ASSET GROWTH RATE AND FINANCIAL PERFORMANCE OF QUOTED MANUFACTURING FIRMS IN NIGERIA

Abstract

This study examines the effect of asset growth rate on the financial performance of quoted manufacturing firms in Nigeria, with the aim of providing empirical evidence on whether expansion in firms’ asset base enhances or weakens profitability. The study is motivated by real-life situations in the Nigerian manufacturing sector where firms frequently invest heavily in new plants, machinery, and working capital in response to market competition, inflationary pressures, and exchange rate volatility, yet still record declining or unstable performance. Asset growth rate is measured as the annual percentage change in total assets, while financial performance is proxied by Return on Assets (ROA). The study is anchored on Agency Theory and Growth Theory, which explain managerial incentives behind asset expansion and the expectation that growth in productive assets should translate into improved firm performance. Using an ex-post facto research design, the study relies on 
secondary data extracted from the audited annual reports and accounts of eleven (11) selected manufacturing firms listed on the Nigerian Exchange Group (NGX) over a 10 year period from 2015 to 2024. The data are analyzed using panel regression techniques, supported by relevant diagnostic tests to ensure robustness of the estimates. Empirically, 
the findings reveal that asset growth rate exhibits a positive but mixed influence on financial performance. From the empirical findings, the study concludes that the asset growth rate has a mixed influence on financial performance. Therefore, the study recommends that asset growth rate should be strategically aligned with the market conditions to improve financial performance in the Nigerian manufacturing sector. 

Keywords: asset growth rate, financial performance, quoted manufacturing firms, return on assets, return on equity