NEXUS BETWEEN AGENCY COST AND FINANCIAL PERFORMANCE OF LISTED MANUFACURING FIRMS IN NIGERIA
Abstract
This study explored the nexus between agency costs and financial performance of listed manufacturing firms in Nigeria from 2015 to 2022, with a focus on the firms listed in the consumer goods (CG) sector. The sample size for this study was 20 firms out of the 21 listed CG firms in Nigeria. Purposive sampling techniques was used in this study. The data estimate tools employed in this investigation were multiple regression analysis and descriptive statistics. Board compensation (BCP), asset utilization ratio (ATR) and administrative expenses ratio (ADE) were used as proxy of agency costs whereas ROA was used to proxy financial performance. BCP and ADE were found to have a negative and significant connection with ROA as demonstrated by t-stats and p-values of (-2.54, -2.76) and (0.011, 0.006) correspondingly. Whereas ATR was found to have a positive and significant effect on ROA evidenced with t-stat and p-val. of (2.03, 0.042) respectively. Thus, this concluded that agency costs have the tendency to influence the financial performance of listed CG firms in Nigeria. Based on the outcomes of this study, the following recommendations are proposed; Firms should eliminate unnecessary administrative expenses, they should prioritize asset maintenance in other to ensure that the facilities remain operational and efficient. Lastly, board compensation should be fair and performance measures criteria should be clearly stated.
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