The Effect of Debt on Earnings Per Share Using Manufacturing Companies in Nigeria from 2011 to 2021

Abstract

This research work analyzed the effect of debt on earnings per share using manufacturing companies in Nigeria from 2011 to 2021. The data for the study were obtained from the financial statements of these listed firms using purposive and stratified sampling procedures. Before conducting the analysis of the effect of debt on earnings per share using SPSS 28, the data used were examined to comply with basic assumptions of linearity, homogenity and outliners. The result obtained indicated that short term debt has no significant effect on earnings per share (p = 0.651, DW = 1.008, R=0.108). This outcome of this study is in disagreement with Sriyono & Fatmasari [1] which opined that short term debt enhances earning per share. Also the study found out that long term debt exert significant positive effect on earnings per share (p=0.025, DW=1.234, R=0.498). The findings is in line with Efuntade, Efuntade, & Akintola, [2]. Siyanbola, Olaoye, & Olurin [3] and Sriyono & Fatmasari [1] as they all suggest that long term debt increase earnings per share. Further findings from this research indicated that there is a significant effect of total debt on earnings per share (p=0.0194, DW= 1.064, R=0.303). This result is in tandem with Badruzaman [4], Efuntade, Efuntade, & Akintola, [2]. Siyanbola, Olaoye, & Olurin [3], Sriyono & Fatmasari [1] among others. This study concluded that while short term debt exert insignificant effect on earnings per share, long term debt and a mix of short term debt and long term debt do. This study further supports the Perking Order Theory which helps in explaining that management elects to finance their investment in the cheapest means available using options that better their lots.