microsoft word rjfa-vol.14 no.6 2023 american interdisciplinary journal of business and economics issn: 2837-1909| impact factor : 4.6 volume. 9, number 2; april-june, 2022; published by: scientific and academic development institute (sadi) 8933 willis ave los angeles, california https://sadipub.com/journals/index.php/aijbe 58 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe socio-psychological investigation of the impact of corruption perception on tax noncompliance among ugandan smes festo m department of accounting and finance, school of business, college of business and management sciences, makerere university. kampala abstract: this study aims to explore the influence of perceptions of corruption on tax noncompliance behavior of small and medium taxpayers in uganda. the research proposes to fill the gap in the existing literature on tax compliance and investigate the impact of perceptions of corruption on self-employed managers from a socio-psychological lens. the study will use a sequential mixed-methods approach, integrating both qualitative and quantitative methods. uganda, being one of the most corrupt countries in subsaharan africa, is of specific interest for this research. the paper's main research questions focus on the relationship between perceptions of corruption, tax fairness, and tax noncompliance behavior among selfemployed taxpayers. the study is significant as it expands the theory of tax morale, identifies the impact of perceptions of corruption on tax compliance behavior, and aims to develop an extended and specific determinant of ugandan smes' income tax compliance behavior. the study aims to provide an evidence-based approach to improve tax compliance behavior in uganda, which could benefit uganda revenue authority and uganda as a country. keywords: perceptions of corruption, tax noncompliance behavior, small and medium taxpayers, tax morale, socio-psychological lens, mixed-methods approach, tax fairness, uganda 1. introduction this study aims to fill a recognized knowledge gap relating to tax compliance behaviour. it seeks to develop a deep understanding of how perceptions of national-level corruption influences tax compliance behaviour, and if so, to what extent. and although scholarly works in this area of tax compliance have identified a wider range of factors that influence behaviour, little attention has been paid to the influence of perceptions of corruption. in particular, what remains unclear is precisely how perceptions of corruption are systematically linked to intentional insight into, or fill a gap in, the existing literature in tax compliance behaviour by expansively exploring the influence of perceptions of corruption employing micro-level data analysis. a comprehensive analysis of small and medium (sme) individual taxpayers’ non-compliance behaviour with their tax obligations clearly requires, among others, an examination at both the administrative (i.e. a revenue body perspective) and sme (self-employment) levels. however, considering the social psychological models, festo m (2022) 59 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe it is argued that taxpayers’ decisions are the most relevant. this is the side of the question that this study attempts to address pragmatically. the design and conduct of this study will be built on the adoption of pragmatism as the philosophical research framework. this is because perceptions of corruption and tax compliance behaviour are considered as highly context-dependent, situational, and socially constructed. also, the scholarly researches that have systematically examined the impact of corruption on tax compliance behaviour are tentative. for these reasons, this framework will be applied by integrating both qualitative and quantitative methods. in particular, this study will adopt sequential, preliminary-contribution mixed methods, in that the findings of the first phase of the qualitative method will inform and develop the second quantitative approach. uganda is of interest for two reasons. first, uganda appears to be among the most corrupt of the major countries in sub-saharan africa (transparency international 2016, 2018). the global competitiveness survey report 2019 suggests corruption as the most challenging issue for conducting business in uganda (world economic forum). although uganda’s tax to gdp ratio has increased from 12 to 15.11 percent (ura, 2019) over the last two decades, it remains low compared to other countries in the region (tusubira, 2018; imf, 2011). besides, the percentage of income tax from smes to uganda’s gdp is below 1 percent (ura, 2018). overall, this evidence might provide a good opportunity to investigate the potential relationship between perceptions of corruption and the way smes behave. also, tax compliance behaviour is a multi-disciplinary and complex issue with a number of causes. however, we are motivated to seek a clearer and deeper understanding of what influences taxpayers’ behaviour in the very specific context of uganda. particularly, there is notice of a collective perception of pervasive corruption in uganda. coincidentally, there have been several corruption cases of public interest involving both public servants and tax officials in the past ten years (ura, 2018). it’s also clear that tax compliance behaviour may not be detached from corruption settings (alm et al. 2016). consequently, the fellow is personally enchanted to methodically explore the effect of this social phenomenon on taxpayers’ non-compliance behaviour by using both theoretical models and data-driven examinations. it’s our belief that an evidence-based approach and a better understanding of the implications of this phenomenon will be of great benefit to uganda revenue authority and uganda as a country, which is fraught to enhancing the level of taxpayer compliance. additionally, tax research is relatively new and while it typically has a high framework specificity, most of the existing literature in this area is inspired from advanced economies, another reason this study will make a contribution. although prior research identifies a number of factors that influence sme taxpayers’ compliance behaviour, they are not the focus for this study. rather, this study aims to deliver more consideration on how perceptions of corruption influence tax fairness and intentional tax non-compliance behaviour from a socio-psychological lens. the reason for this is that it has been contended that behavioural studies in tax compliance might improve tax compliance behaviour (kornhauser, 2007; cullis & lewis, 1997). thus, if the effects of this variable can be understood, it will be possible to establish an extended contextual and specific determinant of ugandan sme income tax’s compliance behaviour in particular, and wider knowledge of tax compliance behaviour in general, as well as suitable plans for its treatment. 1.1 scope of the study there is no single tax compliance theory that is widely accepted. and it has also been recognised that determining the factors that influence taxpayer behaviour, whether compliant or non-compliant, is difficult (oecd, 2010a, 2014b). hence, there is a consensus among researchers that no single variable or compliance festo m (2022) 60 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe model is known to exist that is capable of fully explaining tax compliance behaviour on its own (efebera et al. 2004). however, a number of conceptual models with a wide range of variables, have been entwined in an attempt to explain taxpayers’ compliance behaviour (alm, 1999; jackson & milliron, 1986). nonetheless, due to the limitation of research resources, to comprehensively include all these inherent factors is certainly beyond the scope of this study (oecd, 2010a; mckerchar, 2010). given the information in the foregoing paragraph, this study will be confined to the compliance behaviour of smes in the ugandan context in the informal and formal sectors. in relation to the purpose of the study, it will be assumed that perceptions can only be addressed at the individual level (mendes, 2004) hence the need to target owners and managers of these firms. also, completion of the tax returns is subject to various mental processes, including information processing and motivation which influence tax compliance (antonides & robben, 1995). second, in order to be able to undertake appropriate modelling, this study will only investigate the taxpayers’ compliance behaviour with respect to their annual tax return for the year 2019 and 2020. tax compliance outcomes in this study will focus on oecd’s (2014) classification of expected behaviour namely; correctly reporting income in the annual tax return. 1.2 research questions the main objects of this study can be reflected in three primary research questions: a) what is the extent of the relationship between perceptions of corruption and perceptions of tax unfairness among the self-employed? b) what is the level of the relationship between tax unfairness and tax non-compliance behaviour among the self-employed in uganda? c) what is the extent of the relationship between perceptions of corruption and tax non-compliance behaviour among the self-employed? 1.3 significance and justification with the systematic investigation, the findings will explain the relationship between perceived level of corruption and tax fairness in uganda, and the tax non-compliance behaviour of sme taxpayers. the study findings will make a contribution to both the theoretical and practical levels. on the theoretical level, this study expands the increasingly popular theory of tax morale (brink & porcano, 2016; cummings et al., 2009; frey and torgler, 2007; halla, 2012; jahnke, 2015; kornhauser, 2007; macgregor & wilkinson, 2012; mckerchar et al., 2013; yucedogru & hasseldine, 2016) by identifying the impact of perceptions of corruption have on tax fairness and tax compliance behaviour. furthermore, because deterrence theory often does not work well in practice (osofsky, 2014), to provide adequate explanation of the dynamic of tax compliance behaviour, an extension to the standard model is needed (ritsatos, 2014). although much is currently known about the determinants of tax compliance, the way by which perceptions of corruption influence tax compliance behaviour has not been clearly established. also, tentative studies have distinguished between grand corruption and petty corruption, as well as grand and petty tax corruption. it is envisaged that the outcomes of this study will do more than prove perceptions of corruption have an impact on tax compliance behaviour, but also will demonstrate how and in what ways these variables affect it. 2. theoretical and review of literature the economic model of tax compliance (allingham & sandmo, 1972) emphasises the severity of penalties and the prevalence of getting audited (mckerchar & evans, 2009). this is due to the fact that taxes are perceived in most instances as burdensome (hofmann et al. 2008) which as a consequence results in financial or other incentives not to comply. this non-compliance with the tax system leads to loss of tax revenue festo m (2022) 61 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe (lederman, 2003). several other strategies have been introduced to cope with the tax compliance within the psychological lens like trust in authorities (kirchler, hoelzl, & wahl, 2008), however, non-compliance still exists as a core world problem. to make a further contribution, the following questions need to be answered: 2.1 perceptions of corruption and tax fairness a number of studies (kirchler et al., 2008; saad, 2010; farrar, donnelly & dhaliwal, 2013; kogler, batrancea, nichita, pantya, belianin, & kirchler, 2013) have attributed tax compliance to the perceptions of tax system fairness that taxpayers hold. the authors believe that such a system would allow government to efficiently provide public goods and services to the citizenry and for tax authorities to enforce the law through fair procedures with impartiality. thus, a fair tax system would imply that taxpayers can then trust these authorities and their morale to pay taxes would improve. in addition, taxpayers are likely to accept governments and tax authorities, which legitimises their power of control over them (gangl, hofmann & kirchler, 2015). though, it is desirable to have a fair tax system, sustainability of such a system remains in balance because governments and tax authorities fail to pursue transparency and accountability of the public resources as well as tax procedures to support smooth tax compliance behaviour (kirchler, muehlbacher, kastlunger, & wahl, 2007; fjeldstad & tungodden, 2003). corruption might be one of the most significant factors that affect perceptions of tax system fairness as it enhances resource misallocation with no accountability and transparency. this makes public spending ineffective for social goals (hillman, 2004) hence an unfair tax system. 2.2 perceptions of tax fairness and tax non-compliance behaviour additionally, perceptions of corruption might determine a taxpayer’s intention to report their income as a result of perceived tax system unfairness. in fact, high levels of perceived tax system unfairness significantly influence intentional tax underreporting behaviour and hence tax evasion (alm, martinez-vazquez & mcclellan, 2016; saad, 2010). under such conditions businesses and individuals may experience lower incentive to willingly contribute (alon & hageman, 2013). in such cases, fairness is distorted as there isn’t fair and respectful treatment of taxpayers in administering taxes as well as the way government allocates resources for public expenditure (kirchler et al., 2008; feld & frey, 2007). corrupt practices by the authorities can corrode the ethics of taxpayers, hence destroying the trust which is generally built on the foundation of fairness and ethics (alm & torgler, 2011). low trust in the authorities due to tax system unfairness might reduce the tax morale and increase the chances of tax evasion. 2.3 perceptions of corruption and tax non-compliance behaviour there is a widespread perception that corruption creates inefficient tax systems, erodes tax collection legitimacy, reduces corporate and personal citizens’ willingness to pay their fair share of taxes. this as a result, lowers levels of tax collection (alm et al. 2016; tanzi, 2017). at a macro level, rosid, evans and trannam (2016) indicates that a positive correlation exists between less perceived corruption and higher share of tax revenue. this by implication means that high perceptions of corruption are likely to lead to tax noncompliance behaviour and lower tax revenue as a result. to overcome this challenge, scholars recommend that emerging economies need to prioritise reducing the extent of perceptions of corruption so as to enhance tax compliance (alm et al. 2016; bird, 2015). hence, there is need to examine the relationship between perceptions of corruption and tax noncompliance behaviour among the self-employed individuals that run the smes in uganda. festo m (2022) 62 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe 3. methodology 3.1 research design using a conceptual framework to derive the various research questions and testable hypotheses, this study will employ a cross-sectional research design using a sequential mixed methods approach (rosid et al. 2016). this is considered more appropriate for studying complex social phenomena such as tax compliance behaviour (devos 2014; mckercher, 2003; creswell 2007; bently 2008; bryman 2008). 3.2 the population, sample and analysis the study population shall be the accessible, experienced sme self-employed individual taxpayers or managers within the five regions of the country. this population is considered to be in better position to give insightful data and information concerning their compliance with the tax code. the respondents will be purposely selected because they interact with the tax system as well as the government service delivery system. a sample of 384 self-employed individuals and managers (krejcie & morgan, 1970) will be considered. mixed methods approach will be used and data will be analysed using thematic analysis and spss-amos version 25 for sem. before data collection, ethical clearance will be sought and consent shall be got from every respondent. utmost confidentiality will be observed. 4. dissemination and reporting finding from the study shall be disseminated through progress reports, seminar series, conferences, stakeholders’ workshops and journal articles. references ali, m., fjeldstad, o., & sjursen, i. h. (2014). to pay or not to pay? citizens’ attitudes toward taxation in kenya, tanzania, uganda, and south africa. world development, 64, 828–842. http://dx.doi.org/10.1016/j.worlddev.2014.07.006 alm, j., & torgler, b. (2011). do ethics matter? tax compliance and morality. journal of business ethics, 101, 635–651. doi 10.1007/s10551-011-0761-9 alm, j., martinez-vazquez, j., & mcclellan, c. (2016). corruption and firm tax evasion. journal of economic behavior & organisation, 124, 146-163. alon, a., & hageman, m. a. (2013). the impact of corruption on firm tax compliance in transition economies: whom do you trust? journal of business ethics, 116(3), 479-494. arif, i., & rawat, a. s. (2018). corruption, governance, and tax revenue: evidence from eagle countries. journal of transnational management, 23(2–3), 119–133. http://doi.org/10.1080/15475778.2018.1469912 attride-stirling, j. (2001). thematic networks: an analytic tool for qualitative research. qualitative research, 1(3): 385-405. bird, m. r., martinez-vazquez, j., & torgler, b. (2008). tax effort in developing countries and high income countries: the impact of corruption, voice and accountability. economic analysis and policy, 38(1), 55-71. festo m (2022) 63 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe bird, r. m. (2015). improving tax administration in developing countries. journal of tax administration, 1(1), 23-45. creswell, j. (2013). qualitative inquiry and research design: choosing among five approaches. los angeles: sage publications creswell, j.w. & poth, c.n. (2018) qualitative inquiry and research design choosing among five approaches. 4th edition, sage publications, inc., thousand oaks. farrar, j. m., donnelly, m. e., & dhaliwal, s. b. (2013). procedural aspects of tax fairness: a content analysis of canadian tax jurisprudence. the ata journal of legal tax research, 11(2), 21-37. feld, l. p., & frey, b. (2007), tax compliance as the result of a psychological tax contract: the role of incentives and responsive regulation. law and policy, 29(1), 102-120. fjeldstad, o. h., & tungodden, b. (2003). fiscal corruption: a vice or a virtue? world development, 31(8), 1459–1467. http://doi.org/10.1016/s0305-750x(03)00089-5 gangl, k., hofmann, e., & kirchler, e. (2015), tax authorities’ interaction with taxpayers: a conception of compliance in social dilemmas by power and trust. new ideas in psychology, 37, 13-23. hillman, a. l. (2004). corruption and public finance: an imf perspective. european journal of political economy, 20, 1067–1077. imf (2011), revenue mobilization in developing countries; policy paper prepared by the fiscal affairs department (8 march), washington d.c.: international monetary fund. jahnke, b., & weisser, r. a. (2018). how does petty corruption affect tax morale in sub-saharan africa? european journal of political economy, (september 2017), 1–17. kirchler, e., & braithwaite, v. (2007). interaction kaufmann between tax authorities and taxpayers. cambridge books online, 167-181. kirchler, e., hoelzl, e., & wahl, i. (2008), enforced versus voluntary tax compliance: the “slippery slope” framework. journal of economic psychology, 29(2), 210-225. kirchler, e., muehlbacher, s., kastlunger, s., & wahl, i. (2007), why pay taxes? a review of tax compliance decisions; developing alternative frameworks for explaining tax compliance, 07-30, 15-32. kogler, c., batrancea, l., nichita, a., pantya, j., belianin, a., & kirchler, e. (2013), trust and power as determinants of tax compliance: testing the assumptions of the slippery slope framework in austria, hungary, romania and russia. journal of economic psychology, 34, 169–180. kornhauser, m. e. (2007). normative and cognitive aspects of tax compliance: literature review and recommendations for the irs regarding individual taxpayers. 