Determinants of Capital Structure in Cement Industry: A Case of Nigerian Listed Cement Firms
22 Pages Posted: 5 Aug 2011
Date Written: August 4, 2011
Abstract
This article examines an empirical analysis of determinant of capital structure in Nigerian Cement Industry for the period of 2000-2009. The analyses are performed using time series data pertaining four listed cement firms. The regression analyses are estimated using OLS. We used eight exogenous variables to measure their effect on capital structure. Seven of our variables were significantly related to leverage ratio whereas the remaining one variable was not. Considering the results, profitability, size of the firm, liquidity and lag of leverage are negatively significantly related to leverage whereas potential for growth, age of the firm, tangibility are positively significantly related with the leverage ratio. Our results approve the prediction of pecking order theory in case of profitability where as earnings volatility fails to confirm to trade-off theory. We therefore recommend that firms should always consider their position using above variables as yardstick before embarking on debt financing decision.
Keywords: Capital Structure, Leverage, Cement Industry, Nigeria
JEL Classification: 115
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