FREE CASH FLOW EFFICIENCY, INVENTORY TURNOVER, AND FINANCIAL LEVERAGE AS PREDICTORS OF MARKET VALUATION AMONG NIGERIAN CONSUMER GOODS FIRMS
Keywords:
Financial Leverage, Free Cash Flow Efficiency, Inventory Turnover, Market ValuationAbstract
This study examined the effects of free cash flow efficiency, inventory turnover, and financial leverage on the market valuation of Nigerian manufacturing firms, with market capitalisation serving as the valuation proxy. Using panel data from the 2012 to 2023 audited annual reports of sampled firms listed in the consumer goods sector of the Nigerian Exchange Group, the research employed fixed effects, random effects, and robust regression models, supported by diagnostic and robustness checks to ensure the reliability of results. The specific objectives were to determine the individual and combined effects of the three explanatory variables on market value, assess their statistical significance, and provide practical recommendations for managers and policymakers. The findings reveal that firm size consistently and positively influences market valuation, while firm age exerts a negative effect across all model specifications. Free cash flow efficiency and inventory turnover show positive but generally insignificant effects, except for inventory turnover in the robust regression, while financial leverage has a negative and significant association in some models. Based on these results, the study recommends that Manager’s focus on expanding firm size and exercising caution with debt financing, policymakers enhance governance and market transparency, and investors prioritise firm size and age in valuation assessments.
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