EFFECT OF LEVERAGE ON THE FINANCIAL PERFORMANCE OF  LISTED MANUFACTURING FIRMS IN NIGERIA

Nkasi, E. Ernest

ABSTRACT

This study examines the relationship between leverage and financial performance of selected manufacturing firms in Nigeria, measured by Return on Assets (ROA). The sampling techniques employ in this study is the purposive sampling using ten manufacturing firms including cement, food and beverages etc. Using a fixed-effects regression model and a longitudinal research design, this study analyzes data over a 9 years period (2015-2023), which allows for observing trends and firm-level variations over time. The study reveals that leverage shows a negative relationship with financial performance measured by Return on Assets (ROA), though marginally significant, suggesting that high debt  financing levels may impact profitability of manufacturing firms in Nigeria. The study concludes that optimal use of leverage, prudent debt management, for improving financial performance in Nigeria’s manufacturing sector. Recommendations of the study include right proportion of capital structure and cautious debt use, management to improve profitability and resilience. This study contributes to corporate finance literature and offers practical insights for managers and policymakers in emerging economies.

Keyword:  Leverage, Return on Assets, Debt Ratio, Manufacturing firms.