Conglomerate Firms Research Articles

Corporate Governance Attributes and Segment Reporting of Selected Conglomerates in Nigeria

Consolidated financial statement does not only conceal the performance of individual segments of the group but also hides the risk and opportunities that investors are exposed to by investing in those segments or subsidiaries. A balanced and effective board is a major determinant of financial reporting quality in terms of compliance with International Financial Reporting Standard. This study examined the effect of corporate governance attributes on segment reporting of listed conglomerates firms in Nigeria. Ex post facto research design was adopted for the study and five listed conglomerate firms were purposively selected. Secondary data were extracted from these companies’ annual reports and the Nigeria Exchange Group fact book. The data for the study was analyzed using OLS regression technique and the findings revealed that board size, board diligence and board gender diversity have significant positive effect on segment reporting measured by the number of reportable segments. Thus, it was concluded that corporate governance attributes have a significant effect on segment reporting. Based on the above, it was recommended that the size of the board of directors should be large and balanced enough to accommodate members with cognate experience, expertise and equity in the representation of female.

Value Relevance of Accounting Information: Empirical Evidence from Listed Conglomerate Firms in Nigeria

Value Relevance of Accounting Information: Empirical Evidence from Listed Conglomerate Firms in Nigeria

Audit Committee Characteristics and Corporate Performance: Evidence from Listed Conglomerates in Nigeria

The corporate governance code mandates all publicly quoted firms in Nigeria to establish an audit committee to ensure transparency in financial reporting and protect shareholders' interests. This study examined the effect of audit characteristics on the corporate performance of listed conglomerates in Nigeria from 2015 to 2021. Audit characteristics was proxy as audit committee size, audit committee meetings and audit committee independence, while corporate performance was proxy as return on asset. The secondary data were sourced from the firms' annual reports and were analysed using correlation matrix and panel fixed regression. The result from the panel regression showed that audit committee size and independence do not significantly affect the performance of listed conglomerates in Nigeria. In contrast, audit committee meetings significantly but negatively affect listed conglomerates in Nigeria. This study concludes that the frequency of audit committee meetings does not increase the performance of firms. This study recommends that the Security and Exchange Commission ensure that conglomerate firms in Nigeria comply with at least four audit committee meetings in a year to improve monitoring mechanisms and corporate performance.

Institutional trading and information processing: Evidence from complicated firms and easy‐to‐analyze firms

AbstractIn this article, I examine institutional trading within two groups of firms with different demands on investor information processing: conglomerate firms and stand‐alone firms. On average, institutional trading in conglomerate firm stocks yields significantly lower returns than institutional trading in stand‐alone firm stocks. Inferior returns following institutional trading in conglomerate firm stocks persist across small and large firms. Moreover, financial institutions with a low concentration of conglomerate firms in their portfolios are more profitable in their trading. This study provides evidence that skilled institutional investors intentionally focus their information‐processing efforts on easy‐to‐analyze firms.

Effect of bankruptcy risk on value of conglomerate firms in Nigeria

The study examined the effect of bankruptcy risk on value of conglomerate firms in Nigeria. Ex post facto design was used and data for the study was collected from the Nigerian Exchange Group (NGX Group) Factbook covering from 2017-2021. The design was used since the data is secondary in nature which cannot be manipulated. The study used key proxy variables of leverage (LEV), liquidity (LIQ), profitability (PROF) and firm size (FS) as a measurement for bankruptcy risk while firm value on the other hand, was proxy using net assets per share (NAPS). Four hypotheses were used in the study while regression model was employed in the data analysis. The results of the study indicate that profitability, liquidity, leverage and company size significantly impacted firm value in Nigeria at 1-5% significant level. The study concludes that bankruptcy risk has influenced firms’ value over the years. Hence, the study is crucial as it exposits the influence of bankruptcy risk on firms value in Nigeria. The study's outcome should be considered as a signal to company managers when considering their liquidity position, leverage, profitability and company size, as it could be an indication for corporate bankruptcy risk.

