African Development Finance Journal

Corporate Sustainability Practices and Business Risk in Nigeria

Henry I. Onwere — 2025-01-09

Abstract

Corporate sustainability encompasses a business's dedication to implementing environmentally, socially, and economically responsible practices. This strategic approach ensures long-term viability and effectively mitigates associated risks. Many studies have examined how corporate sustainability impacts financial performance; however, existing literature provides limited evidence regarding the influence of corporate sustainability on business risk. This study investigated the influence of corporate sustainability practices on business risk in Nigeria. The sample included thirty (30) non-financial firms in Nigerian-listed between 2013 and 2022. Corporate sustainability practices were represented through Environmental, Social, and Governance practices. Business risk was measured by the addition of accounting risk and market risk. The analysis utilised the Estimated Generalised Least Squares (EGLS) estimation method to assess the impact of corporate sustainability practices on business risk. The results revealed that environmental and social practices have significant negative impacts on business risk. However, governance practices have significant positive impacts on business risk. The study recommends that the Nigerian government support businesses transitioning to environmental, social, and governance (ESG) compliant processes and supply chains. This may involve developing infrastructure, providing logistics assistance, and creating incentives for sustainable suppliers. Additionally, implementing policies that allow flexible timelines to meet ESG targets could help companies reduce the risk of sudden operational disruptions.

Keywords: Corporate sustainability, business risk, environmental practices, governance practices, social practices

Effect of Trade Credit Management on the Financial Performance of Listed Consumer Goods Companies in Nigeria (2013 to 2022)

Rasheed Olatunji ANIMASAUN — 2025-01-09

The purpose of this study was to investigate the effect of trade credit on the financial performance of consumer goods companies (CGCs) that are listed in Nigeria. Expose-facto was the study design used. Twenty-one CGCs that were listed were the study population, while ten of the listed consumer goods companies were specifically chosen for sampling. Using panel OLS as the data analysis method, it was found that trade credit significantly affects ROA (p = 0.000001 < 0.05) and ROE (p = 0.000024 < 0.05). According to the study's findings, trade credit significantly affects financial performance. Hence, it was recommended that there should also be an enhancement of credit collection processes and a regular assessment of customer creditworthiness. Additionally, companies should consider offering incentives for early payment and exploring alternative financing options to reduce reliance on credit.

Keywords: Cash Conversion Cycle, Payables turnover, Performance, Receivables turnover, Return on assets, Return on Equity

Effects of Income Generating Activities and Donor Funds on Liquidity of Public Universities in Kenya

Hillary Ngugi Mbugua — 2025-01-09

The issue of public universities' financial difficulties is a global one. To determine how well-equipped our universities are to function better, research on the liquidity of public institutions must be crucial. Stakeholders that are keen to address the financial challenges public universities face are particularly interested in how universities fund their operations. The study's main goal was to evaluate how donor financing and income-generating activities affected Kenya's public universities' liquidity. Two theories provided guidance for the study: general systems theory and resource dependency theory. Causal research design was adopted in the study. All 31 Kenyan chartered public universities made up the study's population, which was conducted over the course of five years, from the 2016–2020 fiscal years. Because of the minimal number of public colleges, a census was conducted. Descriptive analysis and inferential analysis utilizing a panel data regression model were used to analyze the data. The Office of the Auditor-General provided the quantitative secondary data used in the investigation. The study guaranteed that all data acquired was used exclusively for the study and secured research permits from NACOSTI. The study found that Income generating activities and donor funding though they contribute largely to the universities finances, they have minimal effect on liquidity of these universities. The study recommends that universities should enhance donor engagement initiatives to cultivate long-term relationships and secure sustainable funding sources. They should also prioritize streamlining their methods for generating revenue and in need to alleviate future liquidity issues, universities should diversify revenue streams, investigate creative income-generating activities, and improving resource utilization efficiency.

