Effect of Capital Structure on Profitability of Listed Consumer Goods Companies in Nigeria

ABSTRACT

The study examined the effect of capital structure on profitability of listed consumer goods companies in Nigeria far the period 2008-2017. Fifteen consumer goods companies listed on the Nigeria Stock Exchange were examined The study employs Debt Ratio (DE) and Debt to Equity ratio (DER) as proxy for capital structure, which serves as the independent variables, and profitability as dependent variable of the study was proxies by Return on Asset (ROA). Et-post factor research design was used for this study. Secondary data were obtained from the financial statement of consumer goods companies listed on the Nigerian Stock Exchange (NSE). Descriptive statistics, correlation matrix, panel regression (Radom effect) were employed in the study. The results of the analysis showed that capital structure affect profitability of listed consumer goods companies in Nigeria. The study revealed that Debt Ratio has significant negative effect on ROA of listed consumer goods companies in Nigeria. While Debt to Equity (DER) has significant positive effect on ROA of listed consumer goods companies in Nigeria. Therefore, the study concludes that capital structure has effect on the profitability of listed consumer goods’ companies in Nigeria. The study recommends that the level of Debt to Equity ratio of listed consumer goods companies in Nigeria should be properly mixed. The higher the debt to equity ratio the more return on asset of listed consumer goods companies in Nigeria.