EFFECT OF FISCAL POLICY INSTRUMENTS ON DEBT FINANCING OF SELECTED PRIVATE COMPANIES IN NIGERIA

Economics and Finance

The issue of whether corporate debt financing responds to fiscal policy changes and in which direction has received little attention in the literature. This study uses a dynamic panel regression framework to examine the effect of fiscal policy instruments on debt financing of private companies in Nigeria. The empirical analysis is based on a balanced panel dataset comprising 21 listed companies across different sectors (consumer goods, healthcare, oil and gas, industrial goods, construction and real estate, agriculture, and services), covering from 2011 to 2022. We provide evidence that while corporate debt financing exhibits high persistence, its relationship with fiscal policy instruments is not affected by latent organizational factors such as organizational culture and leadership style. Also, our evidence shows that firm size has a positive and highly significant impact on corporate long-term debt, implying that larger firms tend to rely more on debt financing than smaller firms. Finally, both government expenditure and taxation have no statistically significant effects on corporate debt financing, showing that private firms do not significantly adjust their capital structure or debt portfolio following changes in both government spending and tax revenues. Based on these findings, we conclude that fiscal policy instruments are not among the macroeconomic determinants of corporate debt financing in Nigeria.

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