Lease Financing and Financial Performance of Listed Construction and Real Estate Companies in Nigeria

Abstract

This study evaluated the effect of lease financing on financial performance of listed construction and real estate companies in Nigeria. Lease financing was proxied by financial lease and operating lease while financial performance was proxied by net profit margin and return on equity. The population of the study consists of six listed construction/real estate companies in Nigeria. The entire population was used as sample size using the census approach. The study employed ex-post facto research design. Secondary data were collected from audited annual financial report of listed construction/real estate companies in Nigeria from 2011-2020. The study adopt the use of descriptive statistics for univariate analysis while hypotheses formulated were tested using multiple regression with the aid of stata 12 statistical software. The findings show that operating lease has a positive and insignificant effect on both net profit margin and return on equity. Also there is a positive and significant effect of financial lease on financial performance. The study concluded that lease financing has a significant effect on financial performance of listed construction and real estate companies on Nigerian Exchange Group. The study recommends amongst others that listed construction and real estate companies should reduce the proportion of operating lease finance in their operations as evidence suggests it negatively affect financial performance (net profit margin). Also, policy makers should increase tax shield for leasing products so as to encourage firms to make use of leasing financing rather than have high credits.