Corporate Financing Options and Its Impact on Shareholders Value in Nigeria
Author(s)
Download Full PDF Pages: 69-78 | Views: 1268 | Downloads: 367 | DOI: 10.5281/zenodo.3484465
Abstract
This study examined corporate financing options on shareholder’s value in Nigeria for eleven (11) years spanning from 2007 to 2017. The study used time series data derived from the central bank of Nigeria (CBN) statistical bulletin (2017) an annual report of the banks under study. The independent variables are debenture, bonds, preference shares and ordinary shares which were proxied for corporate financing options. While the dependent variable is value added which was proxied for shareholder’s value. The value added for the purpose of this study represents the additional wealth which the bank has been able to create by its own and employee’s effort. Multiple regression model through E-views version 7.0 statistical software was applied to the study. The findings of the study revealed that debenture, bond, and ordinary shares have a positive relationship to value added of corporate firms while preference shares do not have a positive relationship to the value added of corporate firms. Furthermore, the findings revealed a direct relationship of those exogenous variables to the endogenous variable (value added). In addition, the result concluded that only bond and ordinary shares build a significant interest among other variables. The study concluded that a unidirectional causal relationship exists among debenture, bond, preference share and value added. This implies that debenture, bond, and preference shares have a short-run relationship with value added. Thus, the researcher recommended that the management of corporate entities in Nigeria should increase the use equity capital in financing to improve value added of their entities and investors should also consider the capital structure of any entity before investing in them as the strength of a firm capital mix determines the level of returns and value added
Keywords
Bond, Financing, Long term debt, Ordinary share, Preference share, Shareholders value
References
i. Akintoye, I. R. (2014). Effect of capital structure on firms’ performance: The Nigerian Experience. European J. Economics, Finance and Administrative Sciences, 10, 233-43.
ii. Akinyomi, O. J. (2013). Effect of capital structure on firm’s performance: Evidence from Nigerian Manufacturing Company. International Journal of Innovative Research and Studies, 2(9), 1-15.
iii. Chaplinsky, G. and Niehaus, G. (2013). European universal banks: An Overview. International Journal of Emerging Research in Management & Technology, 3(5), 1-4.
iv. Damodaran, (2013). Corporate Finance. Theory and Practice (2nd edition). New York: Wiely publishers.
v. Fama, E. F. and French, K. R. (2013). The corporate cost of capital and the return on corporate investment. Center for Research in Security Prices, University of Chicago, Working Paper.
vi. Gang, D. (2014). Capital structure and corporate performance: Evidence from Jordan. Australasian Accounting Business and Finance Journal, 15(3), 42-48.
vii. Huang, O. I. and Song, O. A. (2015). Weak form efficiency of the Asia deposit money banks and its capital structures: Further Evidence. Asia Development Review, 21(1), 94-98.
viii. Ibenta, S. N. (2011). Investment analysis and financial management strategy. Institute for Development Studies. University of Nigeria. Enugu Campus. Enugu.
ix. Inanga, E. L. and Ajayi, C. A. (2014). Accountancy. Lagos: The CIBN Press Limited.
x. Jensen, M. C. (1986). Agency costs of the free cash flow, corporate finance and takeovers. American Economic Review, 76(2): 323 - 329
xi. Modigliani, F. and Miller, M. H. (2012).The cost of capital, corporate finance and the theory of investment. American Economic Review, 48, 261-97.
xii. Olannye, A. P. (2006). Business Research Method for Business: A skill Building Approach. Asaba: Peejee publications.
xiii. Osiegbu, P. I., Nwakanma, P. C. and Onuorah, A. C. (2013). Financial management: A managerial approach. Benin City, Edo State: Most Virtue Publishers.
xiv. Rock, R. O. (2012). The determinants of capital structure of business firms in Nigeria. Econometrica, 55(15), 15-25.
Cite this Article: