Impact of Capital Structure on Financial Performance of Listed Building Materials Companies in Nigeria

Sani Lawan¹ , Muhammad Sirajo² , Yasir Haruna³ , Ismail Gimba Sani⁴

Section:Review Paper, Product Type: Journal-Paper
Vol.9 , Issue.4 , pp.39-43, Dec-2021

Online published on Dec 31, 2021

Copyright © Sani Lawan, Muhammad Sirajo, Yasir Haruna, Ismail Gimba Sani . This is an open access article distributed under the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
 

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Abstract :
This study examined the impact of capital structure on firm’s performance in Nigerian Building Material Industry. Sample of five (5) firms in Nigerian Building Material Industry listed on the Nigerian Stock Exchange were used as a sample over a ten (10) year period (2009-2018). Data was generated from financial statement of the firms within that period. Regression analysis was run to determine the level of impact of capital structure surrogated by short term debt, long term debt and equity on performance epitomized by Return on Asset. The analysis revealed that short term debt has a significant impact on firm performance; long term debt has a significant negative impact on firm performance. The result also revealed that equity has an impact on firm performance and a weak negative relationship between equity and Return on Asset. The study recommends that the management of the listed firms in the industry should ensure a proper trade-off between debt and equity to reduce the risk of overburdened external financing so as to improved financial performance to the benefit of equity holders.

Key-Words / Index Term :
Equity, Short term debt, Long term debt, Financial Performance, Firm

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