Corporate Funding and Firm Sustainability in Quoted Manufacturing Companies in Nigeria
Vol.5 Issue 2
The purpose of this study is to examine the relationship between corporate funding and firms’ sustainability in quoted manufacturing firms in Nigeria. The study adopts a quasi-experimental design with time series data generated from the financial statements of the quoted manufacturing firms and also Nigerian stock exchange fact books from 2007 to 2018. Augmented Dickey Fuller (ADF), multiple regression analysis, and the standard pair-wise Granger Causality tests were employed in analysing the data. The results reveal a significant relationship between the explained and explanatory variables. Among the explanatory variables, retained earnings to total assets ratio show a highly significant positive effects on the criterion variables while total debt to total assets show consistent significant and negative relationship with each of the explained variables. There is a significant bi-directional causality between return on equity and total equity to total assets, return on assets and retained earnings to total assets and Tobin q ratio and total debt to total assets and significant uni-directional causality between return on equity and retained earnings to total assets, working capital to total assets and return on assets, return on assets and total debt to total assets, Tobin q ratio and total debt to total assets. This means that the variables do support and promote themselves to attain firms’ sustainability. It is concluded that retained earnings proved to be a better funding source as it showed a positive influence on the sustainability variables of the firms and that debt capital may not be an appropriate funding source for the operations of the corporate organizations as the results consistently indicate a negative and significant relationship with the dependent variables in each of the stated models.. The study recommends corporations to retain much of their profits for re-investment, a policy should be instituted by quoted firms regulatory bodies whereby a reasonable percentage of net profit is retained and reinvested into the business and quoted firms should balance off between the benefits of debt and bankruptcy costs.
