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Effect Of Liquidity And Leverage On Financial Performance Of Nigerian Listed Consumer Goods Firms

Author

Listed:
  • Sunday Olugboyega KAJOLA

    (Department of Accounting, Federal University of Agriculture, Abeokuta, Nigeria)

  • Adeniyi ALAO

    (Department of Accounting, Olabisi Onabanjo University, Ago-Iwoye, Nigeria)

  • Wasiu Abiodun SANYAOLU

    (Department of Accounting, Crescent University, Abeokuta, Nigeria)

  • Olalekan Jubril OJURONGBE

    (Department of Accounting, Crescent University, Abeokuta, Nigeria)

Abstract

The study examined effect of leverage and liquidity on financial performance of Nigerian firms using data of seventeen consumer goods firms listed on the Nigerian Stock Exchange during the financial years, 2012 to 2017. The study adopted multiple regression method, with pooled Ordinary Least Squares as estimation technique. The finding revealed that leverage proxies- degree of operating leverage and degree of combined leverage have significant effect on financial performance. The study could not however provide empirical evidence in support of liquidity proxies- current ratio and quick asset ratio having significant effect on performance of the companies. The study recommended that in order to improve profitability level, corporate managers and top decision makers should take advantage of debts’ tax shield from the interest in companies’ financial structure and develop robust strategies that will monitor and efficiently manage liquidity requirements.

Suggested Citation

  • Sunday Olugboyega KAJOLA & Adeniyi ALAO & Wasiu Abiodun SANYAOLU & Olalekan Jubril OJURONGBE, 2019. "Effect Of Liquidity And Leverage On Financial Performance Of Nigerian Listed Consumer Goods Firms," Contemporary Economy Journal, Constantin Brancoveanu University, vol. 4(3), pages 91-102.
    • Handle: RePEc:brc:brccej:v:4:y:2019:i:3:p:91-102
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    More about this item

    Keywords

    Current ratio; Quick ratio; Leverage; Liquidity; Profitability;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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