Financing decision and shareholders’ wealth maximisation of Nigeria listed companies.

Financing decision and shareholders’ wealth maximisation of Nigeria listed companies.

Author by Dr. Appolos Nwaobia

Journal/Publisher: Imo State University /business & Finance Journal

Volume/Edition: 12

Language: English

Pages: 18 - 35

Abstract

The primary objective of financial managers is to utilize the available resources to increase the company value that would lead to the shareholders’ wealth maximization. The wealth maximization is the major challenge facing firms as a result of financial sub-optimality. The study examined the relationship between financing decision and shareholders’ wealth maximization. Ex-post facto research design was adopted. Data were extracted from a sample of thirty-five (35) non-financial firms listed on the Nigeria Stock Exchange for a period of ten (10) years (2008 to 2017), giving 350 firm-year observations. The effect of self-financing, equity-financing and debt-financing on market value added were empirically tested using multiple linear regression analysis. The findings indicated that financing decision had significant effect on market value added; self-financing had positive and significant effect on market value added, equity-financing negatively and significantly affected market value added while debtfinancing (DFD) had insignificant negative effect on market value added. Results further revealed that firm size significantly controlled the effect of financing decision on market value added. The study opined that management should enhance their financial planning strategy and increase the asset base of the firm for the achievement of shareholders’ wealth maximization objective.  


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