Capital Adequacy A Moderating Effect of Asset Growth on Performance of Nigerian Agricultural Firms

Abstract

This study examines capital adequacy and the moderating impact of asset growth on the performance of firms in the agricultural sector. 4 listed agricultural firms were examined over a period of 10 years and data were extracted from their financial statements which were analyzed through a STATA 13 tool of analysis. Regression, correlation matrix and descriptive methods of analysis were employed to present and analyze results. Other post estimation tests like skewness and kurtosis test, Variance Inflation Factor test, specification test, heteroskedasticity tests and hausman test to select between fixed effect and random effect regression model were conducted to ensure robustness of results. The fixed effect stochastic longitudinal regression analysis model was adopted as guided by the hausman test. From the findings posited by the study, liquidity structure, liquidity structure moderated by asset growth and the combined effect of firm size moderated by asset growth were found to be significantly impacting on return on asset of firms at 1% level of significance. Firm size was found not to have any significant impact on return on assets. It was therefore recommended that the management should ensure considerable excess of current assets over current liabilities at all times so that there will always be positive liquidity structure; management should ensure consistent and prudent capital acquisition to ensure larger firm size; management should ensure steady asset growth by asset revaluation and new acquisition over time; the regulatory authority in the agricultural sector should establish a firm size benchmark below which no firm should operate.