EFFECTS OF DEBT FINANCING ON FINANCIAL PERFORMANCE OF LISTED INDUSTRIAL GOODS MANUFACTURING FIRMS IN NIGERIA
Keywords:
Long-term debt, Medium-term debt, Short-term debt, Return on AssetsAbstract
This study investigated effects of debt financing on financial performance of quoted industrial goods manufacturing firms in Nigeria. The independent variables were short-term debt, medium-term debt and long-term debt as proxy to debt financing and return on assets as proxy to financial performance. The specific objectives were to ascertain the extent short-term debt financing affects financial performance of listed manufacturing firms, to determine the extent medium-term debt financing affects financial performance of listed manufacturing firms and to ascertain the extent long-term debt financing affects financial performance of manufacturing firms in Nigeria. The hypothesis were stated in line with the stated objectives. The ex-post facto research design was adopted for this study. Secondary data sourced from the audited annual reports of the sampled listed firms were used. The study estimated the models numerically using the secondary data for the period 2019-2023. For the data analysis, the fixed and random effect model was used to test all hypothesis. The findings revealed that short-term debt financing has insignificant effects on financial performance, medium-term debt financing has significant positive effects on financial performance and long-term debt financing has significant negative effects on financial performance of listed industrial goods manufacturing firms in Nigeria. Based on these findings, the study recommends that firms should chase less of short-term debt in financing their operations since it has unnoticeable positive effects on their financial performance, rather firms should sort for more of medium-term debt than short and long-term debt for their operation since it will results to increase on their profitability and finally to reduce their long-term borrowing as its higher cost of finance would put financial pressure on the firm’s profitability.References
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