Capital Structure and Firm Value Evidence from Quoted Agricultural Companies in Nigeria

Abstract

This study investigated the influence of capital structure on firm value, with specific focus on long-term debt, short-term debt, and interest coverage options available to the firm manager. Adopting ex-post facto research design, a sample of four agricultural firms listed on the Nigerian Exchange Group (NGX), selected based on their continuous listing (2014 to 2023) and availability of annual financial reports where data were sourced was examined. Descriptive and inferential statistical methods were used, with preliminary tests: normality of data and multicollinearity test to compliment the regression analysis. Least Square Dummy Variable regression analysis technique which was employed to test the stated hypotheses, reveals that excessive usage of long-term and short-term debt options negatively affect financial firm value, suggesting that over-reliance on debt financing can hinder market performance. In contrast, interest coverage usage option exhibits a positive effect on firm value, highlighting the importance of efficient debt management practices. The findings emphasize the need for agricultural firms to maintain strong interest coverage ratios while minimizing short-term and long-term debt reliance to reduce liquidity risks. Based on the outcomes, this study recommends that managers of agricultural firms should adopt strategic financial management approaches, including improved cash flow forecasting and access to long-term, low-cost capital, to foster sustainable growth.