2007 annual report to congress, 138– 180. festo m (2022) 64 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe mckerchar, m. & evans, c. (2009), sustaining growth in developing economies through improved taxpayer compliance: challenges for policy makers and revenue authorities; ejournal of tax research, 7(2), 171201 rosid, evans & tran-nam (2016). do perceptions of corruption influence personal income taxpayer reporting behaviour? evidence from indonesia. ejournal of tax research, 14(2), 387425. saad, n. (2010). fairness perceptions and compliance behaviour: the case of salaried taxpayers in malaysia after implementation of the self-assessment system. ejournal of tax research, 8(1), 32-63. transparency international, (2016), corruption perceptions index 2016transparency international uk (2016). when is tax abuse corruption? the new official view of transparency international. tanzi, v. (2017). corruption, complexity and tax evasion. ejournal of tax research, 15(2), 144-160. world economic forum, the global competitiveness report 2019. insight report. microsoft word pagination_ida ayu wayan uttamagana.docx american interdisciplinary journal of business and economics issn: 2837-1909| impact factor : 4.6 volume. 9, number 3; july-sept, 2022; published by: scientific and academic development institute (sadi) 8933 willis ave los angeles, california https://sadipub.com/journals/index.php/aijbe 26 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe sustainable success: the crucial role of social and environmental responsibility in business performance grace wayan faculty of economics and business, udayana university, bali, indonesia, 80113 abstract: the increasing population in indonesia leads to a rise in energy consumption, which has a severe impact on the environment. to fulfill their social responsibility, companies in the industrial sector need to allocate a part of their profit to corporate social responsibility (csr) activities. this study aims to examine the moderating effect of the company's life cycle on the relationship between csr cost allocation and market performance. a quantitative research method was adopted, and the data was collected from 90 companies in the industrial energy sector listed on the indonesia stock exchange for the period 2017-2021. the moderated regression analysis was employed to analyze the data using e views software. the findings indicate a positive impact of csr cost allocation on market performance, whereas the company's life cycle did not affect this relationship. this research adds to the literature on the effect of csr cost allocation on market performance and provides insights and information for companies and investors. companies can enhance their market performance by paying attention to the allocation of csr costs, and investors can use this information to make informed investment decisions. companies that allocate funds to csr activities can improve their market performance. keywords: corporate social responsibility, market performance, life cycle, cost allocation, industrial energy sector, indonesia. introduction this study uses quantitative data in the form of annual financial reports for energy industry sector companies listed on the indonesia stock exchange for the 2017-2021 period obtained on the indonesia stock exchange's website, namely www.idx.co.id. based on the criteria in this study, the number of companies selected as research samples was 18 companies with 90 observed data. the financial report data used are the value of total assets, total equity, outstanding shares and related company cash flows. regarding the share price data for each company, it was obtained from the website www.finance.yahoo.com. this research technique is moderated regression analysis (mra) using e views. the dependent variable in this study is market performance. market value added (mva) as a measure of market-based company financial performance. the mva calculation is done by calculating the market value or company value minus the invested capital (aggerholm & trapp, 2014), written mathematically as follows: mva= (number of shares x market price) – total equity grace wayan (2022) 27 interdisciplinary journal of educational practice | https://sadipub.com/journals/index.php/ijep the independent variable in this study is csr cost allocation. the allocation of csr costs is the total funds spent to carry out corporate social responsibility. csr is the result achieved by the company as seen from the reciprocal activities that have been carried out by the company towards society and the environment. in this study, the proxy used to measure csr cost allocation is the csr cost ratio. mathematically, the csr cost ratio can be calculated using the following formula (pyo and lee, 2013): 𝑇𝑜𝑡𝑎𝑙 𝐶𝑆𝑅 𝐸𝑥𝑝𝑒𝑛𝑑𝑖𝑡𝑢𝑟𝑒 𝐶𝑆𝑅 𝐸𝑥𝑝𝑒𝑛𝑑𝑖𝑡𝑢𝑟𝑒 𝑅𝑎𝑡𝑖𝑜 = 𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑒𝑡 the moderating variable in this study is the corporate life cycle. the researcher uses a corporate life cycle proxy based on dickinson (2011) which captures different corporate life cycle stages. classification of sample companies into different corporate life cycle stages based on cash flow patterns using the following code: (1) introduction: if oancf < 0, ivncf < 0 and fincf > 0 then given code 1 (2) growth: if oancf > 0, ivncf < 0 and fincf > 0 then given code 2 (3) mature: if oancf > 0, ivncf < 0 and fincf < 0 then given code 3 (4) decline: if oancf < 0, ivncf > 0 and fincf or 0 then given code 4 (5) shake-out: if it is not included in the other four stages then it is classified in the shake-out stage by giving code 5 the mra model used to test the research hypothesis is. y = α + β1x1 + β2x2 + β3x1x2 + e………(1) results descriptive analysis is used to show the condition of the data in this study. the following is a summary of the results of the descriptive analysis of the dependent variable, namely market performance and the independent variable, namely csr cost allocation, the moderating variable, namely the corporate life cycle. table 1. descriptive statistics n minimum maximum mean std. deviation market performance 90 49,025 63,401 56,421 3,297 csr cost allocation 90 -12,618 -2,396 -7,736 2,393 corporate life cycle 90 1,000 5,000 3,144 1,223 source: data processed, (2022) the standard deviation of the csr cost allocation variable shows a value of 2.393. the standard deviation value which is higher than the mean value indicates that the distribution of information quality data is uneven. as for market performance and corporate life cycle variables, both have a standard deviation value that is lower than the average value, which means that the two variables have a normal distribution of data. the model significance test in this study was carried out through 3 stages. the first stage is the chow test, followed by the hausman test and the lagrange multiplier test. the results of the model significance test in this study are as follows: table 2. model significance test test rule of thumb results decision chow test fem vs cem cross-section chi-square prob (α<0.05 = fixed effect model, α>0.05= common effect model) 0,005 fem grace wayan (2022) 28 interdisciplinary journal of educational practice | https://sadipub.com/journals/index.php/ijep hausman test fem vs rem cross-section random prob. (α<0.05 = fixed effect model, α>0.05= random effect model) 0,028 fem source: data processed, (2022) the results of the chow test in this study show a probability value greater than 0.05, so the exact model used is the fixed effect model (fem). the results of the hausman test in this study indicate that the probability value is greater than 0.05, so the model used is the fixed effect model (fem). based on the results of the chow test and hausman test, researchers can conclude that the panel data regression model used is the fixed effect model (fem) to analyze the data in this study. the following table shows the results of the fixed effect model (fem) panel data regression analysis with the moderated regression analysis test used to analyze the t test, f test and coefficient of determination test (r2). table 3. hypothesis test variables coefficient t-statistics prob. c 61,205 21,090 0,000 csr cost allocation 0,790 2,127 0,037 corporate life cycle 0,479 2,029 0,046 csr cost allocation_ corporate life cycle -21,053 -0,992 0,325 adjusted r-squared 0,500 f-statistics 5,466 prob(f-statistics) 0,000 source: data processed, (2022) based on the calculations in table 3, it shows that this research model has a calculated f value of 5.466 and a probability value that is smaller than 0.05, namely 0.000. so it can be concluded that the csr cost allocation variable, the corporate life cycle, and the interaction variable between the csr cost allocation and the corporate life cycle simultaneously are significant explanations for the dependent variable, namely market performance. the independent variable csr cost allocation has a coefficient value of 0.790 with a t-count of 2.127 which is greater than the t-table of 1.663 and a probability value of 0.037 <0.05. this means that the csr cost allocation has a significant positive effect on market performance, which means that an increase in csr cost allocation will improve market performance. the results of this study are in line with research conducted by mardiandari and rustiyaningsih (2013); and yudharma et al., (2017). signaling theory or signaling theory was first put forward by spence (1973) which explained that the sender (owner of the information) gives a signal or signal in the form of information that reflects the condition of a company that is beneficial to the recipient (investor). according to brigham and houston (2011) signal theory explains management's perception of company growth in the future, which will affect the response of potential investors to the company. the signal is in the form of information that explains management's efforts to realize the owner's wishes. this information is considered as an important indicator for investors and business people in making investment decisions. based on signaling theory, csr disclosure contains information that makes it easy for investors to make decisions and can provide certainty and security for investors to invest in the capital market (dewi et al., 2014). companies that disclose social responsibility will be more attractive to investors because these companies do not only focus on earning profits, but also pay attention to environmental and social issues (almilia & wijayanto, 2007). companies that carry out csr activities also have a good image in the community and can increase trust so that people are more loyal to the company. csr activities can also have grace wayan (2022) 29 interdisciplinary journal of educational practice | https://sadipub.com/journals/index.php/ijep an impact on employees, whereby spending on welfare will make employees more loyal to the company so that employees will be more productive because they feel cared for by the company and increased company productivity will cause sales of the company's products to increase and will affect profits (yudharma , et al., 2016) and its market performance. the results of this study indicate that the interaction variable csr cost allocation and corporate life cycle has a coefficient of -21.053 with a t-count of -0.992 which is smaller than the t-table of 1.663 and a probability value of 0.325 > 0.05. these results indicate that the corporate life cycle variable cannot moderate the effect of csr cost allocation on market performance. the company life cycle or corporate life cycle is a process of company development through several linear and sequential stages (bhaird, 2010). a company has four cycle stages, namely start-up, growth, maturity, and decline. the corporate life cycle is unable to moderate the effect of csr fund allocation on market performance. it is possible that csr activities can provide direction for companies in using company resources to meet stakeholder needs. csr also does not only focus on maximizing shareholder value, but can balance the interests of all different stakeholders. companies that carry out csr activities are considered to have a responsibility towards the surrounding environment and have a good image and reputation in the community. this can provide protection for the company when the company has poor performance and reduce the negative assessment of shareholders. based on this, csr activities need to be carried out by companies throughout the company's life cycle, so that it can be said that the company's life cycle does not moderate the effect of csr fund allocation on market performance. the direction of negative results indicates that the corporate life cycle does not significantly weaken the effect of csr fund allocation on market performance. these results contradict the slack resource theory which states that companies will only use funds for sustainable activities when they have good financial conditions (waddock & graves, 1997). conclusion this study aims to obtain empirical evidence regarding the effect of csr cost allocation on market performance which is moderated by the corporate life cycle. based on the results of empirical testing and discussion, several conclusions are obtained, namely the allocation of csr costs has a positive effect on market performance. this shows that the higher the cost of csr owned by a company, the higher its market performance. meanwhile, the corporate life cycle does not moderate the effect of csr cost allocation on market performance. the results of this study are expected to be able to provide empirical evidence regarding signaling theory. the results of this study indicate that the allocation of csr funds can increase market performance while the corporate life cycle is not a moderating variable because it cannot significantly strengthen the effect of csr fund allocation on market performance. companies that carry out csr activities can also reduce negative ratings from investors when the company has poor performance. therefore, companies must pay attention to the allocation of csr funds and disclose csr activities carried out in order to provide a positive signal to investors. references aggerholm, h. k., & trapp, n. l. (2014). three tiers of csr: an instructive means of understanding and guiding contemporary company approaches to csr? business ethics: a european review, 23(3), 235–247. almilia, l. s., & wijayanto, d. (2007). pengaruh environmental performance dan environmental disclosure terhadap economic performance. proceedings the 1st accounting conference. bhaird, c. m. an. (2010). resourcing small and medium sized enterprises: a financial growth life cycle approach. in icclab.nl. springer. grace wayan (2022) 30 interdisciplinary journal of educational practice | https://sadipub.com/journals/index.php/ijep brigham, eugene f. dan houston, joel f. (2011). dasar-dasar manajemen keuangan terjemahan. edisi 11. jakarta: salemba empat. dewi, d. m., sudarma, m., djumahir, & s., e. g. (2014). csr effect on market and financial performance. international journal of business and management invention, 3(01), 56–66. dickinson, v. (2011). cash flow patterns as a proxy for firm life cycle. accounting review, 86(6), 1969– 1994. hasan, m. m., & habib, a. (2017). corporate life cycle, organizational financial resources and corporate social responsibility. journal of contemporary accounting and economics, 13(2017), 20–36. ismail, solihin. (2009). corporate social responsibility from charity to sustainability. jakarta: salemba empat. jogiyanto. (2010). studi peristiwa: menguji reaksi pasar modal akibat suatu peristiwa (edisi pertama). yogyakarta: yogyakarta. nurharli, a. (2018). pengaruh roa terhadap nilai perusahaan dengan csr sebagai variabel moderating di perusahaan manufaktur industri subsektor tambang yang terdaftar di jakarta islamic index (jii) tahun 2013 – 2017. mardiandari, p., & rustiyaningsih, s. (2013). tanggung jawab sosial dan kinerja keuangan pada perusahaan manufaktur go publik di bursa efek indonesia. jurnal riset manajemen dan akuntansi, 1(1), 70–80. mc williams, a., & siegel, d. (2001). corporate social responsibility: a theory of the firm perspective. acadamy of management review, 26(1), 117–127. purwaningsih, r. w., & aziza, n. (2019). pengaruh corporate social responsbility terhadap financial distress dimoderasi oleh siklus hidup perusahaan pada tahap mature. jurnal akuntansi, 9(3), 173–186. pyo, g., & lee, h.-y. (2013). the association between corporate social responsibility activities and earnings quality: evidence from donations and voluntary issuance of csr reports. journal of applied business research (jabr), 29(3), 945–962. spence, m. (1973). job market signaling. the quarterly journal of economics, vol. 87, no. 3. (aug., 1973), pp. 355-374. waddock, s. & graves, s. (1997). the corporate social performance—financial performance link. strategic management journal, 18, 303-319. yudharma, a. s., nugrahanti, y. w., & kristano, a. b. (2016). pengaruh biaya corporate social responsibility terhadap kinerja keuangan dan nilai perusahaan. derema jurnal manajemen, 11(2), 171– 190. https://doi.org/10.19166/derema.v11i2.206 grace wayan (2022) 31 interdisciplinary journal of educational practice | https://sadipub.com/journals/index.php/ijep yunita, a. (2013). biaya sosial sebagai bagian corporate social responsibility dalam sudut pandang akuntansi. 1(1), 1–18. zeithaml, v. a., varadarajan, p. r., & zeithaml, c. p. (1988). the contingency approach: its foundations and relevance to theory building and research in marketing. european journal of marketing, 22(7), 37–64. type of the paper (article american interdisciplinary journal of business and economics issn: 2837-1909| impact factor : 4.6 volume. 