Effect of Financial Assets on Financial Performance of Pharmaceutical Firms in Nigeria

Abstract

The study evaluates the effect of financial assets on the financial performance of pharmaceutical firms in Nigeria from 2011-2020 with cash, stock and loans as independent variables and return on assets as dependent variables. Data extracted from the published financial statements of the firms for the period covered were subjected to descriptive analysis and inferential statistics analysis. Diagnostics tests include: Panel Unit Root test, Cointegration test, Hausman test. Panel Regression Analysis result reveals positive but insignificant effect of cash, stocks and loans on return on assets of pharmaceutical firms in Nigeria. The conclusion drawn from the findings is that financial assets contribute very little to the financial performance of pharmaceutical firms in Nigeria. The higher the financial assets of pharmaceutical firms in Nigeria, the better, as the performance would be improved. The study recommends amongst others that pharmaceutical firms should improve on their cash management efficiency. Management of pharmaceutical firms in Nigeria should determine the optimal cash level of the firms to avoid liquidity problems while at the same time avoid ideal funds.