CAPITAL STRUCTURE AND FIRMS VALUE IN NIGERIA: DOES INDUSTRY HETEROGENEITY HOLD?
CAPITAL STRUCTURE AND FIRMS VALUE IN NIGERIA: DOES INDUSTRY HETEROGENEITY HOLD?

Summary/Abstract: This study was conducted to investigate the role of industry as a mediator on the capital structure-firm value nexus among listed Oil/Gas firms and Banking firms in the Nigeria Exchange Limited. Panel data spanning 21yrs (2000-2020) was subjected to empirical analysis. Capital structure was measured using leverage ratio, equity ratio and interest expense while market based measure was used to measure firm value (Tobin’s Q). The panel least square was used for data analysis along with other preliminary tests. Competition and technology were used as measures for industry factors while an industry dummy was used to capture industry differences. Findings showed that leverage and equity had a significant positive relationship with firm’s value while interest expense had a negative but significant relationship with firm value. Finally, leverage was found to change with the different industries and positively impacted firm’s value. However, the findings showed that competition and technology did not change with industry thus proving that these factors (technology & competition) are not significant in explaining possible changes in the capital structure of sampled firms. The study concluded that capital structure has a positive significance on firm’s value while industry differences have a significant impact on this relationship. The study recommended that firm’s should ensure that the proportion of leverage to equity do not grow to unsustainable levels to avoid the result of diminishing effect on firms value.

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