Interest Rates and Corporate Leverage: A Panel Data Evidence Quoted Manufacturing Firms in Nigeria
Abstract
This study examined the relationship between interest rates and corporate leverage of quoted manufacturing firms in Nigeria. Panel data were sourced from financial statement of 32 quoted manufacturing firms and Central Bank of Nigeria Statistical Bulletin from 2014-2023.Multiple regression model was formulated to explore the relationship between interest rate and corporate leverage of the quoted manufacturing firms. Corporate leverage was used as dependent variables while prime lending rate, maximum lending rate, savings rate, money market rates and monetary policy rate were used as dependent variables. The study employed panel data Ordinary Least Square Methods. After cross examination of the validity of the pooled effect, fixed effect and the random effect, the study accepts the fixed effect model. The study found that interest rate explained about 59.4 percent systematic variations of corporate leverage. Money interest rate, maximum lending rate and prime lending rate have negative effect on corporate leverage while monetary policy rate and savings rate have positive and significant effect on corporate leverage. From the findings; the study concludes that interest rates have significant effect on leverage of the quoted manufacturing firms. We recommend monetary policy that will reduce the volatility of interest rate to enhance corporate leverage of quoted firms in Nigeria.
Keywords
Interest Rates
Corporate Leverage
Panel Data
Quoted Manufacturing Firms
References
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