The Impact of Cost of Capital on Market Value of Manufacturing Companies in Nigeria


IWEDI,  Marshal1 ONWUSIRIBE, Chigozirim Ndubuisi2 & EDEH, Mark Bekweri3

1Department of Banking and Finance Rivers State University, Port Harcourt, Nigeria

2Department of Agribusiness & Management Michael Okpara University of Agriculture Umudike, Abia State, Nigeria

3Department of Banking and Finance Rivers State University, Port Harcourt, Nigeria

Correspondence: [email protected][email protected]

Received: February 19, 2023     Revised: May 25, 2023     Published: August, 15, 2023


This study examined the influence of the cost of capital on the market value of manufacturing companies that are listed on the Nigerian Exchange Group. The researchers assessed the cost of capital by considering the cost of debt, the cost of equity, and the weighted average cost of capital. The market value of the companies was approximated using their share prices. To select the sample, the researchers used purposive sampling and chose 15 manufacturing firms out of a total of 63 listed firms. They collected panel data from 2007 to 2021 from the Nigerian Exchange Limited fact sheet and the Annual Financial Reports of the companies. Descriptive and inferential statistics were employed to analyze the data, and various econometric techniques were utilized, including Unit Root Test, Co-integration Test, Granger Causality Test, and Panel data regression. To determine the most suitable analysis method, three regression techniques were employed: ordinary least square with a pool effect, fixed effect, and random effect regression. The fixed effect model was ultimately used for interpretation and discussion. The findings indicated that the impact of debt cost on market value was not substantial, whereas equity cost displayed a positive and statistically significant correlation with market value. Moreover, the study discovered no causal connection between firms’ market value and the weighted average cost of capital, implying that changes in the weighted average cost of capital did not influence the market value of the companies. Consequently, the study concludes that the cost of capital plays a significant role in determining the market value of manufacturing firms in Nigeria. It is recommended that company management thoroughly analyze all factors influencing market value and devise strategies to optimize value by effectively utilizing both debt and equity.


Keywords: Cost of capital, cost of debt, cost of equity, weighted average cost of capital, Market value, manufacturing firms, Nigeria

Download the  PDF Document



Marshal, I., Ndubuisi, O. C., & Bekweri, E. M. (2023). The Impact of Cost of Capital on Market Value of Manufacturing Companies in Nigeria. Eurasian Journal of Management & Social Sciences, 4(1).

©Marshal, I., Ndubuisi, O. C., & Bekweri, E. M, Published by EJMSS. This article is published under the Attribution-NonCommercial 2.0 Generic (CC BY-NC 2.0) license. Anyone may copy and redistribute the material in any medium or format, subject to full attribution to the original publication and authors. The full terms of this license may be seen at


Abdul Sattar, M. S. (2015). Cost of capital – the effect to the firm value and profitability: Empirical evidences in case of personal goods (Textile) sector of KSE 100 Index. Journal of Poverty, Investment and Development, 17, 24-28. Available from

Achebelema, D.S (2019).Cost of capital and optimal financing of corporate growth of selected manufacturing firms listed on the floor of Nigerian stock exchange. Asian Finance & Banking Review, 3(1), 12-23.

Ahmed, W., Khan, H. H., Rauf, A., Ulhaq, S., Bano, S., Sarwar, B., & Durrani, M. N. (2021). Simultaneous equation estimation in finance and corporate financial decision: Empirical evidence from Pakistan stock exchange. The Journal of Asian Finance, Economics and Business8(3), 11-21.

Al-Tamimi, K. A. M. & Obeidat, S. F. (2013). Impact of cost of capital, financial leverage, and the growth rate of dividends on rate of return on investment: An empirical study of Amman Stock Exchange. International Journal of Academic Research in Economics and Management Sciences, 2(4), 59-69.

Belkhir, M., Naceur, S. B., Chami, R., & Samet, A. (2021). Bank capital and the cost of equity. Journal of Financial Stability53, 100843.

BenNasr, H. A. M. D. I., Boubakri, N., & Cosset, J. C. (2012). The political determinants of the cost of equity: Evidence from newly privatized firms. Journal of Accounting Research50(3), 605-646.

Cappa, F., Oriani, R., Peruffo, E., & McCarthy, I. (2021). Big data for creating and capturing value in the digitalized environment: unpacking the effects of volume, variety, and veracity on firm performance. Journal of Product Innovation Management38(1), 49-67.

Chakravarty, D., & Mandal, S. K. (2020). Is economic growth a cause or cure for environmental degradation? Empirical evidences from selected developing economies. Environmental and Sustainability Indicators7, 100045.

Chen, D., Ignatius, J., Sun, D., Goh, M., & Zhan, S. (2020). Pricing and equity in cross-regional green supply chains. European Journal of Operational Research280(3), 970-987.

Dagogo, D.W., & Ajadi, S. K. (2021). Private cost of capital and incremental business value of mid-market firms. International Journal of Banking and Finance, 16(1), 1-20.

Denis, D. (2019). The case for maximizing long‐run shareholder value. Journal of Applied Corporate Finance31(3), 81-89.

Egileoniso D.J, & Iwedi, M (2020) Dividend policy and return on investment of quoted manufacturing firms in Nigeria. International Journal of Business & Law Research 8(2), 47-57

Farooq, M., Noor, A., & Ali, S. (2022). Corporate governance and firm performance: empirical evidence from Pakistan. Corporate Governance: The International Journal of Business in Society22(1), 42-66.

