FINANCIAL STRATEGIES AND FIRMS’ FINANCIAL PERFORMANCE: EVIDENCE FROM SELECTED CONSUMER GOODS FIRMS IN NIGERIA

Ifeoma Patricia Osamor (), Matthew Adeolu Abata () and Adebola Muyideen Adebanjo ()
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Ifeoma Patricia Osamor: Department of Accounting, Lagos State University, Nigeria
Matthew Adeolu Abata: Department of Accounting, Lagos State University, Nigeria
Adebola Muyideen Adebanjo: Department of Accounting, Lagos State University, Nigeria

European Journal of Accounting, Finance & Business, 2021, vol. 16, issue 26, 10-20

Abstract: Inappropriate application of financial strategies decisions is a major problem firms faced for effective financial resources utilization; the study therefore reviewed the effects of financial strategies on firms’ financial performance with focus on Consumer Goods sector. Three financial strategies such as working capital strategy (QR and WCR), financing strategy (DR and ER) and investment strategy (EPS and DPS) were considered, while performance was proxy with ROA. Ex-post facto research design was adopted and twelve firms were purposefully selected. Secondary data were sourced from the Annual reports of the sampled firms for fourteen years (2006 – 2019). Descriptive statistics, panel unit root test, panel co-integration test and panel least squares test were used to analyze the data. The results of the study showed that 47.4% variation in ROA is caused by the three combined financial strategies adopted, but when assessed individually, working capital strategy and financing strategy have no significant effects on return on assets, while investment strategy has effects on return on assets. Therefore, the study recommended that cutting-edge financing strategy for proper mix of debt to equity has to be considered and the combination of current and non-current assets in financing short term obligations should not be neglected as these will improve performance.

Date: 2021
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