Submit your papersSubmit Now
For Enquiries: [email protected]
IIARD LogoIIARD

Effect of Financing Mix on Financial Performance of Health Care Firms in Nigeria

Omaliko Emeka L. M.Sc, AMNIM, AIPMA, PDE

Abstract

This work empirically investigated the effect of financing mix on financial performance of firms. The study is vital as it portrays the extent to which financing mix influences firms’ performance. In order to determine the relationship between financing mix and firm’s performance, some key proxy variables were used in the study, namely Equity Financing, Debt Financing, Debt Equity Financing and Preferred Stock Financing; firms’ performance is however represented by ROE. Four hypotheses were formulated to guide the investigation and the statistical test of parameter estimates was conducted using multiple regression model. The research design used is Ex Post Facto design and data for the study were obtained from the published annual financial reports of the entire 9 firms listed under health care sector of NSE with data spanning from 2014-2018. The findings generally indicate that equity financing, debt financing and debt equity financing have significantly influenced firms’ performance. Preferred stock financing was found negatively and insignificantly related with firms’ performance. Based on this, the study concludes that financing mix of firms have exerted significant influence on firms performance over the years. The study however suggests that firms should always thrive to attain that optimal mix in order to achieve the overall objective of the organization

Keywords

Financing Mix; Financial Performance; Equity Financing; Debt Financing; Debt- Equity Financing

