FINANCING-MIX DECISIONS AND FIRM VALUE: EMPIRICAL EVIDENCE FROM QUOTED MEDIUM SCALEFIRMS IN NIGERIA

Debates in past related studies have centered on whether there is an optimal capital structure for an individual firm or whether the proportion of debt, preference shares or equity usage is relevant to the individual’s firm value. This study empirically investigated the financing mix decisions and firm value of quoted medium scale firms in Nigeria. The proxies used in capturing financing mix are; debt, equity and preference shares (hybrid securities), and return on equity to measure firm value. Time series and cross section data were obtained from annual report of firms, second-tier securities market (SSM), and Nigerian stock exchange fact books. The study utilized panel data analytical/estimation tool which were evaluated with analytical technique like the Unit root test using the Levin, Lin & Chu t*-statistics and Im, Pesaran and Shin W-statistics, the Panel Regression, Pedroni Co-integration test followed by the Error Correction Model and the Panel Stacked Granger causality test towards ascertaining the study variable associations.  The findings revealed a positive and significant relationship between debt and return on equity, positive but insignificant relationship between equity and ROE, and negative but significant relationship between preference share and ROE. It was recommended that Government should create an enabling environment for medium-scale firms to thrive and boost their operational performance in the nation. Also, firms should capitalize more on their debt-based financing as this is potent enough to stimulate growth.