An empirical Investigation of the Risk Return Relationship for Listed Manufacturing firms in Nigeria

Abstract

This study investigates the relationship between various dimensions of risk and stock returns among listed manufacturing firms in Nigeria from 2012 to 2023. Using a panel data regression framework, the study examines how systematic risk, total risk, and firm-specific financial indicators influence firm value, proxied by Tobin’s Q. The findings reveal that systematic risk has significantly negative impacts on stock returns, reflecting investor aversion to market-wide volatility. In contrast, total risk captured through firm-specific volatility shows a positive association with firm value, indicating speculative investor behavior or perceived growth opportunities in volatile firms. Additionally, leverage, liquidity, and exchange rate volatility negatively affects stock valuation, while firm size also exhibits an inverse relationship. Return on assets (ROA), however, was not a significant predictor of stock performance, suggesting weak investor confidence in accounting profitability. Based on these findings, the study recommends strategic risk management, improved financial reporting, and optimization of capital structure, and policy support for listed manufacturing firms.

Keywords:       Systematic Risk, Tobin’s Q, Total Risk, Returns