Nigerian Journal of Banking and Financial Issues (NJBFI)

EFFECT OF REMUNERATION ON BUSINESS GROWTH IN THE 21ST CENTURY: A CASE STUDY OF MANUFACTURING FIRMS IN NIGERIA

Abstract

This study investigated the effect of remuneration on business growth in the 21st Century. The study specifically examined the effect of remuneration (measured in terms of salaries and employee benefits) on asset growth and sales growth of selected quoted manufacturing firms in Nigeria. For empirical analysis, two models were formulated to capture effect of remuneration on the two measures of business growth, asset growth and sales growth. Data used for these were then extracted from annual financial reports of ten selected quoted manufacturing firms in Nigeria, and data were analyzed with correlation and panel regression (pooled OLS, fixed effect estimation and random effect estimation) analysis methods. Result of fixed effect estimation for Model 1 showed that remuneration had significant positive effect on asset growth rate of selected manufacturing firms in Nigeria. Result of random effect estimation for Model 2 also indicated that remuneration has insignificant positive effect on sales growth of selected manufacturing firms in Nigeria. Hence, the study concluded that remuneration has significant effect on business growth in manufacturing firms in Nigeria. However, it was identified that the relativity of remuneration system among firms seems to be the main factor responsible for this outcome. Therefore, this study recommended among others that government as a beneficiary to firm growth should put in place appropriate remuneration system for private sector of the economy in order to minimize the gap in payment.