Institutional Determinants of Micro-Finance Banks’ Capital Structure in Nigeria

By: Alade A. Ademokoya, Saheed Olayinka

Pages: 341–362, Volume: 3, Number: 1

Published by: AEFUNAI Journal of Economics, Finance and Development Studies, Alex Ekwueme Federal University, Ndufu-Alike, 2/1/2026, 2026

ISSN (Electronic): 2536-6742

DOI:

Institutional Determinants of Micro-Finance Banks' Capital Structure in Nigeria

Abstract:

This study examines the institutional components of capital structure in Nigerian microfinance banks (MFBs), focusing on legal and regulatory frameworks, political factors, and corruption index. Using an ex-post facto research design, the study relies on secondary data from the Central Bank of Nigeria (CBN) covering the period 1992 to 2022. The Autoregressive Distributed Lag (ARDL) model is employed to analyse the relationship between institutional factors and capital structure indicators, including debt ratio, equity ratio, and debt-to-equity ratio. The findings reveal that political factors significantly affect capital structure, reducing reliance on debt financing in the long run due to policy instability and economic uncertainty. Additionally, corruption control positively influences capital adequacy, suggesting that better institutions lead to more stable funding for MFBs.

Keywords: Microfinance banks, Capital structure, Financial sustainability, Debt-to-equity ratio