EFFECT OF LIQUIDITY AND LEVERAGE ON FINANCIAL PERFORMANCE OF NIGERIAN LISTED CONSUMER GOODS FIRMS

Sunday Kajola, Adeniyi Alao (), Wasiu Abiodun Sanyaolu () and Olalekan Jubril Ojurongbe ()
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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

Contemporary Economy Journal, 2019, vol. 4, issue 3, 91-102

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.

Keywords: Current ratio; Quick ratio; Leverage; Liquidity; Profitability (search for similar items in EconPapers)
JEL-codes: G32 M41 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (1)

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