Financial Structure Decision and Market Value of Listed Deposit Money Banks in Nigeria

Abstract

The difficulties in financial structure mix decision have contributed to the failure and decline of Nigerian deposit money banks. Therefore, this study appraised the influence of financial structure (long-term as well as short-term debts to equity ratios) on the market value (Tobin Q and share price) of listed banks. The objectives were to ascertain the extent of relationship between long-term debt to equity ratio as well as examine the impact of short-term debt to equity ratio on the market value of the banks. A research design employed was an ex post facto, and a purposive sampling technique was used to choose 12 banks that were listed and had intact data as at the period of investigation on the Nigerian Exchange Group. Secondary data of the variables were gotten from the annual reports as well as accounts of selected banks over a period of 12 years (2011 to 2022). Data sourced were analysed with descriptive together with inferential statistics. The outcomes revealed that long term-debt to equity ratio positively as well as significantly influence the market value. This implies that bank’s market value can be optimised by including more long-term debt and less equity in the financial structure mix. The study concluded that financial structure decision influenced the market value of listed Nigerian deposit money banks. The recommendation was that financial manager should maintain more of long-term debt than equity in the mix of its financial structure as it is appropriate to individual bank.