Cost Control and Financial Performance: An Empirical Investigation of Selected Quoted Manufacturing Firms in Nigeria
Keywords:
cost control; administrative cost; selling and distribution costs; manufacturing firmsAbstract
The study examined the link between cost control and the financial performance of selected Nigerian manufacturing firms. Specifically, the study examined the effect of administrative cost, selling and distribution cost on profit after tax of manufacturing firms in Nigeria. The study employed secondary source of data and that were collated through annually financial reports of ten (10) sampled firms through 2011 to 2020. Data were analyzed using descriptive statistics, correlation analysis and panel regression which involve, pooled OLS, random effect estimation and fixed effect estimation including Hausman test as well as post estimation test for the models considered in the study. The findings of the study reported that administrative cost exert insignificant negative effect on profit after tax of the sampled firms, while selling and distribution cost exert insignificant positive effect on profit after tax. Therefore, this study concluded that cost control has both positive and negative effect on financial performance of manufacturing firm in Nigeria, especially, when measured in terms of profit after tax. The study recommended that manufacturing firms need to ensure optimal control of administrative cost as any attempt to employ as positive change agent for a specific financial performance measure can lead to unfavourable effect in another measure. As such control of administrative cost by manufacturing firms should be carried out by taken into consideration the overall performance objective of the firms per time, so that provision can be made available for possible trigger of one measure of financial performance at the expense of the other.
References
Abdul, A. & Isiaka, T. A. (2015). Relationship between cost management and profitability: A study of selected manufacturing firms. International Journal of Management Sciences and Humanities, 3(1), 33-45
Abushammala, S. N. & Sulaiman, J. (2014). Cash holdings and corporate profitability: some evidence from Jordan. International Journal of Innovation and Applied Studies, 8(3), 898-907.
Adam, A.J (2005), Public policy and Industrialization in Nigeria Publication of Central Bank of
Nigeria. 9(2). April June, 2005
Adeniyi, A.A. (2007). An insight into: Management Accounting, 3rd Edition: El- Toda Ventures Limited.
Adeniji, A. A. (2011). Cost accounting: A managerial approach. Lagos, Nigeria. El-Toda ventures Ltd, 5th ed.
Akenbor, C. O. & Agwor, T. C. (2015). Standard Costing and Cost Control in Nigerian Oil and Gas Industry. Journal of Modern Accounting and Auditing, 11(4), 185-193 doi: 10.17265/1548-6583/2015.04.001
Akeem, L. B. (2017). Effect of Cost Control and Cost Reduction Techniques in Organizatonal Performance. International Business and Management, 14 (3), 19-26.
Asaolu, T. O. & Nassar, M. L. (2007). Essentials of Management Accounting & Financial Management. Cedar Productions, Ile - Ife. Nigeria.
Ayodele, E.O. & Alabi, M.O, (2014). Effect of cost control on building projects delivery in Nigeria: Civil and environment research, ISSN 2224-5790 (paper) ISSN 2225-0514 (online), 6(2), 27-37
Babatolu, A. T., Aigienohuwa, O. O. & Adewumi, A. A. (2015). Costing techniques and pricing decisions of Manufacturing Companies in Ogun State. International Journal of Humanities and Social Science, 5(12), 162-170.
Baily, M. N. & Bosworth, B. P. (2014).USS Manufacturing: Understanding Its Past and Its Potential Future, Journal of Economic Perspectives, 28 (1), 3-26.
Barbole, A.N., Yuvraj, D.N. & Santosh.DP. (2013). Impact of cost control and cost reduction techniques on manufacturing sector; Indian streams research journal, 3 (5), 23-35
Emengini S. E, Ezuwore O. C, Ofoegbu G. (2014), Product cost management in development countries: Activity based costing: Research journal of finance and accounting. ISSN 2222-1697(paper) ISSN 2222-2847(online), 5(2), 12-25
Esira, A. F., Ikechukwu, E. C. & Ikechukwu, E. M. (2014). Environmental cost management and profitability of oil sector In Nigeria. Journal of Good Governance and Sustainable Development in Africa (JGGSDA), 2(2), 181-192.
