Moderating Effect of Foreign Exchange on the Relationship between Heterogeneous Ownership Structure and Financial Performance of Listed Industrial Goods Firms in Nigeria

Abstract

The study investigated the moderating effect of foreign exchange (FX) on ownership heterogeneity and the return on assets (ROA) of listed industrial goods firms in Nigeria. An ex-post facto research design was adopted to study the 13 industrial goods firms listed on the Nigeria Group Exchange (NGX) as at December 31, 2023. The multiple linear regression model as a tool for analysis was applied. The major results indicate that managerial ownership has a statistically significant and positive effect on ROA, hence evidence for agency theory’ which argues that the interests of managers should be in line with enhancing shareholder value. The interaction term MOFX, however, is significant and negative, meaning foreign exchange fluctuations reduce the positive effect of managerial ownership. On the other hand, IOFX is significantly positive and implies that institutional investors reduce FX-related risk and enhance performance. The study recommends that Managerial ownership should align management interests with firm performance and thus acts as an incentive to strengthen foreign exchange risk management. This commitment towards governance ensures stability, where institutional investors are attracted to companies that practice disciplined risk-taking, eventually contributing to the firm’s ability to withstand the impact of foreign exchange volatility.