Capital Mix and Performance of Firms Relations: A Pane l Generalized Methods Moment Evidence from Nigeria

This research is in the midst of disagreement between financial experts on the topic of what should make up a company’s capital structure and its connection with the company’s performance. In order to analyse the data gathered from annual reports and accounts of twenty-four quoted companies from the ten sectors in Nigeria, the analysis used Panel generalised process moments. After the empirical analysis, Kao Cointegration found that there is a long-term relationship between market value and the structure of resources. The J-statistic outcome validated the required method to produce the contemporary relationship between company output and capital mix. The study results showed that both equity capital and debt capital have a positive and meaningful relationship with the success of Nigerian companies. These findings contradict Modigliani and Miller’s (1958) claims that the value of the company is not influenced by the capital structure; the company should have the same market value and the same weighted average cost of capital at all levels of the capital structure, since the value of the company should depend on the return and risks of its operations and not on the way it funds its operations. This research corroborates the propositions of the theory of net profits and the view of traditionalists who support the importance of the capital structure in assessing the value of the business. No presence of serial correlation was found in the Arellano-Bond Serial Correlation Test. In order to raise the company’s market value, businesses should have a combination of both debt and equity in their funding system, taking into account the findings of this report. This should be achieved in an efficient manner to accomplish the desired aim of raising the company’s stock value.

Author(s) Details

Ejem, Chukwu Agwu
Department of Banking and Finance, Abia State University, P.M.B. 2000.Uturu, Nigeria.

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