Determinants of Capital Structure: Empirical Evidence from Quoted Electrical and Electronic Technology Firms in Nigeria (2010-2015)

Abstract

The objective of this is to determine the determinants of Capital Structure with a focus on quoted electrical and electronic technology firms in Nigeria. This study made use of secondary data obtained fact books, annual reports and account of the firms under study. The relevant data were subjected to STATA 13 statistical analysis using Pearson coefficient of correlation and ordinary least square regression. The result of this study revealed that there is a positive and significant relationship between profitability, firm size, non-debt tax shield and Capital Structure (proxied by total debt, long term debt and short term debt). It was also empirically verified that profitability, firm size and non-debt tax shield have a statistically significant effect on Capital Structure of electrical and electronic technology firms quoted on the floor of Nigerian Stock Exchange at 5% level of significance. The study recommends that managers of firms should be cautious when seeking loan advances from the money market. This is more important when considering the appropriate capital mix that optimizes firm value, because a wrong mix may significantly raise their level of operational and financial risks.

Keywords: Capital Structure, Profitability, Leverage

JEL Classification: M40, M41, M50, M51