Risk Taking, Incentives and Financing Decision of Quoted Consumer Goods Manufacturing Firms in Nigeria

The purpose of this research was to analyze the financial decisions made by publicly traded Nigerian consumer products manufacturers in relation to their risk tolerance, incentives, and other relevant factors. We set out to investigate how quoted consumer goods manufacturers' risk-taking, incentives, and financing decisions interact with one another. Operating risk is defined as the variation in gross earnings; lleverage risk as the rate of debt capital to total capital; liquidity risk as the ratio of liquid assets to total assets; market risk as the ratio of operating income to money supply; management incentive as the variation in management salaries; executive incentive as the proxy for investment capital allowance; and tax incentives as the variation in tax waivers or holidays. From 2012 to 2021, the food and beverage companies' annual reports and financial statements were used to compile the panel data. To investigate the connection between agency cost and valuation, panel regression models were developed. From the fixed effect, the estimated regression model on the effect of risk taking on financing decision of the quoted firms in Nigeria found that, according to the model, variation in risk taking accounts for 61.3% of the variation in financing decision of the quoted industrial goods manufacturing firms. Among the risk-taking variables' beta coefficients, we find that liquidity risk has a negative and significant effect on the financing decisions of quoted firms throughout the study's periods, market risk and operational risk have a negative effect but no significant effect, and leverage risk has a positive effect but no effect at all. From the fixed effect, the estimated regression model on the effect of incentives on financing decision of quoted firms in Nigeria found that, according to the model, variation in incentives accounts for 61.2% of the variation in financing decision of quoted consumer goods manufacturing firms. Based on the beta coefficients of the variables, we can see that the quoted manufacturing firms' financing decisions are positively and significantly affected by executive incentives, positively and significantly by investment incentives, positively but not significantly by management incentives, and negatively and not significantly by tax incentives. The study suggests that enterprises should implement well-articulated risk management techniques and an appropriate incentive strategy in order to make the most optimal financing decisions possible, and it finds that risk taking, incentives, and financing decisions all have substantial effects.