Macroeconomic Determinants of Capital Structure of Firms: Evidence from Nigeria

Olumuyiwa Ganiyu Yinusa

Abstract


 

This paper examines the impact of macroeconomic factors as determinants of capital structure choice of Nigerian firms based on the data of 115 Nigerian non-financial firms listed on the Nigerian Stock Exchange, for the period 1998-2012. The study employed two step system Generalized Method of Moment in a dynamic panel framework. The findings of the study reveal that negative relationship exist between interest rates, inflation, macroeconomic condition, institutional quality and leverage. The findings also reveal that positive relationship exists between financial development and leverage. The study therefore conclude that variables identified in the agency cost theory that provide explanations for capital structure of firms in  the developed and some emerging countries are relevant in Nigeria firms but not fully applicable in the Nigerian context.

Key words: capital structure, agency theory, generalized method of moment, dynamic panel.


Keywords


capital structure, agency theory, generalized method of moment, dynamic panel.

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