9, number 4; october-december, 2022; published by: scientific and academic development institute (sadi) 8933 willis ave los angeles, california https://sadipub.com/journals/index.php/aijbe 1 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe examining the role of islamic economics in achieving sustainable development goals gülistan eryolu and arif özaydın 1,2gaziantep university. abstract: islamic economics is a discipline that studies economics from an islamic point of view, incorporating its own norms and values that dictate individual and social economic attitudes. it cannot be considered independently of other fields, such as law, politics, history, and sociology, and most importantly, the moral structure. the goal of economic development is to improve the welfare level and provide an environment of trust. however, the level of economic success has been unilaterally associated only with material factors, ignoring moral and ethical values. in this study, we explore the basic conceptual framework and scope of islamic economics and emphasize the importance of an understanding of economic growth and development that encompasses all world markets. by considering the concepts of innovative, entrepreneurial, justice, and morality in a holistic way, a change can be achieved. the article provides a historical account of the emergence and development of islamic economics, and the deep relationship between economics and islam. the article argues that the capitalist system is dominant and moral values are ignored, and therefore, studies on the relationship between religion, culture, and economy, especially in the axis of economics, are prioritized and increased in recent years. keywords: economics, islamic economics, development, moral values, ethics. especially within the framework of economics, have been given priority and increased in recent. introduction the first expectation for societies is to improve the welfare level and to provide an environment of trust. the realization of expectations is significantly related to economic development. therefore, economic development for societies has been the primary goal from past to present. (karagul and açıkgöz, 2009) economic development; all social-political structure, production level, education level, human rights and democratization level of individuals living in a society include health and humane living levels. although economic development is among the most discussed economic concepts, it cannot be said that there is a hypothesis that can be applied in practice to solve the development problem. the reason is that although economics, as a social discipline, has an important place in the literature of economics, this feature has been ignored when it comes to solving economic problems. namely, although production and consumption have a place completely in the science of economics, it is not possible to analyze the human being, who is the leading role of both production and consumption, with all their characteristics. because the states and actions of individuals are related and different from their value judgments, sadness, anger, beliefs, expectations and sense of trust. it is constantly variable. there is no objectivity. for this reason, it has been thought that it should be reconsidered in economics, where the capitalist system is dominant and moral values are ignored, and it seems that the studies on the relationship between religion, culture and economy, years. (karagul and açıkgöz, 2009) gulistan eryolu and arif ozaydin (2022) 2 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe ensuring and maintaining economic growth and development are among the main objectives of developed and developing countries. (karakaya, 2020). the development of a country does not depend on only one factor. well-trained human factor, which is human capital, is the pioneer of development. then, the geographical factor, race, religion, idea, economic, historical, social and cultural factors are the factors that affect development as a whole. islamic economics is trying to create an economic system that we can call islamic within the world economic system. in islamic economics, we can say that the ideas that will serve the economic system that will be embodied in practice rather than theory for all humanity and will benefit the society, in a sense, are islamic economics. (trust, 1995) if the factors that prioritize development in islam, there are many methods for the advancement of humanity. islam is a dynamic religion, aiming at the happiness of humanity by advancing it in the material and spiritual environment. along with being dynamic, it took a stance against laziness and standing still. the religion of islam, in order to be humane, is in harm, whose two days are equal, its hadith should be a principle for us. (kayadibi, 2012) one of the important issues of revealing the leading roles of islamic economic studies in development is to organize the structures of the societies in which these studies are carried out, albeit slowly, in an islamic form. because it is not an issue that can be overcome only by theory. one of the common points in islamic economic studies is the rejection of homoeconomicus. individuals should be living beings who know that they are no longer economic people with a western mentality, not only pursuing their own interests, but also altruistic and able to think of themselves with others, and intellectually knowing that such a behavior is more correct, as long as they are right. the individual within the concept of homo islamus, which zaim dealt with in 1995, is a responsible, benevolent, collaborative, just and moral being while living his life within the framework of the truths and wrongs commanded by allah. if we give an example through this concept, just as the whole body is affected when a damage occurs to a person's body, the existence of people in need in a society will also affect the rest. in order to eliminate these destructive effects, we as a society must help the needy so that the individual and later the society can develop in peace and prosperity. to explain with a hadith, the hadith "muslims, in loving each other, showing mercy and compassion to each other, is like a body that shares this pain with sleeplessness and high fever when one of its organs is sick." (muslim, birr, 66) is completed with the hadith. for the solution of the development of the islamic economic system, “let them do it. starting from the principle of "let them pass" and saying that everyone should take care of themselves is an incomplete and wrong approach. both the individuals they reach and the state are obliged to help people below a certain average life level through various methods and to raise their life level above the average. this study is limited to the problem of how islamic economics can provide development in this market, rather than revealing the islamic economic system. in the study, priority was given to subjects such as the individual, reason, morality, education, science, human rights, and social solidarity. these items are very important issues for the development and development of humanity. the methodology of islamic economics and its reflections in islamic economics in terms of development and growth are examined by adding verses and hadiths. economic activities, which are the environment where many material needs of human beings are met, are indispensable for societies. adam smith's famous “homo economicus” concept is a model of an individual who only thinks about his own interests and takes self-interested and rational decisions on the economic ground. however, there are moral concerns and restrictions for the individual who only considers his own interests in economic activities. the basic expectation of man is to gradually increase the current level of welfare and to create an environment of trust. the implementation of these goals is highly related to economic development. for economies, economic development has been an economic goal from past to present. for this reason, what economic development theoretically means, and which factors affect economic development positively or negatively have always been among the topics discussed. while there is production and consumption in the economics literature, there are differences as a result of the behavior of the individual who forms the basis of production and consumption. because individuals' behaviors, beliefs, expectations, sadness, joy and trust depend on their level and these items vary. for this reason, it is foreseen that the science of economics, which is known as a completely capitalist and immoral theory, needs to be reconsidered, and gulistan eryolu and arif ozaydin (2022) 3 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe therefore, it is seen that the studies of islam and economics have increased rapidly in the axis of economic theory. firstly, the birth of economics will be mentioned and then how and when islamic economics was formed will be mentioned. economics continues to dominate today despite the dominant economic thought, the 1929 economic depression, the 1970 oil crisis and the most recent 2008 global financial crisis. despite the economic growth in the world and the increase in real national income per capita, the injustice and crime rates in income distribution do not decrease, and the happiness of people does not increase. societies and economies need a new economic understanding. in order for islamic economics to respond to the society, it needs to create its own school. in the study, what is the science of islamic economics and its place in the management of economic development, and what is the relationship of development in islamic economics? the answer to the question has been sought. in order to understand the state and movements of the events in the market and to guide the economy correctly, it is aimed to examine how and in what direction the rules that shape social life move. subjects such as human, rationality, morality, reason are mentioned. these concepts are remarkable aspects of the development and development of humanity. 2. islamic economics economics and islam are always closely lived reality. therefore, the logical framework imposes on us the need for a collaborative study of concepts. islamic economics is defined as a system of values that leads the economic behavior of individuals in an islamic society, as a prediction that islamic propositions are in force in social, political and legal circles. islamic economics, a branch of economics, means the investigation of one of the economic systems. this branch of economics deals with the islamic economic model, propositions and principles and thus examines their impact on economic measures. (ersoy, 2015) the existence of islamic economics coincides with the 20th century. the political changes experienced by islamic states after the second world war resulted in the independence of many islamic countries. as a result, it enabled the rise of islamic gains again and was effective in economics. since every direction of the western economy does not meet the criteria of islam, efforts to turn to islam in this area have started. the term 'islamic economics' was put forward by countries such as india and pakistan, and the functioning of mainstream economics was tried to be adapted to islam. islamic economics can be studied and researched as a branch of knowledge determined by islamic beliefs, science and culture, history and islamic law. in addition to these factors, it is seen that he contributed to the works of history and politics as well as the works of islamic law. moreover, they are the product of the experiences of islamic societies. (tabakoglu, 2010) the turning point of islamic economics and the interest of the muslim community in the world began with the 1st international conference on islamic economics held in saudi arabia under the leadership of melik faisal. the 2nd was held in pakistan (1983) and the 3rd in malaysia (1992). conferences caused the field to be heard and known to exist. the emergence times of islamic economics approaches are different. while the first of these doctrines reached the early islamic economists, the later came into existence with the advancement of this branch of science. the first doctrine treats islamic economics as an aggregator of commandments and principles for all concerned with economics in the sources of islamic law. therefore, this approach requires both individual and social life under the leadership of the qur'an and sunnah. the second doctrine argues that islamic economics is a possible means of attaining and attaining economic goals in islam. therefore, islamic economics is the management of the economic life of the society in the way of achieving the goals of islam, rather than the precise application of certain principles in the shari'a.the third doctrine determines the duty of the muslim in the economic life. individual movements in islamic economics; the differences in perception in the nature of the individual are different due to the goals of the individual. the different perceptions of the economic individual lead to different thought frames and their analysis. while the individual in the capitalist order can turn to interest and maximize his profit, the economic individual in islamic economics, on the contrary, reflects the behavioral dimension of benevolence and brotherhood to the individual. as a result, there is a deep relationship between economics and islam. islamic economics seeks answers not only to the "how" question, but also to the "why" question. the question of “why” is related to the ethical gulistan eryolu and arif ozaydin (2022) 4 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe dimension of the event and compliance with ethical values is indispensable in islamic economics. islamic economics, taking its main source from islam, tries to find solutions to the economic problems of the period. 3. economic development economic development is defined as the transformation of a society's mode of production to produce high value-added products, a fair distribution of income and raising living standards. in the light of this definition, the objectives of development are listed below: • human dimension; to increase living standards, • production and technology dimension; to start the production of higher value-added products, • environmental dimension; to cause minimal damage to the environment, • dominance dimension; to be ahead in the race with societies, • employment dimension; increasing employment opportunities and improving working conditions, • freedom dimension; to increase the level of freedom in terms of economic, political, social and international relations, unlike economic growth, economic development must include the following five elements: • improvement of humanitarian conditions, • sustainable growth, • modernization in social, political and institutional fields, • structural change in production, • technological progress. the development process needs both economic growth and social changes. the share of economic development is great for the underdeveloped countries to be able to scale up to the standards. because in underdeveloped countries, the social structure should be corrected before the growth data. in underdeveloped countries, there is an employment problem, this causes the main problems that directly concern the society, such as education and health, and cannot advance the social structure with incorrect policy practices. the development process also includes developing appropriate policies in terms of the aforementioned negativities. because development, together with the improvement of economic indicators, leads to a relief that spreads to all segments of the society. in order for economic development to be implemented in the most effective way, certain reforms should be realized, and regulations should be expanded and encouraged in the industry, service and agriculture sectors. development does not mean an increase in absolute production and per capita income, but an improvement in economic, social and cultural order in an underdeveloped economy. among the main elements of development are the increase in per capita income, the change in the productivity and quantities of production factors, the increase of the share of industry in national income and exports, etc. fundamental reforms. when the concepts of growth and development are compared, growth is “the expansion in the productive capacity of an economy that can be measured quantitatively” (freyssinet, 1985). the concept of economic development indicates qualitative change. qualitative change refers to both more efficiency and changes in technical and institutional infrastructure. when the concepts of growth and development are compared, economic growth; it can be said that it refers to the increase process at the same level, while economic development refers to the adventure of structural change in which the one that is different from all of them takes place. (karataş and çankaya, 2010). 4. relationship between islamic economics and development as a concept, economic development is always kept hot on the agenda, and discussions remain hot on what economic development means, which factors affect economic development, and how they trigger it in a positive or negative way. from an economic point of view, one of the foremost problems of turkey and other developing countries is development. so, what is development in islamic economics? first of all, the most dynamic element of development is people. starting from human beings, the elements necessary for the development of especially developing countries are realized by the fact that they can save and use their savings in the most effective way. capital accumulation leading to economic development can only be realized by transforming the increased savings into investments. in the realization of economic development, in addition gulistan eryolu and arif ozaydin (2022) 5 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe to increasing the savings, which is the most basic indicator of development in our country, it is necessary to transform the increased savings into the most effective investment areas and to be encouraging in all respects. (aras, 2000). in economic development, it is aimed to transform the production structure in a country's economy into a way to produce high value-added products and to increase the level of welfare by distributing this product fairly among the income groups in the market. the main purpose of economic development is to make individuals free in all aspects in the context of economic, political, social and international relations. (source, 2011). in the development dimension of islamic economics, it is seen as an obligation to re-investigate the way or model that will develop the society. the main goal of this study is to investigate islamic development. the shape of a country's economic policy is determined by the existing economic-social system and its framework and economic growth process. they reveal what kind of person and society type is desired. our world either does not know or ignores the approaches of islam about the concept of economic development formed in the capitalist system and its connections. what are islam's thoughts on economic development? an answer to this question is sought. in line with today's modern economy, islam has a stable, harmonious, civilized economic development model and economic policies with humane values. in the concept of homo islamus, which has these features, the feature that distinguishes it from other human types is that its only purpose in life is not material pleasure. for homo islamus, the loftiest goal is not to be rich financially. he is a virtuous, benevolent, benevolent type of person. (hamitogullari, 1984). the islamic development model takes from all the material and spiritual dimensions of the human being. these features are explained in the light of verses and hadiths with the concepts of "falah" and "favz" mentioned in the qur'an as the purpose of development in islam. (umer, 2008) “whoever does good deeds, whether male or female, as a believer, we will make him live a good life. and we will certainly reward them with the best of what they do.” (an-nahl 16/97). the verse is taken as the most general goal of development in islam. the dynamic power created by the spiritual pleasure of obeying divine orders should not be thrown into the background. it is to raise the interest of the society above the interest of the individual (islam aims at social benefits, not narrow and individualistic benefits). the thought of islam is the most important force that directs the human being. it turns the economy into an environment that protects it from waste. islam commands a business sharing that opens up to cooperation. for a muslim, life is a means of pleasing allah and attaining happiness in both worlds. it has features that will lead to sharing in all times of life. islamic economics is a cooperative feature. it is an economy with a social morality. the task of homo islamiccus emerges in the economy to think not only of himself but also of society. it brings a minimum livelihood rule to every member of the society. development is the effort required to achieve a better level in both material and spiritual as pects. “allah (swt) does not change what is in a society until they change their characteristics.” (erra'd 13/11) as stated in the verse, it is necessary to make the necessary material and spiritual effort. also, st. the prophet (saas) sought refuge in allah from laziness and weakness in his prayers. “o allah, i seek refuge in you from distress, sadness, helplessness, laziness, stinginess, debt and the pressure of people.” ( tirmidhi , " daavât " , 71; bukhari , " jihad ", 25; muslim, "dhikr", 17). in this hadith, it is prayed by using the features of backwardness. the strong relationship between economic development and islam is seen in the realization of the socioeconomic justice and welfare (falah) of all individuals. the development of countries will be possible with the conditions suggested by islam. 