References

Abor, D. (2015). Capital structure influence on firms’ performance in Ghana, Harvard Business Review, 77, 4, 19-22. Abu-Rub, N. (2012). Capital Structure and Firm Performance: Evidence from Palestine Stock Exchange. Journal of Money, Investment and Banking, 23, 109-117. Akeem, L. (2014). Effect of Capital Structure on Firm’s Performance: Empirical Study of Manufacturing Company in Nigeria. Journal of Finance and Investment Analysis, 3, 4, 39-57. Akinyomi, Y (2013). Ownership structure, corporate governance and firms’ performance: the case of Chinese stock companies. Amherst College and the World Bank Sponsored Study 1-54. Amordi, S.A (2015). An empirical study of a manufacturing firm’s capital structure: the 7up bottling company experience, Babcock Journal of Management and Social Sciences, 1(1), 1-15. Antwi, B., & Zhao, L. (2012). Effect of financing mix on financial performance, Journal of Finance, 45, 1471- 1494 Arbibiyan, A., & Safari, M. (2017). The effects of capital structure and profitability in the listed firms in Tehran Stock Exchange. Journal of Management Perspective, 33: 159- 175. Babalola, R (2012). The choice between equity and debt: an empirical study, Journal of Finance, 37, 121- 144 Babalola, R. (2014). Effect of capital structure on performance of firms in Nigeria, Intl Journal of Finance, 3(4), 76-82 Bassey, C., Aniekan, B., Ikpe., & Udo, L. (2013). Effect of financing mix on financial performance of firms in Nigeria. Australasian Accounting, Business & Finance Journal, 1(4), 40-61 Chandra, B (2011). Capital structure and firm performance: a new approach to testing agency theory and an application to the banking industry, Federal Reserve System and Wharton Financial institutions Centre, 1- 37 Chandrasekharan, M. (2012). Effect of financing mix on financial performance, Strategic Management Journal, 22, 157- 177 Chechet, I., & Olayiwola, A. B. (2014). Capital structure and profitability of Nigeria quoted firms; the agency cost theory perspective, American International Journal of Social Science, 3(1), 139-158. Damodaran, P (2011). Competition, financial discipline and growth.” Review of Economic Studies, 66, 825- 852. Dev, R., & Rao, M. (2016). Explaining firm capital structure: the role of agency theory vs transaction cost economics, Strategic Management Journal, 17, 713- 728. Ebaid, I. E. (2009). The Impact of Capital Structure Choice on Firm Performance: Empirical Evidence from Egypt. Journal of Risk Finance, 7:479-487. Efobi, M. (2008). Impact of capital structure on corporate execution in Nigeria, Public Choice, 98, 287- 305. Elena, M., Georgeta, I., & Stefan, G. (2018). On the existence of an optimal capital structure: theory and evidence, Journal of Finance, 39, 857- 878 El-Maude, M., Ahmed, M., & Ahmed, I. (2016). Capital structure and financial performance: evidence from Nigeria. Journal of Economics and Business, 1- 23 Eriki, G., & Omorokunwa, E. (2014). Effect of capital structure on banks performance in Nigeria, Journal of Finance, 2(3), 40-52 Eriki, P. O. & Osagie, O. G. (2017). Capita) structure and bank's performance in Nigeria, Management Sciences Review, 5(1& 2), 7-22. Firch, R (2013). The market for corporate control: the scientific evidence, Journal of Financial Economics, 11, 5-50. Graham, J., & Harvey, M. (2001). Herding among investment newsletters: Theory and evidence. The Journal of Finance, 54(1), 237-268. Jensen, M.C., & Meckling, W.H. (1976), Theory of the firm: Managerial behavior, agency costs and ownership structure. Journal of Financial Economics, 3(4), 305-360. Leon, L. (2013). Effect of capital structure of firms on performance of listed manufacturing firms, Financial Management Winter, 82– 91 Magara, M. (2012). Capital structure and its determinant at Nairobi Stock Exchange, Journal of Financial and Quantitative Analysis, 27(2):247-263. Mesquite, D., & Lara, E. (2013). The interaction between capital structure and profitability of Brazilian firms, Journal of Small Business and Enterprise Development, 11, 121- 129 Modigliani, F. & Miller, M. (1958). The Cost of Capital, Operation Finance and Theory of Investment. American Economic Review,48:261-297. Muritala, T. (2012). An Empirical Analysis of Capital Structure on Firms’ Performance in Nigeria, International Journal of Advances in Management and Economics, 1(5), 116- 124 Mwangi, L. (2018). Relationship between Capital Structure and Performance of Non- Financial Companies Listed in the Nairobi Securities Exchange, Kenya. Global Journal of Contemporary Research in Accounting, Auditing and Business Ethics, 1, 2, 72-90. Nwankwo, 1. R. (2014). Effect of capital structure on firms’ performance: the Nigerian experience, European Journal of Economics, Finance and Administrative Sciences, 10, 233- 243. Nwude, E., & Anyalechi, M. (2018). Effect of capital structure on performance of firms in Nigeria, Journal of Finance, 56, 34-43 Obonyo, K (2017). Effect of capital structure on Nigerian firms performance, Academy of Managerial Journal, 25, 254- 264. Osuji, C.C., & Odita, A. (2012). Impact of capital structure on the financial performance of Nigerian non financial firms , Arabian Journal of Business and Management Review (OMAN Chapter) 1(12) :43-61. Simon-Oke, M., & Afolabi, M. (2011). Effect of capital structure on firms profitability, Journal of Empirical Literature, 4(7), 78-84 Taiwo, A. (2012). Effect of debt equity financing on firms performance. Global Journal of Business Research, 6(1):17-22 Ubesie, M. (2016). Capital structure and ownership structure: a review of literature, The Journal of On line Education, January Edition, 1-8. Uremadu, S., & Efobi, R. (2012) The Impact of Capital Structure and Liquidity on Corporate Returns in Nigeria: Evidence from Manufacturing Firms. International Journal of Academic Research in Accounting, Finance and Management Sciences (2)3: 1-10.

More Articles from IIARD INTERNATIONAL JOURNAL OF BANKING AND FINANCE RESEARCH

Effect of Monetary Policy on Profitability of Deposit Money Banks in Nigeria

Author: Stephanie Nguhemen Gbande, Mike T. Soomiyol, Timothy Tyona, Gaius Msendoo Asombo

Cognitive Diversity and Performance of Deposit Money Banks in Nigeria

Author: 1Nwangwu, Okwudiri Iheanyi, 2 Pepple, Grace Jamie PhD

Banking Innovations and Industrial Sector Performance in Nigeria: Evidence from ARDL Model

Author: Peter Ngbede Ajam, Abiodun Edward Adelegan, Benson Emmanuel

Environmental Sustainability and Entrepreneurial Performance in Nigeria: A Case Study of Enugu State

Author: i, Azolike Nkiru Nkechi, ii, Okwor Emmanuel Ejimnkonye, iii, Eneaniofu Daniel Mmaduakonam