EVALUATING THE EFFECT OF CAPITAL STRUCTURE AND PROFITABILITY OF SELECTED NIGERIAN QUOTED CONSTRUCTION COMPANIES
FABI JONATHAN KEHINDE AND AKINSEINDE OLUBOLA ATANDA, Volume 5 Issue 1, 2021 Pages 13-26, Published: 2022-10-02
Abstract
The capital structure decision is the vital one since the profitability of an enterprise is directly affected by such decision. Hence, proper care and attention need to be given while determining the capital structure decision. The choice of capital structure of a firm is determined by a number of factors which include the market forces, type of industry, internal policies of the firm, size of the firm, profitability, corporate tax and bankruptcy costs. The aim of the study is to evaluate the effect of capital structure on profitability of selected construction companies listed on the floor of the Nigerian Stock Exchange in Nigeria. The data collected was for three construction companies for a period of ten years (2009-2018).The study adopted convenience sampling, as the information needed are restricted to available documents. Secondary data were obtained and used for analysis. Inferential statistics of ANOVA, Regression analysis were carried out at 5% level of significant. The major findings from this study are that equity financing has no significant impact on return on equity, debt to asset ratio has a significant impact on the profitability of Nigerian firms and it was established that debt to equity ratio has no significant impact on profitability of Nigerian firms. It was among other things recommended that the management of Nigerian quoted firms should work very hard to optimize the capital structure of their quoted firms to increase the returns on equity, assets and investment.