Capital Structure Determinants and Financial Leverage of Listed Industrial Companies in Nigeria
This study explored the nexus between capital structure determinants and financial leverage of quoted industrial firms in Nigeria for period of eleven years, 2010 to 2020. Secondary data used for this research work obtained from financial report and accounts of sampled companies. Capital structure determinants were measured by profitability, assets tangibility, firm size, growth rate, firm age, default risk and earnings per share. These were used as explanatory variables. Financial leverage measured by total debt to shareholders’ funds representing dependent variable. Fixed effect regression model was used to establish the impact of explanatory variables on dependent variable. Study’s results revealed that assets tangibility, firm’s size and firm’s age have positive and substantial influence on financial leverage. Profitability, default risk and earnings per share have negative and substantial influence on financial leverage of quoted industrial companies in Nigeria. Furthermore, results also showed that collectively capital structure determinants considered by this study have strong and important impact on financial leverage of sampled quoted industrial firms in Nigeria. It was recommended that management of sampled industrial companies should use the three main determinant variables that have positive and significant impact on financial leverage as a yardstick in determining their optimum capital structure; this would reduce their cost of capital and maximize shareholders’ returns. Keywords: Capital Structure, Trade-Off Theory, Pecking Order Theory, Industrial Companies, Financial Leverage