Stock Price Volatility and Corporate Financial Performance of Manufacturing Firms in Nigeria

Abstract

This study investigates the empirical relationship between stock price volatility and the corporate financial performance of listed manufacturing firms on the Nigerian Exchange Group (NGX) from 2014 to 2024. Using a panel data approach, the study measures financial performance through Return on Assets (ROA) and Return on Equity (ROE), while stock price volatility is captured using the Generalized Autoregressive Conditional Heteroskedasticity (GARCH 1,1) model. Control variables include firm size, leverage and asset growth. Panel Fixed Effects and System Generalized Method of Moments (GMM) estimation techniques are applied to control for unobserved heterogeneity and endogeneity. The empirical findings reveal a significant negative relationship between stock price volatility and both ROA and ROE, suggesting that equity market instability diminishes corporate performance by increasing the cost of capital and deterring long-term investment. Firm size exhibits a positive impact while leverage negatively affects performance. The study recommends that manufacturing firms adopt robust risk-management frameworks to hedge against market shocks and urges the Securities and Exchange Commission (SEC) to implement policies that stabilize equity pricing on the Nigerian Exchange Group.