The Effect of Capital Structure on the Liquidity of Listed Pharmaceutical Companies in Nigeria

This study fills a significant empirical data vacuum in developing markets by examining the impact of capital structure on the liquidity of pharmaceutical businesses listed in Nigeria. Debt and equity funding were used to measure the capital structure, while the acid-test ratio was used to quantify liquidity. Five pharmaceutical businesses that were listed on the Nigerian Exchange Group as of June 31, 2025, made up the study's population. However, because these three firms satisfied the evaluation requirements, the study employed purposive sampling to focus on three listed pharmaceutical firms as the sample size. The study explored ex post facto research design gotten from their audited financial statements between the periods 2022 to 2024. The study adopted robust panel data regression analysis. The results of hypothesis one, debt financing (DF) and the acid test ratio (ATR) have a non-inverse relationship (p=0.7291>0.05; β=0.009798), and hypothesis two found that equity financing significantly and favourably affects the acid-test ratio (p=0.0048>0.05; β=0.6904). This study finds that the capital structure and liquidity of Nigerian pharmaceutical businesses that are listed have a beneficial impact. The study suggests that a prudent increase in debt financing should be made within the operating framework of these businesses. This will be linked to an improved capacity to fulfill short-term financial commitments. This will give data-driven insights into how financing decisions affect the short-term solvency of these crucial companies within Nigeria's unique economic and regulatory environment, allowing stakeholders to make better informed financial and investment decisions. This is because capital structure decisions are relevant and impactful in the real-world financial landscape of an emerging market like Nigeria.