Improved Financial Performance Without Improved Operational Efficiency: The Case of Nigerian Firms

Olaniyi Evans

MPRA Paper from University Library of Munich, Germany

Abstract: Is financial performance of firms really on the increase in Nigeria? If so, what about operational efficiency of these firms? Though profits are on the rise, can these companies possibly be efficient, in spite of the problems inherent in the economy? In order to answer these questions, this study uses four different panel unit root tests to establish the stationarity of financial performance and operational efficiency in Nigeria, using one key performance variable (i.e., profit after tax) and three efficiency variables (i.e., return on assets ratio, asset turn ratio and portfolio activity & resilience) with a cross section of the 20 most quoted companies on the Nigerian Stock Exchange. The study shows that profit after tax is non-stationary while return on assets, portfolio activity & resilience and asset turn ratio are stationary. In other words, while financial performance (measured as profit after tax) is increasing in Nigeria, operational efficiency (measured as Return on Assets, Portfolio Activity & Resilience and Asset Turn Ratio) is stagnant. What it means is that while corporate profits are on the rise, the companies are not operationally efficient.

Keywords: Financial Performance; Operational Efficiency; Profit after Tax; Rate of Return on Assets; Asset Turn Ratio; Portfolio Activity & Resilience (search for similar items in EconPapers)
JEL-codes: D49 G31 G32 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations:

Published in Forum Scientiae Oeconomia 3.6(2018): pp. 25-41

Downloads: (external link)
https://mpra.ub.uni-muenchen.de/118202/1/Corporate ... y%20in%20Nigeria.pdf original version (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:118202

Access Statistics for this paper

More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter ().