International Journal of Research and Innovation in Applied Science (IJRIAS) |Volume VII, Issue IX, September 2022|ISSN 2454-6194
Capital Structure and Firm Performance: Evidence From 2021 Best-Performed Stocks in Nigeria
Shedrack Enyeribe Nwannunu
Department of Accountancy, Abdu Gusau Polytechnic, Nigeria
Abstract: The researcher used an eight-firm sample drawn randomly from a population of ten to study the relationship between capital structure and stock performance of the companies that traded the best-performing stocks on the Nigerian stock exchange in 2021. The study used a four-year panel data collection (2018–2021). For hypothesis testing, the study used EXCEL-generated research statistics and the least-squares dummy variables (LSDV) regression in SPSS. The findings show a statistically significant positive correlation between corporate capital structure and stock performance (ROA and R.O.E.). The study recommended employing larger samples of the best-performing equities over two or more years.
Keywords: Best-Performing Stocks, Capital Structure, Least-Squares-Dummy-Variables Regression., Panel data, Stock Performance, Nigerian Stock Exchange,
I. INTRODUCTION
For decades, the tie between business capital structure and operating performance has been a trend in accounting and finance literature (Fatmassari et al., 2021; Dhan Raj Chalise, 2022). Organisations, researchers, and professionals study the best debt-equity combination for long-term viability.
However,(Nugroho, 2021) found that disparities in company characteristics, and rapid changes in technology breakthroughs, render conclusions obsolete in a short period. By examining the type and degree of the relationship between the various components of a firm’s capital structure and operating performance, managers can focus on the elements that contribute the most to success. Similarly, investors invest in companies where the management’s objective is to maximise investors’ wealth (Ibrahim, 2020).
Numerous studies (Rutkowska-Ziarko, 2022) on capital structure-performance correlation focused on financial performance, sectors, industries, and features. A high percentage of capital structure studies are on Asian countries, possibly due to chance or a desire to catch up with Europe and the American continents. This study marks a trend that calls for capital structure-firm performance studies relating to firms’ stock performance on a stock exchange market of an emerging economy, Nigeria. Therefore, this inquiry and discovery have added novelty to literature in the field.
Studies build or encode elements of thought into existing knowledge (Zhang et al., 2022). Many studies examined the type and strength of the relationship between capital structure and firm performance using earnings before interest and Tax (EBIT) or net income (Hung et al., 2021; Javed et al., 2014