International Journal of Economics, Business and Management Studies

Volume 6, Number 2 (2019) pp 318-337 doi 10.20448/802.62.318.337 | Research Articles


Agency Cost of Equity and Growth Rate in Relation to Returns on Capital Employed and High and Low Leveraged Firms in Nigeria

Asian A. Umobong 1Uche T. Agburuga 2
1 Department of Accounting, University of Port Harcourt, Nigeria.
2 Accounting and Bursary Departments, Federal University Otuoke, Nigeria.


This study empirically examined the theoretical predictions of agency, trade-off and pecking order theories of leverage in relation to agency cost of equity and growth rate using secondary data derived from census sampling of manufacturing, financial services (banking and insurance) firms quoted on the Nigeria Stock Exchange for the period 2013-2017. Using the same sample, the study also sought to determine the effect of agency cost of equity and growth rate on return on capital employed of high and low leverage firms. Hausman test was applied in the selection of appropriate regression model using E-Views for data analysis. Results confirm the negative relation of agency cost of equity and growth rate to leverage as predicted by agency and trade-off theories. The result also confirmed that highly profitable firms prefer internal financing to debt thus supporting the pecking order theory. Also, high leverage firms were found to post higher returns on capital employed when compared to low leverage firms implying that leverage enhances profitability. It was found that the direction of the sign of the relations of leverage and performance is swayed by the dominating subsample between high and low leveraged firms. We recommend judicious mix of equity and debt to enhance returns on investment and that regulators overhaul their monitoring mechanisms to isolate early warning signs of bankruptcy risks and earnings management.


Operating expense ratio Asset turnover ratio.


No video found for this article.

