The Influence of Financing Mix on Corporate Performance in Nigeria: A Disaggregated Approach
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This paper investigates the influence of Financing Mix (Capital Structure) on Corporate Performance in Nigeria using a disaggregated approach. To carry out this research we employed a disaggregated approach using sample of twenty seven firms listed on the Nigerian Stock Exchange during the seventeen- year period, 1996- 2013 and a model with the necessary policy variables was constructed. Panel data for the selected firms are generated and analyzed using Ordinary Least Squares (OLS) as a method of estimation. Our result reveals that a firm’s capital structure represented by Debt Ratio, DR has a significantly negative impact on the Return on Asset (ROA) and Return on Equity (ROE) (firm’s performance proxies). Also the relationship between ROA and firm’s asset tangibility is negative and significant at 1% level being wrongly signed, against a priori expectations. This shows that firms with high ratio of tangibility have a lower financial performance ratio. The results also show that the size and growth of firm are correctly signed consistent with Myers and Majluf (1984).The study by these findings indicate consistency with previous empirical studies and provide evidence in support of Agency cost theory. The author recommended among others that firms should identify other relevant factors that influence corporate performance other than debt. Such factors as Corporate governance, quality management, Size of the firm, Tangibility, growth etc. It is also necessary that firms understand their conditions, analyze their debt capacities, look at the need to maintain comparability with firms in the same industry before making the final decision regarding their capital structure; and especially when presented with attractive new growth opportunities.
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