Funding Structure and Performance of Manufacturing Firms in Nigeria

Despite of the theoretical and empirical information extant to the topic of funding structure of a firm, the existing literature focuses mostly on the funding structure itself as it does not affect overall firm performance and there is an inherent neglect of the sector-specific features on market-based measure of the valuation such as the Market value added. The difference in the operational and financial environment in different industries such as consumer goods, industrial goods, conglomerates, natural resources and healthcare industries, that is the need for tailored approach. The paper analysed the correlation between the funding structure and the market value of the quoted manufacturing firms between the years 2014 and 2023. Particularly, the research analysed the relationship between short-term debt, long-term debt, share capital and retained earnings and the market value added and Market value added. The positivist research paradigm has been presumed in the study and ex- post facto research design has been adopted. The information used in the research was the central bank of Nigeria statistical bulletin, the annual audited financial reports of the quoted companies used in the research. Descriptive statistics, Hausman test and random effect panel ordinary least square at 5% level of significance were used in the study. The Hausman test came up with correct outcome which justified the use the random effect panel regression method. The research established that short-term debt had a positive significant relationship with the Market value added, the long-term debt showed significant negative relationship with the Market value Added, the share capital had a positive significant relationship with the Market value Added, the retained earning had a positive but not significant relationship with the Market value Added. This research concluded that the percentage of funding play a very important role in decision making process of financial performance of quoted manufacturing companies in Nigeria. The study among others admonished manufacturing companies in Nigeria when listed publicly in the stock exchange, to have a strategic decision to increase their dependence on short-term debt in order to finance their operations. This will help in management of cash flow in an effective manner and timely repayments which are important in mitigating the liquidity risks. Another good contribution in the study is that it is focused on the manufacturing industry in Nigeria. This study is also different to the past studies in respect that the target industry was the manufacturing industry.