Determinants of Capital Structure of Listed Non-Financial Firms under Firm Life Cycles in Nigeria

This study examines the determinants of capital structure under firms’ life cycles in Nigeria. A sample of seventy six (76) non-financial firms were investigated for the period 2014 to 2022. The dependent variable is debt-to-total asset, while the independent variables are firm size, growth opportunities, profitability, asset structure and firm age. Dummy variables (DLum1-5) were used to represent each of the five cycle life stages in line with Dickinson (2011) five stages of life cycle models. The Dynamic System-GMM was employed for analysis of data and the results generally revealed that life cycle stage is a significant determinant of capital structure of non-financial firms in Nigeria. It was found that while introduction stage (LDUM1), maturity stage (LDUM3) and shake-out stage (LDUM4) have significant positive relationship with capital structure, growth stage (LDUM2) and decline stage (LDUM5) are significant and negatively related to capital structure. Firm size and growth opportunities are significant determinants of capital structure across the life cycle stages. They were found to be inversely related to capital structure of non-financial firms in Nigeria. In the growth stage (LDUM2), profitability is a significant determinant of capital structure; but across the other stages, it does not significantly influence capital structure. The study recommends that asset managers should be constantly trained on how to effectively allocate company’s funds across the life cycle stages.