Firm Characteristic and Financial Performance of Consumer Goods Manufacturing Firms in Nigeria: Moderating Effect of Some Key Monetary Variables

Abstract

This study moderates firm characteristics with key monetary variables (inflation rate and exchange rate) and examine their effect on the financial performance of fifteen (15) listed consumer goods manufacturing firms in Nigeria using an annual panel dataset from 2004 to 2020. The dependent variable (financial performance) is measured as return on assets while the independent variables are capital structure, dividend policy, managerial efficiency and firm size. In addition, the study used fixed and random effects regressions as techniques of data analysis. The results of this study are categorized into two parts namely; regression results without moderators and regression results with moderators (inflation and exchange rate). The result from the model without moderators shows that there is a positive and statistically relationship between capital structure, managerial efficiency and firm size and financial performance while dividend policy has no significant effect on financial performance. However, the results moderated with both the inflation and exchange rate indicate that capital structure and firm size have a significant negative effect on financial performance while dividend policy and managerial efficiency have a significant positive effect on financial performance. Thus, this study recommends the need for an increase in both dividend policy and managerial efficiency and limiting the increase in capital structure and firm size since they adversely affect financial performance. Finally, there is a need for consumer goods manufacturing firms to put into consideration the trends in monetary variables before making any investment decision.