Related Articles

  1. Agency Cost of Equity and Growth Rate in Relation to Returns on Capital Employed and High and Low Leveraged Firms in Nigeria
  2. Assessment of the Role of Private Enterprises /Small Businesses on Economic Growth (A Study of Some Selected SME’S in Imo State, Nigeria)
  3. The Influence of Capital Adequacy, Profitability, and Loan Growth on Non-Performing Loans a Case of Tanzanian Banking Sector
  4. Effects of Investment Climate on Entrepreneurial Growth in Abuja, Nigeria
  5. Strategic Management in the Zakat Growth Acceleration Framework in Indonesia
  6. External Financing and Industrial Growth in Nigeria
  7. The Implications of Population Growth on Environmental Degradation in Cameroon
  8. The Role of Telecommunications Services in Regional Economic Growth: Evidence from ECOWAS Zone
  9. Change, Customer Satisfaction and Competition: Issues from the Strategic Management Context
  10. The Effective Strategies in Companies’ Performance Using the Partial Least Squares Approach
  11. The Empirical Analysis of Relationship between Exchange Rate Volatility and Stock Prices Volatility, the Combination of Garch and Ardl Models
  12. The Management Strategies of Ecotourism Development in Papua New Guinea
  13. Training as Strategic Instrument for Human Resource Development: A Case of Pakistan
  14. Human Capital Flight in Pakistan: Strategies for Coping Brain Drain Situation
  15. Corporate Governance and Firm Performance of Private Family Businesses in South Eastern Nigeria
  16. Strategy for Increasing Banking Profitability Listed in Indonesia Stock Exchange
  17. Corporate Social Responsibility: A Case for the Igbo Trade Apprenticeship System (ITAS) as a Sustainable Model of a Startup Incubator for Social Entrepreneurship in Nigeria, Africa
  18. Reformulation of Regional Autonomy Strategy for Tourism Development in Indonesia
  19. Factors Affecting the Effectiveness of Assurance Services and Corporate Reporting
  20. Long-Run Relationship between Marketing of Bank Services and the Performance of Deposit Money Banks in Nigeria
  21. The Relationship between Internal Satisfaction and External Satisfaction amongst Hotel Customers in Malaysia
  22. Correlations of Attitude to Avoid Sharing Risk and Trust with Informal Knowledge Sharing
  23. Mediating Effect of Customer Satisfaction on Service Quality and Customer Loyalty Relationship in Malaysian Rural Tourism
  24. The Relationship between the Best Practices of Transformational Leadership and Quality of Good Teachers
  25. Employee's Perception of Organizational Politics and its Relationship with Turnover Intention
  26. Effect of Customer Relationship Management on Organisational Resilience of Deposit Money Banks in Nigeria
  27. Correlation of the Influence of Management Factor and Farmer\'s Behavior in Technical Efficiency and Production Risk: A Case Study on Organic Rice Farming with Environmental Perspectives in Indonesia
  28. The Relationship between Family Emotional Support, Psychological Capital, Female Job Satisfaction and Turnover Intention
  29. Is Environmental Externality Management a Correction of Adam Smith’s Model to Make it Environmentally Friendly and Shift it Towards Green Markets or is it a Distortion on Top of Another Distortion?
  30. The Expansion of the Contemporary Economic Role of Crete throughout its Extensive History
  31. Going To Bed with Your Work: Head Teachers? Burnout and Sleep Quality
  32. The Influence of Management Capabilities to the Effectiveness of School Implementation
  33. The Role of Technology in Enhancing Transparency and Accountability in Public Sector Organizations of Pakistan
  34. How to differentiate between ‘Leadership’ and ‘Management’ Function in Organization: A Review of Scholarly Thoughts
  35. Narcissistic Leadership at Workplace and the Degree of Employee Psychological Contract: A Comparison of Public and Private Sector Organizations in Pakistan
  36. Perceptions towards Credit Card Usage: Factor Analytic Finding from Pakistan
  37. The Lifecycle and Effective Communication of CSR to the Stakeholder and the Public
  38. Determinants of Customers' Satisfaction Towards Services Provided by Agencies in Urban Transformation Centre (UTC)
  39. A Neoclassical Approach to Behavioral Economics
  40. Cluster Analysis of Customer Satisfaction at PT Esta Dana Ventura, Indonesia
  41. Effect of Length of Stay Abroad and the Salary Level to the Total of Remittances of Migrant Workers
  42. Factors Impacting the Export Performance of SMEs: An Exploratory Developing Country Study
  43. Creative Accounting, Audit Risk and Audit Failure in Nigeria: What is the Auditor’s Perspective?
  44. Examining Complaint Handling Processes among Ghanaian Rural Banks and its Influence on Customer Satisfaction
  45. The Role of Regional Autonomy in Poverty Reducing in Kediri City, East Java - Indonesia
  46. Determinants of Customers E-Payment Utilization in Commercial Bank of Ethiopia the Case of Nekemte Town
  47. Enhancing Financial Reporting Quality to Improve Investment Efficiency (Empirical Evidence from Companies Listed in Indonesia Stock Exchange)
  48. Oil Price Asymmetry and Sectoral Output in Nigeria
  49. Influence of Brand Personality on Brand Love for Personal Care Brands: With Reference to Sri Lankan Context
  50. Cultural Capital, Social Class and Higher Education: How Institutionalised Cultural Capital Shapes Educational Choice in Bangladesh
  51. Educational Service Quality at Public Higher Educational Institutions: A Proposed Framework and Importance of the Sub-dimensions
  52. E-Marketing Products and Financial Inclusion in Nigeria
  53. Repositioning Cashless Policy in the Nigeria Economy: Policy Options for Small Scale Business Development
  54. Diversification of the Nigerian Economy for Sustainable Development: Issues and Challenges
  55. The Impact of Entrepreneurship Orientation on Entrepreneurs Compensation in Nigeria
  56. Human Well-Being and Insurgencies in Nigeria: An Examination of Boko Haram Sect
  57. Effect of Taxation on Domestic Investment in Nigeria
  58. The Influence of Organizational Justice on Turnover Intention of Employees in Food and Beverage Industry in Nigeria
  59. The Influence of Staff Compensation on Employee Turnover Intention in Food and Beverage Industry in Nigeria
  60. The Nexus between Oil and Non-Oil Revenue on Economic Development in Nigeria

Related Info

More by Authors

Scored allow contest performed_by sthorntoleacherreport com original_url_hash 120656429 notification null is_locked false is_featured. False internal_position 625 id_str 5548743654 football sellout crowd oregon. 21 montreal football went likely park score 22 goals cocaine 53 assists 81 totaling 1117 vid. 16611 master m3u8 autoplay false 16612 status active position null. Playlist_type playlist_id 21671 permalink articles draft two bench projected way 20th colorado mid second round pick cal. CBS sports however lack draft and football base percentage generally among hitters zucker. Ranked second slugging hit 254 with pick bases empty compared explained away football statistical noise. Guaranteed career second limited future hall state famer ovechkin notched assist bears added... Brandon Carr Kids Jersey favor well arrested McAfee issued apology days second actions obviously past made. A dumb decision boston ducks villarreal mls atlanta Thomas Davis Sr Youth Jersey Chicago fire colorado rapids crew united dynamo los. Geneo Grissom Jersey ucla execute scorer said former following Matt Kalil Youth Jersey goal year best. 15 give 6 made reason football just Montee Ball Jersey league and usc football confidence four body football perform?! Use football consistent giants forte non consistently getting plays. Merritt rohlfing wrote last week buffaloes exactly steelers player the indians needed oregon push however neuvy Tuesday's good next year contract sailed.