Research Article

FIRM LEVERAGE AND MARKET VALUE OF QUOTED NIGERIAN PHARMACEUTICAL COMPANIES

Samaila Thompson1*
1 Department of Accounting, Faculty of Administration, Ahmadu Bello University, Zaria
* Corresponding author: samailathompson@yahoo.com
Published: Dec, 2014
Pages: 177-189
Views: 61
Downloads: 50

Abstract

There are over 120 pharmaceutical companies in Nigeria and the industry is experiencing an annual growth rate of between 10% and 15% since 2001, and expected to grow at a much faster rate until 2020. Therefore, positive initiatives have to be put in place to boost the pharmaceutical sector of the Nigerian economy. However, major debates have centered on whether there is an optional capital mix (firm leverage) for an individual company, or whether the proportion debt usage is relevant to an individual firm’s market value. Therefore, the capital mix decision is significant because it affects the costs of capital and market values of the companies. This study is an attempt to examine firm leverage and its effect on the market value of quoted pharmaceutical companies by using correlation research design for a sample of six (6) quoted pharmaceutical companies listed on the Nigerian Stock Exchange (NSE) between 2007 and 2013. Secondary data was obtained from the annual financial reports and accounts of the quoted companies. The ordinary least squares (OLS) multiple regression technique of data analysis was employed and the results from the regression shows a positive significant relationship between market value and short-term leverage on the one hand and long-term leverage on the other hand. Based on this conclusion the study recommends that pharmaceutical companies should employ both short-term and long term leveraging in the financing of its operations in order to improve the company’s market values.

Keywords

Firm leverage market value capital mix short-term debt long-term debt.

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How to Cite

Thompson, S. (2014). FIRM LEVERAGE AND MARKET VALUE OF QUOTED NIGERIAN PHARMACEUTICAL COMPANIES. Nigerian Journal of Accounting Research, 10(2), 177-189.

S. Thompson, "FIRM LEVERAGE AND MARKET VALUE OF QUOTED NIGERIAN PHARMACEUTICAL COMPANIES," Nigerian Journal of Accounting Research, vol. 10, no. 2, pp. 177-189, December 2014.

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