5. results economic development is positively associated with the efficient use of a society's tangible and intangible value. but so far, the level of economic success has been unilaterally associated only with material factors. the fact that those who are rich in natural resources are poor and those who are deprived of natural resources are economically developed make us think about these presented theories. therefore, economic development is intangible; its relationship with religious belief principles was examined in the study. gulistan eryolu and arif ozaydin (2022) 6 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe undoubtedly, it is useful to consider that the foresight and political propositions to be made for economics, which is a social science, are not the only variable that explains the change or break in this thought system and the changes in the economy of societies. it is the dominant school of economics that started with adam smith and developed itself in the axis of different names for the formation of the islamic economic school. it is necessary to reduce its dominance in economics education, economic literature and economic decision-making mechanisms, and the studies on the new alternative islamic economics should be taken into consideration. the understanding of development in islam is based on increasing the level of human welfare. however, the concept of welfare here is the attainment of happiness not only in life in this world, but also in the hereafter. prosperity in the world is not only the high level of income, but also showing a multidimensional level of development from education to health, from social solidarity to good governance. (calgan, 2019). while forming the theory of islamic economics, our main sources are the qur'an and the sunnah. it is seen that concepts such as halal production, income and consumption, moral values, fair sharing, cooperation and spending are included in the qur'an and sunnah. the new generation of islamic economists should create concrete theories of islamic economics in the light of verses, hadiths and islamic law, in addition to the knowledge that has existed as a result of the studies that have come to the present day. a change can only be achieved by considering the concepts of innovative, entrepreneurial, justice and moral values holistically in achieving the ultimate goals of an understanding of economic growth and development that covers all of the world markets. references aras, o. n. (2000). “turkey's development problem and private finance institutions at the solution point”. published in: journal of qafqaz university, vol . 1, no. 3, 93-110. çalgan, m. ali.(2019). “islam and development: an evaluation in the light of verses and hadiths”, i̇slami i̇limler araştırmaları dergisi.2019/1, 7-29. capra, u(2008). the islamic vision of development in the light of maqasid al-shariah , islamic development bank, jeddah. diyanet i̇şleri başkanlığı(2015). kur’an yolu türkçe meal ve tefsiri, ankara. ersoy, a(2015). “i̇slam i̇ktisadı ve i̇ktisadi yapısı: i̇nsan merkezli fıtri i̇ktisat ve i̇ktisadi yapısı”. i̇slam ekonomisi ve finansı dergisi, 2015/1; 37-64. freyssinet j.(1985). azgelişmişlik i̇ktisadı, çevirenler: m. ali kılıçbay tezer öçal, gazi üniversitesi yayınları, ankara. güven, a.g.(1995). faizsiz ekonomi önerisinin i̇ktisadi gelişme perspektifinden i̇ncelenmesi (yüksek lisans tezi), i̇stanbul. hamitoğulları b.(1984).i̇ktisadi sistemlerin temelleri, s.b.f. yayını, ankara. karagül m, açıkgöz ö. (2009). “i̇ktisat tarihi perspektifinde i̇ktisadi kalkınma ve din i̇lişkisi”. sosyal ekonomik araştırmalar dergisi, 9 (18), 472-486. karakaya, u.(2020). “kurumsal boyutuyla kalkınma ve büyümenin i̇slam ekonomisindeki yansımaları”, gümrük ticaret dergisi, mart sayı:7(19),ss 49-63. gulistan eryolu and arif ozaydin (2022) 7 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe karataş, m., çankaya, eda(2012). “i̇ktisadi kalkınma sürecinde beşeri sermayeye i̇lişkin bir i̇nceleme”. mehmet akif ersoy üniversitesi sosyal bilimler enstitüsü dergisi 27. kayadibi, f.(2012). “i̇slam’da kalkınmanın dinamik güçleri”. journal of istanbul university faculty of theology (15):1-24. kaynak, m.(2011). ekonomik kalkınma, gazi kitapevi, ankara. müslim, birr, 66. tabakoğlu, a.(2010). “bir i̇lim olarak i̇slam iktisadı”, i̇slam hukuku araştırmaları dergisi, sy.16, s.11-34. tirmizî, “daavât”, 71; buhârî, “cihâd”, 25; müslim, “zikir”, 17. zaim, s.(1995). i̇slam-i̇nsan-ekonomi, yeni asya yayınları, 2. baskı, i̇stanbul. responsibility for negligence of medical personnel against patients in the perspective of the ius constituendum american interdisciplinary journal of business and economics issn: 2837-1909| impact factor : 4.6 volume. 9, number 1; january-march, 2022; published by: scientific and academic development institute (sadi) 8933 willis ave los angeles, california https://sadipub.com/journals/index.php/aijbe 9 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe medical services and standard operating procedures: the ius constituendum framework for legal responsibility muhammad sulbadana tadulako universitas university, indonesia abstract: this study explores the legal responsibility of medical personnel towards their patients in the context of their obligation to provide adequate care and adhere to standard operating procedures (sop). the authors argue that negligence or malpractice can result in harm to patients and should have legal consequences. through a normative research method supported by empirical research data, this study discusses the concept of negligence and the conditions that must be met for a doctor to be held accountable for their actions. an unlawful act that causes harm must be proven, and the doctor must be found guilty of gross negligence. the study advocates for restorative justice as a solution to medical malpractice, which takes into account the needs and perspectives of both the victim and the perpetrator. the study concludes by emphasizing the need for legal reform to ensure that doctors are accountable for their actions, and that patients' rights are protected. keywords: medical personnel, legal responsibility, negligence, standard operating procedures, restorative justice, legal reform. introduction: the relationship between medical personnel and patients is one that relies heavily on trust and responsibility. doctors have a considerable responsibility to provide adequate care for their patients and adhere to standard operating procedures. however, negligence or malpractice can result in harm to patients, which has legal consequences. the aim of this study is to explore the legal responsibility of medical personnel towards their patients, focusing on the conditions needed for medical staff to be held accountable for their actions. the study discusses the concept of negligence (culpa) and how it relates to the actions of medical personnel, emphasizing the need for doctors to provide medical services in accordance with professional standards and standard operating procedures. the study also considers the role of restorative justice as a means of addressing medical malpractice, which can take into account the needs and perspectives of both the victim and the perpetrator. the study concludes by proposing legal reform to ensure that doctors are accountable for their actions and that patients' rights are protected. through a normative research method supported by empirical research data, this study provides an insight into the legal responsibility of medical personnel towards their patients and the need for reform to uphold the values of social justice and equity. errors in the form of negligence/omissions in the criminal code are stated in the term “aan zijn schuld te wijten” which is contained in article 344, article 359 and article 360 ??of the criminal code. negligence (culpa), simon and van hamel argue: 1. simon,requires two things for negligence (culpa): 2. lack of caution (het gemis van voorzichtigheid); muhammad sulbadana (2022) 10 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe 3. lack of attention to the consequences that might occur (het gemis van de voorzienbaarheid van het gevolg) 4. van hamel, also gives two conditions for negligence (culpa): 5. no estimators are needed 6. the absence of the necessary caution (het gemis van nodige voorzichtigheid). the study of ordinary crimes lies in the consequences of criminal acts, while in medical crimes (medical malpractice) studies on the causes of criminal acts. in medical crimes, in relation to negligence (culpa), accountability must be proven in relation to professional errors, for example misdiagnosis or medication errors. errors in medical action generally occur due to negligence committed by doctors, where the standard for errors in carrying out the duties of the medical profession in the form of negligence in criminal law is gross negligence (culpa lata), not minor negligence (culpa levis). but what needs to be known, negligence (culpa) does not include unlawful acts if it does not cause harm to other people. in the legal doctrine: “de minimus non curat lex” (the law does not interfere in trivial matters), however, the exception is for gross negligence (culpa lata) which is regulated in article 359 of the criminal code. almost certainly, article 359 of the criminal code, is always charged with death allegedly caused by a doctor’s mistake (adami chazawi, 2007). besides the mental attitude of the culpa there must be three more elements. the three elements referred to are the details of the sentence “cause another person to die”, namely: 1. there must be a form of action; 2. there is a consequence in the form of death; 3. there is a causal verband between the form of action and the consequences of death. equality before the lawfound in almost all state constitutions. this is the norm that protects the human rights of citizens. “if this is included in the constitution, then the logical consequence is that the authorities and law enforcers must carry out and realize this principle in the life of the state”. doctor’s negligence or negligence is not the same as malpractice, but negligence is included in the meaning of malpractice, meaning that in malpractice there is not always an element of negligence. negligence is any action taken and can violate standards resulting in injury/loss to others (sampurno, 2005). it can be concluded that negligence is doing something that should be done at a scientific level but not being done or taking action below a predetermined standard. forms of negligence according to sampurno, are as follows: 1. malfeasancenamely taking actions that violate the law or are inappropriate/proper, for example: carrying out nursing actions without adequate/proper indications. 2. misfeasancenamely making the right choice of nursing action but implemented inappropriately, for example: carrying out nursing actions by violating procedures. 3. nonfeasance, namely not carrying out nursing actions which are their obligations, for example: the patient should be put on a bed guard but this is not done. the impact as a result of the criminal justice system being offender oriented, thus providing a rationale for legal renewal with the need for the concept of settling cases outside the criminal justice system in the context of restorative justice. the concept of the restorative justice approach is an approach that focuses more on conditions for creating justice and balance for victims and perpetrators (afthonul afif, 2015). the concept of restorative justice is a critique of the system conceptcriminal justice system that sees crime as a violation of state regulations. so that related to renewal in the field of legal aspects, of course the indonesian people have an ideal in which the legal aspect becomes something noble with the concept that not always a legal problem for the perpetrator becomes a way out by means of being criminalized as a form of final accountability for an act committed. but the concept of restorative justice is the main solution to solving legal problems between fellow citizens in order to achieve the goals of the law itself. muhammad sulbadana (2022) 11 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe method the step to identify this type of research is to use normative research methods supported by empirical research data, whichthis research method focuses on the relationship between the object of health sociology (the relationship between medical personnel and patients) andexamines problems from the perspective of social aspects, health aspects and cannot be separated from legal concepts. the approach in this writing is carried out in normative law research which includes: philosophical approach (philosophical approach) this approach is applied because it examines valuesthe legal basis is related to the actions of medical staff so that they find a new concept in the renewal of the country’s law which is aspired to. approach to legislation (statute approach) it is an approach used to study and analyze: 1. all laws; and 2. regulations related to existing legal issues. 3. conceptual approach the conceptual approach departs from the views that have developed in the science of law by studying these views in the science of law the case approach the case approach is carried out by examining cases related to the issues at hand which have become court decisions that have permanent legal force. the sources of legal materials used in this dissertation are as follows: 1. primary legal material is legal material that is authoritative, meaning it has authority or binding legal material 2. secondary legal materials namelysecondary legal material in this case consists of books on law / social and health or relevant to the topic of study, legal journals, legal papers or views of legal experts contained in the mass media, legal dictionaries and encyclopedias, as well as sources of legal material. that comes from the internet. 3. tertiary legal materials, namely legal materials which are complementary in nature to provide additional instructions or explanations to primary and secondary legal materials results and discussion the relationship between medical personnel and patients in the perspective of health law health services are efforts carried out by the government together with the community in order to improve, maintain and restore the health of the population which includes preventive, curative and rehabilitative promotions. in a narrow sense this effort is carried out by institutions that provide treatment to someone who is sick, in this case is a hospital (sri paptianingsih, 2006). patient rights and responsibilities the patient’s right to receive medical services is regulated in detail in article 45 paragraph (3) of law number 29 of 2004 concerning medical practice, namely: 1. get a complete explanation of medical procedures 2. ask for the opinion of another doctor or dentist, 3. get services according to medical needs, 4. refusing medical action 5. get the contents of the medical record. patients also have the obligations referred to in ri law no.29 article 53 of 2009 concerning medical practice, namely; 1. provide complete and honest information about their health problems. 2. follow the advice and instructions of a doctor or dentist. muhammad sulbadana (2022) 12 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe 3. comply with the provisions that apply in health care facilities. 4. provide compensation for services rendered. 5. fulfill the things that have been agreed / agreements that have been made doctor’s rights and obligations doctor’s rights as contained in article 50 stipulates that doctors in carrying out medical practice have the right: 1. obtain legal protection as long as carrying out duties in accordance with professional standards and standard operating procedures. 2. providing medical services according to professional standards and standard operating procedures 3. obtain complete and honest information from patients or their families; and 4. receiving service fees. obligations as article 51 explains that doctors and dentists in carrying out medical practice have the obligation to: 1. providing medical services in accordance with professional standards and standard operating procedures as well as the medical needs of patients 2. referring the patient to a doctor or dentist who has better expertise or ability, if unable to carry out an examination or treatment. 