Cost of Capital and Corporate Earning of Nigeria Quoted Firms: A Multi-Dimensional Analysis of Quoted Firms in Nigeria
This study examined cost of capital and corporate earning of quoted firms in Nigeria. The objective was to examine the effect of short term, medium term and long term cost of capital on earnings per share. Cross sectional data was sourced from financial statement of twenty quoted firms from 2011-2016. Earnings per share was proxy for dependent variable while cost of trade credit, cost of short term bank loans, cost of commercial paper, cost of banker acceptance, cost of line of credit, cost of revolving credit, cost of hire purchase, cost of operating lease, cost of debt, cost of preference share and cost of equity are proxy for independent variables. After cross examination of the validity of the pooled effect, fixed effect and the random effect, the study accepts the fixed and random effect models. Findings reveals that cost of short term and cost of long term have significant relationship with corporate earning while cost of medium term have no significant effect on corporate earnings. It recommends the need for corporate strategies that will reduce cost of capital.
Anyamaobi, C., & Lucky, A. L., (2017). Corporate Characteristics and Value Creation: A Panel Data Evidence of Nigeria Quoted Manufacturing Firms. World Journal of Finance and Investment Research, 2(1), 31-49.
Braunstein, Y., (2002). Cost of Capital Study for Telecommunications Utilities, Working paper, School of Information Management and Systems, University of California at Berkeley, Pp3.
Claus, J. & Thomas, J. (2001). Equity risk premium as low as three percent? Evidence from analysts’ earnings forecasts for domestic and international stocks. Journal of Finance, 56 (5), 1629-1666.
Easton, P. D. 2003. PE ratios, PEG ratios, and estimating the implied expected rate of return on equity capital. The Accounting Review 79 (1):73-95
Ezirim, B.C., (2005). Finance Dynamics Principles, Techniques & Applications. Markowitz Centre for Research & Development Port Harcourt.
Gode, D., & Mohanram, P. (2003). Inferring the cost of capital using the Ohlson-Juettner model. Review of Accounting Studies, 8(4), 399-431.
Hausman, J. A., & Taylor, W. E., (1981). Panel Data and Unobservable Individual Effect, Econometrical, 49(6), 1377-1398.
Kareem, A., (2006). Testing and assessing the relationship between capital cost and stock market returns, an empirical study on industrial companies listed at Amman stock exchange for the period 1994 – 2004. Humanities Journal, 4(29),1-24.
Kyereboah-Coleman, A., (2007). The impact of capital structure on the performance of microfinance institutions. Journal of Risk Finance, 8 (7),56-71.
Lawal, B. A, Edwin, T. K., Kiyanjui, M. W., and Adisa, M. K., (2014).Effects of Capital Structure on Firm’s Performance: Empirical Study of Manufacturing Companies in Nigeria. Journal of Finance and Investment Analysis, 3,(4), 39-57.
Lee, C., D. Ng, and B. Swaminathan, 2004. International asset pricing: Evidence from cross section of implied cost of capital. Cornell University Working paper
Mayston, D. J., (2002). Tackling The Endogeneity Problem When Estimating the Relationship between School Spending and Pupils’ Outcome, DFEE Research Report 328, Department Of Education and Skills, London.
Modiglinni , franco & Miller Merton.H.,(1958).The Cost of Capital, Corporation Finance and the Theory of Investment. American Economic Review, 48, 261-297.
Ohlson, J., and B. Juettner-Nauroth, 2004, Expected EPS and EPS Growth as Determinants of Value, Working Paper, New York University.
P-Eroitis, Frangouli, & Ventoura (2011). Profit Margin and Capital Structure. The Journal of Applied Research.
Copyright (c) 2017 Lucky Anyike Lucky
This work is licensed under a Creative Commons Attribution 4.0 International License.