Free Cash Flow and Investment Efficiency of Listed Manufacturing Companies in Nigeria
Purpose- This study aims to determine the relationship between free cash flow and investment efficiency of quoted manufacturing companies in Nigeria. Design- An accounting-based model developed by Richardson (2006) was employed to measure investment efficiency and free cash flow. The population o...
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| Format: | Article |
| Language: | English |
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seisense
2021-10-01
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| Series: | SEISENSE Journal of Management |
| Subjects: | |
| Online Access: | https://journal.seisense.com/jom/article/view/698 |
| _version_ | 1797269139648151552 |
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| author | Aliyu Sulaiman Kantudu Abubakar Sadiq Umar |
| author_facet | Aliyu Sulaiman Kantudu Abubakar Sadiq Umar |
| author_sort | Aliyu Sulaiman Kantudu |
| collection | DOAJ |
| description |
Purpose- This study aims to determine the relationship between free cash flow and investment efficiency of quoted manufacturing companies in Nigeria.
Design- An accounting-based model developed by Richardson (2006) was employed to measure investment efficiency and free cash flow. The population of the study consist of all the listed manufacturing companies in Nigeria. Similarly, the purposive sampling technique was employed to arrive at forty-eight companies for 2008-2018.
Findings- The results of the study confirm the agency theory of free cash flow. Hence, it established that there is a positive and robust relationship between free cash flow and overinvestment.
Practical Implications- the findings of this study has practical implications to various group of users of financial information such as investors, policymakers and other stakeholders in the listed manufacturing sector in Nigeria. The study recommends that policymakers reduce the cost of debt, and likewise, managers should emphasize the facilitation of equity capital.
Originality- To the best of the researcher's knowledge, this is the first study to examine the relationship between free cash flow and investment efficiency in Nigeria.
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| first_indexed | 2024-03-07T14:05:21Z |
| format | Article |
| id | doaj.art-d485698343e641679117738e690839db |
| institution | Directory Open Access Journal |
| issn | 2617-5770 |
| language | English |
| last_indexed | 2024-04-25T01:43:38Z |
| publishDate | 2021-10-01 |
| publisher | seisense |
| record_format | Article |
| series | SEISENSE Journal of Management |
| spelling | doaj.art-d485698343e641679117738e690839db2024-03-08T00:04:47ZengseisenseSEISENSE Journal of Management2617-57702021-10-014410.33215/sjom.v4i4.698Free Cash Flow and Investment Efficiency of Listed Manufacturing Companies in NigeriaAliyu Sulaiman Kantudu0Abubakar Sadiq Umar1https://orcid.org/0000-0001-6622-4718Department of Accounting, Bayero University, Kano, NigeriaDepartment of Accounting, Adamawa State University, Mubi, Nigeria Purpose- This study aims to determine the relationship between free cash flow and investment efficiency of quoted manufacturing companies in Nigeria. Design- An accounting-based model developed by Richardson (2006) was employed to measure investment efficiency and free cash flow. The population of the study consist of all the listed manufacturing companies in Nigeria. Similarly, the purposive sampling technique was employed to arrive at forty-eight companies for 2008-2018. Findings- The results of the study confirm the agency theory of free cash flow. Hence, it established that there is a positive and robust relationship between free cash flow and overinvestment. Practical Implications- the findings of this study has practical implications to various group of users of financial information such as investors, policymakers and other stakeholders in the listed manufacturing sector in Nigeria. The study recommends that policymakers reduce the cost of debt, and likewise, managers should emphasize the facilitation of equity capital. Originality- To the best of the researcher's knowledge, this is the first study to examine the relationship between free cash flow and investment efficiency in Nigeria. https://journal.seisense.com/jom/article/view/698Free cash flowInvestment effeciencyOver-investmentUnder-investmentAgency cost |
| spellingShingle | Aliyu Sulaiman Kantudu Abubakar Sadiq Umar Free Cash Flow and Investment Efficiency of Listed Manufacturing Companies in Nigeria SEISENSE Journal of Management Free cash flow Investment effeciency Over-investment Under-investment Agency cost |
| title | Free Cash Flow and Investment Efficiency of Listed Manufacturing Companies in Nigeria |
| title_full | Free Cash Flow and Investment Efficiency of Listed Manufacturing Companies in Nigeria |
| title_fullStr | Free Cash Flow and Investment Efficiency of Listed Manufacturing Companies in Nigeria |
| title_full_unstemmed | Free Cash Flow and Investment Efficiency of Listed Manufacturing Companies in Nigeria |
| title_short | Free Cash Flow and Investment Efficiency of Listed Manufacturing Companies in Nigeria |
| title_sort | free cash flow and investment efficiency of listed manufacturing companies in nigeria |
| topic | Free cash flow Investment effeciency Over-investment Under-investment Agency cost |
| url | https://journal.seisense.com/jom/article/view/698 |
| work_keys_str_mv | AT aliyusulaimankantudu freecashflowandinvestmentefficiencyoflistedmanufacturingcompaniesinnigeria AT abubakarsadiqumar freecashflowandinvestmentefficiencyoflistedmanufacturingcompaniesinnigeria |