Financial performance of locally owned construction firms in southwestern Nigeria

Abstract

Purpose

This paper aims to appraise a decade (2004-2013) of annual financial statements of 58 locally owned construction firms’ (LOCOFs’) financial statements on turnover, fixed assets, gross profit and after-tax profit to assess their financial performance in the Nigerian construction industry. It serves as a check on firms’ financial performance, analysis and benchmarking of LOCOFs’ financial statement values to assess firms’ financial health and psychosocial environment.

Design/methodology/approach

A purposively sampled frame of 580 LOCOFs’ financial values (turnover, fixed asset and gross profit) from 212 turnover, 207 fixed assets, 184 gross profit and 217 after-tax profit data points was obtained. Firms’ capacities were obtained by categorisation, industrial average median was obtained and a regression analysis was used to describe the relationship and test of significance of the variables. A review of the possible effect of the research findings on LOCOFs’ psychosocial environment was undertaken.

Findings

Most LOCOFs were categorised as micro scale construction contracting business enterprises. LOCOFs’ financial performance was less than the performance of similar construction firm types and profits were not necessarily influenced by the cost of its investments on fixed asset but rather on firms’ turnover.

Research limitations/implications

A limitation of this study is the paucity of financial data because of poor information access and storage.

Practical implications

The paper recommends more funding of infrastructural developmental projects and better patronage of LOCOFs which will positively influence firms’ turnover, profit and the psychosocial well-being of organisation and personnel.

Originality/value

This paper fulfils an identified need to periodically assess LOCOFs’ financial values so as to appraise financial performance and its possible effect on firms’ psychosocial environment.

Citation

Oladimeji, O. and Aina, O.O. (2018), "Financial performance of locally owned construction firms in southwestern Nigeria", Journal of Financial Management of Property and Construction, Vol. 23 No. 1, pp. 112-128. https://doi.org/10.1108/JFMPC-01-2017-0003