The effects of capital structure and selected macroeconomic variables on firm value Nigeria

Many studies have stressed the importance of capital structure as a significant aspect of financial planning and its effect on firm value in advanced and emerging nations. However, financial managers in business organisations find it difficult to determine the fundamental ratio of debt and equity and the optimum capital level. As a result of this, the manager's priority is to evaluate the various costs and benefits associated with using both debt and equity. Several factors influence whether to employ debt or equity, namely, the firm-specific factors and external macroeconomic variables. On the premise of this, the main objective of this study is to examine the moderating effects of contingency factors (industry classification, R&D intensity and CEO dominance) on the relationship between capital structure and firm value of listed firms in Nigeria. The second objective is to examine the effects of macroeconomic factors on the firm value of listed firms in Nigeria. Data were collected from DataStream and annual reports of 30 sampled listed firms in Nigeria for the period. For analysis purposes, panel data analysis was used, and the result shows that capital structure components (LTDA ratio, TDTA ratio and TDTE ratio) have a significant positive effect on firm value. In contrast, STDA ratio has an insignificant effect on firm value. In addition, the findings indicate that macroeconomic factors have a significant effect on firm value. Moreover, the findings indicate that contingency factors (industry classification, R&D intensity and CEO dominance) moderates the relationship between capital structure and firm value. Based on these findings, this study concludes that firm can improve their value by aligning and integrating contingency factors towards their capital structure decisions. This study also suggests that managers of Nigerian firms should focus on financing decisions that involve finding a particular combination of equity and debt that maximizes their overall market value.