IIARD International Institute of Academic Research and Development

INTERNATIONAL JOURNAL OF ECONOMICS AND FINANCIAL MANAGEMENT (IJEFM )

E-ISSN 2545-5966
P-ISSN 2695-1932
VOL. 7 NO. 5 2022
DOI: https://doi.org/10.56201/ijefm.v7.no5.2022.pg99.110

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Effect of Debt Capital on Financial Performance of Listed Pharmaceutical Companies in Nigeria

Ezuma, Smart Chinedu

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Abstract

This study investigated the effect of debt capital on financial performance of listed pharmaceutical companies in Nigeria. The ex post facto research design was adopted for the study with a population of ten (10) listed pharmaceutical companies in Nigeria as listed by the Nigerian Exchange Group in 2021. Data were retrieved from the annual reports of the selected listed pharmaceutical companies for the period 2013 to 2017. Multiple regression analysis was used to analyze the data gathered with the aid of Stata12 statistical software. The study revealed a negative and insignificant relationship between debt capital and profit before tax of listed pharmaceutical companies in Nigeria. it also revealed a positive and insignificant relationship between debt capital and return on assets of listed pharmaceutical companies in Nigeria. Therefore, it was recommended that management of listed Pharmaceutical companies should not adopt aggressive total debt financing policy. This means that the managers of listed Pharmaceutical companies should concentrate on using more current liabilities to finance assets, relative to debt capital. Also, the government should regulate the financial sector through various monetary and fiscal policies in order to reduce the cost of borrowing given that many Pharmaceutical companies rely on external borrowing to finance their cash requirements. As it has shown in this study that debt capital has no significant relationship with firm’s performance.

keywords:

Capital Structure, Financial Performance, Debt Capital, Profit before Tax, Return on Assets.

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