THE INTERVENING EFFECT OF FINANCIAL MANAGEMENT IN THE RELATIONSHIP BETWEEN CAPITAL STRUCTURE AND PERFORMANCE OF SMALL AND MEDIUM SCALE ENTERPRISES IN BENUE STATE, NIGERIA

Abstract

The main objective of the study was to investigate the intervening 
effect of financial management on the relationship between capital 
structure and firm performance of small and medium scale 
enterprises (SME) in Benue state, Nigeria, focusing on all SME in 
Benue state registered with Corporate affairs commission from 
2019-2023 using ex-post facto research design. The variables used 
were short term debt (STD) and Long term debt (LTD) for capital 
structure and return on assets (ROA) as proxy for firm 
performance. Regression analysis, using random effects model, as 
determined by hausman specification test was used for data 
analysis using STATA 20. Findings were that, there exists a 
positive and significant effect of short term debt while there was a 
negative and insignificant relationship between long term debt on 
return on assets. However, on intervening with financial 
management, the coefficients of margin of contributions of short 
term debt and long term debt on firm performance became 
significantly enhanced. Based on the results, the study 
recommended, among others that, firm owners and mangers 
should ensure that the processes of sourcing for funds either for 
expansion or investment purposes of SME must submit completely 
to the relevant financial provisions. Government and regulatory agencies should put in place stringent laws to compel firms to 
embrace financial management principles and defaulting firms 
should be sanctioned appropriately.