Moderating Effect of Board Size Attribute on the Relationship Between Capital Structure and Financial Performance of Listed Multinational Companies in Nigeria

Abstract

This study investigated the moderating effect of board size on the relationship between capital structure and financial performance of listed multinational companies in Nigeria. Financial performance was measured using return on assets, while capital structure was captured through the debt-to-equity ratio, short-term debt ratio, and interest coverage ratio. The population comprised twelve multinational companies, of which ten were selected as the sample size. The study covered an eleven-year period from 2014 to 2024. Secondary data were extracted from audited annual reports, and multiple regression analysis was employed to evaluate the direct effects of capital structure and the moderating influence of board size. The findings revealed that the short-term debt ratio exerted a positive and significant effect on return on assets, suggesting that efficient use of short-term financing enhanced operational performance and liquidity support. However, the interaction between short-term debt and board size was negative and significant, indicating that larger boards weakened the beneficial effect of short-term financing, possibly due to more cautious financial policies. The interest coverage ratio showed a negative and significant effect on performance, implying that excessively high interest coverage reflected under-leveraging. Yet, its interaction with board size was positive and significant, demonstrating that larger boards strengthened firms’ ability to convert strong debt-servicing capacity into improved financial outcomes. The debt-to-equity ratio exhibited an insignificant direct and moderated effect, showing limited influence on profitability. It recommended that firms maintain board sizes that balance diverse expertise with decision-making efficiency, strengthen governance practices to guide financing decisions, and adopt financing structures that optimize both short- and long-term debt. Policymakers were encouraged to enhance corporate governance frameworks and deepen access to long-term capital to support sustainable profitability.