Between Capital Intensity and Financial Performance: Insights from Quoted Agricultural Firms in Nigeria

Abstract

This study critically examines the nexus existing between capital intensity and the financial performance of the five publicly traded agricultural companies on the Nigerian Exchange Group. The research specifically investigated how the proxies of capital intensity (investment ratio, property, plant and equipment ratio and intangible ratios) connects and influences the determinant of financial performance (return on assets). The study embraced the ex post facto design, employing a ten year(2014-2024) period of panel data collated from the annual financial reports of the firms. The data were initially estimated via the hausman specification tests and eventually analysed through the instrumentality of the ordinary least squares regression model. The findings reveal a negative and insignificant relationship between the intangible ratio and return on assets indicating that in investments in intangibles does not translate to higher returns on assets. Conversely, the connection between investment ratio and return on assets was found to be positive and statistically significant suggesting that investments in properties leads to improved financial performance. In the same vein, the property, plant and equipment ratio had a positive and significant relationship confirming that tangible fixed assets enhances return on assets. In conclusion, the study recommends that funds diverted to investments should be strengthened while there should be effective utilization of the potentials inherent in intangibles as well as investing heavily on fixed assets so as to increase the productivity of the agricultural firms.