Firms Attributes and Financial Performance of Quoted Conglomerates Companies in Nigeria

The study examined the effect of firms specific attributes and financial performance of quoted conglomerates companies in Nigeria. Secondary data were sourced through the published annual reports of the sampled companies for the period under review 2015-2021. Panel data extracted were analysed using multiple regression technique after conducting series of robustness checks to ascertain validity. Findings from the study reveal that firm size has a positive and significant effect on financial performance. While liquidity has positive and insignificantly effect on financial performance, on the other hand leverage has a negative but insignificantly effect on financial performance. The study recommends that management should try as much as possible to increase their total asset level as this will serve as a guarantee in generating future economic benefit. Management should also watch out for their leverage level so as to keep it at optimum point, because leverage level negatively influence performance for conglomerate firms in Nigeria based on the findings of these study, within the period under review

Cross-Subsidization in Conglomerate Firms: Evidence from Government Spending Shocks

AbstractExploiting demand shocks from changes in federal government spending, we examine how the organizational structure of a firm affects its investment behavior. Government spending shocks affect the investment of government-dependent conglomerate segments less than matched stand-alone firms. Investment also increases in lower government-dependent segments when other segments within the same firm experience positive demand shocks, indicating cross-subsidization between segments. We further show that this cross-subsidization leads to worse operating performance and increases the diversification discount. Our findings are robust after addressing the endogeneity of government spending.

Semibeta asset pricing in the Korean stock market

I examine risk premiums in the Korean stock market using a semibeta asset pricing model. I show that this model performs better than the CAPM in explaining the cross-section of stock returns in Korea. Among four semibetas, three semibetas have significant risk premiums in the Korean stock market, while the semibeta associated with jointly negative stock and market returns shows a significant risk premium only in the financial crisis period. Moreover, I find that conglomerate firms in Korea do not carry significant semibeta-based risk premiums.

Capital Structure, Liquidity and Investment Growth of Listed Conglomerate Firms in Nigeria: Moderating Effect of Firm Size

Capital Structure, Liquidity and Investment Growth of Listed Conglomerate Firms in Nigeria: Moderating Effect of Firm Size

CORPORATE DIVERSIFICATION AND FINANCIAL PERFORMANCE OF CONGLOMERATE FIRMS IN NIGERIA

This study examined the effect of corporate diversification on the financial performance of conglomerate firms in Nigeria. The nine (9) conglomerates firms listed on the Nigerian Stock Exchange as of 2019 formed the population and sample size for this study from 2011 to 2019. Corporate diversification was measured by; product, operational and geographical diversification. Panel least-square analytical method was used. Two-panel co-integration models were developed for empirical analysis to measure financial performance using Return of Assets (Book Value) and Tobin's Q (Market Value). The study's findings revealed that product diversification has a positive impact on the financial performance of conglomerates in Nigeria. However, operational and geographical diversification showed a negative but significant relationship between corporate diversification and the financial performance of conglomerates in Nigeria. It was concluded that corporate diversification has a dominant-negative impact on financial performance. However, only one form of corporate diversification (product) was positively related to financial performance. Therefore, the study recommends that conglomerates focus more on implementing geographical diversification strategy than other types of diversification as it encompasses a great deal of product and services promotions, which is key to improving annual sales and product awareness.

Agency Costs of Debt in Conglomerate Firms

AbstractI use an accounting reform to assess the agency cost of debt in diversified firms. Those firms that switch from single to multiple segments following the reform suffer a 12% increase in their bond spread when compared with their stand-alone peers. Consistent with lenders anticipating underinvestment and asset-substitution incentives, diversified firms with high cash-flow volatility across divisions suffer the highest increase in borrowing costs. I employ a novel approach that allows abstracting from unobservable characteristics that would otherwise influence the pricing of diversified firms’ debt.

An analysis of factors influencing organizational structure in two East Asian nations

The purpose of this paper is to investigate the link between culture, history, government policies and the development of economic institutions. Specifically, the paper discusses the impact that history and culture, including the influence of Confucianism, have played in shaping the economic institutions of South Korea and the People’s Republic of China. Research results indicate that culture, history and government policies all played a role in shaping the organizational structure of these two East Asian nations. However, China’s economic landscape is dominated by small and medium-sized, family-oriented firms, particularly in the rural parts of the country. The South Korean economic landscape, on the other hand, is dominated by large conglomerate firms called Chaebols which are also dominated by one family.

Managerial discretion and efficiency of internal capital markets

I use the staggered adoption of state-level antitakeover laws to provide causal evidence that managerial agency problems reduce the allocative efficiency of conglomerate firms. I find that increases in control slack following the passage of antitakeover laws reduces q-sensitivity of investment by 64%. The adverse impact of the laws appears mostly at conglomerate firms that benefited from disciplinary takeover threats prior to the passage of the laws, lacked alternative sources of pressure on management, or had the structural makings to fuel wasteful influence activities and power struggles among managers. These findings suggest that takeover threats impact the efficiency of resource allocation.

