THE EFFECT OF COMMODITY PRICE CHANGES ON FIRM VALUE: STUDY OF FOOD AND DRINKS SERVICE INDUSTRY IN NIGERIA (Published)
This paper examines the effect of commodity price changes on firms’ value in the food and beverage industry in Nigeria given the frequent changes in the prices of raw materials and inflation. Using the descriptive survey research design, the study focused on secondary data obtained from the annual reports of 11 firms registered on the stock exchange, whose records provided the information required for the study. Revenue, cost of sales, and stock price were computed in order to represent company price of commodity from 2009 to 2013; while firm value comprises Earnings per Share, Earnings before Interests and Taxes and Total Assets. Findings indicate, a significant positive relationship between commodity price and firm value (p<0.05); a joint relationship between revenue, cost of sales, stock price and firm value (p=0.000); a positive slope (B= 0.221) suggesting that an increase in commodity price between 2009 and 2013, led to a proportional increase in firm value. This implies that due attention has to be paid to the issue of raw material sourcing and pricing in Nigeria. Conclusively, price fluctuation, no matter how little or much, will directly impact the price of raw materials and production of goods and services. Government and management of these industries need to pre-empt raw material price fluctuations in order to have a stable and progressive returns from investment. Arbitrary pricing of products is detrimental to progressive firm performance where market is competitive
Keywords: Firm Value, Performance, Price fluctuations, Relationship