Keywords: Income Generating Activities, Liquidity, Public Universities, Donor Funding

Financial Leverage and Performance of Agricultural Cooperative Societies in Kiambu County, Kenya

Anne Amondi Omondi — 2025-01-09

Financial leverage decisions are critical to firm performance, yet empirical studies lack consensus on the nature and strength of the relationship between financial leverage and financial performance, with varying impacts depending on performance measures. In Kiambu County, Kenya, poor financial performance among agricultural co-operative societies has hindered potential growth, prompting some farmers to abandon agriculture for real estate ventures. The research examined the effect of financial leverage on financial performance among 25 active agricultural co-operatives in Kiambu County, focusing on capitalization mix, interest coverage, and asset coverage as the independent variable measures. Grounded on the trade-off, pecking order and agency theories, this research adopted a positivist philosophy and utilized an explanatory research design. The analysis of secondary data (2013–2017) from audited financial statements and the Directorate of Co-operatives was conducted through the application of panel regression, descriptive statistical methods and correlation techniques. Diagnostic tests included normality, multicollinearity, autocorrelation, heteroscedasticity, stationarity, and effects modeling. Results revealed a significant positive effect of interest coverage (β = 2.01937; P = 0.015) and a positive but insignificant effect of asset coverage (β = 1.174203; P = 0.063) on financial performance. Capitalization mix negatively affected performance significantly (β = -0.2589299; P = 0.040). Based on the study findings, managers should formulate optimal debt-equity strategies, reduce reliance on debt to mitigate financial risks and explore cheaper financing options to improve financial performance.

Keywords: Financial Leverage, Agricultural Co-operative Societies, Asset Coverage ratio, Capitalization Mix, Economic Value Added, Financial Performance

Techniques used to Prevent and Detect Fraudulent Financial Reporting: An Aspect of Financial Statement Misrepresentations

James Daniel Chindengwike — 2025-01-09

Techniques used to detect and prevent fraudulent reporting of financial statements are very important in the effective operation of any company. The aim of this paper is to assess the aspect of financial statement misrepresentations and how we can apply the techniques to detect and prevent fraudulent reporting of financial statements. This paper opted for a for a qualitative research approach. This study used different research books (6) as a source of the data (documentary reviews as the tool of data collection). The study found that techniques to detect and prevent fraudulent reporting of financial statements are very crucial in aspects of financial statement misrepresentations. Also, the study observed that techniques used to detect and prevent fraudulent reporting of financial statements are liabilities versus assets, cost of goods sold versus sales, accounts receivable versus sales, gross, inventory a company’s inventory, operating versus sales, net profit margins, and analytical procedures for fraud examiners. The study concluded that the techniques used to detect and prevent fraudulent reporting of financial statements are very imperative to enhance the operation of the organization. The study recommended that the fraud inspectors should apply the ratios to examine debtors for possible larceny schemes. Buying and getting inventory structures can upset the ratios. Minimizing the COGS consequences in a rise in the ratios as well. Significant changes in the inventory turnover ratio are good signs of likely fraudulent inventory action. Also the management should commit to aiding all employees in building internal control systems through interaction and training in order to educate them on issues surrounding the effective application of accounting laws and processes, thereby enhancing their professional skills and competence. There is a need to take legal action against those who misuse local government funds, and recovery must be obtained. This study looked at how internal control systems affect the performance of Tanzanian local government authorities. The paper calls for greater research into the problems of building organizational internal control systems, as well as the impact of information and communication technologies on these systems. The effects of information and communication technology on internal control systems.

Keywords: Fraudulent Financial Reporting, Financial Statement, Misrepresentation

The Mediating Effect of Chief Executive Officers Attributes on Board Characteristics and Corporate Social Responsibility

Godstime Osarobo IKHU-OMOREGBE — 2025-01-09

The focus of this study is to examine the use of Chief Executive Officer’s Attributes such as Tenure and Educational Background as a Mediating Effects on Board Characteristics and Corporate Social and Environmental Disclosures. Using a sample of Seventy-Three (73) firms selected from environmentally sensitive companies from the non-financial sectors in the Nigerian Exchange Group over a ten (10) years period (2011–2020), a combination of panel regression, fractional regression, and Structural Equations Modelling (SEM) were used to evaluate the data. The findings of the study reveal that board independence have negative relationship and statistically significant on CSED. For board gender, it was positively related to CSED and statistically significant. Considering the two (2) CEO’s attributed i.e. tenure, and educational background, they were not statistically related to CSED. The study recommends the need: for companies to imbibe by corporate governance codes which specifies the number of independent directors that should be on the board and also improve on its gender mix. The study finally recommends greater support for corporate social and environmental disclosure strategy by the CEOs.

Keywords: CEO Attributes, Board Characteristics, Corporate Social Responsibility