Open AccessRelating Financial Leverage to Corporate Performance: A Case of Cement Manufacturing Firms in Nigeria
Author(s) -
Makwe Stella Ivo,
Mike Anyanwaokoro
Publication year - 2019
Publication title -
south asian journal of social studies and economics
Language(s) - English
Resource type - Journals
ISSN - 2581-821X
DOI - 10.9734/sajsse/2019/v3i430114
Subject(s) - return on assets , debt to equity ratio , leverage (statistics) , business , return on equity , nonprobability sampling , cement , stock exchange , debt , manufacturing , debt ratio , current ratio , finance , equity (law) , monetary economics , economics , population , mathematics , materials science , metallurgy , statistics , marketing , demography , sociology , political science , law
The study evaluated the effect of leverage financing on performance of quoted cement manufacturing firms in Nigeria for the period 2006-2017. There are four (4) cement manufacturing firms in Nigeria studied out of eight (8) manufacturing cement firms. Purposive sampling technique were used in selecting the four (4) cement manufacturing firms in Nigeria out of the eight (8) cement manufacturing firms quoted in the Nigerian Stock Exchange (NSE). The main objective of the study is to investigate the effect of financial leverage on corporate performance of cement firms in Nigeria. The analytical tool adopted was ordinary least square (OLS) simple and multiple regressions. Findings of the study showed that Debt Ratio and Debt to Equity Ratio has negative insignificant effect on Return on Assets (ROA) of quoted cement manufacturing firms in Nigeria. On the other hand Interest Coverage Ratio (ICR) has positive and insignificant effect on return on assets of quoted cement firms in Nigeria. This implies that increase in Debt Ratio and Debt to Equity Ratio decreases ROA, while increase in ICR increases ROA of cement manufacturing firms in Nigeria. The study therefore recommended that the corporate managers in Nigeria should be encouraged to use more long term debt in their financing than relying more on short term credits, since increase in ICR increases ROA of cement manufacturing firms in Nigeria.