Tag Archives: Return on Equity

Effect of Bond Issuance on Financial Performance of Firms listed on Nairobi Securities Exchange (Published)

The bonds market in Kenya has experienced tremendous growth in the recent past. Firms listed on Nairobi Securities Exchange (NSE) have gone ahead to undertake secondary bond issues as they pursue their growth strategies. Looking at the financial performance (Return on Equity) of these firms that have undertaken secondary bond issues, there are declines at particular periods after these issues. Understanding the effect of bond issues on financial performance is important for the survival of firms. Studies on the relationship between debt and financial performance of firms have shown that debt has an effect on financial performance. This study went further to find out the effect of debt in form of bond issuances on listed firm financial performance as measured by return on equity. The study collected dated from all the six firms that had issued bonds in tranches or additional bonds within the period 2008 to 2017. Data was analyzed via regression to assess whether bonds issuance has any effect on the financial performance of firms listed on NSE. Results indicate that about 75.4 percent of variance in financial performance could be explained by bond issuance as characterized by bond price, bonds coupon rate, bond proportion, and bond yield to maturity. Bond proportion and bond yield to maturity were found to have a statistically significant effect on financial performance. The study concluded that bond issues affected financial performance of listed firms in Kenya. It was recommended that the listed firms ought to take into consideration the various aspects of bond issues in order to enhance their financial performance.

Keywords: Financial Performance, Nairobi Securities Exchange, Return on Equity, bond issuance, bond price, bond proportion, yield to maturity

An Empirical Analysis of Effect of Capital Structure on Firm Performance: Evidence from Microfinance Banks in Nigeria (Published)

Issues surrounding capital structure and performance which have been widely debated in the finance literature, yet there has not been consensus as to how composition of firm‘s capital impact on firm performance including Nigeria. Thus this study investigated the relationship between capital structure and firm performance in the microfinance banking subsector in Nigeria from 2009 to 2018. The study employed explained variables (debt to equity ratio, long term debt ratio and total debt ratio) representing capital structure and the explanatory variable (return on equity) representing firm performance. Descriptive statistics and regression technique were used for the analysis. The results revealed a negative and insignificant relationship between Debt to equity ratio and return on equity, a positive and insignificant relationship between Long term debt ratio and return on equity and a positive and significant relationship between Total debt ratio and return on equity. The results also indicated that F-statistic is 37.16701 with a probability of 0.026372 indicating that the combined effect of the explained variables on firm performance represented by return on equity is statistically significant. It is therefore recommended that microfinance banks in Nigeria and beyond should devise strategies that are effective to expand their debt profile in order to achieve better performance.

 

Keywords: Microfinance Banks, Return on Equity, Total debt ratio, debt to equity ratio, long term debt ratio

Empirical Study on the Impact of Corporate Governance Practices on Performance: Evidence from SMES in an Emerging Economy (Published)

The study examined the impact of corporate governance practices on the performance of SMEs in Ghana. Both descriptive and correlational research design were employed for the study. Convenience sampling technique was used to select one hundred (100) SMEs from two regions in Ghana. The study utilised the annual reports of the SMEs from 2012 to 2016 financial years. Net profit margin (NPM) and return on assets (ROA) were used as proxies for performance and Ordinary Least Square (OLS) regression model was used to estimate the level of impact of corporate governance on the performance of SMEs in Ghana. The study found empirical evidence to support the view that the board size (BS) has a negative impact on NPM, though insignificant. In addition, the evidence obtained indicate that board gender (BG) and management ownership (MO), all have positive impact on NPM. The evidence also showed that role difference for CEO and board chairman (DR) has a negative and positive impact on both ROA and ROE. Similarly, the results showed that board size (BS) has an insignificant negative impact on ROA. Additionally, it was ascertained that board gender (BG) and management ownership (MO) have positive impact on ROA, though the level of impact of board gender (BG) and management ownership (MO) are statistically insignificant. The results further provide evidence that the control variables: firm age (Fage) and industry of the firms (FInd) have a significant positive impact on both NPM and ROA. Generally, the evidence obtained show that corporate governance has positive but insignificant impact on performance of SMEs.

Keywords: Corporate Governance, Ghana Stock Exchange, Manufacturing Firms, Return on Assets, Return on Equity

Effect of Intellectual Capital on Financial Performance of Banks in Nigeria (Published)

This paper appraised the effect of intellectual capital on financial performance of firms in Nigeria using the banking industry.  The research used the Value Added Intellectual Coefficient (VAIC) to ascertain the extent that intellectual capital indices affect financial performance of three Nigeria. Data were collected from the published annual financial statements of the three banks and analyzed using regression tool. The study indicates that IC has a positive and significant effect on banks’ financial performances of the banks but some are not significant. The results further showed that the banks are statistically different in both the intellectual capital and its financial performance indicators. It also shows that the banks with high IC also show high financial performance. The study recommends banks in Nigeria invest vigorously in development of their human capital as a key driver of firm’s performance. They should also provide the infrastructures needed for to achieve a virile human capital in the system.

