“This paper analysed empirically the linkages among interest rates and the leverage ratios (debt-to-equity ratio and debt-to-capital ratio) of selected firms, their investment, turnover and profits. The result of the study showed a link between interest rates and the corporate financing strategies and the profitability of firms. It also revealed that interest rate liberalization has a link with the growth of the equity markets. On sectoral analysis, the study indicated that the interest rate liberalization does not seem to have similar effects on all the investigated quoted companies. However, industrialists are shown to be sensitive to cost of production, with interest rates treated as a major component in the cost profile. Basically, all items of production are admitted to be affected by interest rate variations. The study therefore underscored the need to identify the trilogy of investment, production and finance and also to formulate policies that will not only integrate the entire financial markets (both the money and the capital markets) in an attempt to synchronize the benefits of liberalization, but also to facilitate the financial mobilization process of firms, so that their optimum contribution to development can be facilitated.”
