CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND TO THE STUDY
Every company operates within the
internal and external environments of business.
The internal environments are within a firm such that the prevailing
factors are most times very subject to the control of the managers. The external environment has to do with the
larger business environments in which a firm operates; and the factors therein
are not subject to the control of the managers.
The factors in the external
environment not subject to the control of a manager generally can be regarded
as macro economic factors or variables. The corporate managers cannot control
the macro economic variables but the government can control them through
several policies. Thus, like all
experts, the government in order to do a good job of managing the economy, will
have to study, analyze and understand the major variables that affect or
determine the current behavior of the macro-economy. Examples of the macro-economic variables that
affect the economy and firms majorly include exchange rate, foreign direct
investment, inflation rate, interest rate, money supply, etc.
The management of these variables is
usually done through fiscal and monetary policy by the government and her
agencies e.g. the Central Bank. Another macro economic variable that may impact
on firms’ performance is exchange rate.
Firms’ financials are presented in terms of the home currency. Exchange rate increases or decreases the
value in home currency of revenues and cost incurred in foreign currency.
According to Lars (2003), exchange
rate increases or decreases earnings in home currency share of total
costs. In other words, exchange rate
increases or decreases earnings in home currency before interest costs. Against this backdrop, the study examines the
impact of macro economic variables on corporate performance in Nigeria.
1.2 STATEMENT OF RESEARCH
PROBLEM
Researches on the relationship
between macro economic variables and firm’s performance have been on going in
advanced countries of the world with little or no research in developing countries
of the world such as Nigeria. It is this
existing gap that informed the rationale behind this study. In the light of the above, the following
research questions are raised:
a.
What is the effect of inflation rate on corporate performance in Nigeria?
b.
What is the relationship between exchange rate and corporate performance
in Nigeria?
c.
How does interest rate affect corporate performance in Nigeria?
d.
Is there a relationship between money supply and the performance of
corporate organizations in Nigeria?
1.3 OBJECTIVES OF THE STUDY
The general objective of the study is
to evaluate the impact of macro economic variables on corporate performance in
Nigeria. However, the specific
objectives are stated as follows:
a.
To ascertain the effect of inflation rate on corporate performance in
Nigeria.
b.
To find out if there is a significant relationship between exchange rate
and corporate performance.
c.
To determine how interest rate affect corporate performance in Nigeria.
d.
To examine the relationship between money supply and the performance of
corporate organizations in Nigeria.
1.4 RESEARCH HYPOTHESES
In order to validate the relationship
between macro economic variables and corporate performance in this study, the
following alternative hypotheses are specified:
a.
H1: Exchange rate influences
corporate performance.
b.
H2: there is a relationship
between inflation rate and corporate performance.
c. H3:
Foreign direct investment influence corporate performance in Nigeria.
d.
H4: There is a relationship between money supply and the performance of
corporate organizations in Nigeria.
e H5: Interest rate affect corporate
performance in Nigeria.
1.5 SCOPE OF THE STUDY
This study examines the effects of
macro -economic variables on corporate performance in Nigeria. The time period the study covers is 2002 to
2011. In other words, the study is a
time series one. The sample size is
sixteen quoted firms which are listed on the floor of the Nigerian Stock
Exchange.
1.6 SIGNIFICANCE OF THE STUDY
This study is expected to be relevant
to a number of persons and institutions in Nigeria. First, the Federal Government of Nigeria will
find the outcome of this study useful in terms of making decisions relating to
the macro economic environment; in other words, it will help the government to
regulate the interest rate, inflation rate, exchange rate and others with a
view to achieving macro economic stability so as to assist the companies
operating in Nigeria. The Central Bank
of Nigeria definitely will find the study very much useful in terms of devising
good monetary policy so as to enhance company’s performance and foreign
investors into the Nigeria economy. Similarly, future researchers will find the
study useful in terms of reference materials on a similar subject matter as
this.
1.7 LIMITATIONS OF THE STUDY
The limitations of this study include
data constraint, inadequate research materials extensively dealing on the
subject matter in Nigeria. The sample
size also limits the study due to time factor and its practicality. Similarly, there is also the problem of
generalizing the outcome of the study to other non-manufacturing firms in
Nigeria in terms of how macro economic variables may have affected their
performance.
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Item Type: Project Material | Size: 51 pages | Chapters: 1-5
Format: MS Word | Delivery: Within 30Mins.
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