Effect of Gearing on Shareholders Wealth in Quoted Manufacturing Companies in Nigeria
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Abstract
The research work examined the effect of gearing on shareholders’ wealth in quoted manufacturing companies in Nigeria. The objective of the study was to examine how gearing affects shareholders’ wealth of quoted manufacturing companies in Nigeria. This Study is based on the stakeholder’s theory and agency theory. The secondary data source was explored in presenting the facts of the Study. The secondary data were obtained from relevant literature, journals, and annual reports of selected manufacturing companies in Nigeria for the years 2012 to 2018 (6 years). Data were tested using the Panel Least Square Regression model. The findings showed clearly that collectively, the endogenous variables (board size, firm size, and leverage) were significantly associated with the dependent variable (return on equity). Thus, these independent variables strongly have impact on shareholders’ wealth in quoted manufacturing companies in Nigeria measured by return on equity. As a result, the study concluded that gearing is a good source of finance to firms as it enables firms to carry out capital projects with positive net present values and also reduce the tax payable by the firms. The study recommended among others that, since the major goal of a firm is to maximize profits, the management of quoted manufacturing firms should ensure that gearing levels are maintained at a minimum level.
Keywords
Board Size, Firm Size, Leverage, Manufacturing Firms, Return on Equity
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