Effect of Capital Structure and Profitability Indicators on Firms' Share Price in Nigeria

This study examined the effect of capital structure and profitability indicators on firms’ share price performance among listed non-financial firms in Nigeria. The research adopted an ex-post facto design, using secondary data from 76 non-financial firms selected through a stratified random sampling technique from the Nigerian Exchange Group (NGX). Panel data analysis was employed, with Panel-Corrected Standard Errors (PCSEs) used to address issues of heteroskedasticity and contemporaneous correlation. The results revealed that the model accounted for approximately 18.7% (R² = 0.1869) of the variation in share price, and the overall model was statistically significant (Wald chi² = 28.16; p = 0.000). Findings indicated that long-term debt-to-equity (LTDE) had a significant negative effect on share price (β = -4.53, p = 0.000), suggesting that excessive long-term debt was viewed unfavorably by investors. Earnings per share (EPS) also had a significant negative impact (β = -0.61, p = 0.013), contrary to theoretical expectations, possibly due to earnings management or market inefficiencies. Market capitalization (MARCAP) showed a significant positive relationship with share price (β = 9.29, p = 0.038), reflecting greater investor confidence in larger firms. Based on these findings, the study recommended that firms reduce reliance on long-term debt and ensure optimal capital structure to avoid negative market perception, enhance financial transparency, and pursue strategic growth initiatives. Additionally, regulatory bodies were urged to strengthen oversight functions, and policymakers were advised to develop and enforce industry-specific guidelines to ensure sustainable financing and market stability.