Impact of Macroeconomic Variables on the Capital Structure of Listed Insurance Firms in Nigeria

This paper seeks to examine the impact of macroeconomic variables on the capital structure decision of listed insurance firms in Nigeria for the period of 2008 – 2015. Many studies have been conducted on the determinants of capital structure of firms. However, the dominant tendency has been a focus on endogenous factors. Most studies that addressed the impact of factors in the external environment of the firm like macroeconomic conditions tended to generalize findings across countries and industries leaving out country and industry peculiarities and specificities. In addition, these studies were not carried out using Nigerian data. This study seeks to extend the literature by examining the impact of exogenous factors in the firm’s economic environment to add to the stock of knowledge on the nature and direction of the relationship between the capital structure of insurance firms in Nigeria on one hand, and inflation, interest rate and GDP growth rate on the other. The study used secondary data obtained from published annual reports of listed insurance firms in Nigeria, Central Bank of Nigeria Statistical Bulletin and the World Bank Open Data Base. The study used multiple linear regression and correlation as a technique of data analysis. It was found that inflation, interest rate and GDP growth rate have a significant impact on the capital structure of insurance firms in Nigeria. It is recommended that corporate managers in the insurance industry in Nigeria should approach their financing decision holistically as to critically consider factors in both firm-specific characteristics and prevailing macroeconomic condition.