IIARD International Institute of Academic Research and Development

INTERNATIONAL JOURNAL OF ECONOMICS AND FINANCIAL MANAGEMENT (IJEFM )

E-ISSN 2545-5966
P-ISSN 2695-1932
VOL. 9 NO. 2 2024
DOI: https://doi.org/10.56201/ijefm.v9.no2.2024.pg113.124

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Cost Of Capital and Profitability of Firms Listed in the Construction Sector in Nigeria

Confidence Joel IHENYEN PhD & ASEMOTA, Ofonime Presley

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Abstract

The study investigated the relationship between cost of capital on profitability of firms listed in construction industry in Nigeria. Ex-post-facto research design was adopted for the study. The population of the study consist of all 25 firms listed in the Construction/Real Estate sector and a sample of 1 firm was used for the study. Secondary data source was used. The study used descriptive statistics and Multiple Linear Regression to test the hypotheses. The proxy of profitability was Return on Asset while Cost of Debt and Cost of Equity served as proxies of cost of capital. The results revealed that cost of debt has insignificant negative effect on return on assets of the construction sector companies on one side. Also, the results revealed that cost of equity has a significant positive effect on financial performance of the firms inconstruction industry.” The study recommended that construction companies should put more emphasis in obtaining financial equity capital rather than debt capital given that equity capital has positive effect on firms’ profitability while debt capital has negative effect even though it is insignificant.

keywords:

Cost of Capital, Profitability, Construction Sector

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References:

Abubaka, J., Musa, D. & Yusuf, H. (2016). Determinants of the Capital Structure of Ghanaian
Firms. Research Paper African Economic Research Consortium, 179

Al-Tamimi, K. A. M. & Obeidat, S. F. (2013). Impact of cost of capital, financial leverage, and
the growth rate of dividends on rate of return on investment: An empirical study of Amman
Stock Exchange. International Journal of Academic Research in Economics and
Management Sciences, 2(4), 59-69. http://dx.doi.org/10.6007/IJAREMS/v2-i4/65.

Embong, Z., Mohd-Saleh, N. & Hassan, M. S. (2012). Firm size, disclosure and cost of equity
capital. Asian Review of Accounting, 20(2), 119-139.www.emeraldinsight.com/1321-
7348.htm

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