Business Risk and Capital Structure in Nigerian Listed Firms

Nigeria has one of the most difficult business environments with poor infrastructure especially electricity, water and road network.Electricity supply in particular,coerces Nigerian companies to incur standby power generators.Consequntly the overheads of maintaining generators,fuel,spare parts increases their earnings volatility(business risk). To this end, corporate capital structure theories including the trade-off theory have suggested that higher levels of earnings uncertainty in a firm will increase the probability of financial distress and the chances of the company becoming bankrupt.This study is the first to consider the levrage effect of earnings volatility for a panel of ninety four Nigerian companies listed on the stock exchange of an oil depedent emerging economy.This understanding is important from the persepective of financial market structure, investments and government regulations. It will therefore provide a guide for financial theorists and professionals or anyone else who may be interested in utilizing a less complicated econometric and statistical models in analysing corporate financing decisions.