This paper basically investigates the relationship between capital structure and the financial performance of listed firms in Nigeria. The study considered a total sample of 31 listed firms on the floor of the Nigerian stock exchange. The annual reports for the period 2005-2009udwere analyzed using the Ordinary Least Squares (OLS) technique of model estimation to test theudresearch propositions stated in this study. The study observed that two of the explanatory variablesudin this study (i.e. short-term debt and shareholders’ funds) have a significant positive impact on theudfinancial performance of listed firms in Nigeria. In addition, the study observed that long-term debtudhas a significant negative impact on the financial performance of firms. To this end the studyudconcludes that employing high proportion of long-term debt in firms’ capital structure will invariably result in a low financial performance of a firm.
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