Financial Leverage on The Firm Value of Listed Consumer Goods Firms

Abstract Financial leverage's impact on the firm value of listed consumer goods companies in Nigeria was investigated in this study. The study used secondary data gathered from the quarterly audited financial statements of sixteen (16) consumer goods companies listed on the Nigerian Stock Exchange, spanning the calendar quarters of 2015 Q1 through 2024 Q4. The selection of the 16-firm sample was done by non-probability judgmental sampling. The Equity Multiplier (EM) and Degree of Financial Leverage (DFL) were used as stand-ins to gauge the amount of financial leverage. Enterprise Value (EV), Market to Book Value (MBV), and Price to Sales Ratio (PSR) were used as stand-ins to gauge the degree of business value. Finbox and the Nigerian Stock Exchange were used to collect all of the data, and E-Views was used for the study. The degree of the association between financial leverage and firm value was ascertained using both descriptive and inferential statistics, such as the Unit Root Test, Descriptive Statistics, and Correlation Analysis. The Hausman test was used to determine the preferred model in a panel regression analysis that employed the Fixed Effects Model (FEM), Random Effects Model (REM), and Pooled Ordinary Least Squares (OLS). With a p-value of 0.000 for all three models, the regression findings showed that the Equity Multiplier had a mild and inconsequential impact on the Price to Sales Ratio and Enterprise Value, but a substantial and significant positive influence on Market to Book Value. The impacts of Degree of Financial Leverage on all firm value proxies were found to be extremely weak and statistically negligible. The findings indicate that financial leverage has a limited and proxy-dependent effect on firm valuation and that the market reacts more favorably to capital structure decisions represented by debt-based financing than to leverage-induced earnings volatility. The management of these companies was counseled to implement the best leverage methods that increase shareholder value while considering other metrics that are unaffected by changes in the capital structure.

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Publication Details

Journal
Zenodo (CERN European Organization for Nuclear Research)
Published
2025-08-16
DOI
https://doi.org/10.5281/zenodo.16885979
Primary Topic
Financial Reporting and Valuation Research
Type
article
Field-Weighted Citation Impact
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article

Financial Leverage on The Firm Value of Listed Consumer Goods Firms

Zenodo (CERN European Organization for Nuclear Research)
Financial Reporting and Valuation Research
article

Financial Leverage on The Firm Value of Listed Consumer Goods Firms

article en

Abstract

Abstract Financial leverage's impact on the firm value of listed consumer goods companies in Nigeria was investigated in this study. The study used secondary data gathered from the quarterly audited financial statements of sixteen (16) consumer goods companies listed on the Nigerian Stock Exchange, spanning the calendar quarters of 2015 Q1 through 2024 Q4. The selection of the 16-firm sample was done by non-probability judgmental sampling. The Equity Multiplier (EM) and Degree of Financial Leverage (DFL) were used as stand-ins to gauge the amount of financial leverage. Enterprise Value (EV), Market to Book Value (MBV), and Price to Sales Ratio (PSR) were used as stand-ins to gauge the degree of business value. Finbox and the Nigerian Stock Exchange were used to collect all of the data, and E-Views was used for the study. The degree of the association between financial leverage and firm value was ascertained using both descriptive and inferential statistics, such as the Unit Root Test, Descriptive Statistics, and Correlation Analysis. The Hausman test was used to determine the preferred model in a panel regression analysis that employed the Fixed Effects Model (FEM), Random Effects Model (REM), and Pooled Ordinary Least Squares (OLS). With a p-value of 0.000 for all three models, the regression findings showed that the Equity Multiplier had a mild and inconsequential impact on the Price to Sales Ratio and Enterprise Value, but a substantial and significant positive influence on Market to Book Value. The impacts of Degree of Financial Leverage on all firm value proxies were found to be extremely weak and statistically negligible. The findings indicate that financial leverage has a limited and proxy-dependent effect on firm valuation and that the market reacts more favorably to capital structure decisions represented by debt-based financing than to leverage-induced earnings volatility. The management of these companies was counseled to implement the best leverage methods that increase shareholder value while considering other metrics that are unaffected by changes in the capital structure.

Zenodo (CERN European Organization for Nuclear Research)
Nile University of Nigeria (NG)
Openalex Percentile: Top 38%
Financial Reporting and Valuation Research
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Financial Leverage on The Firm Value of Listed Consumer Goods Firms · Zenodo (CERN European Organization for Nuclear Research) (2025) | TGRS Research Map | TGRS