Abstract:

The capital structure decision of an entity enables it to have a capital mix which enhances maximization of the organisation’s value. The study aims at exploring the capital structure decision of manufacturing companies in Nigeria so as to determine the capital structure decision that enhances maximum organisational value. The variables of interest for capital structure include debt to equity ratio, debt to total assets ratio and equity mix while the variable for firms’ value include return on assets (ROA). The sample size for the purpose of this study includes 10 manufacturing listed firms in Nigeria are using purposive sampling method and the information necessary for the study in the financial statement of the listed manufacturing companies for the period of 2012-2016 were explored. The method of analysis includes the regression analysis of the statistical packages for social science (SPSS). The result revealed that companies with debt and equity mix has higher value than companies with only equity as it significantly affect return on assets (ROA) which support the traditional view of capital structure. Therefore, the study suggests that companies should ensure that there is a judicious mix of debt and equity in their capital structure which will reduce the weighted cost of capital (WACC) and on the long run enhance the organisations’ value.