Effect of Capital Structure of Nigeria Firms on Economic Growth

Abstract

The efficiency of financial system is endogenously achieved if the capital structure of the economy can promote optimal use of the resources available for economic growth and development. The aim of this paper is to examine the effect of capital structure of firms on economic growth in Nigeria. A quantitative research design was used and regression analysis and ordinary least square in carrying out this study. The results of the study indicate that capital structure of firms in Nigeria has a long run relationship with the growth and development of Nigerian economy. The implication of this finding is that capital structure of a firm will help to increase the growth of the economy in the long run if well managed. It is therefore recommended that Nigerian firm should try and match their capital structure with real activities that will help to increase the level of economic growth in Nigeria; and that the firms should go for long term financing instead of going for short term loan or debt which form most of their leverage and as well focus on developing internal strategies that will help the economy to grow.

DOI: 10.5901/mjss.2014.v5n1p515