DETERMINANTS OF CAPITAL STRUCTURE IN NIGERIAN LISTED MANUFACTURING FIRMS: A PANEL GENERALIZED METHOD OF MOMENTS (GMM) APPROACH
DOI:
https://doi.org/10.57233/gujaf.v2i1.52Keywords:
Capital structure, profitability, firm growth, audit committee, Generalized Methods of Moments (GMM)Abstract
In the present day, no large firm especially manufacturing industry has the wherewithal to single handedly finance its operation. Thereby, financing its operation through equity and debt financing become concerning. Despite these, there has been silence on the role play by audit committee on the need for capital structure. Therefore, the study examined the determinants of capital structure in Nigerian manufacturing listed firms using a Generalized Method of Moments (GMM) technique. The result from the GMM discovered that profitability, firm growth and audit committee were directly related to capital structure with their t-statistics (1.8821), (2.4549) and (1.9643) greater than t-values (t0.1= 1.645) and (t0.05 = 1.962) respectively. Also, liquidity ratio exhibited an inverse relationship but non-significance. Therefore, it was concluded that profitability, firm growth and audit committee were the major determinants of capital structure of listed manufacturing firms in Nigeria. It was recommended that Nigerian manufacturing industries especially the quoted firms should consider the feasibility study as carried out by audit committee before deciding on their choice of deb, equity or both. Also, the industries should embrace pecking order theory as propounded by Donaldson during the off-season period to reduce the severity of loan due to unforeseen circumstance.