Skip to content
Research Article Open access CC BY 4.0

Corporate Performance in Nigeria: Insights from Economic-Specific Shocks

Osaretin Kayode Omoregie, Sodik Adejonwo Olofin

Journal of Economics, Management and Trade · pp. 1–15 · Published 7 Jun 2024

10.9734/jemt/2024/v30i71220

Abstract

Aims: This study investigated the impact and contributions of macroeconomic factors to corporate performance by considering the contributions of three key market segments in the economy: international, money, and goods markets. Methodology: This study concentrated on Nigeria, and the time series data span from January 1995 to December 2022. Given the mixed order of integration among the variables of interest, the analysis was based on the SVAR/HD estimations, which investigate shocks based on theoretical restrictions and generate each variable's contributions to corporate performance. Inferences are based on the impulse response, variance decomposition and historical decomposition. Results: Based on Structural One S.D. Innovations ± 2 S.E, the study's results underscore the vulnerability of Nigerian businesses to exogenous shocks and speculative markets (44.63%), with the international market exerting the most significant influence on corporate performance through exchange rate movements (32% of 44.63%), followed by the money market. Notably, the variables under consideration demonstrate varying relationships over different time periods. In the short-term, oil prices, government deficits, and inflation positively impact corporate performance, but this effect reverses to negative in the medium to long term. Conversely, the exchange rate initially has a negative effect but shows a positive long-term impact. Surprisingly, the impact of money supply and economic growth on corporate performance is found to be negligible. The study further reveals that firm-level endogenous shocks exert more influence on corporate performance development (55.37%) than exogenous macroeconomic factors (44.63%). Conclusion: This study provides actionable insights for decision-makers. The research suggests that corporate managers can enhance firm performance by adopting strategic hedging strategies against adverse exogenous international market and money market factors while focusing more on endogenous factors and choices within their direct control, which accounts more for corporate performance outcomes than non-controllable exogenous factors. Policymakers should pursue policies that enhance the macroeconomic climate within which businesses operate, especially in the areas of stable exchange rate, interest rate and inflation targeting policies.

Corporate performance firm value economic specific shocks firm-specific shocks macroeconomic shocks structural VAR historical decomposition

References (44)

  1. 1 Capital Asset Prices: A Theory of Market Equilibrium under Conditions of Risk [DOI]
  2. 2 Inference in Linear Time Series Models with some Unit Roots [DOI]
  3. 3 Bank-specific, industry-specific and macroeconomic determinants of bank profitability [DOI]
  4. 4 Are Forecasting Models Usable for Policy Analysis? [DOI]
  5. 5 The profitability of european banks: a cross‐sectional and dynamic panel analysis [DOI]
  6. 6 Age, Size, Growth and Survival: UK Companies in the 1980s [DOI]
  7. 7 Small Business Failure and External Risk Factors [DOI]
  8. 8 Factors affecting profitability in Malaysia [DOI]
  9. 9 Bank profitability and inflation: the case of China [DOI]
  10. 10 German economic performance: disentangling the role of supply-side reforms, macroeconomic policy and coordinated economy institutions [DOI]
  11. 11 The determinants of corporate profitability: an investigation of Indian manufacturing firms [DOI]
  12. 12 The Arbitrage Theory of Capital Asset Pricing [DOI]
  13. 13 Macroeconomic Instability and Business Exit: Determinants of Failures and Acquisitions of UK Firms [DOI]
  14. 14 Macroeconomic determinants of corporate failures: evidence from the UK [DOI]
  15. 15 The Valuation of Risk Assets and the Selection of Risky Investments in Stock Portfolios and Capital Budgets: A Reply [DOI]
  16. 16 Joint dynamics of foreign exchange and stock markets in emerging Europe [DOI]
  17. 17 Assessing the Financial Performance of Forestry‐Related Investment Vehicles: Capital Asset Pricing Model vs. Arbitrage Pricing Theory [DOI]
  18. 18 The Business Cycle, Macroeconomic Shocks and the Cross‐Section: The Growth of UK Quoted Companies [DOI]
  19. 19 Oil price shocks and stock market behaviour in Nigeria [DOI]
  20. 20 The Impact of Macroeconomic Condition on The Banks Performance in Indonesia [DOI]
  21. 21 IMPACT OF MACROECONOMIC INDICATORS ON STOCK MARKET PERFORMANCE: THE CASE OF THE GHANA STOCK EXCHANGE
  22. 22 The Influence of Macroeconomic Factors on Stock Price: The Case of Real Estate and Property Companies [DOI]
  23. 23 An Impact of Macroeconomic Variables on the functioning of Indian Stock Market: A Study of Manufacturing Firms of BSE 500 [DOI]
  24. 24 The Exchange Rate and Company Failure in a Macro-Micro Model of the UK Company Sector [DOI]
  25. 25 BUSINESS FAILURES AND MACROECONOMIC FACTORS IN THE UK [DOI]
  26. 26 The impact of macroeconomic uncertainty on firms' changes in financial leverage [DOI]
  27. 27 Organizational-level profitability determinants in commercial banks: Swedish evidence [DOI]
  28. 28 The Distribution of Realized Exchange Rate Volatility [DOI]
  29. 29 RATS Handbook for Vector Autoregressions
  30. 30 Do infrastructure and quality of governance matter for manufacturing productivity? Empirical evidence from the Indian states [DOI]
  31. 31 Impact of firm specific and macroeconomic factors on financial performance of the UAE insurance sector [DOI]
  32. 32 The Impact of Exchange Rate Movements on Firm Value in Visegrad Countries [DOI]
  33. 33 Exchange rate volatility and firm performance in Nigeria: A dynamic panel regression approach [DOI]
  34. 34 The effect of oil shocks and cyclicality in hiding Indian twin deficits [DOI]
  35. 35 Exchange rate fluctuations and firm value: impact of global financial crisis [DOI]
  36. 36 CORPORATE PERFORMANCE IN NIGERIA: THE EFFECT OF OIL PRICE AND EXCHANGE RATE FLUCTUATIONS [DOI]
  37. 37 New-Firm Startups, Technology, and Macroeconomic Fluctuations [DOI]
  38. 38 Empirical Link between Macroeconomic Policy Variables and the Performance of Quoted Agro-Based Firms in Nigeria [DOI]
  39. 39 A Study of Interlinkages among Exchange Rate and Stock Price for India [DOI]
  40. 40 Determinants of Commercial Bank Interest Margins and Profitability: Some International Evidence [DOI]
  41. 41 Comparison of Interwar and Postwar Business Cycles: Monetarism Reconsidered [DOI]
  42. 42 The Stability of the Relation between the Stock Market and Macroeconomic Forces [DOI]
  43. 43 Arbitrage Pricing Theory and the Capital Asset Pricing Model - Evidence from the Indian Stock Market
  44. 44 Macroeconomic Variables and Value Creation in the Nigerian Quoted Companies [DOI]

Cited by 1

The Lustrum Performance on Government Revenue Collection for Eastern Zone Forestry Stations in Malawi (2019-2023)

Esnath Bowa, Baxter Makungwa, Edward Missanjo · Journal of Economics and Trade · 2024

Related research

Article metrics

Real usage data collected on this platform.

28

Page views

0

PDF downloads

3

Outbound clicks

1

Citations

Views over time

Views by country

Approximate, from request IP at view time — not citizenship or institution. Countries with fewer than 5 views are grouped as "Other".

Traffic sources

Referring site, by host.

Views and downloads exclude known bots/crawlers. Citations combines this platform's own DOI-resolved index with each external source's own reported total — see Cited by above for individually listed citing works. Last refreshed 0 seconds ago.