Capital Structure and Financial Performance of Quoted Consumer Goods Manufacturing Companies in Nigeria

Abstract

This study evaluates the impact of capital structure on the financial performance of quoted consumer goods manufacturing companies in Nigeria over the period 2015–2024. Using panel data from ten firms and employing a Fixed Effects regression model, the study analyzes how long term debt, short-term debt, and debt-to-equity ratio influence profitability measured by return on assets (ROA), return on equity (ROE), and net profit margin (NPM). The Hausman specification test justified the adoption of the Fixed Effects model. The findings reveal that capital structure variables have a negative and statistically significant effect on financial performance across all three profitability measures, indicating that excessive reliance on debt financing reduces firm profitability. Conversely, firm size, liquidity, and firm age show positive and significant relationships with performance, suggesting that operational strength and financial flexibility enhance profitability. The study concludes that while debt may provide financing advantages, high leverage levels increase financial risk and may adversely affect firm performance in emerging market environments. The study recommends that firms adopt prudent leverage policies, strengthen internal financing capacity, and maintain effective liquidity management to improve long-term financial performance