Evaluation of Return on Assets on Market Capitalization of Quoted Construction/Real Estate and Conglomerate Companies in Nigeria

Abstract

The firm assets earning power has been a subject of discussion globally in relation to the value of a firm due to various decisions of managers and the effect it has on company’s performance. Various corporate actions and information about the companies are disseminated over time and studies have shown the effect on firms’ value. This study examined the effect of return on asset on market capitalization of listed construction/real estate and conglomerate companies in Nigeria. The study adopted ex-post facto research design. A sample of 8 construction/real estate and 5 conglomerate companies from a target population of 168 firms listed on the Nigerian Stock Exchange (NSE) during the study period (2010-2018) was purposively drawn. The study used secondary data from the NSE, CBN and companies’ data on the Bloomberg Terminals. Validity and reliability were premised on the statutory audit of the financial statements. The data was analyzed using (Correlation and Regression) statistics. The findings in this study shows that return on asset has significant effect on the market capitalization of the selected quoted construction/real estate and conglomerate companies in Nigeria. This study recommends that the construction/real estate and conglomerate companies should create policies that will encourage proper utilization of its assets for a better return which will encourage investors and subsequently the firms’ value.