CAPITAL STRUCTURE AND FIRM VALUE OF LISTED INSURANCE COMPANIES IN NIGERIA

Abstract

For firm managers and industry regulators, the optimal debt mix across Nigerian listed insurance companies remains unclear, as prior evidence on Nigerian companies' potential to improve firm value through capital structure management is dated, limited, or irrelevant to the insurance industry. This study seeks to address this gap by examining the capital structures and firm values of Nigerian-listed insurance companies. This study theorises and empirically evaluates the effects of the long-term debt ratio (LTDR), short-term debt ratio (STDR), and debt-to-equity ratio (D/E) on firm value (measured by Tobin’s Q), while controlling for firm size. It employs an ex-post facto research approach. It also utilises available balanced panel data of 14 listed insurance companies covering the years 2015 to 2024. In total, 140 firm-year data points were used in the study. Audited secondary data were subjected to correlation and multiple regression analyses. The findings reveal that while short-term debt and overall leverage do not positively drive firm value, long-term debt does, with a high regression coefficient (β = 0.3565, p = 0.0000161). The p-value indicates that the study model predicts 65.71% of the variations in firm value. The study indicates that a firm’s positive value is significantly driven by long-term debt. It also concludes that short-term debt and overall leverage do not positively drive firm value. Increasing the proportion of long-term debt financing and reducing reliance on short-term debt is expected to create value for insurance companies and is therefore highly recommended