FINANCIAL RISK FACTORS AND FIRM PERFORMANCE: EVIDENCE FROM LISTED COMPANIES IN NIGERIA
Keywords:
Capital Investment Decision, Financial Management Practices, Financing Decision, Firm Size, Economic PerformanceAbstract
The study examined the moderating role of firm size on the relationship between financial management practices and economic performance of listed service firms in Nigeria. The specific objective was to ascertain the extent to which financing decision, capital investment decision, dividend decision and liquidity decision on the value added ratio of listed service firms in Nigeria. The study adopted ex-post facto research design. Twenty-one firms listed under the Nigerian service sector made up the study population while the sample size of fourteen was selected using purposive sampling. Secondary data were collected from the firms’ annual report, from 2014 to 2023. Descriptive analysis, correlational analysis and linearity analysis were conducted. Hypotheses were tested using moderated panel regression. It was found that: financing Decision has a significant positive effect on the value-added ratio of listed service firms in Nigeria (b = 5.4967; p = 0.0000); Capital Investment Decision has a significant negative effect on the value-added ratio of listed service firms in Nigeria (b = -0.6135; p = 0.0000); Dividend Decision has a significant negative effect on the value-added ratio of listed service firms in Nigeria (b = -2.9471; p = 0.0000); Liquidity Decision has a significant positive effect on the value-added ratio of listed service firms in Nigeria (b = 0.2348; p = 0.0023); Firm size significantly moderates the effect of financing, capital investment, and dividend decisions on value added ratio—with negative moderation for financing decision (b = -0.8040, p = 0.0000) and positive moderation for capital investment (b = 0.1658, p = 0.0000) and dividend decisions (b = 0.4562, p = 0.0000), while its moderation effect on liquidity decision is insignificant (b = -0.0186, p = 0.1150).In conclusion, financial management practices significantly influence the economic performance of listed service firms in Nigeria, with firm size playing a moderating role in shaping the effects of financing, capital investment, and dividend decisions on value creation.The study recommends that financial managers should adopt strategic funding approaches such as optimizing debt-equity mix and sourcing funds at the lowest possible cost to maximize the firm’s economic performance.
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