Retained Earnings Financing and Capital Structure Resilience of Nigerian Corporations: Evidence from Firm-Level Financial Performance

This study examined the influence of retained earnings and dividend payout ratio on the capital structure and financial performance of Nigerian corporations, focusing on the gearing ratio, equity-to-total liabilities ratio, return on assets, and Earnings Before Interest and Tax. Using an ex-post facto research design, the study analyzes secondary data from 55 non-financial firms listed on the Nigerian Exchange Group as of December 2025. The results reveal a significant negative relationship between retained earnings and the gearing ratio, indicating that firms with higher retained earnings tend to have lower leverage. Dividend payout ratio has no significant effect on the gearing ratio or the equity-to-total liabilities ratio, supporting the idea that dividend policies do not directly impact capital structure decisions. The study also finds that retained earnings positively influence the equity-to-total liabilities ratio, aligning with the pecking order theory. However, neither retained earnings nor the dividend payout ratio significantly affect the return on assets or Earnings Before Interest and Tax, suggesting that capital structure decisions do not directly influence asset utilization or operating profits. The findings highlight the importance of internal financing in maintaining a stable capital structure and recommend that Nigerian firms prioritize retained earnings while adopting a balanced approach to dividend payouts.