3. keeps everything he knows about the patient a secret, even after the patient dies. 4. carry out emergency aid on the basis of humanity, unless he is sure that someone else is on duty and does it. 5. providing medical services according to professional standards and standard operating procedures 6. obtain complete and honest information from patients or their families; and 7. receiving service fees standard operating procedures according to article 29 paragraph (1) of the republic of indonesia law no29 of 2004 concerning medical practice, it is mandatory to have authority, namely having a registration certificate (str), whereas according to article 36 of the republic of indonesia law number 29 of 2004 concerning medical practice, it is mandatory to have a practice permit (sip). violating either or both of these obligations can pave the way for medical malpractice. informed consent permenkes 290 / menkes / per / iii / 2008 concerning approval of medical actions, namely that before carrying out a medical action, it must be preceded by explanations regarding the actions, risks, that will be carried out on the patient. if this is not done by the doctor, the doctor is considered negligent in carrying out his profession and law. informed consent cannot negate or prevent the holding of a claim before the court or release the doctor/hospital from their responsibilities if there is negligence. according to sumaryono, the function of the professional code of ethics has 3 meanings (a) as a means of social control; (b) as a deterrent to interference from other parties and (c) as a deterrent to misunderstanding and conflict (e. sumaryono1998). responsibility for negligence of medical personnel in the perspective of criminal law in this context, law is qonditio sine quanon, an absolute requirement for society (hendrojono soewono, 2007). the view of legal sources is seen from a philosophical, standard objectivelaw can create justice and prosperity which must be preceded by ideal conditions, namely law users are always principled, everyone must obey the law, so that justice and prosperity can be created (mudakir iskandar, 2017) basically the practice of a doctor is the provision of assistanceindividually by doctors to patients in the form of medical services. if someone comes to a doctor to take advantage of available medical services, then a legal relationship occurs between the doctor as a medical worker and the patient which is called a therapeutic transaction. this kind of legal relationship that does not promise any healing or death is called muhammad sulbadana (2022) 13 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe inspanningsverbintenis, which is different from the legal relationship that normally applies in agreements in general that promise a certain result (risk verbentenis / resultaatsverbentenis). there is a similarity between ethics and law, that is, both require humans to do good and right in society. besides that, in ethics and law to regulate sanctions that can be imposed. the forms of violations committed by medical servants, in this case the medical profession, can be classified as follows: 1. medical responsibility in professional ethics medical 2. medical responsibility in medical discipline 3. medical responsibility in administrative law 4. medical responsibility in civil law 5. medical liability in criminal law draft the idea of ??doctor’s negligence liability for patients as an idea for legal reform (ius constituendum) development of legal materials is an assessment of regulatory legal norms (regeling-recht) which aims to carry out regulatory reform which aims (finally) can be in the form of recommendations in the form of change (revision), replacement (revocation-revocation) or indeed maintaining (preservation) the existing regulatory norms. development of national law, in this case through the analysis and evaluation of the development of the criminal law system is directed at a restorative justice approach that benefits the community (social welfare) (idriyanto seno adji,2016). the restorative justice approach is assumed to be the most recent shift from the various models and mechanisms that work in the criminal justice system in dealing with criminal cases at this time, even though this movement began in the 1970s in north america and europe which was marked by the presence of the victim offender reconciliation program. in ontario, then discovery in indiana and england (muladi, paper, 2012). restorative justice policy is both a response and a critiqueagainst the implementation of the criminal justice system (general) with the prison system which so far has been proven to be ineffective in resolving legal issues. in marian leibmann’s view, the concept of solving criminal problems with a restorative justice approach is more (marian leibmann, 2007): (1) prioritizing support and healing for victims, both physically and psychologically; (2) encourage perpetrators to be accountable for their actions to victims; (3) prioritizing dialogue or deliberation between victims and perpetrators to reach mutually beneficial agreements for the parties, so that the dispute resolution process brings benefits, especially for victims and perpetrators; (4) put in a correct and proportionate manner the losses suffered by the victim arising from the aforementioned legal event; (5) awaken the perpetrators and prevent the emergence or recurrence of new crimes of the same kind; and (6) involving the community in the process of integration between victims and perpetrators after an incident where there is generally disharmony, even grudges against each other, including the occurrence of disharmony of values ??in society. according to howard zehr; restorativejustice is not a particular program or a blueprint: various programs embody restorative justice in part or in full. however, there is no pure model that can be seen as ideal or that can be simply implemented in any community. we are still on a steep learning curve in this field. the most exciting practices that have emerged in the past years were not even imagined by those of us who started the first programs, and many more new ideas will surely emerge through dialogue and experimentation (howard zehr, 2001) restorative justiceis an alternative in the criminal justice system withput forward an integral approach between perpetrators and victims and society as a unit to find solutions and return to patterns of good relations in society where this is a concept of legal expectation that every citizen dreams of so that they think that not all criminals must be punished in imprisonment as a last resort (ultimum remedium)¸ but expect a rule/legal muhammad sulbadana (2022) 14 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe system that makes mediation in a family manner the first or last resort as a form of settlement (ius constituendum). in connection with criminal cases involving medical personnel, throughrestorative justice policies can be applied to deal with medical crimes effectively by: 1. non-litigation, namely by applying the concept of a restorative justice approach through dialogue and deliberation between the parties involved. 2. quasilitigation, i.e. by involving law enforcers as usual litigation process, but ends with peace in a dialogical manner (non-litigation) 3. linvestigation, namely using a pure criminal law approach. of the three ways mentioned above it can be seen thatbathat restorative justice policies have good prospects in efforts to combat medical crime because empirically they are in line with socio-cultural values ??that exist, grow and develop in society, and are also in line with the indonesian nation’s philosophy, pancasila. so, the restorative justice policy is the law of the future (ius constituendum) whose application can be carried out by the following methods: construction, codification, and unification. awareness of the importance of the concept of restorative justice as a soul and personality(volkgeist) of the indonesian people has made the government make legal breakthroughs, even though these legal breakthroughs are still partial regardless of the matter referred to, by considering the importance of legal settlement by means of restorative justice, three legal institutions namely the police, the attorney general’s office and the supreme court have made and issued regulations related to restorative justice in the concept of settlement of criminal cases as a form of breakthrough for the renewal of indonesian law as desired. ideal (ius constituendum), among others: 1. republic of indonesia police based on the chief of police regulation number 8 of 2021, regarding the handling of crimes based on restorative justice, according to the contents of chapter i article 1 3 that restorative justice is the settlement of a crime by involving the perpetrator, victim, perpetrator’s family, victim’s family, community leaders, religious leaders, traditional leaders or stakeholders to collectively seek a just settlement through peace by emphasizing restoration to its original state. 2. republic of indonesia attorney. based on prosecutor’s regulation number 15 of 2020 concerning termination of prosecution based on restorative justice, in accordance with the contents of chapter i article 1 1 that restorative justice is the settlement of a crime by involving the perpetrator, victim, family of the perpetrator/victim, and other related parties to jointly seek a fair solution by emphasizing restoration to its original state and not retaliation . 3. general court (ri supreme court). based on the decree of the director general of the general judiciary agency of the supreme court of the republic of indonesia number: 1691 / dju / sk / ps.00 / 12 / 2020, december 22 2020 concerning enforcement of guidelines for the implementation of restorative justice in the general court environment as contained in chapter i letter d 2 which is contained in the guidelines referred to the settlement of crimes by involving the perpetrator, victim, family of the perpetrator/victim, and other related parties to jointly seek a fair solution by emphasizing restoration to its original state and not retaliation. conclusion 1. legal protection for the community as an object or part of services in the health sector (patients) carried out by doctors, especially related to medical actions taken as well as protection for the medical profession, especially doctors themselves, can apply restorative justice as a concept for solving legal problems faced by both 2. unlawful acts committed by medical personnel / doctors from a medical action carried out against the community if an action is found outside the rules / sop or the action is considered risky but the medical staff muhammad sulbadana (2022) 15 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe / doctor makes an error in the practice carried out, so of course accountability the law that is carried out must have a concept that represents a sense of justice for the patient. 3. renewal of state law is something that is coveted by the community, inseparable from the existence of legal regulations that lead to the concept of justice. restorative justice (restorative justice)has good prospects in efforts to combat medical crime because empirically it is in line with the socio-cultural values ??that exist, grow and develop in society, and are also in line with the indonesian nation’s philosophy, pancasila. so, the restorative justice policy is the law of the future (ius constituendum) which is in line with the concept of reforming state law. acknowledgments praise be to the presence of allah swt, for all his blessings so that the author can complete the dissertation article entitled “accountability of medical personnel negligence to patients in the perspective of ius constituendum”, in which the author realizes that this article can be completed because of the prayers of the author’s parents, ayahnda ilham jafar, s.pd and ibunda hj. zahra, s.pd and the support of the three authors’ children namely muhammad rezky yudistiawan, muhammad ilham ghazali and ananda nurindah ebtawan and to prof. dr. ir. h. muhammad basir, se, ms, ipu, asean eng as promoter and dr. h. sulbadana, sh, mh who has contributed a lot in terms of guidance and assistance as well as directions during his busy time and including the parties, in this case the head of the health office, central sulawesi, reference abintoro prakoso, 2017 pengantar ilmu hukum, jawa timur-pressindo adami chazawi, sh, 2007, malpraktik kedokteran, tinjauan norma dan doktrin hukum, malang bayumedia publishing 2015, malapraktik kedokteran, jakarta sinar grafika, 2010, pelajaran hukum pidana bagian 1, jakarta : pt. rajagrafindo persada afthonul afif, 2015, pemaafan, rekonsiliasi dan restoraive justice, yogyakarta – pustaka pelajar sumaryono, 1998, etika profesi hukum, kanisius, yogyakarta hendrojono soewono, 2007, batas pertanggungjawaban malpraktek dokter, srikandi, surabaya howard zehr, 2001, the litttle book of restorative justice, united states of americagood books indriyanto seno adji, 2016, sistem hukum dan keadilan restoratif, jakarta-pusanev-bphn marian leibmann, 2007, restorative justice: how it works, jessica kingsley publisher mudakir iskandar, 2017, ilmu hukum dan kemasyarakatan, jakarta-tatanusa salim hs, erlies septiana nurbani, 2013, penerapan teori hukum pada penelitian tesis dan disertasi, jakarta – pt rajagrafindo persada sri paptianingsih, 2006, kedudukan hukum perawat dalam upaya pelayanan kesehatan di rumah sakit, jakarta-raja gravindo american interdisciplinary journal of business and economics issn: 2837-1909| impact factor: 6.72 volume. 10, number 2; april-june, 2023; published by: scientific and academic development institute (sadi) 8933 willis ave los angeles, california https://sadipub.com/journals/index.php/aijbe | editorial@sadipub.com 12 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe the interconnectedness between health and financial development: evidence from low-income african countries korkmaz silver and e. smith borsa istanbul trakya university abstract: human capital, particularly health and education, is crucial for the development of countries. this study investigates the causality relationship between financial development and health variables in lowincome african countries. using data from 11 african countries between 2001 and 2017, the study found a bidirectional causal relationship between financial development and health variables. financial development leads to expanded employment opportunities and decreased wage gaps, as well as the possibility for the government to invest more in health expenditures for the poor. the study argues that investments in healthcare are not expenses but are, in fact, investments that contribute to long-term economic growth by increasing the health of the population. the study concludes that investments in human capital, including health, are crucial for economic development of low-income african countries. keywords: health, financial development, low-income african countries, human capital, bidirectional causality 1. introduction one of the important indicators that determine the quality of life of individuals and societies is health. in this context, health expenditures are one of the concepts that are frequently used in determining the welfare levels of countries. economic development is expressed as continuous growth in production and per capita income in comparison to the previous year (todaro and smith, 2003). the development of economic process, that is accepted jointly of the foremost vital indicators of financial aid and development, is among the most economic science goals that area unit tried to be achieved in terms of developed and developing countries. the qualitative and quantitative development of labor, which is the basic production factor needed in the first stage, is of great importance for feasible economic development, which is the ultimate aim of every economy. today, the main target on economic process is on however long-run growth are often achieved, however it is often sustained, and growth policies that increase the quality of living (silver, 2007). the qualitative development of the workforce primarily depends on its being healthy and educated. there is a close and mutual causality relationship between a society's health level and economic development. the resources allocated for health are increasing in societies that have brought their economic development to a certain level. thus, health awareness is formed in individuals. the development of services offered to mailto:editorial@sadipub.com korkmaz silver and e. smith(2023) 13 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe individuals in the health sector provides economic development (mazgit, 2002). many studies have also found a two-way relationship between health services and economic development (ye and zhan, 2018; erdil and yetkiner, 2009). the two-way relationship is explained as the economy will increase welfare after health services provide people with a higher standard of living; healthy people increase both their productivity and information exchange with the people around them and contribute to the productivity of other production factors. in recent years, there has been a lot of study and debate over the link between health spending and economic growth. economists and policymakers agree that there is a favorable relationship between the two. in other words, investing in health can lead to greater long-term economic consequences. one rationale for this association is that health expenditures might act as a buffer between macroeconomic measures such as labor productivity, workforce participation rates, and human capital accumulation. a healthy workforce, for example, is more likely to be productive and less prone to absenteeism, which may contribute to better productivity and economic growth (aghion et al., 2010). furthermore, investment in health may lead to advances in education and training, which can further strengthen human capital (mushkin, 1962). the "healthbased growth hypothesis" is one theoretical paradigm that attempts to explain the positive benefits of healthcare investment on economic growth (admane and slimani, 2021). according to this idea, health expenditures, like investments in physical infrastructure or research and development, constitute a type of productive capital. health expenditures may boost a society's total productivity and contribute to long-term economic growth by increasing the health of its people. health expenditures should not be considered as an expense in the budget but as an investment expenditure. although health expenditures are considered an expense in the short term, they should be considered as an investment expenditure in the long term (raghupathi and raghupathi, 2020). the return of education and similar services are given to healthy individuals will be higher, and it is expected that people will benefit more effectively with increasing life expectancy. theoretical discussions within the literature on specialize in the role of human capital within the process of economic development. considering that the 2 foundations of human capital measure education and health, investments in these 2 fields measure expected to extend the human capital levels of people. it is possible to define the concept of human capital as a qualified workforce (mincer, 1984). especially today, the theory of human capital has become very important both in terms of the development of nations and regional development and has attracted the attention of economists. many studies and analyses have shown that investments in people accelerate the development process. as investments in human capital increase, so does individual income and the number of goods and services produced. socio-economic development takes place depending on human capital investments as well as physical capital investments. because it is the human capital that will provide technical development and marginal benefit by using resources effectively. in order to accelerate the economic development process, it is necessary to increase human capital investments that increase the quality of labor. in this context, it is thought that all kinds of investments made for people will contribute to economic development. thus, the health capital stock of developing humans will constitute an important part of human capital. as a result, health facilities and medical investments that expand the health capital stock will play a significant role in the country's economic success by assuring the continuous improvement of human capital (cooray, 2013). in order to catch up with each other in terms of welfare levels, countries need to be similar in terms of human and physical capital. the relationship is expected to be more effective in lowincome countries than in others (souzakis and cravo, 2008). it is argued that money mediation through the banking industry plays a very important role in allocating savings, up productivity, technical amendment, and therefore the rate of economic development (schumpeter, 1911). the event of monetary markets and establishments may be an essential and integral a part of the korkmaz silver and e. smith(2023) 14 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe expansion method, and therefore the level of monetary development of nations may be a sensible predictor of future rates of economic development, capital accumulation, and technological amendment (levine, 1997). the connection among monetary improvement and financial growth can be defined through 4 one-of-a-kind perspectives. the primary view argues that monetary boom leads to economic development (kar and pentecost, 2000). it is believed that as a result of the new demand, countries will also develop financially. first, economic growth emerges, and the funding requirements of economic growth lead to the development of the financial system and financial markets. according to the second approach, financial development supports economic growth (ahmed and ansari, 1998). this relationship is described as a "supply leading" relationship. the fact that financial institutions are developed ensures that savings are gained as an input to the economy. thus, economic growth occurs with the support of the financial system. third approach clarifies; there is a bidirectional causality relationship between financial progress and economic growth (calderon and liu, 2003). the remaining view, not like previous perspectives, argues that there is a negative between economic development and financial progress (ahmed, 2013). according to the findings of studies in the fields of economics and finance, the economic development of countries is strongly dependent on their financial development. however, a financial structure with a high level of development reduces transaction and monitoring costs and increases the efficiency of intermediary activities. this has a positive effect on economic performance. economic growth, on the other hand, will bring improvements in meeting basic human needs such as income growth, education, and health. the financing of health services is carried out in two different ways, the direct financing method and the indirect financing method (uga and santos, 2007). the direct financing method means that those who request health services pay the price of the service they receive directly. the service produced by the public and private sectors is purchased by the consumer, provided that the price is paid. in the indirect financing method, there is a third-party payer between the service provider and the requestor. in this financing method, the health system is financed by general taxes, special taxes, and consumer contributions. one of the most important problems experienced in health services is the problem of financing. this problem arises in both developed and developing countries, but its economic reflections are different in each country. especially in low-income countries, there are deficiencies in the financing of health services (coovodia et al., 2009). in this context, the relationship between financial development and health will be investigated in low-income african countries. 