Moderating Role of Profitability on the Nexus between Corporate Governance Variables and Capital Structure Decisions of Listed Multinational Firms in Nigeria

In today’s complex corporate environment, aligning governance structures with financial strategies remains a critical challenge for multinational firms, especially in emerging markets like Nigeria. Despite extensive literature on corporate governance and capital structure, limited studies have examined the conditional role of firm-level profitability in shaping this relationship. This study investigates the moderating effect of profitability on the nexus between corporate governance variables (board size and board independence) and capital structure decisions (proxied by total debt ratio) among listed multinational firms in Nigeria. The study employed an ex post facto research design, utilizing secondary data from audited annual reports of selected multinational firms listed on the Nigerian Exchange Group between 2013 and 2022. The study analyzed 130 firm-year observations to test the hypotheses. Findings revealed that board independence had a significant positive effect on capital structure, while board size did not show a direct influence. More importantly, profitability significantly moderated the relationships between both board size and board independence with capital structure, indicating that governance variables exert a stronger influence on debt decisions in more profitable firms. Based on these results, the study recommends that multinational firms in Nigeria align board governance structures with financial performance levels, strengthen board independence through regulatory compliance, and integrate financial indicators into governance and capital planning processes. These measures will support strategic capital structure decisions and improve financial sustainability in the multinational corporate sector.