FINANCIAL DEEPENING INDICATORS AND PERFORMANCE OF PHARMACEUTICAL FIRMS IN NIGERIA: A PANEL ANALYSIS

Abstract

This study empirically explored the effect of financial deepening indicators on the performance of pharmaceutical firms in Nigeria. The study used annual time series secondary data extracted from annual account and financial statement of the selected manufacturing firms for the periods of 2006-2018. The financial deepening indices used were ratio of broad money supply to GDP (M2/GDP); ratio of credit to private sector to GDP (CPS/GDP); and market capitalization (MCAP) as explanatory variables while the response variable was Earnings per Share (EPS) of the pharmaceutical firms in Nigeria. The study adopted ex-post facto research design and employed Ordinary Least Squares (OLS) panel regression analysis techniques. Relevant diagnostic tests such as Levin, Lin and Chu t* unit root test, panel cointegration, Autocorrelation, and Pearson Product Moment Correlation (PPMC) analysis technique were performed. Electronically, the data analysis was aided by Eviews 10.0 econometric package. Findings revealed that the relative effects of the selected indicators were positive but statistically insignificant (p>0.05) with respect to Earnings per Share (EPS) of pharmaceutical firms in Nigeria. Meanwhile, individually. Also, the study provided evidence that financial deepening indicators move freely to financial performance of the pharmaceutical firms in Nigeria. The implication of the finding is that financial deepening helps pharmaceutical firms’ growth in Nigeria but not substantially. Based on these findings, it was recommended among other things that financial deepening should be encouraged since it triggers the performance of pharmaceutical firms and overall economic growth of Nigeria