2. materials and methods the study used data from 11 african countries that can be accessed to investigate the relationship between health and financial development. the available data of the countries used in the study is shown in table 1. data acquired from 11 african countries between 2001 and 2017 were utilized to carry out the study. as for the health variable, the life expectancy index was taken from the world bank data pool. for financial development, the average of financial development indicators was taken from the financial structure data pool made by the world bank. table 1. countries burundi burkina faso congo, dem. rep. chad ethiopia gambia guinea mali uganda togo sudan in the research part of the study, the cross-section dependency test, unit root tests, and causality tests were applied, respectively. considering the cross section dependency between the series has a considerable impact on the outcomes (breusch and pagan, 1980; pesaran, 2004). before commencing the analysis, it is required to verify for the presence of cross section dependency within the variables. when deciding which unit root and relationship tests to run, cross section dependence should be considered. otherwise, the analysis may produce skewed findings. when the time dimension of the panel is bigger than the cross section dimension, the existence of korkmaz silver and e. smith(2023) 15 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe cross-sectional dependency is determined using the breusch-pagan (1980) lagrange multiplier (lm) test; when both are of comparable size, they can be explored with the pesaran test (2004). the mentioned tests are given below. lm =tx n n 2 ( −1)/2 (1) i= =+j j i 1 cdlm = (tpˆij2 −1) n(0,1) (2) n n( −1) i= =+j j i 1 first found unit root tests are supported the notion that the move phase elements that body the panel are freelance which all crosswise gadgets are equally suffering from a surprise to 1 of the gadgets that body the panel. but, it is a further sensible technique if a surprise to one of the pass segment units that frame the panel impacts the other elements at definitely different degrees. with a purpose to remove this deficiency, the contemporary unit root tests are evolved that examine the stationarity by using thinking about the dependence between go phase elements. the second era unit root test pesaran cadf that cares concerning the move section dependency is given below. t n t1(, ) =(y m y −ym y1i w iw i−−11 1/2 (3) the mean t statistical value found per cross-section is called cips. the mathematical model of cips is given below. n t = n−1 t n ti (, ) (4) i=1 the dumitrescu and hurlin test can take into account both the cross-sectional dependence and heterogeneity between the countries that make up the panel. another feature of the dumitrescu and hurlin test is that it can be used both in the presence and absence of a cointegrated relationship (dumitrescu and hurlin, 2012). 1 n wn thnc, = n i=1 wi t, (5) 3. results to identify which unit root test will be used, the cross-section dependency of priorities must be examined. as a result, the breusch pagan and pesaran cross-section de-pendence tests were carried out. it can be seen in table 2. table 2. breusch pagan and pesaran cross section dependency variables breusch pagan statistics breusch pagan probability pesaran sta tistics pesaran prob ability fd 594.0611 0.000* 16.5392 0.000* health 923.4887 0.000* 30.3882 0.000* note: *,**,*** show significance at the level of 1%, 5%, 10%, respectively. n − 1 n p ̂ ij 2 1 n − 1 n i ˆ ) korkmaz silver and e. smith(2023) 16 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe according to the results of breusch pagan and pesaran cross-sectional dependency tests, it is seen that all variables have cross-section dependence. because of this situation, the unit root test to be applied to these variables should also take into account the cross-sectional dependence. the results of the pesaran cadf unit root test, which takes into account the cross-sectional dependence, can be seen in table 3. table 3. pesaran cadf unit root test variables model statistics (cips) fd -2.027 health -0.261 d(fd) -3.332* d(health) --2.224*** note: *,**,*** show significance at the level of 1%, 5%, 10%, respectively. the first difference between the series is represented by d(fd), which represents the first difference between the series' in the unit root test results, it is seen that the variables are not stationary at the first level, but become stationary together at the first differences level. tablo 4. var lag selection 0 0.200271 4.067668 4.120094 4.088880 1 1.36e-05 -5.528.285 -5.371.005 -5.464.650 2 8.85e-07* -8.262190* -8.000056* -8.156130* 3 9.48e-07 -8.194.123 -7.827.136 -8.045.640 4 9.05e-07 -8.241.127 -7.769.287 -8.050.220 5 9.23e-07 -8.221.979 -7.645.286 -7.988.648 6 9.67e-07 -8.176.160 -7.494.613 -7.900.405 7 9.29e-07 -8.218.117 -7.431.717 -7.899.938 8 9.60e-07 -8.187.716 -7.296.463 -7.827.113 note: *,**,*** show significance at the level of 1%, 5%, 10%, respectively as a result of the var model lag length estimation analysis, it was determined that the appropriate lag length should be 2 table 5. pedroni cointegration statistic probability panel pp -1.578006 0.0573** panel adf -2.181715 0.0146** group pp -1.402001 0.0805*** group adf -2.265914 0.0117** note: *,**,*** show significance at the level of 1%, 5%, 10%, respectively fpe aic sc hq korkmaz silver and e. smith(2023) 17 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe consistent with the pedroni cointegration take a look at, the h0 hypothesis (there's no cointegration) is rejected. in step with the results of the assessments that make up both panel and organization information inside the pedroni cointegration check, a cointegration relationship is observed between the variables. table 6: dumitrescu and hurlin causality test causality direction w-stat z-bar stat probability fd->health 12.7977 10.5822 0.0000* health->fd 6.88073 4.50172 0.0000* note: *,**,*** show significance at the level of 1%, 5%, 10%, respectively. the dumitrescu and hurlin causality test shows that a bidirectional relationship was found between financial development and health variables. in other words, the change in financial development causes the change in the health variable, and the change in the health variable causes the change in the financial development. 4. discussion financing health services has been a very difficult and important issue in every country. healthcare financing has three important and interrelated pillars. the first of these is raising sufficient funds to finance health services. the second is the pooling of funds based on risk-sharing between payers and the third is the appropriate use of funds to purchase or provide necessary health care. especially in low-income countries, health services cannot be provided by the public due to priorities. individuals have to meet their health needs themselves. individuals in low-income countries also have limited resources to spend on their health needs. the link between impoverishment and health issues and shorter lifetime is understood. impoverishment adversely affects health in several aspects, particularly deficiency disease and unsuitable housing conditions. for example, a study was conducted on the affordability of public hospitals' emergency delivery and newborn care costs between october 2007 and january 2008 in mahojango province of the boeny region in the northwest of madagascar. while newborns cost an average of 59 dollars, drugs and medical devices accounted for 40% of that cost. the results show that the amounts paid for the health services received far exceed the paying capacity of middle and low-income households (honda et al., 2011). a similar study was conducted on health expenditures in burkina faso. families in burkina faso consist of an average of 8 people. the average monthly expenditure of a family is 23 dollars, and 43% of this expenditure is food. at the end of the study, the ratio of families that allocated 40% of non-food expenditures to health expenditures was found to be 8.66% (su et al., 2006). the health impact of poverty becomes more evident in economic crises. the economic crisis and the recession negatively affect public health not only due to health-specific conditions such as reductions in health expenditures but also for reasons related to social determinants of health, such as increased unemployment. nowhere in the world is there a society in which income and wealth are perfectly evenly distributed among individuals. however, the existence of people who are too poor to meet their needs, even at the lowest level, draws attention as a source of unrest in society. the financial development of countries both provides economic growth and increases the health quality of individuals. in this study, as a supporting finding, a bidirectional relationship was found between health and financial development. 5. conclusions technological developments that accelerated in today and the increases in per capita income deeply affected the financial services sector as well as many economic sectors and paved the way for modern changes in both korkmaz silver and e. smith(2023) 18 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe private sector organizations and the regulatory institutions of the state. with the effect of globalization, national financial systems are connected with developed transaction networks and integrated around the world. the link between financial development and health development is a hot issue among politicians, scholars, and practitioners worldwide. financial development is a measure of financial systems' success in providing access to financial services and goods, whereas health development is the process of increasing health outcomes and healthcare services. in many aspects, financial development is projected to boost the development of the health sector. the purpose of this research is to look at the link between financial development and health development. the development and effective use of human capital are very important, especially for underdeveloped and developing countries. for this, an educated and healthy society is needed. on the other hand, the degree of satisfaction of individuals in terms of financial opportunities and social relations is also an indispensable condition. the success of societies in their economic development processes depends on the development of their human capital as well as their physical capital. in this sense, it is not possible for countries that do not invest in human and social capital to show a high performance in the economic field. especially in developing low-income countries, the necessary investment in human capital cannot be made. failure to make the necessary investments is a problem that affects the welfare of the country and individuals. many studies in the literature have examined the relationship between financial development and human capital (outreville, 1999; monaceli et al., 2011). in these studies, it is seen that human capital is strongly related to financial development. similar findings were obtained in this study on low-income countries. several studies in the literature have found a link between economic growth and health (mehrara and musai, 2011; nasiru and usman, 2012). unfortunately, financial development has not been included as a variable in this context. financial development affects the health level of individuals living in low-income countries. at the same time, the financial development rate of economically growing countries is also affected by the health quality of individuals. to summarize, there is a bidirectional relationship between financial development and the health level of individuals. the study's findings are consistent with those found in earlier investigations (mehrara and musai, 2011; nasiru and usman, 2012). in the future, studies in this topic will be able to draw various conclusions by investigating countries of varying economic sizes. references admane, m., & slimani, s. (2021). the impact of health expenditure on economic growth in algeria. international journal of economics and finance, 13(2), 1-25. aghion, p., howitt, p., & murtin, f. (2010). the relationship between health and growth: when lucas meets nelson-phelps (no. w15813). national bureau of economic research. ahmed, a. d. (2013). effects of financial liberalization on financial market development and economic performance of the ssa region: an empirical assessment. economic modelling, 30, 261-273. ahmed, s. m., & ansari, m. i. (1998). financial sector development and economic growth: the south-asian experience. journal of asian economics, 9(3), 503-517. breusch, t. s. pagan, a. r. (1980), “the lagrange multiplier test and its applications to model specification in econometrics”, review of economic studies, 47(1), pp. 239– 253. calderón, c., & liu, l. (2003). the direction of causality between financial development and economic growth. journal of development economics, 72(1), 321-334. cooray, a. (2013). does health capital have differential effects on economic growth?. applied economics letters, 20(3), 244-249. coovadia, h., jewkes, r., barron, p., sanders, d., & mcintyre, d. (2009). the health and health system of south africa: historical roots of current public health challenges. the lancet, 374(9692), 817-834. dumitrescu, e. i., & hurlin, c. (2012). testing for granger non-causality in heterogeneous panels. economic modeling, 29(4), 1450-1460. korkmaz silver and e. smith(2023) 19 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe erdil, e., & yetkiner, i. h. (2009). the granger-causality between health care expenditure and output: a panel data approach. applied economics, 41(4), 511-518. honda, a., randaoharison, p. g., & matsui, m. (2011). affordability of emergency obstetric and neonatal care at public hospitals in madagascar. reproductive health matters, 19(37), 10-20. kar, m., & pentecost, e. j. (2000). financial development and economic growth in turkey: further evidence on the causality issue. universitäts-und landesbibliothek sachsen-anhalt. levine, r. (1997). financial development and economic growth: views and agenda. journal of economic literature, 35(2), 688-726. mazgit, i̇. (2002). information society and the increasing importance of health. i. ulusal bilgi, ekonomi ve yönetim kongresi, 405-415. mehrara, m., & musai, m. (2011). the causality between health expenditure and economic growth in iran. int. j. eco. res, 2(4), 13-19. mincer, j. (1984). human capital and economic growth. economics of education review, 3(3), 195-205. monacelli, t., iovino, l., & pascucci, f. (2011). financial development and human development index. erişim tarihi: 11.04.2018, http://www.inesad.edu.bo/bcde2013/papers/bcde2013-27.pdf mushkin, s. j. (1962). health as an investment. journal of political economy, 70(5, part 2), 129-157. nasiru, i., & usman, h. m. (2012). health expenditure and economic growth nexus: an ardl approach for the case of nigeria. journal of research in national development, 10(3), 95-100. outreville, j. f. (1999, october). financial development, human capital, and political stability. united nations conference on trade and development. erişim tarihi: 30.04.2018, http://unctad.org/en/ docs/dp_142.en.pdf pesaran, m. h.(2004), “general diagnostic tests for cross section dependence in panels”, cambridge working papers in economics working paper no: 435. raghupathi, v., & raghupathi, w. (2020). healthcare expenditure and economic performance: insights from the united states data. frontiers in public health, 8, 156. schumpeter, joseph a., the theory of economic development (cambridge, ma: harvard university press, 1911). silver, m. (2007). roman economic growth and living standards: perceptions versus evidence. ancient society, 191-252. soukiazis, e., & cravo, t. (2008). human capital and the convergence process among countries. review of development economics, 12(1), 124-142. su, t. t., kouyaté, b., & flessa, s. (2006). catastrophic household expenditure for health care in a low-income society: a study from nouna district, burkina faso. bulletin of the world health organization, 84, 2127. todaro, m. p., & smith, s. c. (2003). economic development, eight editions. england: pearson education limited. ugá, m. a. d., & santos, i. s. (2007). an analysis of equity in brazilian health system financing. health affairs, 26(4), 1017-1028. ye, l., & zhang, x. (2018). nonlinear granger causality between health care expenditure and economic growth in the oecd and major developing countries. international journal of environmental research and public health, 15(9), 1953 impact of electricity loss on gross domestic product in nigeria american interdisciplinary journal of business and economics issn: 2837-1909| impact factor : 4.6 volume. 