The study sought to examine the determinants of financial structure of Nigeria quoted firms during the period spanning 1999 – 2014. The 15-year period accommodated several time periods and data points. The study adopted ex-post facto research design. The research work also adopted two theoretical frameworks: Pecking Order and Static Trade – off theories captured in a panel regression model. A sample of 24 firms was selected based on data quality and availability to address the requirements of the variables in the model. Five hypotheses were formulated and tested using Pooled Ordinary Least Squares (OLS) multiple regression. Results show that profitability (PRT) had a positive and significant impact on financial structure; tangible fixed asset (TAN) has a positive and significant impact on financial structure of quoted firms; growth opportunities (GRW) had a positive and significant impact on financial structure of Nigerian quoted firms. Results of panel regression also indicate that operating risk (volatility), (OPR) had a positive and statistically significant impact on financial structure of listed firms in Nigeria. Finally, firm size (FST) which is the natural logarithm of total assets had a positive and significant impact on financial structure. Firm size was used to control possible non-linearity and prevent problem of heteroskedasticity. These findings are corroborative of theoretical and empirical predictions. For instance, employing a high proportion of a long term debt in the financial structure results in low profitability because short-term debts are less expensive, but accessible to many firms. On the basis of the entire findings, useful recommendations for optimal financial mix by managers as well as measures to enhance the management of the Nigerian Stock Exchange were made. For instance, reducing floatation costs insider abuses will enable firms to access funds easily and increase investors confidence respectively.

1.1 Background of the study
In some countries, governments often give financial assistance to business firms to enable them to kick-start and sustain their operations and overcome some teething problems. Such assistance takes pre-eminence during economic recession which is often characterized by low demand for goods and services occasioned by low level of income, falling Gross Domestic Product (GDP), business failure and loss of jobs. The rationale for governments’ action in this direction are legion: to prevent corporate failure and its contagious effects; increase the Gross Domestic Product by producing goods and services for local and international consumption; maintain a desired level of employment and above all, encourage entrepreneurial development.

Financial and economic crises are known to have effects on financial structure decision of firms. For instance, Deesomak, Paudyal and Pescetto (2004) investigated the determinants of capital structure of Asia Pacific region after the financial crisis that engulfed Thailand, Malaysia and Singapore. The crisis which originated in Thailand, had a snowball effect on the region’s capital markets severely, with outflows of foreign investments as international investors become concerned with higher risk in the affected countries. Raising capital in these countries became more costly because of high risk premia, compounded by the high level of interest rates needed to support local currencies (Deesomark, et al 2004). Grenville (1999) and Chou and Ho (2002), reported that the Asian countries were hit in different degrees by the crisis. This prompted researchers to conduct research on determinants of capital structure across the affected countries between the pre and post- crisis period to provide insights into firms’ financial decision making. In the same vein Zoppa and McMahon(2009) compared Pecking Order Theory with the financial structure of manufacturing SMEs in Australia.

Financing decisions have also been identified to have direct impact on financial structure and performance of companies. See for instance, Gupta, Srivastava and Sharma (2010), Chou and lee (2007), Schwarts and Aronsou (1979), Booth, et al (2001), Pratheepkpanth (2001), Bas, Muradoglu and Phylaktis (2009) and Booth, Alvazian and Demirguc – Kunt (2001).

Economic and financial crises are not alien to Nigeria especially during the period spanning 1990 – 2008. See for instance, Dagogo and Ollor (2009), Olo (1991), Uche (2000), Sanusi (2003) and Soludo (2004). In every economy, the real and financial sectors complement each other in order to maintain a progressive balance (Dagogo and Ollor, 2009).

A deficiency in one sector hampers growth and development in the other. For instance, Sharpe, Alexander and Bailey (1995) argued that there exists a strong relationship between highly developed financial sector and real sector investment. In Nigeria, however, evidence shows that both sectors are not so symbiotic such that the financial sector milk – dries the real sector. Thus, funds meant for real sector development are channeled to non-productive sectors. Soludo (2004) and Sanusi (2003) observed that banks declare huge profits even as factories close down, simply because Nigeria banks were less responsible to long-term financing than they were to short–term trade financing and foreign on exchange deals.

