Capital Structure and Shareholders Value of Commercial Banks in Nigeria: A Multi-variate Study Analysis

AKANI; HENRY WALERU; LUCKY; ANYIKE LUCKY

Capital Structure and Shareholders Value of Commercial Banks in Nigeria: A Multi-variate Study Analysis

AKANI, HENRY WALERU, LUCKY, ANYIKE LUCKY

Abstract

This study examined the effects of capital structure on shareholders’ value of quoted Nigerian commercial banks from 1981 – 2014. The model built for the study proxy Return on Investment (ROI), Equity Price (EQP) and Earnings per Share (EPS) as dependent variables measuring shareholder’s value as the function of percentage in Debt Capital to Total Capital (DC/TC), percentage of Equity Capital to Total Capital (EQC/TC), percentage of Preference Share Capital to Total Capital (PSC/TC as independent variables). Annual time series data were sourced from stock exchange factbook and financial statement of quoted commercial banks. The Econometrics Techniques of Ordinary Least Square (OLS), Augmented Dickey Fuller (ADF), Unit Root Test, Johansen co-integration test and pair wise Granger Causality test were employed in the empirical analysis. R2, Regression coefficient, probability value, t-statistics and f-statistics were used to determine the extent to which the independent variables can affect the dependent variable. The co-integration result shows that long run equilibrium exists among the variables except preference share capital. In model I, the study found that all the independent variables have positive relationship with the Return on Investment. Model II found that equity capital and preference share capital have positive effects but insignificant relationship with Return on Investment while short term borrowings and preference share capital have positive relationship and debt capital have negative relationship with Equity Price of quoted commercial banks. Model III found that Equity Capital has positive relationship while debt and preference share capital have negative relationship with Earnings per Share. From the regression summary, Model I can explain 79% variation on Return on Investment, Model II explains 48% variation on Equity Prices while Model III explains only 11% variation on Earnings per Share. From the above, the study concludes that capital structure

Keywords

Capital StructureShareholders ValueDebt CapitalEquity Capital and Preference Share Capital

References

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Capital Structure and Shareholders Value of Commercial Banks in Nigeria: A Multi-variate Study Analysis

Abstract

Keywords

References

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