EFFECT OF DEBT FINANCING AND EQUITY FINANCING ON FIRM VALUE OF QUOTED MANUFACTURING COMPANIES IN NIGERIA

Abstract

This study examined the effect of debt financing and equity financing on firm value of quoted manufacturing companies in Nigeria. The objective was to determine how capital structure choices debt financing and equity financing affect firm value. An ex post facto research design was adopted, utilising panel data from thirty-five manufacturing companies listed on the Nigerian Exchange Group over the period 2014 to 2023. Descriptive statistics, correlation analysis, Hausman specification test, variance inflation factor, Breusch-Pagan heteroskedasticity test, and fixed effects regression analysis were employed to test the hypotheses. The findings revealed that debt financing had a significant negative effect on firm value (β = -0.73, p = 0.002), while equity financing positively influenced firm value (β = 0.86, p = 0.000). The Hausman test confirmed the appropriateness of the fixed effects model, and no evidence of multicollinearity or heteroskedasticity was detected. The study concluded that capital structure composition materially affects firm value, with equity enhancing and debt diminishing market valuation. It recommended that managers prioritise equity financing and implement governance mechanisms to optimise firm value.