Tag Archives: Financial Leverage

The Effect of Capital Structure on the Financial Performance of Nigerian Quoted Conglomerates (Published)

This study investigated the effect of Nigerian banks’ capital structure on the performance of conglomerates quoted on the floor of the Nigerian stock exchange from 2011 to 2015. The paper identified four levels of dependent variables such as return on assets, ratio (ROA), return on equity ratio (ROE), assets turnover ratio (AT) and earnings per share whereas the independent variable is financial leverage. Essentially the paper sets out to determine the effect of capital structure on the above dependable variables hence return on assets of quoted conglomerates, return on equity of quoted conglomerates, asset turnover of the quoted conglomerates and on the earnings per share of quoted conglomerates. Descriptive statistics and the pooled ordinary least square (POLS) regression analytical method were used for data analysis. The study finds that capital structure has effect on both return on assets and asset turnover of the conglomerates but no effect on return on equity and earnings per share of the conglomerate. It is then concluded that an in-depth analysis of business factors which affect a particular industry should be considered so as to obtain the benefits of the debt-equity mix. The result of the study is in agreement with most previous studies on other sectors that discovered mixed results on the effect of capital structure on financial performance. It is therefore necessary to employ a critical analysis of the appropriate debt-equity mix suitable for the company.

Keywords: Capital Structure, Financial Leverage, POLS, ROA, ROE, conglomerates


Indonesia’s banking sector is expected to improve the performance management productivity positive direction (in other words the emphasis on earnings quality and performance should be improved), and making it into the (Association of Southeast Asia Nations) ASEAN free market in 2020 and became the largest bank in ASEAN.The aim of this study are to determine the factors that affect income smoothing on the National Private Commercial Foreign Exchange Banks that listed in Indonesia Stock Exchange (IDX). Variables used in this study are the firm size, profitability and financial leverage. Eckel Index (1981) was used to measure income smoothing, where net profit after tax as income smoothing object.The sample was taken by random sampling of 10 private foreign exchange national banks that listed in Indonesia Stock Exchange (IDX) during the years 1/1/2009 to 31/12/2013 with a sub-sample of 50 financial reports. Testing is done through panel data analysis technique with simultaneous test (F test) and partial test (t test) was used to identify factors that affect income smoothing.The results showed that income smoothing is done by most of the National Private Commercial Foreign Exchange Bank which listed on the Indonesia Stock Exchange (IDX). The test results result are variable size of the company, profitability and financial leverage simultaneously significant effect on income smoothing. Partial test results are that the variable size of the company, profitability and leverage financial has effect on income smoothing.

Keywords: : Company Size, Financial Leverage, Profitability, smoothing earnings