Dynamic Relationship Between Capital Structure and Quoted Manufacturing Firms’ Performance in Nigeria
Oyedeji Rasheed Olarewaju
Issue:
Volume 7, Issue 3, June 2019
Pages:
82-87
Received:
15 May 2019
Accepted:
18 June 2019
Published:
1 July 2019
Abstract: For so long, and most recently, relationship between capital structure and manufacturing firm’s performance has been an issue in financial world. Financial analysts are controversial in advising the investors on the best capital structure to employ while undertaking investment decisions. This paper investigates dynamic relationship between capital structure and quoted manufacturing firms’ performance in Nigeria from 1990-2016. Using panel unit root test to verify the stationarity property of the data, Pedroni conitegration tests and Panel Vector Error Correction Method (PVECM) are employed to examine the equilibrium among the variables as well as analysing the data. There is evidence of long run relationship between capital structure and firms’ performance in Nigeria as revealed by Cointegration test results. Results from PVECM show that, throughout the period i.e. both in the long run and short run, except itself, none of the variables’ shocks in the system significantly accounts for variations in the returns on asset (ROA), given variance error decomposition’s statistics. Also, both in the short run and long run, innovations from only equity (EQU) explains, on average, 1.76% variations to profit margin. Arising from these findings, the study could not find dynamic relationship between capital structure and firms’ performance. The study, therefore, recommends that manufacturing firms should be pragmatic when choosing capital structure outlays to enhance performance in their activities.
Abstract: For so long, and most recently, relationship between capital structure and manufacturing firm’s performance has been an issue in financial world. Financial analysts are controversial in advising the investors on the best capital structure to employ while undertaking investment decisions. This paper investigates dynamic relationship between capital ...
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Profitability in Complex Investments: Errors of IRR and Other Anomalies, Their Solutions
Issue:
Volume 7, Issue 3, June 2019
Pages:
88-94
Received:
13 February 2019
Accepted:
3 June 2019
Published:
5 August 2019
Abstract: This investigation conceptually shows, also mathematically and empirically, the unacceptable errors of IRR for the evaluation of the financial profitability in complex investments. The solutions of the IRR are still generally unknown because they are solutions of a polynomial equation without normal mathematical resolution. Through a particular financial-vectoral model, this work has managed to solve it, knowing all its possible solutions, which confirm the announced errors. The model also allows us to return to the correct definition of financial profitability, necessarily obviated by the IRR for the lack of a single investment term for all the partial investments existing in the complex investment. Through a Medium Financial Term (MFT), financially equivalent to effective diverse existing investment terms, the work has made possible to return to the strict financial definition of investment profitability through the Profitability Financial Rate (PFR) substitution of the IRR. Through a simulation with five easy complex investments, the work empirically shows the solutions achieved which prove, also empirically, the errors of the IRR. Finally, the work shows other serious anomalies of the IRR in the evaluation of complex investments and in the selection of the optimal investment, derived from its hidden calculus type (the same IRR). Also, it evidences its ignorance on a possible investor degeneration, with serious consequences in the economic meaning of the result.
Abstract: This investigation conceptually shows, also mathematically and empirically, the unacceptable errors of IRR for the evaluation of the financial profitability in complex investments. The solutions of the IRR are still generally unknown because they are solutions of a polynomial equation without normal mathematical resolution. Through a particular fin...
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