9, number 2; april-june, 2022; published by: scientific and academic development institute (sadi) 8933 willis ave los angeles, california https://sadipub.com/journals/index.php/aijbe 1 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe improving transmission and distribution infrastructure to reduce electricity loss and boost gdp in nigeria akindele samson department of economics, trinity university, lagos, nigeria abstract: this study examines the impact of electricity loss on the economic growth of nigeria from the period 1981 to 2020. the study employs a vector autoregressive (var) model to estimate the effects of electricity loss, electricity demand, and electricity supplied from hydropower on the gross domestic product (gdp) of the country. the results of the study reveal that electricity loss has a negative impact on the gdp, while electricity demand has a positive impact on gdp, and electricity supplied from hydropower negatively affects gdp. however, the study finds that there is no causal relationship between electricity loss, electricity demand, and electricity supply, and gdp in nigeria. the study recommends a deliberate policy to stimulate investment in the transmission and distribution infrastructure to reduce electricity losses in the country. the study highlights the different forms of electricity losses, which can be technical or non-technical, and categorizes them into transmission and distribution losses. the study suggests that decreasing electricity losses leads to an increase in gdp through an increase in distribution company revenue and an increase in the quantity of electricity reaching the end-users. keywords: electricity loss, economic growth, gross domestic product (gdp), vector autoregressive (var) model, transmission and distribution losses, nigeria. introduction electricity is a vital input for economic growth and development in all sectors of the economy. however, it is a well-known fact that many countries, especially developing countries, experience significant losses in the electricity sector due to various reasons such as outdated infrastructure, vandalism, and theft. these losses not only impact the quality and availability of electricity to households and businesses but also impede the economic growth of these countries. nigeria, being the most populous country in africa, has experienced frequent electricity outages that have had severe consequences on the economy. this study aims to investigate the impact of electricity loss on the gross domestic product (gdp) of nigeria from 1981 to 2020, using a vector autoregressive model. the study considers electricity loss, electricity demand, and electricity supplied from hydropower as the primary variables affecting gdp. the study provides policy recommendations to reduce electricity losses and increase economic growth in nigeria. the remainder of the study is divided into five sections. the next section presents a review of the empirical literature on electricity loss and economic growth. the third section outlines the theoretical framework underpinning this study, while section four presents the methodology and model specification. section five provides sources and data for the study, and the final section presents and discusses the results alongside the policy recommendations for reducing electricity losses and increasing economic growth in nigeria. there are different degrees of electricity loss along the transmission lines. chint (2020) showed that as the electricity is being generated and stepped up by the transformer, about 1 to 2 percent of generated energy is lost. another 2 to 4 percent is again lost in the transmission lines, while another 1 to 2 percent is lost during step down from the high tension wires. more importantly, about 4 to 6 percent is lost in the distribution process akindele samson (2022) 2 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe to the end users. on the whole, about 8 to 15 percent of electricity is lost between the power plants and the end users. this overall percentage loss implies a heavy dampening effect on gross domestic product through firms’ productivity. dakpogan and smit (2018) estimated the effect on gdp from 0.5 to 1.2 percent in some sub-saharan african countries. a comparison of electricity loss in nigeria with some other countries can be observed in figure one. the country with the highest volatility of losses is nigeria followed by ghana. the highest for electricity loss in britain was 9.8 percent in 1994 while the highest loss in nigeria was 49.27 percent in 1981. the lowest loss that nigeria has ever had was 4.5 in 2009. this amount of electricity loss in nigeria is quite worrisome and could be a factor responsible for the incessant power outages in the country and this has grave consequences on productivity in the country and attendant effect on gdp growth. figure 1: electricity loss in some selected countries source: author generated using excel 2010 losses in electricity transmission and distribution in the latin american and the caribbean countries was estimated at between 0.19 and 0.3 of gdp for all the countries and the losses in terms of monetary value ranges between $11 to $17 billion (jiménez, serebrisky and mercado, 2014). on a country by country analysis, electricity loss in brazil cost about 0.26 of gdp, while that of mexico is between 0.12 and 0.3 (jiménez, et al, 2014). these authors estimated technical losses in uruguay at $80 million as at 2010. the implication of these is that as the monetary losses increase, it finds its expression in reduction of productivity and consequently on economic growth. a reduction in electric power losses leads to increase in gdp through increase in the revenue of the distribution companies, as a result of increase in the quantity of electricity that reaches the end users. this increase in electricity supply will increase its consumption and a reduction in the use of alternative sources of electricity, like generators, which in turn reduces the cost of production and raises profits of firms and expands investment potentials. this work is particularly important because, to the best of the author’s knowledge, most of the works done on electricity loss in nigeria have only considered the effect of the loss on power outages in the country using descriptive analysis without a sound methodological approach. none of the works have investigated the impact of electricity loss on the gross domestic product of the country. the remaining part of this work will be divided into six sections. the following section will handle the recent empirical literature, while the following section three will present the theoretical framework underpinning this study. section four will show the methodology and the model specification while section five will show the sources of data for the work and section six will present the result and then analyze. section seven will then summarize and give policy recommendations. literature review das and mcfarlane (2021) investigated the effect of remittances on electricity consumption and electricity losses in jamaica between 1976 and 2014. the work employed vector error correction model and granger causality to analyze the work. the findings revealed that cointegration existed between remittances and electricity consumption and losses. it was also discovered that there was a bi-directional causality among the variables; however, the relationship between electricity losses and remittances was negative while that between energy consumption and remittances was positive. it was therefore recommended that social policies be designed to make use of remittances to reduce electricity theft in the country. adams, atsu, klobodu and lamptey (2020) employed autoregressive distributed lag model to evaluate the effect of transmission and distribution losses on the growth of south african economy using time series data akindele samson (2022) 3 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe between 1971 and 2014. their findings showed that there existed a long run relationship among the variables by using foreign direct investment as a control variable. by the time the robustness check was carried out it was found that 1 percent change in electricity loss in the country results in a decline in economic growth from about 3.8 percent to 2.2 percent. it was therefore recommended that policy makers should invest more in energy production and infrastructure to help reduce electricity loss due to technical factors. george-anokwuru and ekpenyong (2020) did an empirical study on relationship between electricity and economic growth in nigeria between 1971 and 2018 and using consumption of electricity, generation along with transmission and distribution losses. the work employed autoregressive distributed lag model, the findings revealed that electricity generation and distribution losses have negative relationship with economic growth and electricity generation has a negative relationship with economic growth. it was therefore suggested that production and transmission infrastructure expenditure be encouraged to boost energy consumption and reduce the losses. dakpogan and smit (2018) looked at the effect of electricity loss on gross domestic product (gdp) in benin republic between 1980 and 2014 by employing the methodology of autoregressive distributed lag model. the findings of the study showed that a 1 percent loss in electricity in the country would cost about 0.16 percent decline in gdp. it was therefore proposed that a financing mechanism on electricity infrastructure to reduce the losses from electricity in order to increase gdp be designed and implemented. adams, klobodu and lamptey (2017) carried out an examination of how electricity loss from transmission to distribution affects gdp growth in ghana between 1971 and 2012. the work employed autoregressive distributed lag model using bounds test for cointegration and their findings revealed that there was a long run relationship between electricity loss and economic growth in the country. it was further discovered that electricity loss did not show any significant effect on economic growth but when the urban population growth was factored in, it was discovered that electricity loss became significant in affecting economic growth in ghana. costa-campi, daví-arderius and trujillo-baute (2016) carried out an analysis of the impact of consumption and generation on electricity losses in spain. the study used a quantitative analysis of the marginal effect of losses in mega watts from an additional mega watts produced or consumed. it was found that there is a huge amount of saving that will be made when losses can be reduced by using smart meters. it was found out from the result that a 1 percent reduction in loss of electricity will lead to about 1.25 percent in saving. it was also discovered that in increase in solar and wind capacity would reduce energy losses. it was therefore recommended that a stronger coordination between the transmission and distribution system operators be encouraged. theoretical framework the work of samuelson and nordhaus (1989) on growth will be the framework on which this study will rest. the mainstream theory of economic growth claims that production plays the most important role of determining the growth of an economy, and every production process requires energy to be able to transform any matter into finished product. the theory classifies capital, labour and land into primary factors that must be obtained at the beginning of any production and they are not used up although they can be degraded or improved upon. but the theory asserts that energy resources or commodities like oil, gas fuels, electricity and coal are classified as intermediate inputs and can be completely used up in the production process. this theory helps us to explain that production can be influenced by the availability of electricity. the more the productive agents have access to electricity the more productivity can be enhanced. increase in energy loss will imply shortage of electricity supply and consequently the negative implication on productivity and growth. methodology and model specification this study employed an ex post facto research design by trying to interrogate the relationship between electricity loss and economic growth in nigeria. an econometric method of vector autoregressive (var) model will be employed. the reason is that this method of estimation is to be used when all the variables are stationary at first difference or integrated at order one, i(1). the data were subjected to unit root test using augmented dickey fuller test method and it was found that all variables were integrated at i(1). the first step after confirming the order of integration is to test for the long run relationship among the variables and this was done using johansen cointegration test and it was found that there was no cointegration, and so the work has to employ vector autoregressive model. akindele samson (2022) 4 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe the model for this work is hinged on the growth model proposed by samuelson and nordhaus (1989) where the cobb-douglas production function depends on labour and capital and energy as specified below: output = f (labour, capital, energy) … (1) qt = wla cb e1-a-b … (2) where is the output, is the total factor productivity, l is the labour input, c is the capital input and e is the energy input, , and are the share of the factor inputs in income. adapting model (2) and incorporating the electricity components that is the focus of this study, we then have: gdp=f(elelos,eledd,elehp) … (3) expressing (3) econometrically, we have: rgdpt = a + b1elelost + b2eleddt + b3elehpt + ut … (4) where rgdp is the real gross domestic product, elelos is the electricity loss both at the transmission and distribution lines, eledd is electricity demand in total and elehp is electricity supplied from hydropower source, is the error term. 4.1 specification of vector autoregressive model the basic form of a var model consists of a set of m variables that are endogenous: gt = g1t , ..,gmt, for m = 1, …m. when the lags p of the endogenous variables is included, we have var(p) expresses as: gt = b1gt-1 + … + bpgt-p + eft + et … (5) where are (m x m) coefficient matrices for i =1, …., p, is an m-dimensional white noise with time invariant positive definite covariant matrix , where e[et] = 0 whose value is positive and definite the matrix e is the matrix of coefficients of possible deterministic regressors having dimension (m x n), while f is a column vector containing deterministic regressors like constant, trend, dummy and seasonal variables. equation (5) can be expressed var with the variables of interest in this work as: 𝑅�𝐺�𝐷�𝑃�𝑡��=�∑𝒌�𝒊�=𝟏��𝛽�𝑖��𝑅�𝐺�𝐷�𝑃�𝑡�−1�+ ∑𝒌�𝒋�=𝟏��𝛽�𝑗��𝐸�𝐿�𝐸�𝐿�𝑂�𝑆�𝑡�−1 + ∑𝒌�𝒏�=𝟏��𝛽�𝑛��𝐸�𝐿�𝐸�𝐷�𝐷�𝑡�−1 + ∑𝒌�𝒎�=𝟏��𝛽�𝑚���𝐸�𝐿�𝐸�𝐻�𝑃�𝑡�−1�+� u1t … (6) … (7) 𝐸�𝐿�𝐸�𝐷�𝐷�𝑡��=�∑𝒌�𝒊�=𝟏��𝛽�𝑖��𝑅�𝐺�𝐷�𝑃�𝑡�−1�+ ∑𝒋�𝒌�=𝟏��𝛽�𝑗��𝐸�𝐿�𝐸�𝐿�𝑂�𝑆�𝑡�−1 + ∑𝒌�𝒏�=𝟏��𝛽�𝑛��𝐸�𝐿�𝐸�𝐷�𝐷�𝑡�−1 + ∑𝒌�𝒎�=𝟏��𝛽�𝑚���𝐸�𝐿�𝐸�𝐻�𝑃�𝑡�−1 + u3t … (8) 𝐸�𝐿�𝐸�𝐻�𝑃�𝑡��=�∑𝒌�𝒊�=𝟏��𝛽�𝑖��𝑅�𝐺�𝐷�𝑃�𝑡�−1�+ ∑𝒋�𝒌�=𝟏��𝛽�𝑗��𝐸�𝐿�𝐸�𝐿�𝑂�𝑆�𝑡�−1 + ∑𝒌�𝒏�=𝟏��𝛽�𝑛��𝐸�𝐿�𝐸�𝐷�𝐷�𝑡�−1 + ∑𝒌�𝒎�=𝟏��𝛽�𝑚���𝐸�𝐿�𝐸�𝐻�𝑃�𝑡�−1 + u4t … (9) where the variables remained as defined earlier. data and sources annual time series data will be used for this study and it will cover the period between 1981 and 2014. real gross domestic product data is obtained from the national bureau of statistics of the country while data for electricity loss, electricity demand, and electricity from hydropower are all sourced from the world bank development indicator. electricity loss, electricity demand and supply are expressed as percentage of output. table 1: variables, definition and source no variable definition source 1 rgdp real gross domestic product national bureau of statistics 2 elelos electricity loss wdi 3 eledd elecricity demand wdi 4 elehp elecridity supply from hydropower wdi note: wdi is world development indicator data base of world bank akindele samson (2022) 5 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe results and discussion 6.1 unit root test the variables were tested for the presence of unit root, because time series are assumed to be stationary. table 2: stationarity test (augmented dickey fuller) at level at first difference variable adf stat 5 % level prob. value adf stat 5 % level prob. value order of integration rgdp 0.650415 -2.92245 0.9898 -5.95836 -2.92378 0.0000 i(1) elelos -1.45922 -2.92517 0.5453 -6.54566 -2.92517 0.0000 i(1) eledd -1.48747 -2.92245 0.5316 -9.39097 -2.92378 0.0000 i(1) elehp -2.70943 -2.92245 0.0797 -8.98493 -2.92378 0.0000 i(1) source: author generated using eviews 10 the result of the test is in table 1. it showed that all the variables are stationary at first difference with all the probability values less than 5 percent. 6.2 optimum lag selection the lag selection criteria were used and all the criteria selected lag length one as indicated in table 3. table 3: optimum lag length selection lag logl lr fpe aic sc hq 0 -1080.21 na 4.89e+14 45.17536 45.33129 45.23428 1 -908.892 306.9428* 7.59e+11* 38.70382* 39.48348* 38.99845* 2 -895.812 21.25386 8.70e+11 38.82551 40.22891 39.35586 *lag length selected. source: author generated using eviews 10 6.3 cointegration test from the result of the unit root test results, the test for the existence of long run relationship among the variables was carried out using johansen cointegration test method as shown in table 3. table 4: cointegration (johansen) trace test max-eigen test null: no of coint. 5 % prob. trace statistic level value 5 % max-eigen level prob. statistic value none 32.62383 47.85613 0.5777 14.44681 27.58434 0.7906 at most 1 18.17702 29.79707 0.5530 10.56215 21.13162 0.6907 at most 2 7.614869 15.49471 0.5074 7.600756 14.26460 0.4207 source: author generated using eviews 10 the condition for accepting the null hypothesis is that if the probability value of the first null hypothesis is greater than 5 percent critical value, we accept the null hypothesis that there is no cointegration. the probability is 79 percent, so we conclude that there is no cointegration among the variables and we can only run the var at level. 