RISK EXPOSURE AND THE PERFORMANCE OF MANUFACTURING FIRMS IN NIGERIA

Sunday Adekunle Aduloju (PhD), Olajide Solomon Fadun (PhD), Adedeji Viscker Osasona

Abstract


Background: The performance of a sample of manufacturing enterprises was measured in terms of return on assets, and this study looked at the impact of exposure to credit risk, liquidity risk, and interest rate exposure. Objective: The aim of this study is to examine how risk exposure affects the productivity of manufacturing companies in Nigeria. The specific objectives of this study are to examine the effect of credit risk exposure on return on asset of manufacturing firms, investigate the effect of liquidity risk exposure on return on asset of manufacturing firms and assess the effect of interest risk exposure on return on asset of manufacturing firms in Nigeria

Method: This study employs inferential and descriptive analysis, using metrics like mean, minimum and maximum value, kurtosis, skewness, and Jacque bera for descriptive analysis. Inferential analytic approaches include correlation analysis and panel regression estimation. Panel regression estimation was chosen to determine if heterogeneity affects the influence of risk exposure on performance, a feature not found in previous studies.

Results: Results showed that exposure to credit risk and liquidity risk positively affected return on assets, while interest rate risk exposure had a negative effect. However, credit risk exposure was the only factor significantly affecting the return on assets of the chosen enterprises. The study concluded that manufacturing firms' exposure to risk, particularly credit risk exposure, significantly affects performance.

Conclusion: To improve performance, the study suggested that manufacturing enterprises should be exposed to a certain level of risk related to debtors and creditors.


Keywords


Credit risk, Interest rate; Liquidity risk; Manufacturing Firms; Performance.

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