IOSR Journal of Business and Management (IOSR-JBM) e-ISSN: 2278-487X, p-ISSN: 2319-7668. Volume 23, Issue 9. Ser. VI (September. 2021), PP 33-39 www.iosrjournals.org DOI: 10.9790/487X-2309063339 www.iosrjournals.org 33 | Page Effect of Corporate Debts on the Financial Performance of Healthcare Manufacturing Firms in Nigeria NNAJIEZE, IFEYINWA ELIZABETH 1 PROF. CHIKE NWOHA 2 PROF. IFEOMA OKWO 3 PROF. UCHE UGWUANYI 4 Department Of Accountancy, Faculty of Management Sciences,Enugu State University of Science and Technology (ESUT), Enugu Abstract This study empirically investigated the effect of corporate debt on the financial performance of Healthcare manufacturing companies in Nigeria. A random sample of three (3) Healthcare firms quoted in the Nigeria Stock Exchange as at May, 2019, were selected and studied for the period of ten years (2009-2018). Theresponse variable used for the study was Return on Asset (ROA) while explanatory variables were Short- Term Debt (STD) and Long-Term Debt (LTD). Annual time series secondary data extracted from the annual report and financial statements of the selected firms were used while the ex-post facto research design was adopted. Statistical analysis techniques employed were descriptive statistics and random effect panel least squares multiple regression mechanism. Necessary diagnostic and robustness tests such as Levin, Lin & Chu t* panel unit root and correlation analysis were performed. Findings revealed that corporate debt exert significant negative effect on the financial performance of pharmaceutical firms in Nigeria. Particularly, the empirical evidence provided that in disaggregated form,the effect of STD and LTD on ROA were individually negative and insignificant. The implication of this result is that debt of any sort is not favourable to pharmaceutical firms in Nigeria. Based on these findings, it was recommended among others that firms in Nigeria should strive to reduce their debt ratio as it draws back their profit levels in the company. Key Words: Long-term debt, Short-term debt, Total debt, Return on Assets, Pharmaceutical Company --------------------------------------------------------------------------------------------------------------------------------------- Date of Submission: 13-09-2021 Date of Acceptance: 29-09-2021 --------------------------------------------------------------------------------------------------------------------------------------- I. Introduction Corporate finance executives around the world, in regional and local markets, are still grappling with the combined challenges of poor financial performance and seeking the best company financing solutions. These executives must also balance the triple demands of generating wealth for investors, maintaining firm operations, and contributing to an economy's growth. Debt financing is a crucial component of external finance for enterprises raising extra cash after incorporation, according to Baltac and Ayaydm (2014). It has both a positive and negative effect on corporate growth and strategic investments (O'Brien and David, 2010). The impact of debt financing on financial performance is critical for all firms (Karuma, Ndambiri and Oluoch, 2018). Although existing theory shows that debt is one of the primary sources of funding for a firm's long-term activities, which significantly define its performance, determining the optimal capital structure remains an illusivegoal (Nwude, Itiri, Agbadua, &Udeh, 2016; Prempeh, Sekyere,&Asare, 2016). Debt is the second most important type of capital structure after equity. It entails the issuance of financial instruments such as loans payable, notes payable, short-term debt, long-term debt, bonds, debentures, and other similar instruments to finance a company's activities and assets (Chadha and Sharma, 2016). Furthermore, because of the higher costs of financial crisis, debt overhang issues suggest that excessive levels of debt will inhibit investments (Diamond and He, 2014). Theoretical projections on the relationship between debt financing and firm performance are conflicting in both established and developing economies, according to corporate finance literature. While some experts expect that debt has a favorable impact on financial performance (Margaritis and Psillaki, 2010; Fosu, 2013), others argue that debt has a detrimental impact, especially when enterprises are heavily indebted (Kayhan and Titman, 2007; Bhagat and Bolton, 2008; Ghosh, 2008; Prempeh, Sekyere and Asare, 2016). This study, on the other hand, aims to look into the impact of corporate debt on the financial performance of healthcare manufacturing companies in Nigeria over a ten-year period.