Original Research Article | OPEN ACCESS
Determinants of Capital Structure in Nigeria

For correspondence:-    

Received: 27 April 2018        Accepted: 30 May 2018        Published: 30 Septemb 2018

Citation: Determinants of Capital Structure in Nigeria. Account Tax Rev 2003; 2(3):1-12 doi:

© 2003 The authors.
This is an Open Access article that uses a funding model which does not charge readers or their institutions for access and distributed under the terms of the Creative Commons Attribution License (http://creativecommons.org/licenses/by/4.0) and the Budapest Open Access Initiative (http://www.budapestopenaccessinitiative.org/read), which permit unrestricted use, distribution, and reproduction in any medium, provided the original work is properly credited..


Decision regarding optimum capital structure in terms of mixture of debt and equity in financing firms operation is one of the most challenging decisions to be made by firms’ financial managers. This study focused on determinants of capital structure in Nigeria with the aim of examining whether the identified determinants (profitability, liquidity, size, tangibility and growth) exert significant influence on capital structure in Nigerian listed Cement Manufacturing Companies, Oil and Gas Companies and Food and Beverages Companies. The study adopted ex post facto research design on the secondary data obtained from the annual reports and accounts of the sampled companies from 2007-2016. The data obtained from secondary source were analysed by using descriptive statistics, panel unit root test, multiple regression analysis and the Hausman specification test was conducted to choose appropriate model post estimation test was done to consider appropriateness of the chosen model. The results of the random effect model revealed that capital structure determinants identified in this study like profitability, liquidity, size, growth have no significant effect on capital structure, while only tangibility was found to exert significant effect on capital structure. All the variables apart from liquidity and sales growth have positive coefficient. The probability of the f- statistics which is less than 5% implies that all the determinants of capital structure identified have joint significant negative effect on gearing. The study therefore recommends that firms’ should improve on their profitability, liquidity, size, asset growth and sales growth so as to attain optimum capital structure.

Keywords: Profitability, liquidity, growth tangibility, size and gearing.

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