Capital Structure and Firm Value Nexus of Listed Pharmaceutical Firms in Nigeria

Abstract

This study was conducted to examine the relationship between capital structure and firm value of listed pharmaceutical companies in Nigeria. This was facilitated by the need for firms to have a balanced capital structure that will influence her value positively. In view of this, a correlational study was conducted on five pharmaceutical companies that are listed in the Nigeria Stock Exchange from 2010 to 2019. The purposeful random sampling technique was applied on the population based on availability of data. The time series data from the sample population was analysed using Fixed Effects Panel Regression on SPSS by applying the Least Squares Dummy Variable Approach. Three models were used to examine the influence of capital structure on firm value. The enterprise value, market capitalization and price to book were used as dependent variable (Firm value), while leverage, growth, profitability, firm size and firm age were used as the independent variables (capital structure). The result showed that capital structure had no significant influence on firm value using the first two models (enterprise value and market capitalization). However, size, growth and age had significant influence on firm value using price to book. The study conclude that profitability, leverage, and liquidity have no significant relationship with firm value; while firm size, growth and firm age have significant relationship with firm value of pharmaceutical companies in Nigeria.