Funding Structure and Performance of Quoted Manufacturing Firms in Nigeria

This study examines the relationship between funding structure and the performance of quoted manufacturing firms (QMFs) in Nigeria from 2012 to 2022. The ratio of short-term financial liabilities to equity (SFLE), ratio of long-term financial liabilities to equity (LFLE), ratio of lease liabilities to equity (LLE), and the ratio of trade and other payables to equity (TPE) were used as indices of funding structure, while gross profit (LGPT) was used as proxy for performance. We sourced for data from the annual reports of thirty-two QMFs and thus giving a total observation of 352. The study made use of an ex-post facto research design. The study employed the descriptive statistics, unit root, Hausman, Panel Causality, and the Fixed Effect Panel Ordinary Least Square (POLS) tests at the 95% confidence interval. The unit root test shows that all the variables are stationary at level requiring the Hausman test that verifies that the Fixed Effect POLS is the more appropriate technique to apply in this study. The Fixed Effect POLS shows that LFLE and TPE are positive and significant to LGPT, LLE is negative and significant, and SFLE is negative and insignificant to LGPT. The Panel Causality test shows that there are uni-directional supports from LFLE, SFLE, and TPE to LGPT for QMFs in Nigeria. However, there is bi-directional support from LLE and LGPT. The study concludes that the ratio of short and long-term financial liabilities as well as trade and other payables to equity affect the earnings of QMFsin Nigeria. The study recommends that QMFs should continue to use trade and other payables and long-term financial liabilities as means of funding their investments since it promotes their earnings.