Department of Accounting, Faculty of Management Sciences, University of Calabar, P.M.B.1115, Calabar, 8037983154, Nigeria
Bassey, B.E., Department of Accounting, Faculty of Management Sciences, University of Calabar, P.M.B.1115, Calabar, 8037983154, Nigeria; Inah, E.U., Department of Accounting, Faculty of Management Sciences, University of Calabar, P.M.B.1115, Calabar, 8037983154, Nigeria
This study examines capital structure, corporate financial performance and shareholders' investment decisions. The greatest issue striving against the management of any firm in Nigeria and the world over is how to minimize cost of capital and maximize shareholders wealth. To achieve this major objective, financial managers of firms need to understand the source of capital to finance the growth of the firm and also the efficient use of the available capital. The study made use of an ex-post facto design and the data collected through the use of questionnaires were analyzed using the ordinary least square (OLS) method. The results therefore revealed that capital structure have a significant relationship with corporate financial performance and shareholders' investment decisions. Based on the findings obtained the study therefore concluded that capital structure ratios significantly influence investment decisions in companies, with most investors preferring to invest in companies with a smaller debt/equity ratio. Finally, it was recommended that retained earnings should be the first source of financing a business venture before considering debt and equity. Where extra fund is needed, the company should preferably go for equity capital as the risk would be shared among the different investors. © EuroJournals, Inc. 2012.