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Capital Budgeting and Market Valuation: Evidence from Quoted Manufacturing Firms in Nigeria

Briggs, Alasin Captain

Abstract

This study focused on the effect of capital budgeting and the market value of quoted manufacturing firms in Nigeria. The objective was to determine the extent which capital budgeting relate to market value of quoted manufacturing firms. Cross sectional data was sourced from financial statements of 25 quoted manufacturing firms from 2014-2025. Market value of the quoted firms was modeled as the function of corporate investment to total assets, fixed assets to total assets and fixed assets to operating cost. The study adopted fixed effect regression mode after cross examination of fixed and random effect using Hausman test. The study found that 70.2 percent variation in market value of the quoted manufacturing firms was explained by variation in capital budgeting. The analysis of coefficients revealed long term investment to total assets have positive effect while fixed assets to total assets and fixed assets to operating income have negative effect on market value of the quoted firms. From the findings, the study conclude that capital budgeting determines market valuation of the quoted manufacturing firms. It recommends that managers of the manufacturing firms should devote adequate time in designing long term investment policy that enhances firm’s shareholder value and the companies should review its long-term investment strategies in order to reduce volatility in market prices and maximize the value of the firms.

Keywords

Capital BudgetingMarket ValuationQuoted Manufacturing FirmsNigeria

References

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