ISSN: 2225-8329
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This study sought to ascertain the effect of Firm Characteristics on Capital Structure of Deposit Money Banks (DMBs) listed on Nigeria Stock Exchange using a sample of fifteen (15) DMBs from 2008-2017. Ex-Post Facto research design was employed while secondary data were collected and subjected to multiple regression and correlation analysis in order to achieve the study objectives. A firm characteristic, which is the independent variables, was measured by size and asset tangibility, while capital structure, which is the dependent variable, was measured by Debt-Capital ratio, Debt-Asset ratio and Debt-Common Equity ratio. Results of this study suggested that Firm Characteristics have a significant negative effect on Debt-Capital ratio; Firm Characteristics have a significant positive effect on Debt-Asset ratio; Firm Characteristics have a non-significant positive effect on Debt-Common Equity ratio. This implies that, the two variables have a strong positive effect on the capital structure of DMBs. Overall; the implications of the findings of this study support both the trade-off theory and the pecking order theory of capital structure. This study recommended that, management of DMBs need to embrace innovation as a way of increasing the efficiency of the assets. Increased efficiency of assets is critical to maximizing the profitability of the firms, which consequently reduces the negative impact arising from the cost of debt (financing costs). Additionally, finance managers are advised to adopt a residual dividend policy while at the same time, emphasizing on cost-effectiveness.
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To cite this article: Okegbe, T.O., Eneh, O.M.-R., Ndubuisi, A.N. (2019). Effect of Firm Characteristics on Capital Structure of Deposit Money Banks Listed on Nigeria Stock, International Journal of Academic Research in Accounting, Finance and Management Sciences 9 (2): 198-210.
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