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    • regorafenib side effects High level of bank concentration ca

    2018-10-29

    High level of bank concentration can serve as a constraint to corporate investment because little or no regorafenib side effects is a barrier when obtaining loan from bank. Investors would be induced to bribe bank officers (this happens when there is weak institution); which serves as an incentive for quick accessibility of investible fund. It is believed that weak institution may affect free entry in an industry (Di Tella, 1997). If the degree of bank competition increases it can lower overheard cost, but the presence of competition in an industry may not improve the institutions. Following this assertion, we also include a measure of bank competition variable (HHI) and the interaction term (IQ*HHI) in our model as shown in Eq. (6).where, = Represent co-efficient of explanatory variables, = Error term representing other explanatory variables that were not captured, I = Investment, Q = Tobin׳s Q, K = Capital stock, LV = Leverage ratio, CA = Cash flows, LQ = Stock of Liquid financial assets, S = Sales, IQ = measure to examine the efficiency of Institutional Quality (such as perceived corruption, political stability, regulatory quality, and control of corruption), HHI = Bank competition.
    Results and discussion The descriptive statistics of Table 1 shows that the mean value of ratio of investment to capital is 1.13 while the level of volatility is 32.67. Also, the leverage ratio is 0.82 on average with volatility of 1.416. The mean of Tobin-Q is 1.71 with maximum of 96.1 and the results show that the minimum value is -32.9. The average value of corruption perception index is 2.15 with low volatility rate of 0.44. This reflects the high level of corruption in the country. The average of the Herfindhal-Hirschman Index is 0.055. It means the level of bank competition is low in Nigeria, although, the industry is highly regulated. It reflects maximum of 0.097 and minimum of 0.009. The level of volatile is 0.023. Table 2 reports the results of the estimated equation. It gives evidence to support the standard investment models. It shows how significance is the firm-specific factors influence corporate investment in Nigeria. The model 1, 2 3 show that value of Cash flows and Sales are significant at 1%. This shows that using internally generated funds (which is highly correlated with profits), will improve the investment activities of firms; especially firms that are more sensitive to cash flow. The coefficient of leverage is negative. It implies that the more firms resort to external source of finance, the lower their investment activity level and not statistically significant. This shows that a greater portion of firms’ cash flows must be used to meet interest payments on debt. Should cash flows fall, firms may not be able to meet these obligations. To do so, they may need to curtail investment and employment. Higher leverage can discourage investment by, for example, raising the cost of obtaining further external finance; higher cash flows will boost investment by providing more, relatively cheap, internal funds and increasing the collateral backing of firms. As seen in Table 2, we first include corruption index and competition index in the model and, estimate along with firm-specific factors, the coefficients of corruption and bank competition are negative and not significant in the determination of corporate investment. The insignificant relationship between corruption and investment supports the view of Wang and You (2012) who start that corruption appears not to be a vital constraint on firm growth and investment if financial markets are underdeveloped. Low bank competition makes credit accessibility difficult (Emerson, 2006). Also, when the two institutional variables (i.e. corruption and bank competition) are interacted, the result shows positive relationship with investment. It means investments are made not on the basis of their rates of return but on the capacity of the entrepreneur to pay bribes for the purpose of getting loan in the banking industry.