Firm Value Behavior in Nigeria’s Agro-Allied Sector Under Varying Profitability Levels

Abstract

Many listed agro-allied firms in Nigeria struggle to translate profits into meaningful market value, leaving investors uncertain and the sector vulnerable to financial instability. This disconnect undermines growth, weakens investor confidence, and threatens the survival of companies that are crucial to food production and economic development. Hence, the study examined the influence of profitability on the firm value of listed agro-allied companies in Nigeria. The study adopted an ex-post facto research design, utilizing historical data from the financial statements and annual reports of five listed agro-allied firms, namely Ellah Lakes, FTN Cocoa Processor, Livestock Feeds, Okomu Oil Palm, and Presco. Secondary data spanning the period 2015 to 2024 were collected and analyzed. Diagnostic tests for multicollinearity, heteroscedasticity, and cross-sectional dependence were performed, and the panel Generalized Least Squares method with cross-sectional Seemingly Unrelated Regression was used to test the hypotheses. The findings revealed that profitability has a negative and significant effect on firm value (b = -0.0000405, p = 0.0072). Thus, higher short-term profits may not always align with market perceptions of long-term value for agro-allied companies in Nigeria. The study recommended that the management of agro-allied firms in Nigeria should adopt financial and operational strategies that convert accounting profits into sustainable shareholder value. Specifically, managers should ensure that profits are efficiently utilized through productive reinvestment in growth-oriented projects, modernization of production facilities, expansion into new markets, and improved cost management practices rather than allowing profits to accumulate without clear strategic direction.