IIARD International Institute of Academic Research and Development

WORLD JOURNAL OF FINANCE AND INVESTMENT RESEARCH (WJFIR )

E-ISSN 2550-7125
P-ISSN 2682-5902
VOL. 7 NO. 1 2023
DOI: https://doi.org/10.56201/ijssmr.v8.no1.2022.pg32.40

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Agency Cost and Corporate Valuation of Quoted Manufacturing Firms in Nigeria.

ADIBE, Francis Chikwendu, Dr Ezebunwo Nyeche.

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Abstract

This study examined the relationship between agency cost and valuation of quoted manufacturing firms in Nigeria. The purpose was to examine the relationship between agency cost and corporate valuation. The study modelled equity value and net present value as the function of monitoring cost, bonding cost, residual loss and operating cost. Panel s data were sourced from financial statement and annual reports of the manufacturing firms from 2016- 2020. The study found that 52.7 and 60.2 percent variation in equity value and net present value of the quoted manufacturing firms can be traced to variation in the agency cost variables as estimated in the regression model. Beta coefficient of the variables fond that bonding cost and monitoring cost have positive effect while operating expenses and residual loss have negative effect on equity valuation. bonding cost, residual loss and operating cost have negative effect on net present value while monitoring cost have negative effect on the net present value of the quoted manufacturing firms. the study conclude that Monitoring cost has no significant effect on equity valuation but monitoring cost has significant effect on net present value. Bonding cost has significant effect on equity valuation; bonding cost had significant effect on net present value. Residual loss has no significant effect on equity valuation but residual loss has significant effect on net present value. Operating cost has significant effect on equity valuation but operating cost has significant effect on net present value. It is recommended that manufacturing firms should establish policies for executive stockholding.

keywords:

Agency Cost, Corporate Valuation, Manufacturing Firms, Nigeria

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References:

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control in the Dutch East Indies. American Sociological Review, 61(1), 12–28.

Aggarwal, R., & Kyaw, N. A. (2006). Leverage, investment opportunities, and firm value: A
Global Perspective. Financial Development, 1 (2), 1-26.

Agrawal, A., & Berle, A., & Means, G. (1932). The modern corporation and private property.
New York, NY: Macmillan

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