Capital Structure and Financial Performance in Quoted Telecommunication Companies in Nigeria
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Date
2023-12
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Lead City University
Abstract
Capital structure is a mixture of the financing options a company uses to finance its investments. However, deciding on an optimal capital mix has been a huge task for most telecommunication companies. The main objective of this study is to examined the effect of capital structure on performance of the quoted telecommunication companies in Nigeria. The study used an ex-post facto research design. The study population consisted of 9 quoted
telecommunication companies on Nigeria Stock exchange. The purposive sampling technique was adopted to select a sample of seven (7) telecommunication firms for the period of ten years (2012-2021). Data for this study were extracted from the published annual reports and accounts
of the sampled companies and validated by the statutory auditors. Data were analyzed using descriptive and inferential statistics. The study found that short term debt, long term debt, equity and total debt had joint and significant effect on profit before tax, return on asset, return on
equity and return on capital employed of quoted telecommunication companies in Nigeria. (PBT– Adj. R2 =0.8034, Wald test = 71.51 p < 0.05; ROA – Adj. R2 = 0.1543, Wald test = 4.15, p <0.05; ROE – Adj. R2 = 0.7620, Wald test = 56.23, p < 0.05 and ROCE – Adj. R2=0.4523, Wald test =42.74, p < 0.05). The study concluded that capital structure had significant effects on the performance of telecommunication companies in Nigeria. It was recommended that the management of the telecommunication companies should pay attention to the composition of capital structure in term of short term debt, long term debt, equity and total debt and should be careful and cautious in accumulating debt that could eventually have adverse effects on their value and financial performance.
Keywords: Capital Structure, Performance, Profit before Tax, return on Asset, return on Equity.
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Keywords
Capital Structure, Performance, Profit before Tax, return on Asset, return on Equity.