Cost of Capital and Corporate Governance of Privatised Cement Company of Northern Nigeria

Abstract

The study examines the Cost of Capital and Corporate Governance of Privatised Cement Company of Northern Nigeria. The variables used were leverage ratio as proxy of cost of capital and Corporate Governance proxies as independent variables. Data was obtained from the secondary sources, and the statistical tools employed in the Methodology were; Performance Trend Analysis and OLS regression. The trend analysis result reveals that, post-privatization period has lower cost of capital, government relinquished ownership in totality, and foreign ownership has concentration shares, low work force. Percentage of non-management staff declined shapely, while, pre-privatization periods has smaller board size and percentage of management staff. In both periods, board chairman was not the CEO and Chairman Audit Committee was a non-executive director. Comparatively, cost of capital was higher pre-privatization period. The inferential statistic result reveals that, Privatization policy, workforce, board size have positive and significant impact on company’s cost of capital. While Total Market Value of Shares and Percentage of Non-Executive Directors have negative and significant impact on company’s cost of capital. However, the minority ownership has positive and insignificant impact on company’s cost of capital. The study recommends that, Nigerian government should ensure favourable macroeconomic environment such as stable exchange rate and low interest rate. The post privatization corporate governance has to be using retained earnings for further investment and running cost to avoid unnecessary financial burden due to high cost of capital in Nigeria. The findings may be useful to corporate stakeholders and government policy makers.