The Impact of Retained Earnings on the Financial Growth of Pension Fund Administrator (PFA) Companies in Nigeria.

Abstract

The study examined the relationship between retained earnings and growth of companies in Nigeria. There is a gap in investors’ knowledge as to the relationship between retained earnings and the growth of corporate organisations. The model of retained earnings of some Companies in Nigeria does not follow the pattern of a growth inclined strategy; this has always impacted negatively on growth and expansion as well as the operational efficiency (operating expenses) and value of some companies in Nigeria because they fail to reflect their intrinsic value. For organisation to grow well it must be able to leverage on the advantage of the cheapest source of financing from the available alternatives such as retained earnings. The population for the study is 20 registered and licensed Pension Fund Administrators (PFAs) in Nigeria. Sample of the top four (4) PFAs in terms of their Asset Under Management (AUM) was taken from the population and examined. Data were collected through panel secondary source from the websites of the various PFAs from 2016 to 2020 and these were analysed using panel regression analysis to establish the effect of Retained Earnings (RE) and Operating Expenses (OPEX) on Gross Earnings in these companies. The results revealed that fixed effect panel is plausible and it establishes a significant positive relationship between retained earnings and the gross earning or growth of these companies in Nigeria. The study therefore concludes that retained earnings are an essential method of financing for PFAs’ operations. It is recommended that the PFAs in Nigeria need to improve design strategies that can be used to increase their earnings, to prevent future shocks, and operating expenses (OPEX) which is the lubricant for growth in these companies should be used wisely. Keywords: Dividend pay-out, Dividend Policy, operating expenses, Gross earnings, Retained earnings, Strategies.