IIARD International Institute of Academic Research and Development

Journal of Accounting and Financial Management (JAFM )

E-ISSN 2504-8856
P-ISSN 2695-2211
VOL. 9 NO. 5 2023
DOI: https://doi.org/10.56201/jafm.v9.no5.2023.pg120.135

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Liquidity and Firm Value

Confidence, Joel Ihenyen (Ph.D) and Igoniderigha, Roseline

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Abstract

Between 2015 and 2021, the research project examined the effect of liquidity on firm value across a few Nigerian consumer goods industries. business value served as the independent variable with dimensions of liquidity ratio, acid test ratio, and stock multiplier ratio, whilst business value served as the explanatory variable and was proxied by market share price. The goal was to determine if the explanatory and dependent variables have a meaningful connection. The study's methodology was ex-post-facto research design. Twenty-six consumer products businesses listed on the Nigerian Exchange Group make up the population, and five of those companies were chosen as the study's sample. The investigation used a secondary source to gather data. The audited financial statements of the chosen companies between 2015 and 2021 were used to collect data for both the dependent and independent variables. The statistical method for multiple regression was used to examine the given data. The results of the investigation's studies have unmistakably demonstrated that in Nigerian consumer goods businesses, there is a weak link between stock multiplier ratio and market share price and a strong relationship between firm liquidity ratio, acid test ratio, and market share price. Therefore, the study draws the following conclusions: consumer goods companies should maintain a reasonable level of liquidity in order to encourage demand and supply in the stock market; the acid level of the companies should be frequently checked by stakeholders to detect any potential problems; and stock multiplier ratio has immaterial influence on firm market share price in the studied organizations in the country. Because doing so helps investors understand the company's worth. In other words, the P/E ratio depicts market expectations as well as the price that must be paid per unit of either current or future profits, depending on the situation.

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References:

Admati and Pfleidrer(2009), and Palmiter (2002). The impact of Stock Liquidity and Firm
Value; Evidence from Vietnam 30th Australian Finance and Banking Conference
2017.

Amalendu Bhunia(2010). A study of liquidity trends on private sector steel companies in
India.
Bhunia Amalendu(2011). Journal of Management Research 3(2). Dol:10.5296/jmr.v 312.574

Friedman, M.1970. The social responsibility of business is to increase its profit. New York
Times Magazine, September 13.

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