Debt Financing And Firm Valuation Of Quoted Non-Financial Firms In Nigeria Stock Exchange

Published: Sep 5, 2022

Abstract:

Purpose: This study examined the effect of debt financing on the firm valuation of quoted non-financial firms on the Nigerian Stock Exchange (NSE). The study specifically evaluated the effect of short-term debt to equity, long-term debt to equity, and total debt to assets on Tobin’s Q for the period 2011 to 2019.

Methodology: The study adopts the ex post facto research design. The sampling technique utilized in the study was non-probability sampling. The final sample comprised seventy-five firms quoted non-financial firms on the Nigerian Stock Exchange (NSE). The secondary data obtained from MachameRATIOS®were analyzed using panel regression techniques. Unlike prior studies, the study also employs the Arellano Bond Dynamic Panel-data Estimation Model for robustness analysis.

Results: There is a negative effect of short-term debt to equity on Tobin’s Q. The effect of long-term debt to equity and total debt to assets was positive and significant.

Limitations: The main limitation is the unbalanced nature of some sectors due to data unavailability.

Contribution: The study contributes to the literature in the context of developing countries, on the effect of long-term debt on firm valuation; consistent with the trade-off theory of the cost of long-term debt financing as an alternative to internal funding.

Keywords:
1. Debt financing
2. Short-term debt
3. Long-term debt
4. Tobin’s Q
Authors:
1 . Patricia Chinyere Oranefo
2 . Chinedu Egbunike
How to Cite
Oranefo, P., & Egbunike, C. (2022). Debt Financing And Firm Valuation Of Quoted Non-Financial Firms In Nigeria Stock Exchange. International Journal of Financial, Accounting, and Management, 4(2), 199–218. https://doi.org/10.35912/ijfam.v4i2.1064

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