The Determinants of Capital Structure of Nigerian Quoted Firms

Paseda, Oluseun A.

doi:10.2139/ssrn.2890900

Cited by 7 publications

(4 citation statements)

References 298 publications

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“…When corporate tax is included in the analytical framework, then optimal leverage occurs at a theoretical 99.9% debt ratio. The powerful results demonstrated by their arbitrage proof points to the direction that corporate finance theories must follow by showing under what conditions capital structure is irrelevant (Graham & Leary, 2011;Paseda, 2016;Alter & Elekdag, 2020;Ferres, Ormazabal, Povel & Sertsios, 2020;Gale & Gottardi, 2020;Kim, 2020). With the perspective provided by asset pricing theories (Sharpe, 1964;Lintner, 1965;Mossin, 1966;Black, 1972;Lucas 1978;Breeden, 1979 and others) which were unavailable to MM, their propositions do not require their highly restrictive risk classes.…”

Section: Prior Literature On the Zero-leverage Puzzlementioning

confidence: 98%

“…There is usually no substitute behavior between operating leverage and financial leverage. Source: Updated from Paseda (2016) 3. Methodology…”

Section: Empirical Reviewmentioning

confidence: 99%

“…This study focuses on an aspect of capital structure viz-a-viz zero-leverage behaviour of firms. Based on a careful review of the literature and an earlier empirical work conducted by Paseda (2016) where the economic mechanisms driving capital structure choice of Nigerian quoted firms became evaluated, this study builds on that work. This research sorts the market leverage ratios of the firms from smallest to largest and extracts those firm years with ratios not higher than 5%.…”

Section: Designmentioning

confidence: 99%

“…This paper is an extension of one of the author's Ph.D. thesis at the University of Lagos (Paseda, 2016). An aspect of this paper was a seminar presentation at the Faculty of Business Administration and Academic Programmes' Committee of the University of Lagos.…”

Section: Acknowledgementsmentioning

confidence: 99%

See 3 more Smart Citations

The Mystery of Zero-Leverage Firms: Evidence from Nigerian Quoted Firms

Paseda

Adedeji

2020

Acc. Fin. Review

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Objective – Empirical finance literature has added a new twist to the debt conservatism puzzle within the broader capital structure puzzle, namely the phenomenon of zero leverage. Motivated by Strebulaev and Yang (2013), this study investigates the attributes of zero leverage firms in Nigeria in an attempt to add a developing country perspective to the zero-leverage phenomenon observed in firms. Methodology/Technique – The non-financial corporations quoted on the Nigerian Stock Exchange (NSE) for the period 1999-2014 constitute the population of the study. Firms with market leverage ratios ranging from 0% to 5% met the criteria for inclusion. Panel data regression techniques such as the generalized method of moments (GMM) and two stage least squares (2SLS) were used in the study. Findings – Zero leverage is persistent across 13 industries and is a declining function of the marginal tax rate, firm size, profitability, and liquidity. Firms that follow a zero-leverage (and almost zero-leverage) policy have higher growth opportunities, more tangible assets, pay higher dividends, are older, and have access to debt markets. Non-debt tax shields do not explain zero-leverage behaviour. Originality/Value – This study addresses the gaps related to the questions of why and how firm-specific attributes affect zero leverage behaviour among Nigerian quoted firms. It sheds light on the economic mechanisms driving zero leverage phenomenon within firms with high debt capacity. Type of Paper: Empirical. JEL Classification: G30, G32. Keywords: Capital Structure; Zero Leverage Puzzle; Tax Benefits; Debt Capacity; Financing Decisions. Reference to this paper should be made as follows: Paseda, O; Adedeji, B.S. 2020. The Mystery of Zero-Leverage Firms: Evidence from Nigerian Quoted Firms, Acc. Fin. Review 5 (2): 44 – 71. https://doi.org/10.35609/afr.2020.5.2(2)

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