CAPITAL MIX, FINANCIAL RISK AND CORPORATE VALUE OF LISTED INDUSTRIAL GOODS COMPANIES IN NIGERIA

Abstract

In recent years, the listed industrial goods companies in Nigeria have experienced dwindling in
their corporate value. Capital mix is the utmost arguable matter in finance and one of the
strategic corporate decisions affect firm corporate value. Several scholars have examined the
effect of capital mix on corporate value of firms have come out with mixed result. Due to that,
this paper has tried to address the mixed findings with the starter of moderating variable. Hence,
the paper examined capital mix, financial risk and corporate value of listed industrial goods
companies in Nigeria, using micro panel analysis techniques for the companies under study
spanning 2008-2018. Hierarchical analysis is applied for estimate. The outcome from the study
prior to moderation shows that equity financing has a negative 1% significant effect on
corporate value of firm. However, the moderator (financial risk) had a negative effect on
corporate value as it has altered the direction of the relationship from a negative 1% level of
significance to a negative 10% significant relationship. It is also discovered that the firm size
have negative influence on the corporate firm’s value. The estimate indicates a negative
moderating effect of financial risk with equity, firm size and growth. The study conclude that,
financial risk results in decline in corporate value among listed industrial goods companies.
Hence, the study suggests that corporate financial decision makers are advised to employ more
of long-term-debt than equity capital in financing their operations since it results in a positive
corporate value of firm. It is also necessary for financial institutions to give more consideration
to long term debt and its component to be viable and profitable for the prospective borrowers.
Firms in Nigeria should be guided on the possible control and minimizing financial risk for the
benefit of long term debt so as to increase the performance of the firms. Thus, financial risk must
be eluded at all cost for the progress, profit, high production and enactment of every business
entity. Monetary institution should also come up refine modalities in which appropriate and
viable capital mix can be apply by the business endeavor in Nigeria.