Resumen
This paper investigates the relationship between firm performance and capital structure of firms in Nigeria. Using panel data consisting of 115 firms over the period 1998-2012, the generalized method of moments results indicate that firm performance is statistically significant negatively related to capital structure of firms thereby supporting the franchise-value hypothesis. The paper therefore concludes that past performance of firm impact on their capital structure. Based on this, the study recommends that firms in emerging markets may need to improve on their financial performances so that they can optimize their capital structure decisions.Keywords: capital structure, generalized method of moments, firm performance, agency cost.