CAPITAL INTENSITY AND FINANCIAL STRUCTURE OF PUBLICLY TRADED INDUSTRIAL GOODS FIRMS IN NIGERIA

Abstract

This study examines the relationship between financial structure and capital intensity of listed industrial goods firms in Nigeria using a multidimensional approach to financial structure. Financial structure is proxied by retained earnings, revaluation reserves, and lease financing, which collectively reflect the diverse financing strategies adopted by firms. Retained earnings represent internally generated funds that support reinvestment without external financing costs, while revaluation reserves capture unrealized gains on fixed assets that strengthen the equity base of firms. Lease financing, on the other hand, provides firms with access to productive assets without requiring substantial upfront capital outlay, thereby enhancing liquidity management and operational flexibility.

Capital intensity, the dependent variable, is measured as the ratio of capital assets to revenue and serves as an indicator of the extent of investment in fixed assets relative to operational output. The study posits that firms operating in capital-intensive industries rely heavily on long-term asset investment to enhance productivity, competitiveness, and efficiency. By investigating the linkage between financial structure and capital intensity, the study provides empirical evidence on how listed industrial goods firms in Nigeria utilize internal and external financing options to support asset acquisition and expand production capacity. The findings are expected to offer useful insights for corporate financial decision-making and strategic planning within a challenging macroeconomic environment.