Gleißner, W. (2019). Cost of capital and probability of default in value-based risk management. Management Research Review.

House, W. C., & Benefield, M. E. (1995, March). The impact of sales and income growth on profitability and market measures in actual and simulated industries. In Developments in Business Simulation and Experiential Learning: Proceedings of the Annual ABSEL conference (Vol. 22).

Hussain, S. W., Ali, G. & Islam, Z. U. (2012). Impact of WACC on corporate profitability (A case study of the cement industry, Pakistan). Journal of Risk and Diversification, (4). 72 Retrieved from Profitability_A_case_study_of_cement_industry of pakistan

Ibrahim, M. & Ibrahim, A. (2015). The effect of SMEs’ cost of capital on their financial performance in Nigeria. Journal of Finance and Accounting, 3(1), 8-11. doi:10.12691/jfa-3-1-2.

Iheanachor, N., & Umukoro, I. (2022). Partnerships in digital financial services: An exploratory study of providers in an emerging market. Journal of Business Research152, 425-435.

Ivascu, E. V. & Barbuta-Misu, N. (2017). Influences of the capital structure and the cost of capital on financial Performance: Case study on ENGIE Group. In S. Hugues, & N. Cristache (Ed.), Risk in Contemporary Economy. Proceeding of the 18th LUMEN Proceeding, (pp. 304-320). Galati, Romania. doi:10.18662/lumproc.rce2017.1.26

Isaac, A. U & Iwedi, M. (2020) Capital budgeting and corporate financing decisions of selected quoted firms in Nigeria. International Journal of Innovative Finance and Economics Research 8 (2), 1-14

Khaled, A. M. A. & Samer, F. O. (2013). Impact of cost of capital, financial leverage and the growth rate of dividend on return on investment. An empirical study of Amman stock exchange; International Journal of Academic Research in Economics and Management Sciences, 2(4), 59-69.

Lilford, E. (2023). Natural resources: Cost of capital and discounting–Risk and uncertainty. Resources Policy80, 103242.

Lucky, L. A. (2017). Cost of capital and corporate earning of Nigeria quoted firms: A multidimensional analysis of quoted firms in Nigeria. Australian Finance & Banking Review, 1(2), 41-65. Retrieved from:[email protected]

Luo, Y., & Jiang, C. (2022). The impact of corporate capital structure on financial performance based on convolutional neural network. Computational Intelligence and Neuroscience2022.

Modigliani, F. & Miller, M. H. (1958). The cost of capital, corporation finance and the theory of investment. The American Economic Review, 48(3), 261-297. Accessed from…/terra_-_the_cost_of_capital_corporation_finance.pdf

Mohamad, N. A. & Saad, N. M. (2012) Cost of capital: The Effect to firm value and profitability performance in Malaysia. International Journal of Academic Research in Accounting, Finance and Management Sciences, 2(4), 353-361. Retrieved from

Moro Visconti, R., & Morea, D. (2019). Big data for the sustainability of healthcare project financing. Sustainability11(13), 3748.

Ogunmokun, O. C., Mafimisebi, O., & Obembe, D. (2022). Bank lending behaviour and small enterprise debt financing. Journal of Entrepreneurship in Emerging Economies, (ahead-of-print).

Ok, Y., & Kim, J. (2019). Which corporate social responsibility performance affects the cost of equity? Evidence from Korea. Sustainability11(10), 2947.

Park, J. J. (2021). From Managers to Markets: Valuation and Shareholder Wealth Maximization. J. Corp. L.47, 435.

Pesaran, M. H. (2012). On the interpretation of panel unit root tests. Economics Letters116(3), 545-546.

Purbawangsa, I. B. A., Solimun, S., Fernandes, A. A. R., & Mangesti Rahayu, S. (2020). Corporate governance, corporate profitability toward corporate social responsibility disclosure and corporate value (comparative study in Indonesia, China and India stock exchange in 2013-2016). Social Responsibility Journal16(7), 983-999.

Rahman, F. (2022). Impact of WACC on firm profitability: Evidence from the food and allied industry of Bangladesh. European Journal of Business and Management Research, 7(6), 89-92.

Raimo, N., de Nuccio, E., Giakoumelou, A., Petruzzella, F., & Vitolla, F. (2020). Non-financial information and cost of equity capital: An empirical analysis in the food and beverage industry. British Food Journal123(1), 49-65.

Rasheed, R., & Siddiqui, S. H. (2019). Attitude for inclusive finance: influence of owner-managers’ and firms’ characteristics on SMEs financial decision making. Journal of Economic and Administrative Sciences35(3), 158-171.

Setyawan, I. R. (2015). An empirical study on market timing theory of capital structure. International Research Journal of Business Studies4(2).

Sharma, A. (2012). Cost of capital and profitability analysis: A case study of telecommunication industry. Journal of Commerce and Accounting Research, 1(4), 42-50. Retrieved from

Syriopoulos, T., Tsatsaronis, M., & Gorila, M. (2022). The global cruise industry: Financial performance evaluation. Research in Transportation Business & Management45, 100558.

Torres-Reyna, O. (2007). Panel data analysis fixed and random effects using Stata (v. 4.2). Data & Statistical Services, Priceton University112, 49.

Zakirova, A., Klychova, G., Ostaev, G., Zaugarova, E., Nigmetzyanov, A., & Zaharova, E. (2020). Organizational and methodological approach to managing financial flows of agricultural enterprises. In E3S web of conferences (Vol. 164, p. 10009). EDP Sciences.

Visits: 103