Dagogo and Ollor (2009), have observed that the failure of previous financial policies of government to achieve desirable economic growth was a concern that demands restructuring of the Nigerian system, especially in the glare of an ailing economy. Thus, the introduction of the Structural Adjustment Programme (SAP) in 1986 and the privatisation programme in 1989 were in response to failed institutional measures to promote growth in the industrial sector. Uche (2000) is of the view that SAP was designed to achieve balance of payment viability by altering and restructuring the production and consumption patterns of the economy, eliminating price distortions, reducing the heavy dependence on consumer goods, imports and crude oil exports, enhancing the non-oil export base, rationalising the role of the public sector, accelerating the growth potential of the private sector and achieving sustainable growth. To achieve these objectives, the main strategies of the programme were the adoption of a market exchange rate for the Naira, the deregulation of external trade and balance of payment arrangements, reduction in the price and administrative control and more reliance on market forces as a major determinant of economic activity. In the same vein, Ojo (1991) pointed out that government’s reasons for deregulation of the economy were legion: stagnant growth, rising inflation, unemployment, food shortage and mounting external debt.

The corporate sector remains the engine room of growth and development of all economies. Abor (2008) observed that corporate sector growth is vital to economic development.

While acknowledging the role of small and medium scale enterprises in the Nigerian economy, Yerima and Danjuma (2007) pointed out that these enterprises have been identified as the means through which rapid industrialization, job creation, poverty alleviation, and other developmental goals are realized. Again, Abor (2008) asserts that it is imperative for firms in developing countries to be able to finance their activities and grow overtime if they are ever to play an increasing and predominant role in providing employment as well as income in terms of profits, dividends and wages to households. Firms earn economic gains or rents from strategic assets which are financed by debt or equality. Kochhar (1997) affirms that strategic assets provide a firm with a source of steady stream of rents so that it gains a sustained competitive advantage over its rivals. Thus, it is the stock of strategic assets that is important in determining a firm’s profitability level.

Increasingly, business people are seeking to manage companies in a strategic manner. The strategic model of the firm argues that improved firm performance occurs when the firm’s managers select strategic goals and all of the activities of the firm are directed towards meeting those goals. Therefore, the financial strategy of the firm should be consistent with the firm’s strategic objectives (Prasad, et al,1997).

Again, Kochhar (1997) asserts that the nature of the firm’s assets predicts efficient ways of organising transactions. Varying characteristics of assets imply different levels of optimal capital mix of debt and equity. If the transactions with suppliers of finance are not organised as per these predictions, the ability of firms to obtain a competitive advantage over their rivals maybe impaired (Hennart, 1994).

It suggests, therefore that the capabilities in managing financial policies are important if a firm is to realise gains from its specialized resources; poor capital structure decisions lead to a possible reduction/loss in the value derived from strategic assets (Kochhar, 1997).

In the presence of uncertainty, bounded rationality and opportunism, contracts that completely safeguard an investment cannot be designed. This leads to organising costs for the firm, as is the case for other economic activities. These organising costs are a function of the institutional and environmental constraints (Williamson, 1991). It is important to note that different countries have different institutional arrangements, mainly with respect to their tax and bankruptcy codes, the existing market for corporate control and the roles banks and securities markets play (Pratheepkpanth, 2011).

The choice between two governance structures depends on the comparative costs for organising a particular transaction, for instance, financing a particular investment (Kochhar, 1997). As Williamson (1991) argued, it is the characteristics of assets under consideration that affect costs under alternative governance structures. Alternative governance structures are referred to debt and equity. The variation in the benefits of the two instruments and their ability to monitor and evaluate managerial actions according to Berglof (1990) and Williamson (1988) imply that debt and equity can be considered as alternative governance structures. A firm has the option to choose either one when financing a new investment. The debt-to-equality ratio, therefore is the result of transactions with potential debt-holders and equality holders. These transactions come about with the formation of explicit or implicit contracts that delineate the benefits and resource available to the suppliers of finance (Jensen and Meckling, 1976). The benefits available represent the property rights due to their claims over the return streams (from the assets). This recourse available is in the form of their control rights over management actions (Kochhar, 1997)....

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