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Financial Leverage and Financial Performance of Quoted Industrial Goods Firms in Nigeria

Financial Leverage and Financial Performance of Quoted Industrial Goods Firms in Nigeria

ABSTRACT

This study examined the relationship between financial leverage and financial performance of quoted industrial goods firms in Nigeria for a thirteen (13) year period covering from 2008-2020. Specifically, this study ascertained the relationship between Debt-to-Equity Ratio, Short-term Debt Ratio, Long-term Debt Ratio and Cash Value-added. Panel data obtained from the annual reports and accounts of fourteen (14) sampled quoted industrial goods firms were used in the study. The ex-post facto research design was employed. Inferential statistics using Pearson correlation coefficient, Multicollinearity test, and Panel Least Square (PLS) regression analysis were applied to test the hypotheses of the study. The results revealed that Debt-to-Equity Ratio and Long-term Debt Ratio have a significant negative relationship with cash value-added, while Short-term Debt Ratio significantly and positively relates with the cash value-added of quoted industrial goods firms in Nigeria at a 5% level of significance. The study recommended amongst others that firms need to look more closely at the company’s ability to pay its debt obligations, by managing the use of assets and cash flows to reduce the firm’s risk of loss from not paying a liability on time.

Keywords: Financial Leverage, Financial Performance, Long-term Debt Ratio, Panel Least Square (PLS)

Authorship
Odum, Augustine Nwekemezie, Ph.D1; Odum, Chinwe Gloria, Ph.D 2 and Ofolue, Igbodo3 | Full PDF

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