Abstract
The paper examined the causal relationship between lease financing and profitability of Nigerian quoted conglomerates for the period spanning 2012 – 2017. The study focused on 6 conglomerates that are quoted on the Nigerian Stock Exchange as at 2017. Data were collated from published accounts of the affected companies. Data were analysed using descriptive and pooled OLS multiple regression statistics. Unit Root Test was conducted using Augmented Dickey –Fuller.. Estimated panel results indicated a negative and insignificant impact of Fixed Assets Turnover (FAT) on Return on Assets (ROA), Lease Financing (LFN) had a positive and insignificant impact on ROA, and Debt Ratio (LTDR) had a negative and insignificant impact on ROA. Firm size was used to control possible problem of non-linearity and heteroscedasticity. Based on these findings, leasing option was recommended as one of the sources of debt financing to boost the capital of Nigerian conglomerates to enable them to absorb losses, multiply fixed assets and grow continuously, thus providing employment and income in terms of tax revenue, profits, dividends, and wages and salaries to households for national growth and development.Keywords: Lease Financing, Profitability, Quoted ConglomeratesJEL Classifications: G3, G32DOI: https://doi.org/10.32479/ijefi.8942
Highlights
Government’s macroeconomic objectives of increased gross domestic product, price stability, exchange rate stability and employment for the citizenry cannot be achieved in a vacuum
Model Specification The popular models in empirical literature are stated as follows: return on assets (ROA) = f ROE = f. These models have been modified into one equation: ROA = f (LFN, TAT, fixed assets turnover (FAT), FSE, LTDR)
Description of variables ROA = Return on asset LFN = Proxy for lease financing measured by lease expenses divided by total assets or operating lease finance divided by total asset
Summary
Government’s macroeconomic objectives of increased gross domestic product, price stability, exchange rate stability and employment for the citizenry cannot be achieved in a vacuum. Abor (2008) pointed out that corporate sector growth is vital to economic growth and development It is imperative for firms in developing countries to fund their activities and provide employment as well as income in terms of profits, dividends and wages/salaries to different economic units such as households, individuals and governments. Governments often provide financial assistance to micro, small and medium scale enterprises as well as startups to enable them to kick–start and sustain their operations and overcome teething problems. Such assistance may take pre-eminence during economic recession which is often characterized by low level of disposable income, falling gross domestic product; massive business failure and job loss (Atseye et al, 2014)
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