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Determinants of Firm Profitability in Nigeria: Evidence from Dynamic Panel Models

Author

Listed:
  • Ibrahim Abidemi Odusanya

    (Department of Economics, Olabisi OnabanjoUniversity, P.M.B 2002, Ago-Iwoye, Ogun State, Nigeria.)

  • Olumuyiwa Ganiyu Yinusa

    (Department of Accounting, Banking and Finance, Olabisi OnabanjoUniversity, P.M.B 2002, Ago-Iwoye, Ogun State, Nigeria.)

  • Bamidele M. Ilo

    (Department of Accounting, Banking and Finance, Olabisi OnabanjoUniversity, P.M.B 2002, Ago-Iwoye, Ogun State, Nigeria.)

Abstract

This study examines the determinants of firm profitability for 114 firms listed on the Nigerian Stock Exchange (NSE) from 1998 to 2012, using the system Generalized Method of Moments (GMM). The results show that lagged profitability exerts significant positive effect on contemporaneous firm profitability. However, short-term leverage, inflation rate, interest rate and financial risk have significant negative effects on firm profitability. The study therefore suggests, among other recommendations, that the cost of borrowing to the real sector of the economy should be reduced in order to minimize costs of production, enhance productivity and profitability while necessary macroeconomic policies should be put in place by the government to curb inflationary pressure in the economy.

Suggested Citation

  • Ibrahim Abidemi Odusanya & Olumuyiwa Ganiyu Yinusa & Bamidele M. Ilo, 2018. "Determinants of Firm Profitability in Nigeria: Evidence from Dynamic Panel Models," SPOUDAI Journal of Economics and Business, SPOUDAI Journal of Economics and Business, University of Piraeus, vol. 68(1), pages 43-58, January-M.
    • Handle: RePEc:spd:journl:v:68:y:2018:i:1:p:43-58
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    More about this item

    Keywords

    Firm; Non-financial; Profitability; Leverage; Generalized Method of Moments; Nigeria;
    All these keywords.

    JEL classification:

    • B21 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Microeconomics
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance

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