Short Term Interest Rates and Capital Structure of Quoted Firms in Second Tier Security Exchange Market

Leesi Lenyie; Joseph Adebayo Komolafe

doi:10.56201/wjeds.v11.no1.2026

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Short Term Interest Rates and Capital Structure of Quoted Firms in Second Tier Security Exchange Market

Leesi Lenyie, Joseph Adebayo Komolafe

Abstract

The purpose of this study was to estimate the effect of short-term interest rate on the capital structure of quoted firms on the second-tier security exchange market. Cross sectional data was sourced from financial statement of the quoted firms and Central Bank of Nigeria Statistical Bulletin from 2015-2024. Multiple regression models were formulated to explore the relationship between short term interest rate and capital structure of quoted firms in second tier security exchange market. Equity and debt capital were 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. Models found that 50.1 % variation in both equity capital and debt of the firms was explained by short term interest rate.The study found that money market rate, maximum lending rate and prime lending rate have positive effect on debt capital of the quoted firms while monetary policy rate and savings rate have negative effect. The study found that money market rate and savings rate have positive effect on equity capital of the quoted firms while prime lending rates, maximum lending rate and monetary policy rate have negative effect on equity capital of the quoted firms. From the findings, we conclude that short term interest averagely determines capital structure of the quoted firms in the second-tier security exchange market. The study recommends that capital market regulatory authorities should ensure that Nigeria stock market operate with international best practice, all barriers to inflow of foreign portfolio investment should be discouraged as this will enhance market mechanism m to determine interest rate. Policies should be directed toward increasing the openness of the financial market Nigeria should, as a matter of urgency, deploy resources towards gathering reliable and accurate information which would facilitate develo

Keywords

Short TermInterest RatesCapital StructureSecond Tier Security Exchange Market

References

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Short Term Interest Rates and Capital Structure of Quoted Firms in Second Tier Security Exchange Market

Abstract

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