CAPITAL EXPENDITURE AND CORPORATE PERFORMANCE OF SELECTED QUOTED FIRMS IN NIGERIA
ABSTRACT
This study examined the impact of capital expenditure and corporate performance.  By nature this study necessitated empirical approach, thus, utilizes ex-post facto data. The population of the study which is also the sample size consists of all the quoted banks in Nigeria using a time series data for a period of 24 years (1991 to 2014). To constitute sample size out of the population of the study, the Purposive non-probability sampling method was adopted in the collection of sample. Considering the objectives of the study, an emphasis has been placed on the impact of capital expenditure on corporate performance of some quoted banks in Nigeria.  Two methods are used; these are the correlation coefficient and the Ordinary Least Square analysis (OLS). Relevant data were sourced from the Central Bank of Nigeria Statistical Bulletin (various years). The population entails all the quoted banks in Nigeria.  That bank capital structure does not have any significant impact on corporate performance in Nigeria.  These results seem to be consistent with the studies of Mahdavi and Sohrabian (1991) and Olweny and Kimani (2011). For this result to be re-enforcing in nature, the market should strengthen it linkages with the real sector of the economy in order to be able to deliver better benefits to the banking sector and the economy in general. Indeed, further work needs to be carried out in order to better understand the relationship between banks’ capital expenditure and corporate performance.
TABLE OF CONTENT
CHAPTER ONE: INTRODUCTION
1.1     Background to the Study    -    -    -    -    -
Statement of the Research Question     -    -    -
1.3     Research Questions     -    -    -    -    
1.4     Objectives of the Study    -    -    -    -    -
Hypothesis of the Study    -    -    -    -    
Scope of the Study    -    -    -    -    -    -    
Significant of the Study     -    -    -    -
Limitation of the Study-    -    -    -    -
Definition of Terms     -    -    -    -    
CHAPTER TWO: REVIEW OF RELATED LITERATURE
2.1     Introduction-    -    -    -    -
2.2    effect of capital expenditure on corporate performance    -
2.3 Financial performance    -    -    -    -    
2.4     Review of Empirical Literature    -    -    -    -
2.5     Theoretical Review    -    -    -    -
2.5.1 theory of public expenditure    -    -    -    
2.5.2 Musgrave theory of expenditure    -    -    -
2.5.3      the Keynesian theory    -    -    -    -    
2.6 Summary of Literature Review    -    -    -    
CHAPTER THREE: METHODOLOGY OF THE STUDY
3.1     Introduction    -    -    -    -    
3.2    Population and Sample Size    -    -    -    
3.3    Model Specification    -    -    -    -
3.4    Estimation Technique    -    -    -    -
3.5    Sources of Data    -    -    -    -    -    -    
3.6    Operationalization of Variables    -    -    -
CHAPTER FOUR: EMPIRICAL ANALYSIS
4.1    Introduction    -    -    -    -    -    
4.2     Correlation Analysis    -    -    -    -
4.3    Regression Analysis    -    -    -    
CHAPTER FIVE:     SUMMARY OF FINDINGS, RECOMMENDATIONS AND CONCLUSION
5.1    Summary of Findings    -    -    -    -
5.2    Policy Recommendations    -    -    -    -    
5.3    Conclusion    -    -    -    -    -
    Bibliography     -    -    -    -    -    
Appendices    -    -    -    -    -    
CHAPTER ONE
INTRODUCTION
1.1     BACKGROUND TO THE STUDY
Capital expenditure is the engine that keep a firm moving and it determine   their ability to generate cash flow. It is a driving force for good performance   as well as growth in value. Firms require investment in capital expenditure in order to achieve their business goals ultimately, add value to the organization and maximize shareholder’s wealth. It is therefore expected that investment in capital expenditures should be followed by future returns and consequently an increase in corporate performance and value of the firm.
Harold (2003) defined capital expenditure as the money or funds spent by a firm for acquiring, upgrading asset or adding value to an existing asset with useful life beyond one accounting period , it is often use to undertake new project by a firm. Businessdictionary.com also define capital expenditure as an expenses (spending) made on the acquisition and upgrade of physical assets, as in form of land, building, vehicle, machineries and equipment. These expenses include everything from repairing a roof to a building, to purchasing a piece of equipment or building a brand new factory. In accounting it is included in asset account and it applies to the depreciation of it useful life and it is charge against the profit of the firm. It is therefore capitalize thus requiring the firm to spread the cost of the expenditure     over the useful life of the assets. However, if the expenses are the one that maintain the assets at it current condition, the cost is deducted fully in the year the expenses are made. Nevertheless, the amount of capital expenditure a firm is likely to have depends on the industry it occupies. In financial reporting, capital expenditure is classified as property, plant and equipment. According to international financial reporting standard (2002), property, plant and equipment are tangible items that are held for use in the production of goods and services, for rentals to others or for administrative purposes and are expected to be used during more than one period.
