Publication Details
Abstract
Given the persistent debates in corporate accounting and finance regarding whether financing decisions significantly influence profitability and shareholder value in highly leveraged banking institutions, the study examined the relationship between capital structure reporting and firm value of selected quoted deposit money banks in Nigeria for the period 2020 to 2024. Capital structure was proxied by Debt-to-Equity Ratio (DER) and Long-Term Debt Ratio (LTD), while firm value was measured using Earnings per Share (EPS). The study adopted an ex-post facto research design because the variables were historical in nature and could not be manipulated by the researcher. Secondary panel data were obtained from the audited annual financial statements of eight selected deposit money banks listed on the Nigerian Exchange Group (NGX). The study employed a combination of econometric techniques including unit root (stationarity) tests using the Augmented Dickey–Fuller (ADF) approach, panel regression estimations (pooled OLS, fixed effects, and random effects models), diagnostic tests, Johansen cointegration test, and an error correction model to determine both short-run and long-run relationships among variables. The results of the stationarity test revealed that all variables were stationary at level, indicating stability in the data series. The panel regression results showed that both DER and LTD have positive and statistically significant effects on EPS across the estimated models, with the fixed effect model providing the strongest explanatory power. Diagnostic tests confirmed the absence of econometric problems such as heteroskedasticity, autocorrelation, and multicollinearity, thereby validating the robustness of the models. The cointegration test further established the existence of a long-run equilibrium relationship among the variables, while the error correction model indicated a relatively high speed of adjustment toward equilibrium following short-run shocks. The study concludes that capital structure has a significant and positive influence on firm value in Nigerian deposit money banks, implying that optimal use of debt financing enhances profitability when effectively managed. Based on the findings, it is recommended that bank management should adopt balanced leverage strategies that optimize the benefits of debt while minimizing financial risk, increase the use of long-term debt financing for sustainable growth, strengthen internal risk management frameworks, and ensure compliance with regulatory capital requirements while pursuing profitability objectives.