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Effect of Asset Growth on the Market Value of Listed Companies in Nigeria

Abstract

Asset growth is an important indicator of corporate expansion that reflects the increase in a company's total assets over time. It provides an indication of the extent to which a company is expanding its resource base through investments in property, plant and equipment, intangible assets, inventories, receivables, and other productive resources. Market value represents the value assigned to a company by investors based on its financial performance, future growth opportunities, risk profile, expected returns, and other relevant information available in the capital market. Asset growth may influence market value by signalling expansion, increased productive capacity, stronger future revenue-generating potential, and improved competitive positioning. However, rapid asset growth may also create concerns where additional assets are inefficiently utilized, financed through excessive debt, or fail to generate sufficient returns. In Nigeria, listed companies operate in an economic environment characterized by inflation, exchange rate volatility, high financing costs, rising operating expenses, changing consumer demand, and economic uncertainty. These conditions can affect companies' investment decisions, asset acquisition costs, productive capacity, and market valuation. Effective management and utilization of growing assets are therefore important for sustaining corporate value. Regulatory institutions such as the Financial Reporting Council of Nigeria (FRCN), the Securities and Exchange Commission (SEC), and the Nigerian Exchange Group (NGX) promote transparent financial reporting and corporate governance practices that enable investors and other stakeholders to evaluate the financial position and growth prospects of listed companies. Despite these regulatory efforts, listed companies differ significantly in their asset growth patterns and market valuations, raising questions about whether asset expansion translates into increased market value. Although previous studies have examined firm growth, investment, asset structure, and firm value, empirical evidence regarding the effect of asset growth on the market value of listed companies in Nigeria remains limited and inconclusive. Against this background, this study investigates the effect of asset growth on the market value of listed companies in Nigeria. The study is anchored on the Resource-Based View (RBV), Signaling Theory, and Tobin's Q Theory of Investment. The Resource-Based View suggests that valuable and efficiently managed assets can provide firms with productive capabilities and competitive advantages that enhance long-term corporate value. Signaling Theory suggests that sustained asset growth may communicate positive information to investors concerning expansion opportunities, management confidence, productive capacity, and future earnings potential. Tobin's Q perspective explains that market valuation may reflect investors' assessment of the relationship between the market value of a firm's assets and their replacement cost, thereby linking investment and asset expansion with market valuation. Collectively, these theoretical perspectives provide a comprehensive framework for explaining the relationship between asset growth and the market value of listed companies in Nigeria. The study adopts a quantitative research design using a structured questionnaire administered to chief financial officers, finance managers, accountants, financial controllers, investment analysts, portfolio managers, fund managers, internal auditors, external auditors, and other professionals involved in corporate financial management and investment decisions within selected listed companies in Nigeria. A stratified random sampling technique will be employed to ensure adequate representation of companies operating in the financial services, manufacturing, consumer goods, industrial goods, oil and gas, telecommunications, agriculture, healthcare, and other sectors listed on the Nigerian Exchange Group (NGX). Asset growth will be measured using the percentage change in total assets, growth in property, plant and equipment, expansion of productive assets, growth in current assets, investment in intangible assets, and overall expansion of the corporate resource base, while market value will be measured using market capitalization, Tobin's Q, price-to-book ratio, share price performance, and overall market valuation. Primary data collected from respondents will be analyzed using descriptive statistics to summarize respondents' demographic characteristics and perceptions regarding asset growth and market value. Structural Equation Modeling (SEM) will be employed to examine the effect of asset growth on market value. The measurement model will be evaluated using Cronbach's Alpha, Composite Reliability (CR), Average Variance Extracted (AVE), and Confirmatory Factor Analysis (CFA) to establish the reliability and validity of the research instrument. Additional diagnostic tests, including multicollinearity assessment, common method bias analysis, and model fit indices such as the Comparative Fit Index (CFI), Tucker-Lewis Index (TLI), Root Mean Square Error of Approximation (RMSEA), and Standardized Root Mean Square Residual (SRMR), will be conducted to ensure the adequacy, consistency, reliability, and robustness of the structural model. The study anticipates that asset growth will have a significant positive effect on the market value of listed companies in Nigeria. Sustained growth in assets is expected to increase productive capacity, expand operational scale, create opportunities for revenue growth, and strengthen the ability of companies to respond to changing market conditions. Investors may interpret consistent asset expansion as an indication of management's confidence in future business prospects and the company's ability to generate additional earnings from its investments. Consequently, companies with efficient and profitable asset growth may attract greater investor confidence and experience higher share prices and market valuation. However, asset growth that is not accompanied by corresponding improvements in revenue, profitability, cash flows, or asset utilization may raise concerns regarding inefficient investment, overcapacity, excessive borrowing, or poor capital allocation. Such inefficient growth may negatively affect investor perceptions and market value. Therefore, the effect of asset growth on market value is expected to depend significantly on the quality, productivity, and efficiency of the assets acquired. Overall, sustainable and efficiently managed asset growth is expected to contribute significantly to increased market value and shareholder wealth among listed companies in Nigeria. This study is expected to make significant theoretical and empirical contributions to the literature on corporate growth, financial accounting, investment, corporate finance, and capital market valuation by providing comprehensive evidence on the relationship between asset growth and the market value of listed companies in Nigeria. Unlike previous studies that broadly examined firm growth, investment decisions, or asset structure, this research specifically evaluates asset growth as a determinant of market value using primary data and Structural Equation Modeling (SEM). The findings will provide valuable insights for listed companies, financial managers, accountants, investment analysts, auditors, investors, the Financial Reporting Council of Nigeria (FRCN), the Securities and Exchange Commission (SEC), the Nigerian Exchange Group (NGX), professional accounting bodies, policymakers, regulators, and academic researchers regarding the importance of sustainable asset expansion. The study will also provide evidence-based recommendations for improving capital allocation, strengthening asset utilization, evaluating investment opportunities, controlling inefficient expansion, and ensuring that asset growth contributes effectively to sustainable market value and shareholder wealth among listed companies in Nigeria.

Keywords: Asset growth, market value, listed companies, corporate growth, asset utilization, investment, firm value, shareholder wealth, Tobin's Q, Structural Equation Modeling (SEM), Nigeria.