International Journal of Food and Agricultural Economics
Abstract
The study examined the determinants of capital structure decision and compared the
capital structure of quoted and unquoted agro-based firms in Nigeria. Data collected
through a multi- stage random sampling from the financial statements of 28 quoted and 60
unquoted agro-based firms for the period 2005-2010 were analyzed using descriptive
statistics, Z-test and Ordinary Least Square (OLS) regression. The result revealed significant
differences in capital structure (long term debt and total debt use) between quoted and
unquoted agro-based firms. Short-term debts constituted a higher proportion of total debts of
both sampled groups. The regression result showed that firm size, asset structure andgrowth
coefficients had significant positive relationships with both long and short term debt finance
for both listed and unlisted agro-based firms respectively. Result further showed that age of
firms, educational status of CEO, export status of firms, and gender of firm owners were
positive and significantly related to long term debt for both listed and unlisted firms. Also,
highly profitable firms depended on internally generated revenue, thereby lending credence
to the pecking order theory (POT). Therefore, The study showed that pecking order theory
dominated the financing behavior of agro-based firms in Nigeria while the agency cost
argument was only relevant for listed agro-based firms. Hence, policies that would enhance
the acquisition of tangible assets, encourage exportation, ensure appropriate record keeping
and encourage the use of more long term finance in place of short-term finance should be
pursued