Shareholders’ Wealth and Debt- Equity Mix of Quoted Companies in Nigeria

Amos O. Arowoshegbe, Francis Kehinde Emeni

Abstract


The study examined the relationship between shareholders’ wealth and debt-equity mix of quoted companies in Nigeria. The study was based on a panel data set from 1997 to 2011 comprising sixty non – financial companies. The study specified two panel regression models. Two measures of shareholders’ wealth: Return on Equity (ROE) and Earnings per Share (EPS) were taken as the dependent variables respectively. The principal explanatory variable for each of the models was Debt Ratio (DR). The results of the study conform to our a-priori expectation that there is a significant negative relationship between shareholders’ wealth and debt-equity mix of quoted companies in Nigeria. This is not unexpected considering the inactive debt market in Nigeria, the dominance of the money market in the Nigerian financial system, the shallow nature of the Nigerian capital market, the buy-hold syndrome of the Nigerian investors and the macro economic instability in the country. It was recommended that adequate fiscal policies, relevant capital market institutional and legal framework should be put in place. These measures, we believe, will enhance the development of the Nigerian capital market and create a more conducive environment for business to thrive.

Full Text: PDF DOI: 10.5430/ijfr.v5n1p107

Creative Commons License
This work is licensed under a Creative Commons Attribution 3.0 License.

International Journal of Financial Research
ISSN 1923-4023(Print) ISSN 1923-4031(Online)

 

Copyright © Sciedu Press

To make sure that you can receive messages from us, please add the 'Sciedu.ca' domain to your e-mail 'safe list'. If you do not receive e-mail in your 'inbox', check your 'bulk mail' or 'junk mail' folders.