A Theoretical Review of Capital Structure of Quoted Companies in Nigeria

Abstract

Capital structure is a significant managerial decision because it influences the shareholders’ returns and risk as the market value of the share and may be affected by the capital structure decisions. The theory maintained that financing adapts to mitigate problems created by differences in information between insiders (managers) and outside investors. The company turns first to the financing sources where differences in information matter least. A company’s capital structure shows all the sources of finance a company is utilizing to finance its operations. The study was undertaken to review capital structure of quoted companies in Nigeria. So many theories of capital structure have been developed over the years. These theories have directly and indirectly affected the ways companies in Nigeria raise their capital. From the review obtained, it was revealed that capital structure of quoted companies in Nigeria is a significant measure of their performance. In view of the findings, it was concluded that capital structure of quoted companies in Nigeria is a significant measure of their performance and should be effectively and efficiently managed at all time. The study recommended that quoted companies in Nigeria should invest their profits when there are good investment opportunities and pay cash dividend as soon as enough income is generated.