Impact of Capital Structure on Financial Performance of Listed Consumer Goods Companies in Nigeria

Corporate entities face the challenge of determining the optimal mix of equity and debt to maximize returns and firm value. This paper investigates the influence of capital structure on the financial performance of consumer goods companies in Nigeria. Utilizing secondary data from the annual financial reports of 21 sampled companies from 2013 to 2022, obtained from the Nigeria Stock Exchange website, the research employed a census sampling technique and an ex-post facto research design to explore the relationship between independent and dependent variables. Descriptive statistics, correlation, and multiple regression analysis were conducted to test hypotheses. The study reveals a significant association between a firm’s capital structure and its financial performance. Specifically, it finds that the total debt to total equity ratio, short-term debt to total assets ratio, and long-term debt to total assets ratio do not significantly impact the financial performance of listed consumer goods firms in Nigeria. It suggests that companies should prudently manage their equity and debt usage, as these factors profoundly affect corporate performance. Regulatory authorities are encouraged to foster a conducive business environment, particularly for capital-constrained firms, by facilitating access to long-term debt financing. This strategic approach can enhance operational capabilities and short-term performance, rather than resorting to short-term debt as a stopgap measure for financing and profitability issues. Keywords: Capital structure, financial performance, total debt, total equity, long-term debt and total assets ratio