Capital Structure and Firm Performance: Evidence from Publicly Quoted Insurance Companies in Nigeria

Abstract

This paper investigated the nexus between capital structure and firm performance in Nigeria. Secondary data of long-term and short-term debts ratios and firm size as well as firm performance metrics of earnings per share and book value per share were obtained from the annual reports and accounts of thirty-one (31) insurance companies publicly quoted on the floor of the Nigerian Stock Exchange. The data obtained were analyzed by means of descriptive (mean, standard deviation, minimum and maximum values, and correlation matrix) and inferential (multivariate regression) statistical techniques. Findings of the study revealed that there is significant link between shortterm, long-term and total debts ratios and firm performance of earnings per share and book value per share. Based on the findings of the study, it is recommended that management should strive to improve on their companies’ short and long-term debts, as this will go a long way in determining their survival. Moreover, firms are encouraged to use more of equity than debt in financing their operations, this is because in spite of the fact that the value of a firm can be enhanced with debt capital, it gets to a point that it becomes detrimental.