EFFECT OF FINANCIAL LEVERAGE ON STOCK RETURNS OF LISTED COMPANIES IN NIGERIA CAPITAL MARKET

Abstract

This study investigated the effect of financial leverage on stock returns of listed companies in Nigeria. The study population is listed companies in Nigeria capital market. The adjusted population is 103 companies. Monthly share prices and financial leverage from 2010 to 2018 were extracted from Bloomberg. Data were transformed to single period averages, and cross sectional regression and Z-test analysis were conducted. The outcome from the regression and z-test revealed that financial leverage has no significant relationship with stock returns. The outcome was consistent with Modiglianni and Miller theory. It was recommended that companies focus on investment strategies as opposed to financing strategies.