THE IMPACT OF CAPITAL STRUCTURE ON FINANCIAL PERFORMANCE OF NIGERIAN LISTED FOOD PRODUCT COMPANIES

Nma Alhaji Baba, Ndagi Mohammed, & Sadiq Abubakar Mustafa

Department of Accountancy

The Federal Polytechnic, Bida, Niger State, Nigeria.

Email: Nalhajibaba@Yahoo.Com

ABSTRACT

This study is purposely carried out to examine the impact of capital structure on financial performance of Nigerian listed food product companies. Annual financial report of five (5) companies listed on the Nigeria stuck exchange under the food product categories were used within the study period of seven (7) years from 2006-2012. Least square regression analysis was applied on Return on Asset (ROA) and Return on Equity (ROE) as performance indicators while Long-term Debt to Capital (LTDC), Total Debt to Capital (TDC), Total Debt to Equity (TDE) are used as capital structure proxies and AGE as control variable. The study reveal that there is a negative and insignificant relationship between LTDC, TDC, TDE and ROA while the relationship between LTDC, TDC, TDE and ROE is positive but also insignificant. More so, from the result positive and significant relationship exist between AGE and the two performance variables (ROA and ROE). The study concludes that capital structure is not a major determinant of firm performance and recommends that organization managers should focus more attention on firm age when making capital structure decision that will improve firm’s financial performance.

Keywords: Capital Structure, Financial Performance