Identifying organizational variables to the implementation of horizontal strategy in conglomerates

PurposeThe paper aims to investigate organizational variables and develop their relationship with horizontal strategy. The cultural dimensions and organization structure have been considered as organizational variables. The study also aims to shed light on the implementation horizontal strategy in conglomerates.Design/methodology/approachA survey was carried out with 122 conglomerate firms for examination. These companies were chosen to be of different sizes and sectors. The multiple regression analysis was utilized to analyze the data.FindingsThe results reveal that conglomerate firms also have a horizontal strategy. Additionally, organizational cultural dimensions namely, collectivism, clan culture, market culture and long-term orientation; formal and informal relationship; and horizontal organization structure (HOS) have positive and significant relationship with horizontal strategy. No significant relationship was found between uncertainty avoidance and adhocracy culture, and horizontal strategy.Research limitations/implicationsThe major contributions of this study are explicitly identified as horizontal strategy exists in the conglomerate firms where the few organizational variables play a significant role in horizontal strategy implementation.Originality/valueThis study has been done in an effort to make supporting guidelines to fill the gaps in conglomerate firms. This study offers an effective role of cultural dimensions and structure as drivers of horizontal strategy implementation, and this study spells out and extends the literature and proposes a conceptual framework.

Inventory Control and Financial Performance of Listed Conglomerate Firms in Nigeria

Inventory constitutes the substantial portion of the cost of production of firms. Conglomerate firms faced a challenge pf dwindling return due to the huge cost of production of which inventory constitute the larger portion. Studies have shown that effective inventory management which entails forecasting, acquisition, transportation, inspection, material handling, storing, warehousing, suppliers’ management and inventory security are germane in reducing the cost of production to the barest minimum and enhance the returns. This study examined the effect of inventory control (inventory procurement control, inventory security control and inventory usage control) on the financial performance of listed conglomerate firms in Nigeria. The study adopted both field and empirical survey research design. The population of the study constitutes the entire six (6) listed conglomerates as at 31st December, 2018. The target population represent 108 staff of the finance and store sections out of which seventy-two were selected using quota sampling techniques for the administration of structure questionnaire, while total enumeration technique was used for the secondary data. The research instrument was validated by checking the constructs of the questions in the questionnaire using content validity. Cronbach Alpha reliability test was carried out and the result showed that the research instrument is reliable with an overall value of 0.988 which is greater than 0.70-0.80 threshold. 68 out of 72 administered structured questionnaire were retrieved representing 94.4% retrieved and used for the analysis. Secondary data extracted from the audited annual reports and accounts for a period of twenty-two (22) years yielding 110 unbalanced firm year observations were used. Descriptive and inferential statistics were employed for testing the hypotheses. The findings revealed that: inventory control significantly affects financial performance of listed conglomerate firms in Nigeria (Adj.R2= 0.873, F(3,65)=10.19, p< 0.1); inventory procurement control has significant positive effect on financial performance (β= .628, R2= 0.565, t(67)= 3.494, p <0.1); inventory security control exerts significant positive effect on financial performance (β= .535, R2= 0.706, t(67)= 2.684, p< 0.1); and inventory usage control significantly and positively influence financial performance (β= .531, R2= 0.492, t(67)= 2.844, p <0.1). Also, inventory turnover period exerted insignificant positive effect on financial performance (β= 4.64, R2= 0.006, t(108)= 0.83, p> 0.1). The study concluded that inventory control significantly influence financial performance of listed conglomerate firms in Nigeria. The study recommended that management of the firm should improve on suppliers’ strategic relationship and provides adequate automated security for monitoring the movements of inventory in the firm.

The Effect of Inventory Turnover Period on the Profitability of Listed Nigerian Conglomerate Companies

This study analyses the association concerning inventory turnover management and Nigerian conglomerate firms’ profitability. The study is used a historical panel data analysis. Data were generated from the yearly accounts of listed firms from 2007 to 2016. The population of the study consists of six conglomerate firms registered on the Nigerian Stock Exchange. Feasible generalized least square (FGLS) regression was utilized as tools of analysis in the study. The findings establish that inventory turnover management affects Nigerian conglomerate companies’ profitability inversely associated to the profitability of the listed conglomerate firms in Nigeria. The study suggests that there must be regular stock-taking to determine eventually, the slothful stocks to dodge over venture in such stocks (if any). Furthermore, if there is no high demand for the goods the inventory needs to be reduce that are obsolescence. Management should also implement an extraordinary inventory management measures.

