Capital Structure: A Determinant of Firm's Value in Nigeria

Abstract

The study examined capital structure as a determinant of firm’s value in Nigeria by proxying the independent variables with equity, long-term debt and current liabilities on firm’s value of firms in Nigeria. The study adopted the ex-post facto research design while used granger causality, co-integration and ordinary least squared as tools for data analysis, data were extracted from the annual and audited financial report of 14 firms in 2022. The data extracted were analyzed using E-views 9.0 analytical software. The results indicate that in Nigeria, both equity and long-term debt positively and significantly affects a firm's value, while current liabilities have a negative but significant effect. The analysis further reveals no causal relationship between the independent and dependent variables. Based on these findings, it is recommended that firm management carefully monitor and maintain the use of long-term debt as it can enhance the firm's value. Additionally, they should exercise caution when increasing shareholders' equity through share issuance, as this may not be beneficial for existing businesses. However, new firms can take advantage of this strategy.