EFFECT OF CAPITAL STRUCTURE ON THE PROFITABILITY OF SELECTED QUOTED INSURANCE FIRMS
Abstract
This study examines the effect of capital structure on the profitability of selected quoted insurance firms. Capital structure, which represents the mix of debt and equity used in financing a firm’s operations, plays a significant role in determining financial performance. The study specifically investigates how debt financing, equity financing, and leverage influence profitability indicators such as Return on Assets (ROA) and Return on Equity (ROE). Secondary data were obtained from the annual financial reports of selected insurance firms listed on the Nigerian Exchange Group over a specified period. The data were analyzed using descriptive statistics and regression analysis. Findings reveal that capital structure significantly affects the profitability of insurance firms, with moderate leverage contributing positively to performance, while excessive debt negatively impacts profitability due to increased financial risk. The study concludes that an optimal capital structure is essential for maximizing profitability and recommends that managers should carefully balance debt and equity financing to enhance firm performance.
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