Research in International Business and Finance 35 (2015) 111–121 Contents lists available at ScienceDirect Research in International Business and Finance journal homepage: www.elsevier.com/locate/ribaf The impact of profitability on capital structure and speed of adjustment: An empirical examination of selected firms in Nigerian Stock Exchange Isaiah Oino a,∗ , Ben Ukaegbu b a University of East London Business and Law School, United Kingdom b London Metropolitan University, Business School, United Kingdom a r t i c l e i n f o Article history: Received 3 September 2014 Received in revised form 23 February 2015 Accepted 24 March 2015 Available online 29 April 2015 Keyword: Leverage Performance Target capital structure Adjustment speed a b s t r a c t The aim of the study was to investigate the impacts of capital struc- ture on the performance of Nigerian listed non-financial firms and how these firms adjust to the target capital structure. We tested the Trade-off theory and the pecking order theory and the rele- vance of these theories to Nigerian firms is confirmed. The speed of adjustment to the target capital structure is determined using both pool OLS and GMM to ensure the robustness of the finding. The descriptive statistics show that leverage constitute 63% of the capi- tal structure of Nigerian firms, while leverage is dominated with the short term leverage. We observed that profitability and asset struc- ture were negatively related to leverage while the size of the firm and non-debt tax shield were positively related to leverage. The adjustment speed of Nigerian firms is very high 47% that compares well with studies on non-financial firms done in most developed countries. © 2015 Published by Elsevier B.V. 1. Introduction Capital structure puzzle continues to attract many scholars and policy makers, especially in regard to financial institutions. Capital structure is the permutation of equity and debt which is used to derive ∗ Corresponding author. Tel.: +44 7931773960. E-mail addresses: i.oino@uel.ac.uk, jumaoino@yahoo.co.uk (I. Oino), b.ukaegbu@londonmet.ac.uk (B. Ukaegbu). http://dx.doi.org/10.1016/j.ribaf.2015.03.004 0275-5319/© 2015 Published by Elsevier B.V.