Determinants of Capital Structure Decision of Micro, Small and Medium Scale Entreprises (MSMES) in Selected South Western States, Nigeria

Abstract

This research investigated the firm characteristics and owner-manager characteristics that affect capital structure decisions of Micro Small and Medium Scale Enterprises (MSMEs) in Nigeria using a sample size of 120, drawn from MSMEs in Ondo and Osun states, combining the simple random sampling technique with the cluster sampling technique. This study employed primary data by administering questionnaires to MSME owners and managers. The descriptive statistics and logistic regression analysis was used to analyse data. The results showed that size of firms using capital investments had a significant positive impact on capital structure decisions, while size of firms using number of employees had a positive but insignificant effect on capital structure decisions. In the same vein, firm age showed an insignificant positive effect on capital structure choices of MSMEs in Nigeria. Owner-Manager gender, age and education revealed an insignificant negative effect on capital structure decisions of MSMEs in Nigeria. Consider. This study therefore recommends that MSMEs should from time to time expand the scope of their activities as they grow in order to easily access external finance when the need arises. In the same vein, external finance such as debt can be explored by both the male and female gender when there is a need for it, after carefully considering the risks and benefits.