Value; Tobin’s Q; Fixed Effect Model; Random Effect Model.

JEL Classification

G30, G32, C20, C23.

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