Etale, L. M. & Bingilar, P. F. (2016). The Effect of Inventory Cost Management on Profitability: A Study of Listed Brewery Companies in Nigeria. International Journal of Economics, Commerce and Management, 4(6), 446-455
Imeokparia, L. &Adebisi, S. (2014). Target costing and performance of manufacturing industry in south-western nigeria. Global Journal of Management and Business Research: D Accounting and Auditing, 14(4), 51-58.
Knight,F.H.(1940).Uncertainly and Profit Online publication.https://economicskey.com/theories-profits-8717.
Lockey, K. (2002). Factory and production (4th ed.). London: Dp Publisher.
Okwo, I. M. & Ugwunta, D. O. (2012). Impact of firms input costs on firm profitability: Evaluation of the Nigerian brewery industry, Research Journal of Finance and Accounting, 3(6), 78 -89.
Ogundele O. J. (2004). Introduction to Business Organization; A book of Readings (ed) Lagos Molofin Nominees.
Olabisi, J., Sokefun, A. O. & Oginni, B. O. (2012). Kaizen Cost Management Technique and Profitability of Small and Medium Scale Enterprises (SMEs) in Ogun State, Nigeria. Research Journal of Finance and Accounting, 3(5), 103-111.
Olagunju, A.,Imeokparia, L. & Afolabi, T. S. (2014). Budgetary Control: A Tool for Cost Control in Manufacturing Companies in Nigeria. European Journal of Business and Management, 6(37), 98-108.
Olalekan, L. I., &Tajudeen, N. F. (2015). Cost Control and Its Impact on the Survival of Nigeria Firms: A Case Study of Nigeria Bottling Company Plc. International Journal of Management, Accounting and Economics, 2(4), 312-324.
Oyerogba, E. O., Olaleye M. O. & Solomon, A. Z. (2014). Cost management practices and firms performance of manufacturing organisations. International Journal of Economics and Finance, 6(6),234-239.
Oyewo B. M. (2013). Strategic cost management as a recession survival tool in the Nigerian manufacturing and financial service industries. Research journal of finance and accounting, 4(11), 20-32
Panigrahi, A. K. (2013). Relationship between inventory management and profitability: An empirical analysis of Indian cement companies. Asia Pacific Journal of Marketing and Management Review, 2(7), 107 -120.
Prempeh, K. B. (2015). The impact of efficient inventory management on profitability: Evidence from selected manufacturing firms in Ghana, Munich Personal RePEc Archive MPRA , 67889 .1-6,https://mpra.ub.uni-muenchen.de/67889
Rof, M. L. (2012). Kaizen costing method and its role in the management of an entity. The Young Economists Journal, 2(4), 104109.
Sarokolaei, A. M., & Rahimi poor, A. (2013). Studying the obstacles of applying a target costing system in firms accepted in Tehran Stock Exchange. Journal of Economics and International Finance, 5(1), 17-20.
Schumpeter, J. A. (1939). The Theory of Economic Development. Translated by Redvers Opie, Cambridge MA: Harvard University Press.
Shah, G. P. & Pradhan, R. (2016). Cost Management Practices and Firms Performance of Nepal Oil Corporation. International Academic Institute for Science and Technology, 3(3), 1-8.
Sekeroglu, G. & Altan, M. (2014). The relationship between inventory management and profitability: A comparative research on Turkish firms operated in weaving industry, eatables industry, wholesale and retail industry. International Journal of Social. Behavioral, Economic, Business and Industrial Engineering, 8(6), 1698 - 1703
Siyanbola, T. T. & Raji, G. M. (2013). The Impact of cost control on manufacturing industries profitability. International Journal of Management and Social Sciences Research (IJMSSR), 2(4), 1-7.
Downloads
Published
How to Cite
Issue
Section
License
Copyright (c) 2022 Ali-Momoh Betty Oluwayemisi, Egbekun Elkanah, Omoolorun Ademola, Mathew Omole Olusola, Aruna Ishola Mamidu
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.
The author fully assumes the content originality and the holograph signature makes him responsible in case of trial.
