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Abstract: This study
investigated the effect of market returns and macroeconomic factors on the
stock prices of Nestle Plc in Nigeria. The main objective was to examine the
impact of external macroeconomic shocks on equity valuation, considering the
critical controlling roles of internal profitability and operational scale.
Specifically, the study analyzed the trends of equity pricing; determined the
effect of market returns, inflation, and interest rates on stock prices; and
assessed the impact of firm-specific characteristics, such as firm size and
earnings per share, on these market valuations.
The study
adopted an ex-post facto research design. Time-series quarterly data covering a
fifteen-year period from 2010 to 2024 were sourced from the Central Bank of
Nigeria (CBN) Statistical Bulletin, the Nigerian Exchange Group (NGX), and the
published audited financial reports of Nestle Nigeria Plc. Data were analyzed
using descriptive statistics, Augmented Dickey-Fuller unit root tests, the
Autoregressive Distributed Lag (ARDL) bounds testing approach, and the Error
Correction Model (ECM). All hypotheses were tested at the 0.05 level of
significance.
Results from
the ARDL long-run estimation showed that the inflation rate had a highly
significant negative impact on Nestle's stock price (β = -0.0620, p = 0.0000),
while market returns (β = 0.0170, p = 0.0021) and interest rates (β = 0.0423, p
= 0.0259) exhibited significant positive impacts. Regarding the internal
firm-specific controls, firm size had a highly significant positive impact on
the stock price (β = 0.7541, p = 0.0000). The model yielded an R² = 0.9745.
Furthermore, the ARDL bounds test established a significant long-run
equilibrium relationship among the variables (F-statistic = 5.23), with an
error correction adjustment speed of 38.58% per quarter following macroeconomic
shocks.
The study concluded that massive operational scale and internal efficiency serve as the primary drivers of market valuation for Nestle Plc, whereas severe domestic inflation operates as a value-destroying force, invalidating the premise of equities as a natural inflationary hedge. Recommendations include advising investors to aggressively prioritize highly capitalized entities to buffer against systemic volatility, urging corporate management to pursue supply-chain efficiency to insulate internal profitability from inflation, and directing economic policymakers to prioritize strict inflation targeting to prevent the continuous erosion of corporate equity value. DOI: https://doi.org/10.51505/IJEBMR.2026.10514 |
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