AKANI, Elfreda Nwakaego
Department of Banking and Finance
Rivers State University Port Harcourt
elfreda.akani@ust.edu.ng
KUROTAMUNOBARAOMI, Tamunosiki
Department of Accountancy
Port Harcourt Polytechnic, Port Harcourt.
sikilization@gmail.com
ABSTRACT
This study examined the relationship between agency problems and corporate value in Nigeria. Agency
problem being measured by executive effort, assets structure, overinvestment and risk preference, while
corporate value was proxied by net book value. The study examined the relationship between executive
effort, assets structure, overinvestment and risk preference on one hand, and net book value on the other by
obtaining secondary panel data from the Nigeria Exchange Group and the annual reports of the 21 consumer
goods manufacturing companies in Nigeria. Several analytical techniques that include panel regression
model, cointegration and causality test were employed to analyse the data. From the results we found that
overinvestment has an inverse relationship with net book value, while risk preference, executive effort and
assets structure have direct relationships with net book value; with the relationships relating to
overinvestment and assets structure being insignificant, while those of risk preference and executive effort
being significant. The results further showed long run relationship among the variables, and a unidirectional causality that stems from risk preference to net book value. Based on these findings, it was
recommended that regardless of the motivation, only projects with positive net present values should be
considered for investment, performance targets should be reviewed periodically and incentivised, and
calculated risks can be taken in investment choices.
Keywords: Agency problem, corporate value, executive effort, overinvestment, risk preference.