The Impact Of Corporate Strategy On Investment Decision In Nigeria

Authors

  • Olubunmi Omotayo Efuntade Afe Babalola University,(ABUAD) PMB 5454 Ado-Ekiti,Ekiti State.Nigeria
  • Niyi Oladipo Olaniyan
  • Efuntade Alani Olusegun Federal University, P. M. B. 373, Oye Ekiti, Nigeria

Keywords:

Corporate Strategy; Investment Decision; Net Profit Margin; Operating Cash Flow;Return on Investment,

Abstract

This study investigated the impact of corporate strategy on investment decision in Nigeria. The objective of the study was to examine how strategic planning and implementation impact the company’s expansion through investment decision in Nigeria. This study was predicated on the Penrose Theory of Firm Growth and Keynes’s Liquidity Preference Theory

Primary data source was explored through the administration of questionnaires to respondents which was explored in presenting the facts of the situation from various investment companies in Lagos, Nigeria. The data collected from the respondents were analyzed using ex-post facto research design.

Findings from the study revealed that corporate strategy has positive and significant impact on investment decision as this enhance company’s expansion depending on variable of interest. It was concluded that for organizations in Nigeria to remain competitive in business, it has to implement a thorough strategic plan on any investment decision in other to achieve their set goals. In fact, the level of strategy implemented often determines the level of investment decision because of the when the end result is positive it will definite improve their return on investment

This study recommends that organizations should adopt best practices in their investment activities in order to keep abreast with the dynamics of global economic climate. Individual investors should internalize the habit of improving on their strategic pattern and investment information so that they can make better decisions and also investors should reinforce the need for a strategic framework for problem solving under complexities and the relevance of strategic considerations in investment planning. Lastly, individual investors and corporate organizations should internalize a process that would serve as a veritable tool for qualitative and thorough appraisal that is tailored towards improving project and investment performance.

This study investigated the impact of corporate strategy on investment decision in Nigeria. The objective of the study was to examine how strategic planning and implementation impact the company’s expansion through investment decision in Nigeria. This study was predicated on the Penrose Theory of Firm Growth and Keynes’s Liquidity Preference Theory

Primary data source was explored through the administration of questionnaires to respondents which was explored in presenting the facts of the situation from various investment companies in Lagos, Nigeria. The data collected from the respondents were analyzed using ex-post facto research design.

Findings from the study revealed that corporate strategy has positive and significant impact on investment decision as this enhance company’s expansion depending on variable of interest. It was concluded that for organizations in Nigeria to remain competitive in business, it has to implement a thorough strategic plan on any investment decision in other to achieve their set goals. In fact, the level of strategy implemented often determines the level of investment decision because of the when the end result is positive it will definite improve their return on investment

This study recommends that organizations should adopt best practices in their investment activities in order to keep abreast with the dynamics of global economic climate. Individual investors should internalize the habit of improving on their strategic pattern and investment information so that they can make better decisions and also investors should reinforce the need for a strategic framework for problem solving under complexities and the relevance of strategic considerations in investment planning. Lastly, individual investors and corporate organizations should internalize a process that would serve as a veritable tool for qualitative and thorough appraisal that is tailored towards improving project and investment performance.

Author Biographies

Olubunmi Omotayo Efuntade, Afe Babalola University,(ABUAD) PMB 5454 Ado-Ekiti,Ekiti State.Nigeria

Department of Economics, College of Social and Management Sciences, 

Efuntade Alani Olusegun, Federal University, P. M. B. 373, Oye Ekiti, Nigeria

                                                                               

References

Abor, J., & Biekpe, N. (2007). Small business reliance on bank financing in Ghana. Emerging Markets Finance and Trade, 43(4), 93-102. http://dx.doi.org/10.2753/REE1540- 496X430405
Adner, R. and Helfat, C.E. (2013). Corporate effects and dynamic managerial Capabilities,.Strategic Management Journal, 24, pp. 1011‐1025 (2013).

Afuah, A. (2002). Mapping technological capabilities into product markets and Competitive advantage: The case of cholesterol drugs. Strategic Management Journal, 23, pp. 171‐179

Ahmed Hunjra, Salman Qureshi and Kashif Rehman (2012). Factors Affecting Investment Decision Making of Equity Fund Managers. Wulfenia Journal 19.10 (2012): 280-291.
Ainuddin, R.A., Beamish, P.W., Hulland, J.S. and Rouse, M.J. (2007). Resource attributes and firm performance in international joint ventures. Journal of World Business, 42 (2007) pp. 47‐ 60.

ALShubiri, F. N. (2011). The Effect of Working Capital Practices on Risk Management: Evidence from Jordan.Global Journal of Business Research, 5(1), 39-54, 2011.
Aquino, S. (2010). Accounting indicators for credit risk analysis of firms: a historical perspective. Economia Aziendale Online, 1(2), 145-54.
Armstrong, C.E. and Shimizu, K. (2007). A review of approaches to empirical research on the resource based view of the firm. Journal of Management, Vol. 33, No. 6, pp. 959‐986
.
Bamiatzi, V., & Hall, G. (2014). Firm versus sector effects on profitability and growth: The importance of size and interaction. International Journal of the Economics of Business, 16(2), 205-20. http://dx.doi.org/10.1080/13571510902917517
Barney, J. B. (2010). Firm resources and sustained competitive advantage. Journal of Management, Vol. 17, No. 1, pp. 99‐120.

