COMPARATIVE ANALYSIS OF THE FINANCIALPERFORMANCE OF QUOTED

COMPARATIVE ANALYSIS OF THE FINANCIAL PERFORMANCE OF QUOTED AND UNQUOTED FIRMS IN NIGERIA (EVIDENCE FROM SELECTED FIRMS)

CHAPTER ONE

INTRODUCTION

1.1 Background of the Study

The firm financial performance has been the focus in the literature and often emphasized in policy debate with many researchers associating it to entrepreneurship. Significantly, financial performance of a firm, which translates into liquid assets whether generated by the corporate cash flow from operations or by the attraction of new shareholders is considered the most important source of business continuance in the long-run. It has been one of the indicators most commonly used to define the success and failure of management. Financial performance is a measure of profitability that should be sustained, since firms can not invest or expand without profit. Markman (2002) remarked that growth used as a measure of financial performance is based on the belief that growth is a precursor to the attainment of sustainability, competitive advantage and profitability. This indicator has been a concern to shareholders who invested in the business and a worry to directors of the firm because the result reflects their capacity to keep the business moving. A firm’s rate of growth is a function of the rate of profit and the rate of interest when the firm is constrained in either the labour market or the output market. The most widely emphasized goal of a firm is to maximize the value of the firm to its owners which is the driving force that makes a firm to succeed (Kannadhasan, 2002). The investment the government and private sponsors are expected to make in an organization will depend on their social returns and profitability potentials. Moreso, in a capitalist economy, there is one and only one responsibility of a firm – to use its resources and engage in activities designed to increase its profits as long as it stays within the rules of the game, which is to say engage in an open and free competition without deception or fraud.

The financial performance of firms in the 1980s under the military era did not spur profitability of firms. The economic environment was characterized by inconsistency of policy formulation and implementation, multiple taxation and a crop of civil servants that had no sense of duty, and who frustrated any would be investor, local or foreign. This led to the closure of many local firms and withdrawal of many foreign investors.

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