Moderating Effect of Cost of Capital in the Investment Decisions–firm Value Nexus: Evidence from Nigeria’s Manufacturing Sector
Yare Gloria Gamu *
Financial Management Department, College of Private Sector Accounting, ANAN University, Kwall, Plateau State, Nigeria.
Ovbe Simon Akpadaka
Financial Management Department, College of Private Sector Accounting, ANAN University, Kwall, Plateau State, Nigeria.
Dagwom Yohanna Dang
Public Sector Accounting Department, College of Public Sector Accounting, ANAN University, Kwall, Plateau State, Nigeria.
Tamunonimim Ngerebo-a
Public Sector Accounting Department, College of Public Sector Accounting, ANAN University, Kwall, Plateau State, Nigeria.
*Author to whom correspondence should be addressed.
Abstract
This study examines the moderating role of the Weighted Average Cost of Capital (WACC) on the relationship between investment decisions—specifically in Property, Plant, and Equipment Assets (PPEAI) and Inventory Investment (II)—and firm value in Nigeria’s manufacturing sector. Using panel data from 42 manufacturing firms listed on the Nigerian Exchange Group (NGX) from 2013 to 2023, the study applies fixed-effects panel regression and interaction models to evaluate how WACC influences investment effectiveness. The findings reveal that PPEAI has a positive and significant effect on firm value, whereas II shows a negative and significant direct effect. Furthermore, WACC negatively moderates the PPEAI–firm value relationship while positively moderating the II–firm value relationship. These results underscore the critical role of costsof capital in shaping corporate investment outcomes. The study offers theoretical contributions grounded in the Dynamic Investment Theory, Pecking Order Theory, and Resource-Based View, while also providing actionable recommendations for corporate managers and policymakers seeking to enhance firm value through cost-effective investment strategies.
Keywords: Weighted average cost of capital, investment decisions, firm value, manufacturing sector