Financial Leverage and Financial Stability of Quoted Industrial Goods Firms in Nigeria
Year: 2025
Type: article
Abstract: Businesses use financing decisions to optimize their capital structure, control risk, and spur growth. In view of this, this study examined the relationship between financial leverage and financial stability of quoted industrial goods firms in Nigeria. The specific objectives were to determine the effect of debt-equity ratio on liquidity of quoted industrial goods firms in Nigeria, to ascertain the effect of interest coverage ratio on liquidity of quoted industrial goods firms in Nigeria and to assess the effect of total debt ratio on liquidity of quoted industrial goods firms in Nigeria. Ex-post facto research design was adopted, and panel data covering ten (10) years (2014-2023) were collected from twelve (12) listed industrial goods firms in Nigeria which formed the sample size of the study. The data collected were analysed using panel linear regression technique. Findings showed that debt equity ratio has a significant negative relationship (Coeff. = -0.00219{0.0097}) with liquidity of quoted industrial goods firms in Nigeria while interest coverage ratio has a significant positive relationship (Coeff. = 0.00029{0.0124}) with liquidity of quoted industrial goods firms in Nigeria. It also revealed that total debt ratio has a non-significant negative relationship (Coeff. = - 0.00011{0.1260}) with liquidity of quoted industrial goods firms in Nigeria. It was thus concluded that financial leverage has a significant impact on the financial stability of quoted industrial goods firms in Nigeria. Recommendations made included that quoted industrial goods firms in Nigeria should consider reducing their debt levels and increasing their equity base. This could be achieved through strategies such as debtrestructuring, equity financing, and improving profitability to reduce dependence on debt.
Authors: OYOKUNYI E. ISONG MNIM, ENOBONG I. OKON, CHARLES B. BASSEY
Institutions: Akwa Ibom State University, Akwa Ibom State Polytechnic
Language: English
Subfield: Accounting
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W7077520399
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