Economic Characteristics and Financial Performance of Selected Manufacturing Companies in Nigeria.
ABSTRACT
Firms make several financial and strategic decisions which are usually moderated by the workings of operating business environment. Understanding how the fluctuations of these economic variables moderate variations in firms’ financial performance is crucial and germane to meeting cooperate goals and objectives.
Insensitive to how these economic variables affect financial performance may lead to wrong decisions and may have implications on performance.
Consequently, this study investigated the impact of economic characteristics of a firm’s operating environment represented by;
Government Expenditure, Inflation, Interest rate and Exchange rate fluctuations on financial performance expressed by earnings per share (EPS), Return on Equity (ROE), Return on Asset (ROA), and Tobin’s Q (TQ) of Nigeria manufacturing firms 7 The study adopted ex-post facto research design.
Stratified and random sampling methods were used to select 31 out of the 45 manufacturing firms listed on the Nigeria Stock Exchange as at 2014. Secondary data were obtained from the Nigerian Stock Exchange library, the Central Bank of Nigeria publications,
National Bureau of Statistics and the Internet. A critical analysis of the financial statements of the selected manufacturing firms over a period of 5 years (2010– 2014) was conducted. Diagnostic tests were conducted using Hausman specification test.
TABLE OF CONTENTS
Content Page
Title Page i
Certification ii
Dedication iiii
Acknowledgements v
Abstract vi
Table of Contents vii
List of Tables x
List of Figures xi
CHAPTER ONE: INTRODUCTION
1.1 Background to the Study 1
1.2 Statement of the Problem 3
1.3 Objective of the Study 5
1.4 Research Questions 6
1.5 Hypotheses 6
1.5.1 Rationale for Hypotheses 7
1.6 Significance of the Study 9
1.7 Scope of the Study 11
1.8 Operationalization of Variables 11
CHAPTER TWO: REVIEW OF LITERATURE
2.1 Conceptual Model 14
2.2 Theoretical Framework 21
2.3 Empirical Framework 30
2.4 Gaps in Literature 42
CHAPTER THREE: METHODOLOGY
3.1 Research Design 44
3.2 Population 44
3.3 Sample size and sampling Technique 45
3.4 Source of Data 45
3.5 Data Analysis Technique 46
3.5.1 Regression Analysis 47
3.6 Model Specification 47
3.7 Apriori Expectations 49
3.8 Ethical Consideration 49
CHAPTER FOUR: DATA ANALYSIS, RESULTS AND DISCUSSION OF FINDINGS
4.1 Descriptive Analysis 50
4.2 Descriptive Statistics 50
4.3 Empirical Analysis 52
4.3.1 Test of Main Hypothesis 52
4.3.1 Interpretation of Result 53
4.3.2 Test of Hypothesis one 57
4.3.1 Interpretation of result 59
4.3.2 Test of Hypothesis Two 60
4.3.1 Interpretation of result 62
4.3.2 Test of Hypothesis Three 62
4.3.1 Interpretation of result 64
4.3.2 Test of Hypothesis Four 64
4.3.1 Interpretation of result 66
CHAPTER FIVE: SUMMARY, CONCLUSION AND RECOMMENDATIONS
5.1 Summary 68
5.1.1 Summary of Findings 69
5.1.3 Policy Implications of Findings 69
5.2 Conclusion 72
5.3 Recommendations 72
5.4 Contributions to Knowledge 73
5.5 Limitation of the Study 74
5.6 Suggestion for Further Studies 75
References 76
INTRODUCTION
Background to the Study
Organizations are institutions deliberately designed to achieve and accomplish certain goals and objectives which in turn maximize the shareholders’ wealth in the context of the definition of the organization objective.
Activities in these organizations are affected by both identified operating environment and firms’ specific characteristics.
The state of a nation’s economy affects the performance of its organizations. Whenever the economy is performing well the general expectation of most investors and shareholders is that companies would perform well and thus shareholder’s wealth is maximized.
The economic performance is judged by the stability in macroeconomic variables, such as exchange rate, the rate of inflation, consumer price index, GDP, stock market index and interest rates, the policy makers at both the macro and micro levels expect that economic condition would remain stable and favorable to sustain business performance.
Moreover, it is the wish of potential and existing investors that these macroeconomic elements remain pleasant so as not to threaten the firm’s ability to meet up with set objectives.
Firms make several operational and strategic decisions which are usually moderated by the fundamentals of business operating environment; these include financing decision, investing decision and operational decision.
Hence, firms must pay particular engrossment than before to their operating environments when formulating and implementing survival and growth strategies (Otokiti & Awodun, 2003).
A firm’s decision in financing, investing and any other decision pattern is primed on the trend of the behavior and disposed characters of its operating environment.
Organisational performance has been a source of influence on the actions taken by companies and the degree to which an organisation realizes its goals as well as the stated objectives through the stated strategies and policies of the organisation (Folan & Browne, 2005). The search for improvement on performance has always been a fundamental issue for firms.
As it implied in the natural habitat where the survival of the inhabitants depends largely on the environmental phenomena, such as sunlight, rainfall, and humidity, so it applies in corporate life. A firm is as good as the workings of the fundamentals of its environment.
REFERENCES
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