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Corporate Leverage and Asset Efficiency: Evidence from Nigeria

Onwuka, Onwuka Okwara, Ihebinike, Godwin Emezie, Aruomah, Obinwanne Kelechukwu

Abstract

The general objective of this study is to investigate the relationship between asset efficiency and corporate leverage and financial performance of firms in Nigeria. This study utilize data from 11 selected firms in Nigeria using convenience sampling technique for the period 2005- 2013. This study adopted both descriptive and correlation analysis in describing the data set and in investigating the relationship between asset efficiency and corporate leverage in firms performance. The study was anchored on Modigliani-Miller (M&M) Theory, findings from the correlation analysis reveal that there is significant relationship between asset efficiency and corporate leverage in firm performance proxy by return on asset. However, the findings also indicate that there is significant relationship between asset efficiency and corporate leverage in firms’ financial performance. Furthermore, findings from the descriptive analysis show that about 84% of total assets of firms in Nigeria are financed by debts, confirming that firms are highly levered by asset efficiency. The study recommends among others that an appropriate asset recapitalization mix should be adopted by firms if they must improve their financial performance, survive and remain competitive in a declining economy.

Keywords

; AssetEfficiency and Corporate Leverage

References

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