AN EMPIRICAL ANALYSIS ON THE RELATIONSHIP BETWEEN FIRM SIZE AND FINANCIAL PERFORMANCE OF SELECTED NIGERIAN MANUFACTURING FIRMS

Nkasi, E. Ernest  and Folorunsho, J. Monday

ABSTRACT

This study examines the relationship between firm size and financial performance of selected manufacturing firms in Nigeria.  The study adopts a quantitative approach and descriptive statistics design. Data for this study was gotten from the financial statements and annual accounts of the sampled companies listed in the Nigeria exchange group (NGX). While, the study’s population comprised of all manufacturing firms in Nigeria using purposive sampling technique in selecting the five sampled companies quoted on the floor of NGX with a study period ranging from 2015 to 2023. Pearson’s correlation co-efficient analysis was used to test the relationship between firm size and financial performance (ROA) and SPSS software was employed to analyze the dataset. The findings of this study  indicates  a moderate and positive relationship between firm size and ROA, with a correlation coefficient (R) of 0.426 suggesting that as firm size increases, ROA tends to improve as well.  Therefore, we reject the null hypothesis which says there is no significant relationship between firm size (FS) and return on Assets (ROA) in the manufacturing firms in Nigeria, and we accept the alternate hypothesis. This study emphasizes the importance of leveraging on firm resources to optimize financial outcomes in the Nigerian manufacturing firms, while also identifying areas for future research to further explore this complex relationship. Therefore, the study recommends that manufacturing firms should expand their operations by entering new markets, or acquiring smaller companies.

Keywords: Firm Size, Return on Assets (ROA), Manufacturing firms, Total Asset