IJLTEMASInternational Journal of Latest Technology in Engineering, Management & Applied Science (IJLTEMAS)IJLTEMAS2278-2540IJLTEMAS5610.51583/IJLTEMAS.2026.150700051Financial LeverageFinancial Leverage and Financial Performance of Listed Manufacturing Firms in NigeriaSamuel OrjiIbiam,
Department of Banking and Finance, College of Management Sciences, Michael Okpara University of Agriculture Umudike NigeriaChinonso ChurchillOkoro,
Department of Accounting, College of Management Sciences, Michael Okpara University of Agriculture Umudike NigeriaOkafor OkpanOkafor,
Department of Accounting, College of Management Sciences, Michael Okpara University of Agriculture Umudike Nigeria157617630270720260108202608082026Financial leveragedebt to equity ratiocoverage ratiofinancial performancereturn on assetreturn on equityearnings per share.Abstract
The study focused on financial leverage and financial performance of listed manufacturing firms in Nigeria. Financial leverage was measured using debt to equity ratio & coverage ratio. However, financial performance was measured using return on asset, return on equity and earnings per share. To achieve the objectives of the study, ex-post facto research design was adopted. The source of data collection is secondary data. Data were generated from annual reports and accounts of the selected manufacturing firms. The data collected were analyzed using multiple regression analysis. The first findings revealed that financial leverage (Debt to equity ratio & coverage ratio) has a significant effect on return on asset of listed manufacturing firms in Nigeria. The second findings revealed that financial leverage (Debt to equity ratio & coverage ratio) has no significant effect on return on equity of listed manufacturing firms in Nigeria. the third findings revealed that financial leverage (Debt to equity ratio & coverage ratio) has a significant effect on earnings per share of listed manufacturing firms in Nigeria. The study recommends that the amount of debt finance in the financial mix of the firm should be at the optimal level so as to ensure adequate utilisation of the firms’ assets.
ReferencesAbdul, J. & Badmus, O. (2017), Effect of leverage on firm performance in Nigeria: A case of listed chemicals and paints firms in Nigeria. Global Journal of Management and Business Research: D Accounting and Auditing, 17 (2), 2249-4588.Abor, J. (2018), Determinants of the capital structure of Ghanaian Firms. African Economic Research Consortium AERC Research Paper, 3(2)34-43.Abubakar, A. (2016), Financial leverage and firms' performance: A study of quoted companies in the Nigerian stock exchange. Conference Paper.Adenugba, A., Ige, A. & Kesinro, O. (2016), Financial leverage and firms’ value: A study of selected firms in Nigeria. European Journal of Research and Reflection in Management Sciences, 4 (1), 2056-5992.Akani, H. & Kenn-Ndubuisi, J. (2017), Effects of capital structure and board structure on corporate performance of selected firms in Nigeria. Indian Journal of Finance and Banking, 1(2), 2574-6081.Akbarian, S. (2023), The investigation effect of financial leverage and Environment Risk on performance firms of listed companies in tehran Stock Exchange. Arabian Journal 8(3), 249- 255.Akinmulegun, S. (2022), The effect of financial leverage on corporate performance of some selected companies in Nigeria. Canadian Social Science, 8(1), 85-91. 7.Akhtar, S., Javed, B., Maryam, A. & Sadia, H. (2022), Relationship between Financial Leverage and Financial Performance: Evidence from Fuel &Energy Sector of Pakistan. European Journal of Business and Management, 4(11)23-34.Dawood, M., Moustafa, E. & El-Hennawi, M. (2021), The determinants of capital structure in listed Egyptian corporations. Middle Eastern Finance and Economics, 9(1), 83-99.Damouri, D., Khanagha, J. & Kaffash, M. (2023), The relationship between changes in the financial leverage and the values of the Tehran listed firms. Research Journal of Finance and Accounting, 1(2), 23-33.Deloof, M. (2023), Does working capital management affect profitability of Belgian firms? Journal of Business Finance and Accountancy, 30(3), 12-25.Dilpreet, S. & Harish S. (2018), Study on impact of financial leverage and liquidity on financial performance: A case study on DLF Ltd.; Construction & contracting- real estate company in India. International Journal of Research in Management, Economics and Commerce, (8)1, 60-64.Enekwe, C.. Agu, C. & Eziedo, K. (2024), The effect of financial leverage on financial performance: evidence of quoted pharmaceutical companies in Nigeria. IOSR Journal of Economics and Finance, 5(3), 17-25.Enuju, Y. & Soocheong, J. (2025), The effect of financial leverage on profitability and Risk of Restaurant firms. Journal of Hospitality Financial Management, 13(1), 1-18.Ezeamama, M. (2020), Fundamentals of Financial Management: A practical guide. Enugu: Ema press Ltd.Falope, O. & Ajilore, O. (2019), Working capital management and corporate profitability: Evidence from panel data analysis of selected quoted firms in Nigeria. Research Journal of Business Management, 3(3), 73-84.Fama, E. (1980) Agency problems