THE EFFECT OF CAPITAL STRUCTURE ON PERFORMANCE
THE EFFECT OF CAPITAL STRUCTURE ON PERFORMANCE
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Date
1997-03
Authors
SAMUEL, BARNABAS,
ABAYOMI
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Abstract
ABSTRACT
This thesis evaluates the impact of capital structure on
performance evaluation of firms using selected quoted companies
in Nigeria. A lot of literature has been written on this
subject especially in advanced economies such as USA. The
results of the empirical studies in advanced economies differ.
Some from their findings reveal that except for tax advantage
debt, financing does not have any advantage. While others from
thesis contended, that debt has greater advantage that its tax
advantages. The research conducted was to reveal the true
situation in Nigeria, a model of developing economy.
Two groups are considered; the conglomerates and drinks
groups and Building Materials group, using two stage least
square regression, Model; values of firms being the dependent
variable and computed earning , size, growth and debt serve as
the instrumental variable. The regression co-efficient of the
debt variable unlike the case of Miller and Modigliani was
significantly greater than zero and thus it was subsequently
introduced in the instrumental/independent variable. The
regression coefficient for the debt variable . shows the
value greater than zero. From this, it can be concluded that
the advantage of debt is higher than the tax advantage. The
coefficient of debt variable for the four years both the second
stage estimate and direct estimate is higher than the
corporation income tax rate (1990-1992; 40% and 1994 35%) the
result obtained gives more credence to the fact the debt has
greater advantage than its tax advantage.
The research work reveals that shareholder wealth
increases with debt through the ranges observed, though there
are practical limitations to this. It was discovered that, in
practice, that firms operate within a particular combination of
debt'and equity they considered optimum. It is observed that
apart from the capital structure, there are other quantitative
and non-quantitative factors that influence the price of a firm
share in the market; such as management epitude, economic
situations, political instability etc.
Description
A Thesis submitted to the Department of Accounting.
Ahmadu Bello University Zaria, in partial fulfillment of the requirements
for the awards of Masters of Science Degree in Acounting and Finance
Keywords
EFFECT,, CAPITAL,, STRUCTURE,,, PERFORMANCE,, STUDY,, SELECTED,, FIRMS.