Financing Mix Decision and Firm Performance Optimality: Evidence from the Nigerian Oil and Gas Industry
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ThankGod Eseimieghan*
Anastasia Chi-Chi Onuorah
This study examined the effect of financing mix decision on firm performance optimality with evidence from the Nigerian oil and gas industry from 2014 to 2023. The study decomposed financing mix decisions into Debt-to-equity Ratio (DER), Debt Ratio (DTR), Capitalization Ratio (CAR), and Interest Coverage Ratio (ICR). These formed the independent variables. The dependent variable is financial performance operationalized as return on equity (ROE). The study adopted the ex-post facto design because it facilitates the investigation of how regressors, prior to the study, affect regressed. The study population is confined to the 9 listed sampled firms in the Nigerian exchange group as at 31st December, 2024. The Robust Least Square estimation technique was used to test the research hypothesis. The study confirmed that Debt-to-equity Ratio (DER), Debt Ratio (DTR), and Interest Coverage Ratio (ICR) have positive significant effect on firm performance optimality while Capitalization Ratio (CAR) has a negative significant effect on firm performance optimality. The study concludes that equity and debt optimality enhances profitability. Overall, the study emphasized the need for an optimal financial structure in enhancing firm profitability. Hence, the paper submits that the sampled firms need to balance debt financing to tax benefits while minimizing financial distress risks. This study provides empirical evidence on the optimal mix of equity and debt financing for enhanced firm profitability.
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