Capital Structure and Profitability of Manufacturing Firms listed on the Nigerian Stock Exchange
This study examined capital structure and profitability of manufacturing firms listed on the
Nigerian stock exchange. Specifically the study analyzed the impact of disaggregated variables of debt finance
(Short term debt and long term debt) and equity finance (share capital and share premium) on profit after
tax. Secondary data were gathered from annual reports of sampled firms over a period of ten years (2008-
2017) and were analyzed using panel data estimators such as pooled OLS estimator, fixed effect estimator,
random effect estimator, Hausman test, and Pesaran test of cross sectional dependence. The findings revealed
that short term debt has insignificant positive effect on profit after tax of manufacturing firms showing in
specific term a coefficient estimate of 0.114985 (p=0.5890> 0.05) long term debt exerts significant positive
impact on profit after tax, with specific coefficient estimate of 0.578290 (p=0.0001< 0.05) share capital exerts
significant positive effect on profit after tax, with coefficient estimate of 0.784525 (p=0.0000< 0.05) share
premium exerts insignificant negative effect on profit after tax, with coefficient estimate of -0.000395 (p=
0.9924> 0.05). The study concluded that short term debt has declining effect on the profitability of
manufacturing firms in the country, while the long term variable of debt finance of firms spurs the rate of
profitability. In clear term disaggregated debt finance subsets exerts significant effect on the profitability of
firms sampled in the study. On the other hand equity finance disaggregated into share capital and share
premiums reflect that share capital has significant positive effect on profit after tax, while share premium has
insignificant negative effect on profit after tax.
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