Capital structure, market capitalization, and share price: A fixed effects analysis on industrial goods firms in Nigeria

Abstract

This study examined the relationship between capital structure, market capitalization, and share price in Nigerian industrial goods firms using a fixed effects panel data analysis. The research specifically investigates the effects of debt-to-equity ratio, debt-to-asset ratio and long-term debt-to-equity ratio on share price, while also assessing the controlling role of market capitalization. Empirical results reveal that capital structure variables (debt-to-equity ratio, debt-to-asset ratio and long-term debt-to-equity ratio) do not significantly affect share price, as indicated by their high p-values. However, market capitalization demonstrates a strong positive influence on share price, with a significant coefficient p-value, suggesting that firm growth and market strategizing are key determinants of share price fluctuations. The findings suggest that Nigerian industrial goods firms should prioritize market expansion and revenue growth over debt management as a means to enhance shareholder value. Based on these insights, the study recommends that firms should focus on strengthening financial transparency, adopting strategic growth policies, and improving investor confidence through sound corporate governance practices.