Return on Equity, Return on Asset and Stock Returns Behavior of Quoted Manufacturing Firms in Nigeria

Abstract

The study was carried out to examine the relevant of Returns on Equity (ROE) and Returns on Asset (ROA) in influencing Stock Returns as well as behavior in the capital market as they relate to manufacturing firms listed on the floor of the Nigerian Exchange Group for the period 2015 to 2025 (11 Years). This is premise on the grounds that theoretical evidence proofs these performance indicators drive investment decision propelled by stock returns. Ex-post facto research design was adopted to explore time-series data from nine (9) selected manufacturing companies with all the relevant data required for the study. Data collected were subjected to various econometric tests to ensure normality, and avoid spurious outcomes. Descriptive and inferential statistics were used for the analyses using OLS regression model. Results revealed stability of data set, absence of multicollinearity and non-violation of the assumption requisite for an econometric analysis. The two predictor variables had positive coefficients (ROE – 𝛽 =0.00152; ROA – 𝛽 = 0.00792) implying very weak influence on stock Returns, woth P- values greater than 0.05 (ROE = 0.1552, and ROE = 0.1708) which are statistically insignificant. It was concluded that these financial indicators were not good propellers of stock returns, and recommended that investors assess other macro-economic factors and business ecosystem when decisions to invest arise.