The outcome of management process from strategic planning to implementation of the plan, underpin corporate performance. Daft (1997), defines corporate performance as the organization’s ability to attain its goals by using resources in an efficient an effective manner. This measurement can be used to deduce a firm’s overall health over a given period of time and also to provide a metric that can be use for comparism purposes with similar firms, industries, sectors and geography. Corporate performance also provides the intelligence required by management to forecast performance and growth of the firm in the short and long run.
STATEMENT OF THE RESEARCH QUESTION
Over the past few years many firms have minimized spending and investment. But the pressure to stay competitive in the global market place  makes it unrealistic to hold off on technology and operation improvement in the long run, for others, it’s time to  determine what initial investment makes the most strategic sense and how to finance them and resulting effect of these investment on organization McConnell and MuScarella (1985).
According to neoclassical view, capital expenditure are likely to result in either negative returns to firms or at least returns that are substantially lower, that are possible from other investment (Palmer, Oates and Portney 1995). Supporting evidence suggest that environmental capital outlay, mandated by regulating requirement may hamper firm productivity and reduce firm value (Barbera and McConnell 1986). Also in consistent with the proposition of net cost, some studies report a negative stock market reaction to environmental legislative news (Shane 1995).
In contrast the porter hypothesis, Porter and Van der linder  (1995), suggest that firms may be able to gain net economic benefit through well designed environmental regulations  that encourage resources productivity, enhance innovation and improve competitiveness. Okwo, Ugwunta and Nweze (2012) in their research to ascertain the  relationship between investment in fixed asset  and firm profitability on Nigeria brewery industry, find a positive relationship exist between investment in fixed asset and firm profitability.
We can deduce from the above argument that the actual effect of capital expenditure on corporate performance in Nigeria has been a major problem which has not been resolved.
1.3     RESEARCH QUESTIONS
Is there any relationship between capital expenditure and corporate performance of quoted firms in Nigeria?
What is the impact of total assets on corporate performance of quoted firms in Nigeria?
What is the relationship between corporate investment and corporate performance of quoted firms in Nigeria?
1.4     OBJECTIVES OF THE STUDY
The following are the objectives of the study:
To determine the relationship between capital expenditure and corporate performance of quoted firms in Nigeria.
To investigate the impact of impact of total assets on corporate performance of quoted firms in Nigeria
To examine the relationship between corporate investment and corporate performance of quoted firms in Nigeria.
HYPOTHESIS OF THE STUDY
The following are the formulated hypothesis of the study:
There is no significant between capital expenditure and corporate performance of quoted firms in Nigeria.
There is no significant relationship between total assets on corporate performance of quoted firms in Nigeria.
Corporate investment does not have any significant impact on corporate performance of quoted firms in Nigeria.
     SCOPE OF THE STUDY
The study covers all the quoted banks in Nigeria, who have consistently published their annual report for 24 consecutive years (1991-2014). This work relate to how capital expenditure affect corporate performance of quoted firms in Nigeria.
 SIGNIFICANT OF THE STUDY
The finding of this study would be important to shareholders, regulators, auditors and investors of firms, enlightening them on the effect of capital expenditure on corporate performance.
       Investments in fixed assets increase the value of firm in the long run which will in turn create additional dividend to shareholders in the future. The study also affects regulators suggesting that wealth of regulated firms may increase when environmental regulation assign property right to environmental assets (Maloney and McCormick, 1982). The outcome of the study would also enable auditors to make proper allocation of capital investment activities and capital expenditure decisions by management since capital affect the value and the very survival of the firms.
 LIMITATION OF THE STUDY
The limitation of the study occurs as a result of the impossibilities to exhaust all aspects of this topic in a single work due to limited supply of data and fact.
Secondly, the difference in the nature of business, operating practice, innovation drive, focuses and risk profile of shareholders and management.
DEFINITION OF TERMS
Capital expenditure: this is the money spent by firms on acquiring or upgrading fixed assets.
Capital: this is the start up fund raised by shareholders of a firm.
Fixed assets: these are assets purchased which have a lifespan of more than one accounting period.
Investment:  is the purchase of financial product or item of value with expectation of favorable future returns.
Net income: this is the firm’s income minus cost of goods sold, expenses and taxes for an accounting period.
Leverage: this involves using more of borrowed funds in buying assets which the income from the asset pricing appreciates more than the cost of borrowing.
Cash flow:  this is the movement of money in and out of the business.
Rate of return: is the profit generated on an investment over a period of time.
Net present value: is the sum of expected stream of income determined as of the date of valuation.