Economic Dynamics of the Growth of Firms in Nigeria (1989 – 2010).
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Date
2014
Authors
Sangosanya, A.O
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Abstract
Firms are least expected to be static. They metamorphose in size, shape, structure and performance overtime. This growth phenomenal is predicated on certain factors (determinants), whose instability distort the growth process, a large dose of which throws firms into comatose. This latter state defines the situation of Nigerian firms, thus its low contribution to the economy. This study therefore examined the economic factors influencing the dynamics of the growth of firms in different industries of the Nigerian economy.
The study employed secondary data on one hundred and nine (109) quoted firms in the Nigerian Stock Exchange using multi-stage sampling technique for the period of 1989 to 2010. Data on Tobin’s Q, Capital intensity, managerial efficiency, lending rates, interest rate, exchange rate, export and import were sourced from various issues of Central Bank of Nigeria(CBN)Annual Report, Statement of Accounts and Statistical Bulletin, Nigerian Stock Exchange Facts Book and National Bureau of Statistics (NBS). The study employed Generalized Least Square Panel regression technique and Autoregressive Distributed Lag method to test the formulated hypotheses.
Preliminary analysis which utilized profit after tax (PAT) as proxy to firms growth indicated that capital intensity, Tobin’s Q, operating efficiency, managerial efficiency and capital reserve are significant determinants of firms growth. Also the first auto-regressive of capital employed revealed Tobin’s Q, operating efficiency, and capital reserve as the main factors of the pooled firms total asset or valuation as a growth index. The main model of pooled proxies of firms growth used to validate the Gilbrat’s hypothesis were found to be statistically significant at different levels with the exception of Government Regulations & Policies (GRP). Capital Intensity (CIT) and Tobin’s Q (TBQ) were significant at 1%, OPE at 5% and each of Management Efficiency (MEF) and Capital Adequacy (CRV) at 10% level of significance. This explains the economic dynamics adjustment of firms’ growth in Nigeria. The study therefore concluded that previous firm’s growth size, capital intensity, finance mix, financial performance; efficient cost management and capital reserves are the key determinants of firm’s growth in Nigeria. Similarly, human asset (labour force), capital, exchange rate (of naira to U.S dollar), lending rate, export, and per capita income were the major macroeconomic indicators influencing changes in firm’s growth in Nigeria.
The study, inter alia recommends that firms irrespective of the sectors should coordinate their operations and activities in making effective strategic plans. This will assist firms in optimizing and enhancing their size and expansion process in order to utilize available resources in propelling future growth in sales, profit and total net worth dependent on the significant dynamic growth adjustment of preceding performance.
Description
A Thesis Submitted to the School of Postgraduate Studies, University of Lagos.
Keywords
Growth , Economic Dynamics , Firm , Nigerian Economy , Research Subject Categories::SOCIAL SCIENCES::Business and economics::Economics::Econometrics
Citation
Sangosanya, A.O (2014), Economic Dynamics of the Growth of Firms in Nigeria (1989 – 2010). A Thesis Submitted to University of Lagos School of Postgraduate Studies Phd Thesis and Dissertation, 259pp.