FINANCING DECISION AND SHAREHOLDERS’ WEALTH MAXIMISATION OF NIGERIA LISTED COMPANIES
Authors:
OGUNDAJO GRACE
Publication Type: Journal article
Journal: Imo State University /business & Finance Journal
ISSN Number:
0
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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.