The Influence Of Market To Book Value Of Equity On Capital Structure Choice In Nigeria

Abstract

The main objective of this study is to examine the influence of market to book value of equity on capital structure choice of firms in Nigeria with the specific aim to confirming if it exhibits any form of reverse causality between financial performance and capital structure choice. The causal research design was adopted while a total of 87 samples was included in the study. Using the General Method of Moment (GMM) estimation technique, the estimated results of the effects of the explanatory variable is statistically significant at all levels of Capital Structure as represented by Total debt ratio, Debt to Equity ratio and Long-term debt to total assets ratio. Based on the significance of these results it was concluded that both the efficiency risk and franchise value hypotheses of the reverse causality hypothesis are observable in the capital structure choice of the non- financial firms in the NSE.