Nigeria Ailing Industries and the Capital Structure Theory: A Need for Concern
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Date
2013-01-11
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Australian Journal of Business and Management Research
Abstract
It is necessary to identify that what are factors contribute to the firms’ capital structure composition in its
operation. Hence the present study was undertaken with the objective of finding out the relationship between
capital structure determinants and ailing manufacturing firms of the listed companies in Nigeria. Using a
multiple regression analysis, ailing manufacturing companies in Nigeria stock exchange market was examined
for the period of 2005-2010. The final sample consists of 14 manufacturing companies. In this study, dependent
variable that is, leverage level of the companies, is measured by long-term debt ratio, short term debt ratio and
total debt ratio. Capital structure determinants (independent variables) are measured by capital intensity,
tangibility, profitability, firm size and non- debt tax shield. Findings showed that the direction of the
explanatory variables such as tangibility, profitability, firm size and non-debt tax shields with total debt largely
consistent with the explanations of trade-off theory and prove past empirical findings also
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Keywords
Capital structure determinants, Ailing firms, Non-debt tax shields, Trade - off theory