Revenue Reserves and Financial Performance in the Brewery Industry: Evidence from Nigeria

The research evaluates the co-integration, magnitude and strength of the relationships between corporate retentions as proxied by retained earnings and some key financial performance indicators, in the Nigeria manufacturing industry using the Brewery sub-sector as a focal point. The ex- post facto research designed which made use of secondary data obtained from annual reports and accounts of the two market leaders in the sector: Nigeria Breweries Plc and Guinness Nigeria Plc, from year 2000 to 2013.The magnitude of association of the variables was validated using the ordinary least squares method. Augmented Dickey- Fuller (ADF) test was also conducted on all the variables to check for stationary of time series data. Log of retained earnings, current asset ratio, dividend per share attained stationary at first difference, while earnings per share, net asset value per share, price -to- earnings ratio and market price of equity shares, achieved stationary at second difference. Results indicate that a strong relationship (about 77%) exist between retained earnings and net asset value per share. Also long run relationship exists between retained earnings, and the rest of the variables implying that, if the retained earnings are properly invested, the returns will catalyze growth, development and expansion of the firms while the financial performance indicators will serve as predictors to the appropriate levels of retentions and investment which could guarantee good bottom line without incurring the opportunity cost of excess liquidity.