EMPLOYEE COST AND FINANCIAL PERFORMANCE OF LISTED MANUFACTURING FIRMS IN NIGERIA
Keywords:
Earnings Before Tax Margin, Employee Bonuses, Employee Cost, Financial Performance, Employee Retirement Benefits, Employee SalariesAbstract
The study determined the effect of employee cost on the financial performance of listed manufacturing firms in Nigeria. The specific objective were to ascertain the effect of employee salaries, employee retirement benefits and employee bonuses on earnings before tax margin of listed manufacturing firms in Nigeria. Ex-post facto research design was deployed in the study based on a population of seventy-five listed manufacturing firms. Purposive sampling was applied in selecting the twenty-six firms that made up the sample size. Secondary data were sourced from the firms’ annual reports from 2013 to 2022. Employing a Pooled Ordinary Least Squares (OLS) regression model for hypotheses testing, the study found the following: Employee salaries have a non-significant but positive effect on the earnings before tax margin of listed manufacturing firms in Nigeria (p-value = 0.3777); Employee retirement benefits have a non-significant but positive effect on earnings before tax margin of listed manufacturing firms in Nigeria (p-value = 0.0544); Employee bonuses have a non-significant and negative effect on earnings before tax margin of listed manufacturing firms in Nigeria (p-value = 0.1077). In conclusion, designing and implementing bonus structures that do not align with long-term wealth-maximization goal makes it impossible for financial incentives to contribute positively to overall performance. The study recommends the following: manufacturing firms should regularly benchmark its salary structures against industry standards to ensure it remains competitive; managers should engage in periodical review and adjust retirement benefit offerings to align with changing employee expectations and market trends so as to help in sustaining the positive impact on financial performance of firms; manufacturing firms should implement a transparent and well-communicated bonus system that clearly outlines the criteria for bonus eligibility and the link between performance and rewards.
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