Keywords: Financial Performance, Gross Earnings., Intellectual Capital, Return on Assets, Return on Equity

Capital Structure Impact on Financial Performance of Sharia and Non-Sharia Complaint Companies of Pakistan Stock Exchange (Published)

For a firm to be profitable, it is necessary to create an optimal capital structure that contribute towards desired performance level. This study was conducted to explore the relationship between capital structure and financial performance of firms specifically with respect to shariah complaint and non shariah complaint companies. The analysis was conducted on panel data of 8 companies (3 shariah complaint and 5 non shariah complaint) listed under technology and communication sector of Pakistan Stock Exchange under the period 2009-2015.  Financial Performance was the dependent variable measured by ROA and ROE while capital structure was independent variable measured by indicators, LTDR, STDR, SGR, NDTS and INSHOL. Multiple linear regression and correlation were used as statistical tools to run the model. On the basis key findings we concluded in Pakistan Shariah and non shariah companies have different pattrens of capital structure. We further concluded that capital structure effect the performance of firm in case of non-shariah but do not significantly affect performance of shariah complaint.

Keywords: Capital Structure, Financial Performance, Non- Sharia complaint, Pakistan, Return on Asset, Return on Equity, Sharia complaint, Technology and Communication

Effect of Sustainability Accounting and Reporting on Financial Performance of Firms in Nigeria Brewery Sector (Published)

This paper evaluates the effect of sustainability accounting on the financial performance of listed manufacturing firms in Nigeria. Firms used for the study were chosen from the Nigerian brewery sector. Data were sourced from the financial statements of three sampled firms. Data were analysed using the ordinary linear regression.  The study reveals that sustainability reporting has   positive and significant effect on financial performance of firms studied. Following the findings, the study recommends that firms in Nigeria should invest reasonable amount of their earnings on sustainability activities while specific accounting templates be articulated by professional accounting regulating bodies to guide firms’ reportage on sustainability activities. The Financial Reporting Council of Nigeria (FRC) and others alike should make sustainability reporting compulsory while adequate sanctions are spelt out and enforced on defaulting organizations to serve as a deterrent

Keywords: Financial Performance, Nigeria, Return on Assets, Return on Equity, sustainability accounting

Managerial and Controlling Ownership, Profitability, Firm Size and Financial Leverage in Nigeria (Published)

An ordinary least squares regression test of sample of firms in manufacturing and services industries sorted into overall, low and high managerial and controlling interests (MCOWN), shows financial leverage (FL) as an increasing (decreasing) function of MCOWN, for firms with low (high) MCOWN and service (manufacturing) industry, and negatively (positively) related to profitability and size for firms with high (low) MCOWN.  Result suggests increasing (decreasing) use of debt capital when MCOWN is low (high) and that the higher (lower) the MCOWN, the greater (lesser) the agency cost contradicting the notion that FL is a governance mechanism that mitigates agency problem

Keywords: Return on Assets, Return on Equity, convergence of interest hypothesis, entrenchment of interest hypothesis, free cash flow theory, managerial and controlling interest hypothesis

The Effect of Dividend Payout on Performance Evaluation: Evidence of Quoted Cement Companies in Nigeria (Published)

