INFLUENCE OF AGENCY COST ON FINANCIAL PERFORMANCE OF LISTED CONSUMER GOODS MANUFACTURING COMPANIES IN NIGERIA

Abstract

The study examined the influence of agency costs on financial performance of listed consumer goods manufacturing companies in Nigeria. This study employed Ex-post facto research design. Ten (10) manufacturing companies were purposively selected based on convenience and availability of annual reports. The period of the study covered five (5) years between 2015 and 2019. Secondary data were used for the purpose of this study. Descriptive statistics such as mean, median, range and inferential statistics such as panel regression analysis (fixed effect) and correlation analysis were used to analyzed the data collected from the annual reports and accounts of the sampled listed manufacturing firms. The findings from this study revealed that there is a positive significant relationship between current ratio and return on asset supported by t-statistics = 5.0684, p-value (0.0268), p-value < 0.05%, it was further discovered that there is a negative significant relationship between administrative expenses and profit after tax margin evidenced by t-statistic = -3.03321, p-value (0.0037), p-value < 0.05%. Therefore, this study concluded that there is a significant relationship between agency costs and financial performance of listed consumer goods manufacturing company in Nigeria. Based on this result the study recommends that managements of listed consumer goods companies in Nigeria should introduce control measures that will assist in reducing administrative expenses and also help to prevent frivolous and unnecessary spending’s. Also, motivating managers will help to increase effort level and in turn brings about improvement in organization current and asset utilization ratio.