Effect of Capital Structure on Earning Quality of Listed Manufacturing Firms in Nigeria

This study examined the effect of capital structure on the earning quality of listed manufacturing firms in Nigeria. The specific objectives were to determine the effects of longterm debt ratio (LTDR), short-term debt ratio (STDR), and interest coverage ratio (ICR) on earning quality. The study adopted an ex-post facto research design and utilized a sample of 30 listed manufacturing firms on the Nigerian Exchange Group (NGX) for the period 20212025, yielding 150 firm-year observations. Secondary data sourced from annual reports and financial statements were analyzed using the fixed-effects panel regression model in Stata 17, following Hausman specification test results. Findings revealed that LTDR had a positive and statistically significant effect on earning quality (β = 0.0423, p = 0.0048), while STDR exerted a positive but statistically insignificant effect (β = 0.0187, p = 0.2531). The ICR had a negative and statistically significant effect on earning quality (β = -0.0034, p = 0.0023). The study concludes that capital structure decisions critically shape the quality of reported earnings in Nigeria's manufacturing sector. It is recommended that firms managers adopt optimal longterm financing structures and that regulators strengthen earnings reporting standards to mitigate earnings manipulation risks associated with debt servicing pressures