Financial Risk and Firm Value in Nigeria: The Moderating Role of Ownership Structure

Abstract

This study investigated ownership structure in Nigeria and how it affects the relationship between financial risk and company value. The main objectives of the study were to examine the interaction between financial risk and company value in Nigeria and the moderating roles of institutional ownership and management. 16 consumer products businesses listed on the Nigeria Exchange Group (NGX) between 2014 and 2023 were evaluated by the study using an ex-post facto research design method. The data was analyzed using descriptive statistics, a correlation matrix, and the least squares method. According to the findings, financial risk considerably raised the value of the company, management ownership had a somewhat negative impact, and institutional ownership had a moderating favourable effect. In order to ensure effective use of borrowed funds for the positive maximization of the firm's worth, risk management is recommended for publicly traded consumer products manufacturing companies in Nigeria. Accordingly, management should make sure that institutional shareholders are present in order to reduce financial risk in terms of cost of capital and raise the firm's value. Corporate governance norms, such as ownership concentration— which occurs when a small number of shareholders control the majority of the company—and monitoring techniques, which include an efficient board of directors, are in line with the study's findings. Other fundamental concepts that guarantee an organization is run in an ethical and efficient manner are responsibility, accountability, transparency, equity, and risk management.