Editorial Title:The Effect of Capital Structure on Financial Performance: Evidence of Listed Manufacturing Companies in Nigeria International Sciences of Management Journal(ISMJ) Al-Madinah International University MEDIU (Malaysia) www.mediu.edu.my International Sciences of management journal Volume 2/1439H/2017

1. THE EFFECT OF CAPITAL
STRUCTURE ON FINANCIAL
PERFORMANCE: EVIDENCE OF
LISTED MANUFACTURING
COMPANIES IN NIGERIA
http://ojs.mediu.edu.my/index.php/ISMJ/article/view/831

2. PAPER OUTLINE
• Abstract
• Introduction
• Literature review
• Material and Methods
• Results and discussion
• Conclusion

3. ABSTRACT
• Capital structure decision is important for every business organization because of the need to
maximize returns to various organizational stakeholders and also ensure positive financial
performance. Therefore, this study investigated the effect of capital structure on the financial
performance of listed Manufacturing companies in Nigeria. To do so, five (5) listed
manufacturing companies were selected and studied during the period 2006-2015. Debt to
equity ratio, debt ratio and long term debt to asset ratio were considered as capital structure
attributes while return on assets was used as a measure of financial performance. Secondary
data was obtained from the financial statements of the listed companies. Data collected was
analyzed using linear regression to test the research hypotheses so as to determine the
relationship of each of the independent variables on financial performance. The findings reveal
that debt to equity ratio and debt ratio have positive and significant relationship with financial
performance while long term debt to asset ratio has a positive and no significant relationship
with financial performance. The study found that a unit increase in any of the independent
variable would lead to a unit increase in financial performance. It was recommended that firm
should use a mixture of debt and equity to finance their assets.
• Key words: Capital structure, Debt, Equity, Companies and Financial performance

4. INTRODUCTION
• Debt is money borrowed from short and long term creditors while equity is a pool of contribution
from investors who own shares in the business.
• This study:
 Critically assess the effect of capital structure on the financial performance of listed
Manufacturing companies in Nigeria.
 The objective of the study is,
 To assess the effect of debt-equity ratio on the financial performance of listed manufacturing
companies in Nigeria.
 To examine the influence of debt ratio on the financial performance of listed manufacturing
companies in Nigeria.

5. LITERATURE REVIEW
• Studies of many authors including; Ahmad (2015), Akeem et al.,
(2014), Birru (2016,) Khanam, Syed and Pirzada (2014), Birru,
2016), Patrick, Ogebe &Alewi (2013), Akeem et al., (2014),
Khanam, Syed and Pirzada (2014), Akeem et al., (2014), Enekwe,
Agu and Eziedo (2014), Nwaolisa and Chijindu (2016), Ikapel and
Kajirwa (2017) and Bello, Ahmad and Aliyu, (2016), etc. have been
summarized in literature review section of the paper.

6. CONT….
• The variables of this study including; Return on
Asset,Debt to equity ratio, Debt ratio, Long term debt to
Asset Ratio have been evaluated form a research of Birru
(2016), Enekwe, Agu, and Eziedo(2014),Nwaolisa and
Chijindu (2016) Adekunle & Aghedo, (2014),Ray, (2011)
and Bello, Ahmad & Aliyu, (2016).

7. MATERIAL AND METHODS
• A time series data of period 2006-2015 from five (5) manufacturing companies of
Nigeria was chosen to establish the relationship of each of the independent
variables (debt to equity ratio, debt ratio and long term debt to asset ratio) on the
dependent variable (Return on Asset).
• The statistical process for calculation and analysis was based on the applied
linear regression with following equations:
Y = β0 + β1X1 + β2X2 + β3X3 +Ɛ

8. RESULTS AND DISCUSSION
• The coefficient of determination (R square) was 0.70.
• A unit increase in debt to equity ratio would lead to a 0.857 increase
in financial performance.
• A unit increase in debt ratio will eventually lead will to a 0.663
increase in financial performance.
• There is a positive and significant relationship between debt ratio
and financial performance.

9. CONCLUSION
• A unit increase in any of the independent variable would lead to a
unit increase in financial performance.
• Companies should use a mixture of debt and equity to finance their
operations to ensure continual financial performance.