Firm Performance and Its Drivers: How Important Are the Industry and Firm-Level Factors?

This paper provides empirical evidence for the relative importance of industry and firm-level factors as determinants of firm performance. It also shows the relevance of the individual factors at both industry and firm levels. The paper therefore attempts to provide evidence for effects of industry and business-specific factors on firm performance using data from a developing economy. The study uses the financial and other organization-specific data of firms listed on the Nigerian Stock Exchange. The findings show that organization-specific factors are relatively more important than the industry factors, accounting for 66.58 percent of the variation in return on asset with little or no evidence for the effects of industry-level factors on return on asset. Financial leverage, firm size and firm growth rate are shown to be the most relevant firm-level factors. Firm-level factors also account for slightly more variance in Tobin¡¯s Q than the industry factors. The results also show that the industry sector of the firm is the most relevant industry-level determinant of firm market performance. There is however little or no evidence for the effects of both industry- and firm-level factors on return on equity.