|Title: CAPITAL STRUCTURE AND FIRM VALUE OF QUOTED PHARMACEUTICAL FIRMS IN NIGERIA|
Okudo, Chijioke Louis, Mbonu, Chikwelu Maduabuchi and Amahalu, Nestor Ndubuisi
This study ascertained the effect of capital structure on firm value of Pharmaceutical firms listed on the floor of the Nigerian Exchange (NGX) Group between 2010 and 2021. Equity capital, short term debt, long term debt and total debt served as proxies for capital structure, while Tobin’s Q was used to measure firm value. Secondary data were used in this study. Ex-post facto research design was adopted. Purposively sampling technique was used to sample the seven (7) pharmaceutical firms. Pearson Correlation Coefficient and Panel Least Square (PLS) Regression analysis via E-Views 10.0 statistical software were used to test the hypotheses of the study. The result of this study revealed that Equity Capital has a significant and positive effect on Tobin’s Q (β1 = 0.165227, P-value = 0.0001<0.05); Short Term Debt has a significant and positive effect on Tobin’s Q (β2 = 0.897693, P-value = 0.0444<0.05); Long Term Debt has a significant and positive effect on Tobin’s Q (β3 = 0.333631; P-value = 0.0006<0.05); Total Debt has a significant and positive effect on Tobin’s Q (β4 = 0.039992; P-value = 0.0000<0.05). In conclusion, this study upholds that Capital Structure has a significant and positive effect on Firm Value of quoted Pharmaceutical companies in Nigeria at 5% level of significance. The study recommended that companies should use more equity than debt in order to have a lower risk of bankruptcy. Also, companies that use equity capital, have no obligation to make interest payments or to repay equity investors’ initial investment, thereby making such companies to keep more profits and allowing more spending flexibility.
|Keywords: Equity Capital, Short Term Debt, Long Term Debt, Total Debt, Tobin’s Q|