Corporate Financing Decisions and Shareholders' Wealth of Listed Consumer Goods Manufacturing Companies in Nigeria

This study examined the effect of corporate financing decisions on the wealth of shareholders of listed consumer goods manufacturing companies in Nigeria. Corporate financing decisions were disaggregated into four dimensions, capital structure, debt financing, equity financing and trade payables, each with distinct implications for the residual earnings available to equity holders and the financial risk they bear. Specifically, the study analysed the effect of capital structure on shareholders' wealth, determined the influence of debt financing on shareholders' wealth, assessed the effect of equity financing on shareholders' wealth, and examined the extent to which trade payables affect the shareholders' wealth of listed consumer goods manufacturing companies in Nigeria.
The study was anchored on the Trade-off Theory, complemented by the Pecking Order Theory, and adopted an ex-post facto research design using a quantitative panel-data approach. Secondary data were obtained from the audited annual reports and financial statements of thirteen purposively selected consumer goods manufacturing companies listed on the Nigerian Exchange Group, covering the period 2000 to 2024 and yielding 307 firm-year observations. Shareholders' wealth was proxied by earnings per share (EPS), while capital structure, debt financing, equity financing and trade payables were measured respectively by the debt-to-equity ratio, the debt ratio, the equity ratio and the natural logarithm of gross trade payables, with firm size, board composition and liquidity included as control variables. Following correlation, cross-sectional dependence, panel unit root and Hausman specification tests, the four models were estimated using the Driscoll-Kraay standard error estimator with Fixed Effects and tested at the 5% level of significance.
Capital structure had a positive and statistically significant effect on shareholders' wealth (β = 0.703, t = 11.70, p < 0.01). Debt financing had a negative and statistically significant effect on shareholders' wealth (β = -0.068, t = -3.16, p < 0.01). Equity financing had a positive and statistically significant effect on shareholders' wealth (β = 6.679, t = 4.55, p < 0.01). Trade payables had a positive and statistically significant effect on shareholders' wealth (β = 0.038, t = 3.56, p < 0.01). All four regressions were jointly significant, and consequently, all four null hypotheses were rejected. The study concludes that corporate financing decisions are a first-order determinant of shareholders' wealth among Nigerian consumer goods manufacturing companies: an optimised debt-equity mix and equity-based financing enhance the earnings available to shareholders, formal debt erodes it, and trade payables function as a low-cost, additive source of shareholder value. The study recommends that finance managers actively optimise capital structure toward the cost-minimising threshold, treat formal debt as a financing source of last resort, prioritise equity issuance for long-term capital expenditure where valuation conditions permit, and manage supplier payment terms as a deliberate financing instrument.

Capital structure, debt financing, equity financing

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