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Oino, Isaiah; Ukaegbu, Ben (2015)
Publisher: Elsevier
Languages: English
Types: Article
The aim of the study was to investigate the impacts of capital structure on the\ud performance of Nigerian listed non-financial firms and how these firms adjust to the\ud target capital structure. We tested the Trade-off theory and the pecking order theory\ud and the relevance of these theories to Nigerian firms is confirmed. The speed of\ud adjustment to the target capital structure is determined using both pool OLS and GMM\ud to ensure the robustness of the finding. The descriptive statistics show that leverage\ud constitute 63 percent of the capital structure of Nigerian firms, while leverage is\ud dominated with the short term leverage. We observed that profitability and asset\ud structure were negatively related to leverage while the size of the firm and non-debt tax\ud shield were positively related to leverage. The adjustment speed of Nigerian firms is\ud very high 47% that compares well with studies on non-financial firms done in most\ud developed countries.
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    • Abbadi, S. and Abu-Rub. N. (2012), The Effect of Capital Structure on the Performance of Palestinian Financial Institutions. British Journal of Economics, Finance and Management Sciences, Vol.3 (2),pp. 92-101.
    • Flannery, M. and Rangan, K., (2006) “Partial adjustment toward target capital structures” Journal of Financial Economics, vol.79, pp. 469-506.
    • Modigliani, F. and Miller, M. H. (1958) “The cost of capital, corporation finance and the theory of investment”, The American Economic Review, vol.13 (3), pp. 262-302.
    • Modigliani, F. and Miller, M.H. (1963) “Corporate income taxes and the cost of capital: A correction”, The American Economic Review, vol. 53(3), pp. 433-443.
    • Myers, S. C. (1984) “The capital structure puzzle”, Journal of Finance, vol.39, pp 575-592.
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