and the theory of the firm. Journal ofPolitica1 Economy, 88(1), 288-307.Ferri, M. & Jones, W. (2019) Determinants of financial structure: A new methodological approach. The Journal of Finance, 34(3), 631-644.Galai, D. Masulis, R. (2016) The option pricing model and the risk factor of stock. Journal of Financial Economics, 3(1), 53-81.Gibbs, P. (2023), Determinants of corporate restructuring: The relative importance of corporate governance, takeover threat, and free cash flow. Strategic Management Journal, 14, Special Issue: Corporate Restructuring, 12(2), 51-68.Gujarati, D. & Sangeetha, S. (2017), Basic Econometrics: 4th Ed. New Delhi. Tata McGraw: Hill publisher. Co. Ltd.Gweyi, M. & Karanja, J. (2024), Effect of financial leverage on financial performance of deposit taking savings and credit co-operative in Kenya. International Journal of Academic Research in Accounting, Finance and Management Sciences, 4(2), 176-184.Haim L. & Marshall, S. (2018), Principle of financial management. Brooking Papers on Economic Activity, 1-51.Hasanzadeh, B., Torabynia, S., Esgandari, K. & Kordbacheh, S. (2023), Evaluating effects of financial leverage on future stock value at Stock Exchange. Research Journal of Recent Sciences, 2(2), 81-84.Haugen, R. & Senbet, L. (2018) Bankruptcy and Agency Costs: Their significance to the theory of optimal capital structure. The Journal of Financial and Quantitative Analysis, 23(1), 27-38.Horne, J. (2022), Financial Management and Policy. Pretence – Hall Ltd, India. Jensen, M. (1986) Agency costs of free cash flow, corporate finance, and takeovers. American Economic Review, 76(3), 323-339.Jensen, M. (1989) The eclipse of the public corporation. Harvard Business Review, 67(1) 61-75.Jensen, M. & Meckling, W. (1976), Theory of the firm: Management behaviour agency costs and capital structure. Journal of Financial Economics, 3(1), 305-360.Jelinek, K. (2017), The effect of leverage increases on earnings management. Journal of Business and Economic Studies, 13(2), 24-46.John-Akamelu, R., Iyidiobi, F. & Ezejiofor, A. (2017), Leverage and financial performance: Evidence from Nigerian food production firms. European Journal of Research and Reflection in Management Sciences, 5(4), 2056-5992.Karaduman, H., Akbas, H., Caliskan, A. & Durers, S. (2021), The relationship between working capital management and profitability: Evidence from an emerging market. International Research Journal of Finance and Economics, 62(2), 61 – 67.Kenn-Ndubisi, I. & Nweke, C. (2019), Financial Leverage and firm financial performance in Nigeria: A panel data analysis approach. Global Journal of Management and Business Research Corporate Finance, 19(4), 14-22.Kraus, A. & Robert, L. (1973), A state-preference model of optimal financial leverage. Journal of Finance, 33(3), 911-922.Lazaridis, I. & Tryfonidis, D. (2016), Relationship between working capital management and profitability of listed companies in the Athens Stock Exchange. Journal of Financial Management and Analysis, 19(5), 26-35.Maghanga, E. & Kalio, A. (2022), Effects of leverage on the financial performance of parastatals: A case study of Kenya Power. International Journal of Science and Research, 3(10), 990-994.Mesquita, J. & Lara, J. (2023), Capital structure and profitability: The Brazilian case. Academy of Business and Administration Sciences Conferences, 2(3), 43-52.Muhammad, W. (2023), Affect of financial leverage on firm performance. Empirical evidence from Karachi Stock Exchange. Online at http://mpra.ub.unimuenchen.de/50383/ MPRA Paper No. 50383.Nazir, M. & Saita, H. (2023), Financial leverage and agency cost: An empirical evidence of Pakistan. International Journal of Innovative and Applied Finance, 19(1), 1-16.Obradovich, J. & Gill, A. (2023), The impact of corporate governance and financial leverage on the value of American firms. Faculty Publications and Presentations, Paper 25.Orajaka, U. (2017), The Impact of leverage financing on financial performance of some manufacturing industries in Nigerian Stock Exchange. Saudi Journal of Business and Management Studies, 2(7), 716-726.Rajin, S. (2022), Impact of financial leverage on shareholders returns and market capitalization: empirical evidence of telecommunication sector Companies India. International Journal of Research in IT, Management and Engineering, 2(12), 23-35.Raza, M. (2023), Effect of financial leverage on firm performance. Empirical evidence from Karachi Stock Exchange. Online at https://mpra.ub.uni muenchen.de/50383/Rehman, S, (2023), Relationship between financial leverage and financial performance: Empirical Evidence of listed sugar companies of Pakistan. Global Journal of management and Business Research finance, 13(8), 33-40.Shehu, U. (2021). Determinants of Capital Structure in the Nigerian Listed Insurance Firms. International Conference on Management (ICM) Proceeding697 Shin, H. & Soenen, L. (2000), Liquidity management on profitability is there room for Both? AFP Exchange, 20(2), 46-49.Singh, J. & Pandey, S. (2018), Impact of working capital management in the profitability of Hindalco industries Limited. The IUP Journal of financial Economics, 6(4), 62-72.