Capital Structure, Corporate Governance and Profitability of Listed Industrial Goods Firms in Nigeria A Moderating Effect of Firm Size

Abstract

Nowadays, industrial goods firms have experienced draught in debt financing due to the lending preference of financial institutions to firms in the oil and gas sector, corporate failures and financial scandals as well as the overstatements of accounts of some firms in and outside Nigeria blamed to be as a result of account improprieties and ineffective board of directors also Issues of the mixed outcome of previous researches; thus, necessitating and justifying the need for undergoing more investigations into the subject area. The objective of this study is to determine the overall effect of capital structure and corporate governance on profitability with the influence of firm size of the sampled industrial goods firms. The study used multiple regressions as a tool for analysis. The population of the study includes the thirteen (13) industrial goods firms listed by the Nigerian Stock Exchange as of 31st December 2022 out of which ten (10) are considered as sample size. The study employed panel data analysis by using random-effect estimation model as alternatively considered more appropriate. Secondary data explored from the annual reports and accounts of the sampled firms for the period of ten (10) years from 2013 to 2022 were analyzed. The results revealed that Leverage, board size and firm size are negatively significant at 1% level of significance. While board composition is positively significant at 5% level of significance to the profitability of the sampled firms. In view of the findings, it is recommended that the financial managers/ management of the industrial goods firms should have more independent directors of its board size to enhance proper control over the activities of the managers through which profit level would be increased. It is therefore recommended to conduct careful evaluation and take into consideration on leverage, board size and firm size that influence the profitability of their firms before making major business decisions as this will go a long way in improving their profitability.