Capital structure, board characteristics and financial performance of listed consumer goods companies in Nigeria

Abstract

Purpose: The main objective of the study is to examine the moderating effect of board characteristics on the relationship between capital structure and financial performance of listed consumer goods companies in Nigeria.

Methodology: The study utilized a secondary source of data collection, which was obtained from the annual reports and accounts of listed consumer goods companies in Nigeria for a period of fourteen years (2010-2023). The panel data are analyzed using descriptive statistics, Pearson correlation, and regression analysis.

Results and conclusion: The findings reveal that capital structure has a significant impact on the financial performance of the sampled companies. Board composition has an insignificant impact on the financial performance (ROA and Tobin’s Q) of listed consumer goods companies in Nigeria. More so, board composition does not moderate the relationship between capital structure and financial performance of listed consumer goods companies in Nigeria.

Implication of findings: The conclusion implies that the relationship between capital structure and financial performance cannot be moderated by board composition. It is therefore recommended that management of consumer goods companies in Nigeria should maintain a capital structure that is balanced between debt and equity. This will help to reduce the cost of capital and improve the firm's financial flexibility. Similarly, management should use debt financing strategically to fund productive investments. These steps will help to increase the firm's profitability and return on equity. Increasing the proportion of independent directors on the board will help improve the board's independence and effectiveness, which can lead to better decision-making and firm performance.