Macroeconomic Variables and Retained Earnings of Quoted Manufacturing Firms in Nigeria: A Time Variant Study

  • Ngozi G. Iheduru Department of Accountancy, Faculty of Business Administration, Imo State University, Owerri, Nigeria
  • Charles U. Okoro M. Sc., Department of Accountancy, School of Management Sciences, Ken Saro-Wiwa Polytechnic, Bori, Rivers State, Nigeria
Keywords: Macroeconomic Variables, Retained Earnings, Quoted Manufacturing Firms, Money Supply


This study examined external factors that determine retained earnings of quoted manufacturing firms in Nigeria. Annual time series data were sourced from Central Bank of Nigerian Statistical Bulletin, and Annual Reports of the selected manufacturing firms, the study modeled retained earnings the function of money supply, exchange rate, oil price, inflation rate and interest rate. The ordinary Least Square method was employed with multiple regression model based on Statistical Package for Social Sciences version (22.0). The Durbin-Watson statistics show the presence of multiple serial autocorrelation.The result shows collinearity that corresponds with the Eigen value condition index and variance constants are less than the required number, while the variance inflation factors indicate the absence of auto-correlation.It was found that Oil price have positive impact on retention rate of the selected manufacturing firms while exchange rate and interest rate have negative impact on the dependent variable. It was also found that   money supply have negative effect on dividend payout rate while inflation rate have positive impact on retention rate. From the findings we conclude that oil price, interest rate, exchange rate and money supply have no significant relationship with dividend policy while inflation rate have significant relationship with dividend policy of the selected quoted manufacturing firms. We recommend the need for the manufacturing firms to formulate policies that leverage the negative effect of macroeconomic variables on retained earnings of the manufacturing firms and interest rate should properly be defined in the Nigerian financial market that is either full deregulated or regulated to determine the market rate of return, investment and the profitability of manufacturing firms. The operational efficiency of Nigerian capital market and the financial environment should be deepened, existing laws that does not encourage profitable investment should be changed and new laws enacted to enhance investment that will affect the profitability of manufacturing firms positively.


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How to Cite
Iheduru, N. G., & Okoro, C. U. (2018). Macroeconomic Variables and Retained Earnings of Quoted Manufacturing Firms in Nigeria: A Time Variant Study. International Journal of Accounting & Finance Review, 3(1), 33-47. Retrieved from