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Moderating Effects of Cost of Capital on Debt Financing and Firm Value in Nigeria

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  • Auwalu Sani Ibrahim

    (Department of Management Science, Kano State College of Education and Preliminary Studies)

  • Isma’il Tijjani Idris

    (Department of Banking and Finance, ABU Business School, Ahmadu Bello University, Zaria)

Abstract

The study examines the moderating effect of cost of capital on debt financing and firm value. Where as, micro panel analysis techniques were utilized for the companies under study spanning 2006-2016. Secondary data were obtained through the companies’ individual annual reports and data base of Nigerian Stock Exchange. The studies utilize a sample of 12 listed industrial goods companies in Nigeria. While, hierarchical moderated multiple regression analysis was used for the estimate. The findings of the study revealed a significant positive association among debt financing and value of listed industrial goods companies in Nigeria. While, cost of capital as a good moderator, it was emphasized that, debt financing and cost of capital are drivers of increasing value of the firm among listed industrial goods companies. It was recommended among others that, the finance managers should source capital from various avenues in such way it reduce risk and cost. Likewise, the listed Industrial goods firms should employ more use of debt financing.

Suggested Citation

  • Auwalu Sani Ibrahim & Isma’il Tijjani Idris, 2020. "Moderating Effects of Cost of Capital on Debt Financing and Firm Value in Nigeria," International Journal of Research and Scientific Innovation, International Journal of Research and Scientific Innovation (IJRSI), vol. 7(6), pages 156-159, June.
    • Handle: RePEc:bjc:journl:v:7:y:2020:i:6:p:156-159
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    References listed on IDEAS

    as
    1. Huang, Guihai & Song, Frank M., 2006. "The determinants of capital structure: Evidence from China," China Economic Review, Elsevier, vol. 17(1), pages 14-36.
    2. Harris, Milton & Raviv, Artur, 1991. "The Theory of Capital Structure," Journal of Finance, American Finance Association, vol. 46(1), pages 297-355, March.
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