Baumol, W. J. (1957). Speculation, Profitability and Stability. Review of Econoomics and Statistics, 39: 263-271.
Beck, T., Demirgüçkunt, A., & Maksimovic, V. (2005). Financial and legal constraints to growth: The Journal of Finance, 60(1),
Berja G.M. (2009). The impact of empirical tests of transaction cost economics on the debate on the nature of the firm. Strategic Management Journal, Vol. 27, pp. 461‐476.

Burden, R. and Proctor, T. (2000). Creating a sustainable competitive advantage through training.Team Performance Management, Vol. 6 No. 5/6, 2000, pp. 90‐97.

Calaguas, G. M., & Dizon, C. S. (2011). Development and initial validation of the social competency inventory for tertiary level faculty members. International Journal of Human and Social Sciences, 6(3), 171-6.
Caloghirou, Y., Protogerou, A., Spanos, Y., & Papagiannakis, L. (2004). Industry-Versus Firm- specific Effects on Performance: Contrasting SMEs and Large-sized Firms. European Management Journal, 22(2), 231-43. http://dx.doi.org/10.1016/j.emj.2004.01.017
Camelia Burja and Vasile Burja (2009). The Risk Analysis for Investments Projects Decision. Annales Universitatis Apulensis Series Oeconomica, 11(1), 2009.
Carmines, E. G., & Zeller, R. A. (1979). Reliability and validity assessment. Sage Publications, Inc.
Cole, G.A. (2004). Management Theory and Practice, Sixth Edition. Thomson Learning, United Kingdom.

Colotla, I., Shi, Y. and Gregory, M.J. (2003). Operation and Performance of international manufacturing networks. International Journal of Operations & Production Management, Vol. 23, No. 10, 2003, pp. 1184‐1206.

Drever, M., & Hutchinson, P. (2007). Industry Differences in the Determinants of the Liquidity of Australian Small and Medium Sized Enterprises. Small Enterprise Research: The Journal of SEAANZ, 15(1), 60. http://dx.doi.org/10.5172/ser.15.1.60
Fairoz, F. M., Hirobumi, T., & Tanaka, Y. (2010). Entrepreneurial Orientation and Business Performance of Small and Medium Scale Enterprises of Hambantota District Sri Lanka. Asian Social Science, 6(3), 34.
Fama, E. (1980). Agency Problems and the Theory of the Firm. The Journal of Political Economy,88(2), 288-307. http://dx.doi.org/10.1086/260866
Friedman Milton, and Savage L.J. (1948). The Utility Analysis of Choices Involving Risk. Journal of political economy. Pp 279-304.
Froeb, L. M., & McCann, B. T. (2009). Managerial Economics: A Problem Solving Approach. Global Journal of Management and Business Research Economics and Commerce, 13(5), 21-30.
Hung, Angela and Heinberg, Aileen and Yoong, Joanne (2010). Do Risk Disclosures Affect Investment Choice? RAND Working Paper No. WR-788
Hunjra A.I. and Niazi G. S. (2012). Relationship between Decision Making Styles and Consumer Behavior. Actual Problem of Economics 2.4 (2012): 21-26.
Hunjra, A.I., M. Azam, G.S. Niazi, B.Z. Butt, K. Rehman and R. Azam, (2011). Investment decision and Return Relationship in Stock Market and Commodity Prices: A Comprehensive Study of Pakistani Markets. World Applied Sciences Journal, 13(3): 470- 481.
Islam, A., Aktaruzzaman Khan, M., Obaidullah, A. Z. M., & Syed Alam, M. (2011). Effect of entrepreneur and firm characteristics on the business success of small and medium enterprises (SMEs) in Bangladesh. International Journal of Business and Management, 6(3), 289.
Jensen, M., & Meckling, W. (1976). Theory of the firm: Managerial behavior, agency costs and ownership structure. Journal of financial economics, 3(4), 305-60. http://dx.doi.org/10.1016/0304-405X(76)90026-X
John Maynerd Keynes (1930). The General Theory of Employment, Interest and Money. New York Harcourt, Brace and Company, PP 27-28.
Koutsoyiannis A. (1963). Demand Function. Readings in applied economics Clarendon Press, Oxford.
Lippman and Rumelt, (2010). Generic strategies and firm performance in SMEs: a longitudinal study of Austrian SMEs. Small Business Economics, 35(2), 169-89. http://dx.doi.org/10.1007/s11187-009-9239-x
López-Gracia, J., & Sogorb-Mira, F. (2008). Testing trade-off and pecking order theories financing SMEs.Small Business Economics, 31(2), 117-36. http://dx.doi.org/10.1007/s11187-007-9088-4
Lubna Riaz, Hunjra A.I. and Rauf-i-Azam (2012 ). Impact of Psychological Factors on Investment Decision Making Mediating by Risk Perception: A Conceptual Study. Middle-East Journal of Scientific Research 12 (6): 789-795, 2012.
Muth John (1961). Rational Expectations and the Theory of Price Movements. Econometrica 29, 315-335.
Perry M. (1995). Does working capital management affect profitability of Belgian firms? Journal of Business Finance & Accounting, 30(3-4), 573-88. http://dx.doi.org/10.1111/1468- 5957.00008
Sitkin, S.S. and Weingart, L.R. (2015). Determinants of Risky Decision-Making Behavior: A Test of the Mediating Role of Risk Perceptions and Propensity. The Academy of Management Journal, 38(6): 1573-1592.
Vicky Arnold, Jean Bedard , Jillian Phillips and Steve Sutton (2007). The Impact of Risk on Investor Decision Processes and Outcomes in the Post-Sox Environment. Preliminary Working Paper No 360.
.

Downloads

Published

2020-12-15

Issue

Section

Financial Economics