DETERMINANTS OF RESEARCH AND DEVELOPMENT INVESTMENT: A MULTIVARIATE ANALYSIS OF WORKING CAPITAL, RETAINED EARNINGS, EBIT AND VALUE OF EQUITY

This study investigated the determinants of Research and Development (R&D) investment among listed non-financial firms in Nigeria, focusing on the roles of Working Capital (WC), Retained Earnings (RE), Earnings Before Interest and Tax (EBIT), and Value of Equity (VOE). Employing an ex-post facto research design, the study analyzed secondary panel data from 55 firms over six years (2018–2023). The panel-corrected regression technique is utilized to examine the relationship between financial variables and R&D expenditure. Results reveal a statistically significant model (Wald χ² = 196.62, p < 0.001) explaining 6.8% of the variation in R&D investment. The findings indicate that WC and EBIT negatively impact R&D investment, suggesting firms with higher liquidity and operating earnings may prefer short-term financial stability over uncertain innovation spending. Conversely, RE and Return on Assets (ROA) positively influence R&D, underscoring the importance of profitability and internal funding in driving innovation activities. VOE exhibits a negative relationship with R&D, reflecting shareholder risk aversion to investment uncertainty. These findings align with prior studies emphasizing the nuanced financial and market factors shaping firms’ innovation strategies. The study concludes that both operational performance and market valuation critically affect R&D investment decisions. It recommends that firms balance liquidity management with long-term innovation goals while encouraging policies that promote reinvestment of earnings into R&D. Enhancing investor confidence through transparency and risk mitigation is also essential to support sustainable innovation and economic growth in Nigeria.