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Effect of Corporate Reserve on the Financial Performance of Listed Industrial Good Companies in Nigeria

Author

Listed:
  • Okeke, Clement Ejiofor
  • Oyewobi, Ifeoluwapo A.

Abstract

The Nigerian Industrial sector contributed 19.02% of the country’s GDP by the end of Q4 of 2022 according to the National Bureau of Statistics. The sector has the potential to do more in terms of lifting the nation’s economy to a greater height and its financing structure is key in revolutionizing the profitability of firms in that sector, especially the Industrial Goods Firms. This study’s goal is to review the effect of cooperate reserve on the financial performance of firms in the industrial goods sector as measured by their Earnings Per Share (EPS) with firm size added as a control variable. For a period of ten (10) years, from 2013 to 2022, the study used eight (8) listed industrial goods companies in Nigeria. The study used an ex-post facto research approach and secondary data were gathered from the companies’ annual reports for the period under review. E-views version 10 was used to do correlation and regression analysis. The findings show that retained earnings have a negative and insignificant effect on financial performance while capital reserves have a positive and significant effect on the financial performance of listed industrial goods firms in Nigeria. The study suggests that the firms should desist from keeping large sums as retained earnings.

Suggested Citation

  • Okeke, Clement Ejiofor & Oyewobi, Ifeoluwapo A., 2024. "Effect of Corporate Reserve on the Financial Performance of Listed Industrial Good Companies in Nigeria," MPRA Paper 124021, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:124021
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    File URL: https://mpra.ub.uni-muenchen.de/124021/1/MPRA_paper_124021.pdf
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    References listed on IDEAS

    as
    1. Brav, Alon & Graham, John R. & Harvey, Campbell R. & Michaely, Roni, 2005. "Payout policy in the 21st century," Journal of Financial Economics, Elsevier, vol. 77(3), pages 483-527, September.
    2. Mikkelson, Wayne H. & Partch, M. Megan, 2003. "Do Persistent Large Cash Reserves Hinder Performance?," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 38(2), pages 275-294, June.
    3. Benter Omollo Achieng & Willy Muturi & Joshua Wanjare, 2018. "Effect of Equity Financing Options on Financial Performance of Non-Financial Firms Listed at the Nairobi Securities Exchange, Kenya," Applied Economics and Finance, Redfame publishing, vol. 5(4), pages 160-173, July.
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    More about this item

    Keywords

    Retained Earnings; Capital Reserve; Earnings Per Share; Financial performance; Industrial Goods;
    All these keywords.

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G3 - Financial Economics - - Corporate Finance and Governance
    • M0 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - General
    • M1 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration

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