The issue of dividend payout is a very important matter in the current business environment and more especially on the performance evaluation of firms’. The dividend payment decisions of firms are the primary element of any corporate policy which is basically the benefit of shareholders in return for investing their money in the organization. The successful selection and use of appropriate dividend policy is one of the key elements of the firm’s performance evaluation. Hence, proper care and attention need to be given when such decision is taken. The purpose of this paper is to investigate the effect of dividend payout on performance evaluation of quoted cement companies in Nigeria over the past twelve (12) years period from 2003 to 2014. The researcher employed four (4) variables for the analyses such as: Dividend Payout Ratio (DPR); Return on Capital Employed (ROCE); Return on Assets (ROA) and Return on Equity (ROE). Performance evaluation as dependent variable is represented by Return on Capital Employed (ROCE); Return on Assets (ROA) and Return on Equity (ROE) while Dividend Payout stands as Dividend Payout Ratio (DPR) for independent variable. Secondary data were obtained from the financial statements (Statement of Comprehensive income and Statement of Financial Position) of the selected quoted cement companies in Nigeria on Nigerian Stock Exchange. The model specification for the analysis of data is ordinary least squares techniques applied as panel estimation while descriptive research method and simple linear regression for the analyses. The researchers’ empirical results suggest that dividend payout ratio (DPR) has positive relationship with all the dependent variables (ROCE, ROA and ROE) used for this study; that dividend payout ratio (DPR) has statistically significant with Return on Capital Employed (ROCE) and Return on Asset (ROA) while DPR has statistically insignificant with Return on Equity (ROE) of quoted cement companies in Nigeria and that R2 of all the dependent variables (Return on Capital Employed; Return on Assets and Return on Equity) used for this study were affected by other variables outside our model. It further revealed that dividend payout ratio (DPR) has statistically effect on Return on Capital Employed (ROCE) and Return on Assets (ROA) of quoted cement companies in Nigeria while DPR has no statistically effect on Return on Equity (ROE) of quoted cement companies in Nigeria. Based on this, we recommend that management should improve on their Return on Assets (ROA) and Return on Equity (ROE) as they are of great important in the valuation of performance evaluation of quoted cement companies in Nigeria; adopt optimal dividend policy that would better the lots of shareholders both in the short-run and long-run; devote adequate time in designing a dividend policy that will enhance firm’s performance and shareholder value and adopted good dividend payout policies in order to reduce agency cost and maximise the value of the company and attract more investors.

Keywords: Dividend Payout Ratio, Return on Assets, Return on Capital Employed, Return on Equity, Spss and Dividend Policy

Assessing the Impact of Liquidity and Profitability Ratios on Growth of Profits in Pharmaceutical Firms in Nigeri (Published)

This paper assesses the impact of liquidity and profitability ratios on growth of profits in Pharmaceutical firms in Nigeria. Eight ratios: acid test, current ratio, net working Capital. Return on assets, returns on capital employed, returns on equity, gross profit ratio and net profit ratio were regressed against the dependent variable growth of profit. Haussmann test was conducted to choose between Fixed Effect and Random Effects model. Results justified the use of Fixed Effect model. Test results indicate significant contributions of all the variables to profit growth of pharmaceutical companies in Nigeria implying that continued improvement in the variables can lead to increases in growth of profit by the Pharmaceutical firms.

Keywords: Growth of Profit, Liquidity, Profitability, Return on Assets, Return on Capital Employed, Return on Equity, Working capital.

CAPITAL STRUCTURE AND BANK PERFORMANCE – EVIDENCE FROM SUB-SAHARA AFRICA (Published)

This paper seeks to examine the relationship between capital structure and bank performance in Sub-Sahara Africa. This study has employed the use of panel data techniques to analyze the relationship between capital structure and bank performance. The performance variables used in the study were return on asset (ROA), Return on equity (ROE) and net interest margin (NIM). The results from Levin-Lin-Chu and Im-pesaran-shin unit root test show that all the variables were stationary in levels. The study hypothesized negative relationship between capital structure and bank performance. The results also indicate that capital structure does not determine bank performance but rather it is performance that determines banks capital structure.

Keywords: Capital Structure. Bank performance, Return on Asset and Net Interst margin, Return on Equity, Total debt ratio

Sector-wise Effect of Solvency on Profitability: Evidence from Jordanian Context (Review Completed - Accepted)

This study is conducted to investigate the effect of solvency on profitability among Jordanian Industrial sectors. As far as this study is concerned solvency which expressed by debt ratio (DEBT), and equity ratio (EQUITY), and the profitability which expressed by variables including earnings before interest and tax (EBIT), net profit margin (NPM), return on asset (ROA), and return on equity (ROE), and. For the analysis the multiple regressions cover a period 2008-2011, used to examine the effect of solvency on profitability among sectors. The study found that table the Mining and Extraction sector has the highest earnings before interest and tax (EBIT) while the lowest the Glass and Ceramic Industries. The Mining and Extraction sector has the highest Net Profit Margin (NPM), return on asset (ROA); return on equity (ROE) while the lowest the Glass and Ceramic Industries. Also table the Electrical Industries sector has the highest debit ratio (DEBT) while the lowest the Glass and Ceramic Industries. But The Glass and Ceramic Industries have the highest equity ratio (EQUITY) and the lowest equity ratio (EQUITY) for the Electrical Industries sector.

The study revealed that solvency has a significant relationship with earnings before interest and tax (EBIT), net profit margin (NPM), return on asset (ROA), and return on equity (ROE), because the test was at level 5%.

 

Keywords: Amman Stock Exchange (ASE), Debt Ratio, Earning before Interest and Tax, Equity Ratio, Net Profit Margin, Profitability, Return on Asset, Return on Equity, Solvency