AN EMPIRICAL ANALYSIS OF CORPORATE CAPITAL STRUCTURE AND FINANCIAL PERFORMANCE OF LISTED CONGLOMERATES IN NIGERIA

The relationship between capital structure and firms’ financial performance has attracted the attention of many researchers both locally and globally. The paucity of empirical evidence from Nigeria in this regard, especially on Nigerian conglomerate firms, portends the need for further research. Against this backdrop, the study investigated the impact of capital structure on the financial performance of listed conglomerates in Nigerian using descriptive statistics, pairwise correlation and panel data regression technique to analyze the secondary data extracted from the annual reports and accounts of the six (6) selected conglomerates for the period 2008 to 2017. The study found that financial leverage proxy by total debt ratio, long-term debt ratio and short-term debt ratio have significant impact on the selected firms’ financial performance proxy by return on assets, except debt to equity ratio that reveals an insignificant impact on return assets (ROA). Firm size and growth also reported a significant effect on the financial performance of the selected firms. The findings is in tandem with the proposition of the agency cost theory in the Nigeria settings but with caution considering the facts that firms in Nigeria were largely finance through short term debt obligation as against long term debt funding that was presumed in the agency cost theoretical proposition. It is therefore recommended that managers of companies should be guided when seeking credit advances from the financial market as it is important when considering the appropriate capital mix that optimize firm value.

Offshore Sales Networks and Stock Return Predictability

Based on 10-K textual analysis, we assemble firm-level offshore sales networks (OSN) and find strong return predictability among industry participants that have overlapping offshore sales activities. This intra-industry return predictability based on offshore sales networks is distinct from that along several previously documented economic linkages (e.g., industry momentum, technological links, and standalone vs conglomerate firms. Moreover, we find that the effect is stronger for firms that receive low investor attention, issue hard-to-read 10-Ks, and pose high arbitrage costs. Our results highlight important asset pricing implications of the commonality of corporate offshore activities, and are broadly consistent with sluggish price adjustment caused by investors’ inattention to offshore networks.

The Moderating Effect of Institutional Ownership on Intellectual Capital and Financial Performance of Listed Conglomerates

Purpose - The study aims to examine the moderating effect of institution on the relationship between intellectual capital on the financial performance of conglomerates in Nigeria
 Design/Methodology - correlational research design which is based on historical data extracted from annual report and accounts of the sample firm on NSE. Firms were chosen based on censor sampling method. Eleven years of financial data were used. Multiple regression analysis was employed to analyze the data extracted.
 Findings - The results from pooled ordinary least square regression (OLS) and Fixed effect revealed that intellectual capital indexed by a value-added intellectual coefficient (VAIC) has a positive and significant impact on financial performance indexed by return on asset (ROA) of listed conglomerate firms in Nigeria. Furthermore, the interaction effect of institutional ownership was found to be positive and significant
 Practical Implications - The study recommends that institutional shareholders should invest more in shares of listed conglomerate firms in Nigeria and that management should recognize the effort and understand the importance of intellectual capital toward improving firm performance.

Measuring organizational capabilities to horizontal strategy implementation for conglomerates

AbstractThe horizontal strategy is recommended for the conglomerates by Porter to achieve competitive advantage. There is no established or standard way to execute a horizontal strategy. However, for the execution of a horizontal strategy in an organization, it requires advanced organizational capabilities. Therefore, the purpose of this paper is to identify how to implement horizontal strategies in conglomerate firms. In particular, we investigated the extent to which organizational capabilities or competencies were related to the implementation of a horizontal strategy in conglomerate firms. Apart from this, we considered two organizational capabilities as a management control system and leadership styles. In this study, four novel hypotheses addressing primary constructs, that is, the interactive control system, collective, participatory, and transformative, have been explored. The data for this study were drawn from a sample survey of 122 firms in India. In addition, the data were analyzed by correlation, and then multiple regression analysis followed by the results of this analysis helps to identify the influence of leadership styles and interactive control system on horizontal strategy implementation. We argue through a theoretical and statistical analysis that demonstrates that collective, participative, and transformational leadership will contribute to the success of the horizontal strategy and lent good support to our hypotheses. This study helps the company to investigate the perceived role of organizational arrangements in the implementation of a horizontal strategy in conglomerate firms. This was done in an effort to provide guidelines for the effective use of organizational capabilities as drivers of horizontal strategy implementation. The study provides two key contributions in the field of strategic management: The first explicitly identified horizontal strategies are present in conglomerate firms; the other organizational capabilities that play a significant role in the implementation of horizontal strategy.