6.4 var impulse response function the var models (6) to (9) were estimated and the impulse response functions were generated as shown in figure 2 to 4. figure 2: response of rgdp to electricity loss akindele samson (2022) 6 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe source: author generated using eviews 10 the response of gdp to a shock in electricity loss as shown in figure 2 assumes a negative dimension from period one to period 10 of the horizon. this implies that gdp and electricity loss are negatively related and significant. it also means that as more electricity is lost through the technical and non-technical channels, it is manifesting a dampening effect on the nation’s productivity. this finding is in support of most of the works from other countires, such as dakpogan and smit (2018) and george-anokwuru and ekpenyong (2020). figure 3 on the other hand showed the response of gdp to a shock in electricity demand. it showed that gdp is positively responding to electricity demand. this implied that if more electricity is available for consumption it has a positively strong impact on gdp. it is obvious that the more the available electricity for consumption, the more positive ripple effect it will have on gdp of the country. the response of gdp to a shock in electricity supply from hydropower is shown in figure 4 and it revealed that gdp is negatively related to electricity supply from hydropower. it is expected however, since electricity loss is huge, it means the available electricity supplied will not be able to influence gdp significantly. figure 3: response of rgdp to electricity demand source: author generated using eviews 10 figure 4: response of rgdp to electricity supplied from hydropower source: author generated using eviews 10 6.5 residual diagnostics the var model was checked if the assumptions of ordinary least squares are satisfied. table 4 showed that the model is free from serial correlation among the residuals and that is makes the model suitable for policy akindele samson (2022) 7 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe prescription and forecast. but the errors in the model are not free from heteroscedasticity and they are not normally distributed. table 5: residual diagnostic tests var residual serial correlation lm tests lag lre stat df prob. rao f-stat df prob. value 1 21.23046 16 0.1698 1.366627 (16, 13.7) 0.1711 var residual heteroskedasticity tests (levels and squares) joint test: chi-sq df prob. 139.5899 80 0.0000 var residual normality tests component jarque-bera df prob. rgdp 701.0944 2 0.0000 elelos 3.775582 2 0.1514 eledd 3.806633 2 0.1491 elehp 33.81916 2 0.0000 joint 742.4958 8 0.0000 source: author generated using eviews 10 6.6 granger causality test it was shown in table 5 that none of the independent variables could cause gdp with all their probability values more than 5 percent significant level. this implies that even though electricity loss is negatively impacting gdp, there is no causality running from electricity loss to gdp. similarly, electricity demand and supplied from hydropower could not granger cause gdp. table 6: var granger causality test dependent variable: rgdp excluded chi-sq df prob. elelos 0.238600 1 0.6252 eledd 1.609738 1 0.2045 elehp 0.335856 1 0.5622 all 3.975535 3 0.2641 source: author generated using eviews 10 conclusion and policy implications this study investigated the impact of electricity loss on real gross domestic product in nigeria along with electricity demand and supplied from hydroelectric power. it was found that there was no long run relationship among the variables, vector autoregressive impulse response analysis was employed to check the how the independent variables stimulate the response of rgdp and it was revealed that gdp responds negatively to electricity loss significantly through the period under consideration. although the period covered was limited due to availability of data on electricity loss, the situation described in this work has not changed, but rather grown worse. similarly, electricity demand impacted gdp positively and electricity supplied from hydropower impacted gdp negatively. this negative relationship between electricity demand and gdp shows that if only more electricity could be supplied, it would boost gdp. it was also shown that electricity supply showed a negative impact on gdp simply due to the huge loss of electricity through transmission and distribution channels. the major recommendation therefore is that there should be a sound energy policy that would be designed to encourage investment in the transmission and distribution lines to upgrade the infrastructure with the purpose of reducing electricity loss. it is certain that if the losses can be reduced, it will increase the quantity being akindele samson (2022) 8 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe supplied and consequently increase the quantity demanded and eventually translate to higher productivity and gdp. references adams, s., atsu, f., klobodu, e. m. and lamptey, r. (2020). electricity transmission, distribution losses and economic growth in south africa. heliyon 6, 1-9. adams, s., klobodu, e. k. m. and lamptey, r. o. (2017). electric power transmission, distribution losses, and economic growth in ghana. social, health, and environmental infrastructures for economic growth, 18. antmann, p. (2009). reducing technical and non-technical losses in the power sector. background paper for the world bank group energy sector strategy. available at: https://siteresources.worldbank.org/extesc/resources/background_paper_reducing_losses_in_the _p ower_ bandim, c. alves jr., j. pinto jr., a. souza, f. loureiro, m. magalhaes, c. and galvez-durand, f. (2003). “identification of energy theft and tampered meters using a central observer meter: a mathematical approach,” in ieee pes transmission and distribution conference and exposition, dallas, 2003, 163168. chint (2020). https://chintglobal.com/blog/how-much-power-loss-in-transmission-lines/ costa-campi, m. t., daví-arderius, d. and trujillo-baute, e. (2016). the economic impact of electricity losses. documents de treball de l’ieb 2016/4. dakpogan, a. and smit, e. (2018). the effect of electricity losses on gdp in benin. munich personal repec archive (mpra), paper no. 89545 das, a. and mcfarlane, a. (2021), “remittances, electricity consumption and electric power losses in jamaica”, journal of economic studies, https://doi.org/10.1108/jes-09-2020-0466 eberhard, a,, foster, v., briceño-garmendia, c., ouedraogo, f., camos, d. and shkaratan, m. (2008). underpowered: the state of the power sector in sub-saharan africa. aicd background paper 6, world bank. george-anokwuru, c. c. and ekpenyong, b. i. (2020). electricity and economic growth in nigeria. journal of economics, business and market research, 1(1), 1-7. international monetary fund (imf). (2015). structural reforms and macroeconomic performance: initial considerations for the fund. imf policy paper, staff report. washington, d.c. jiménez,r., serebrisky, t. and mercado, j. (2014). sizing electricity losses in transmission and distribution systems in latin america and the caribbean, inter-american development bank felipe herrera library. 1-42. jones, c, i. (2011). intermediate goods and weak links in the theory of economic development. america economic journal of macroeconomics. 3, 1–28. nagi, j., yap, k., nagi, f., tiong, s. koh, s. and ahmed, s. (2010). “ntl detection of electricity theft and abnormalities,” in proceedings of 2010 ieee student conference on research and development (scored 2010), putrajaya, malaysia, 2010, 202-206 akindele samson (2022) 9 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe nigerian electricity regulation commission (nerc), (2019). “industry statistics” [online]. available: https://nercng.org/index.php/library/industrystatistics/distribution/119-atc-c-losses/464 phdisco#data. [accessed 20 march, 2019). ogujor, e. and otasowie, p. (2010). “the impact of the pre-paid meter on revenue generation in nigeria,” pacific journal of science and technology, 11(1), 138-142. payne, j. e. (2010). a survey of the electricity consumption-growth literature. applied energy, 87(3), 723– 731. http://doi.org/10.1016/j.apenergy.2009.06.034 samuelson, p. a. and nordhaus, w. d. (1989). economics. mcgraw-hill, 1989 world development indicators. (2017). https://data.worldbank.org/products/wdi http://doi.org/10.1016/j.apenergy.2009.06.034 http://doi.org/10.1016/j.apenergy.2009.06.034 american interdisciplinary journal of business and economics issn: 2837-1909| impact factor: 6.72 volume. 10, number 2; april-june, 2023; published by: scientific and academic development institute (sadi) 8933 willis ave los angeles, california https://sadipub.com/journals/index.php/aijbe | editorial@sadipub.com 1 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe improving the audit quality of nigerian listed oil and gas companies through institutional shareholding sagir lawal nigeria police academy wudil kano abstract: this study examines the impact of institutional shareholding on the audit quality of listed oil and gas companies in nigeria. the study utilizes secondary data from annual reports of ten oil and gas companies from the years 2010 to 2019, where institutional shareholding is measured as the proportion of institutional shareholding to non-institutional shareholding on the board and firm size is used to measure audit quality. the study found a significant positive relationship between institutional shareholding and audit quality of financial reports for listed oil and gas companies in nigeria. the study concludes that higher institutional shareholding can enhance audit quality, and recommends an increase in institutional shareholding on the boards of oil and gas companies in nigeria. the study contributes to the literature on institutional shareholding, audit quality, and agency theory, and is relevant for investors, creditors, and other stakeholders interested in assessing the profitability and decision-making of oil and gas companies in nigeria. keywords: institutional shareholding, audit quality, oil and gas companies, nigeria, financial reports, firm size. 1.0 introduction the beginning of the pass 2 decade, is full of crisis in the capital markets, this affected large companies worldwide. incidence among others, enron, worldcom, xerox, cadbury nigerian plc, african petroleum (now forte oil) plc, and unilever plc. these scandals led to a loss of public confidence in the quality of published financial reports and the role of the audit function globally, many businesses closing down. highquality external auditing is an integral component of working capital markets. companies with a reputation for accurate financial reporting are likely to change auditors when their audit efficiency is called into question to mitigate the effects of poor financial reporting on the capital markets. an independent audit is also regarded as a measure of corporate governance's external control effectiveness, which safeguards the interests of all the company's stakeholders by accrediting the financial statements, ensuring transparency and verifying the accuracy of financial information (seyedeh, hamid & hashem 2016, david, uche &azah 2019, david & ahmed 2020). besides, investors, creditors and other stakeholders who assess the profitability of the different business units, and decisionmaking on the different investment opportunities, rely on the audit results of reputable independent audit firms. mailto:editorial@sadipub.com sagir lawal (2023) 2 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe thus, greater credibility of the auditor improves the interest, reliability, and acceptability of financial statements consumers and thereby decreases the expense of earnings and agency management (ashbaugh, lafond& mayhew, 2003). the executive board plays an important role in corporate governance. regardless of the division of corporate management and ownership, boards function to safeguard shareholder interests. the board's connection with the quality of the audit services performed may be formal or informal. in terms of formal relations, the board of directors usually cooperates with management in the selection of the external auditor, often subject to shareholder ratification (adeyemi & temitope, 2010. in response to the aforementioned corporate scandals, regulators from many countries around the world have embarked on new reforms to reinforce the auditor's independence and also restore public confidence in the quality of published financial reports. in the us for instance, the sarbanes-oxley act was once surpassed in 2002, which installed the public company accounting oversight board (pcaob) to oversee the monetary reporting procedure of public companies. similar regulatory reforms aimed at bettering audit first-class and the great of annual economic statements produced through public companies were also carried out in the uk, canada, malaysia, south africa, and nigeria. however, despite these regulatory reforms to mitigate fraudulent monetary reports, improve audit exceptional and utilizing extension the fine of posted accounting reports, accounting scandals and corporate disasters involving especially professional external auditors are still regularly occurring globally. this has attracted the attention of accounting researchers who sought to set up a feasible purpose and impact connection between institutional shareholding and possession awareness on audit quality. institutional shareholding and director shareholding have also been a central problem in the empirical discussions on the interplay between monitoring mechanism and audit quality. perhaps, the predominant view is that institutions have the required resources and economic knowledge to reveal and self-discipline managers and thereby lowering company problems. this impact may also result in wonderful audit quality. on the different hand, discussions on the affiliation between director shareholding and audit great have also documented contradictory results. two conflicting arguments appear to dominate these discussions. some researchers believe that when owners pay good attention and concentrate fully on their investment it will drastically reduce mis appropriation and enhance audit quality because the value implication of their monitoring is less than the predicted gain from their big investments (klein, 2002). on the contrary, chen, yen, and chang. (2007) pointed out that audit quality is indeed weak and compromised when an auditor faces an agency of controlled shareholders although, some huge amount of research exists on the relationship between company governance mechanisms and audit excellent (such as abdullah 2008; sulong, gardner, hussin, sanusi & mcgowan 2013; alnawaiseh, 2006, qasim, (2011; abolfazl, amir, noroozi mohammad &sahraneshinb, 2015), few centered on the effect of institutional shareholding and ownership awareness on audit quality. whereas the few that exist are mentioned in the light of different countries, the outcomes are debatable in the nigerian perspective given the dissimilarities like monitoring structures. similarly, the outcomes that are got from samples drawn from several sectors of the economy to learn about phenomena spotlight the feasible implication of such phenomena on unique industries within the sample. therefore, the decision to focal point on the quoted oil and fuel organizations in nigeria. in nigeria, the oil and gas sector are pivotal to economic progress for the reason that the bulk of the revenue is generated from this sector. it is anticipated that this quarter ought to acquire the most interest in phrases of monitoring and supervision given its economic importance. it is towards the backdrop that this finds out about empirically the effect of institutional shareholding and director shareholding on audit quality of listed oil and gas corporations in nigeria. therefore, the objective of this study is to observe the sagir lawal (2023) 3 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe impact of institutional shareholding and ownership attention on audit quality of listed oil and gas groups in nigeria. to acquire this objective, it is hence hypothesized that: h01: institutional shareholding has no widespread impact on audit high-quality of listed oil and gas companies in nigeria 2.0 literature review 2.1 institutional shareholding institutional ownership refers to the stake in a company that is held by large financial organizations such as banks, investment companies and insurance companies. institutional shareholders generally purchase large blocksof a company’s outstanding shares and can exert considerable influence upon its management. jensen and meckling (1976) claimed that institutional shareholding has a very extensive function in minimizing agency conflicts between managers and shareholders. the existence of institutional shareholding is considered successful in being a highquality monitoring device in any choice taken through the manager. the agency concept suggests that monitoring via institutional possession can be a vital governance mechanism. institutional buyers can provide energetic monitoring that is hard for smaller, more passive or less-informed investors (almazan, hartzell & starks 2005, , david & ahmed 2020). moreover, institutional traders have the opportunity, resources, and capacity to reveal managers. therefore, efficient monitoring suggests that institutional possession is related to better monitoring of management activities, lowering the capability of managers to opportunistically manipulate earnings. the environment-friendly monitoring assumption suggests an inverse relationship between a firm's revenue management recreation and its institutional share ownership. in this vein, numerous researches documented that institutional possession prevents managers to opportunistically interact in revenue management (ebrahim, 2007; koh, 2003). considering the significance of corporate governance in the firm's management, shareholder's lively participation in monitoring administration functions is important to ensure exact corporate governance practices. to date, institutional investors‟ participation has emerged as an important pressure include monitoring to serve as mechanisms to shield minority shareholder's interest. the significant extend in the institutional investors‟ shareholdings have led to the formation of a large and powerful constituency to play a large role in company governance. earnings information, as part of accounting information, presents traders with relevant information that would help them in making correct asset pricing and funding choices (yuan & jaing, 2008). the active monitoring hypothesis views institutional investors as long-term buyers with raving incentives and motivations to closely display administration motion (jung & kown, 2002). however, some argue that institutional traders do now not play an energetic role in monitoring administration activities (claessens & fan, 2002; porter, 1992). according to duggal and millar (1999), 'institutional buyers are passive buyers who are greater likely to promote their holdings in poorly performing companies than to use up their resources in monitoring and improving their performance'. institutional traders may also be incapable of exerting their monitoring position and vote towards managers because it may also affect their enterprise relationships with the firm. accordingly, institutional buyers can also collude with administration (pound, 1988; sundaramurthy, rhoades & rechner, 2005). it is also argued that institutional owners are overly centered on non-permanent monetary results, and as such, they are unable to screen management (bushee, 1998; potter, 1992). so, there will be pressure on management to meet short-term profits expectations. these sagir lawal (2023) 4 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe arguments indicate that institutional investors may additionally now not restriction managers' revenue management discretion and can also increase managerial incentives to have interaction in salary management. 2.2 audit quality international auditing and assurance standards board (iaasb, 2010) in its framework for audit quality mentioned that the purpose of an audit is to enhance the degree of confidence of intended users in the financial statements. this can be achieved through gathering sufficient appropriate audit evidence to express an opinion on whether the financial statements are prepared, in all material respects, under the applicable financial reporting framework. this indicates that iaasb linked between auditing quality and audit evidence that used to express an opinion about firms' financial statements according to financial reporting standards. issa (2008) described audit satisfactory as the capability of audit technique to discover and file necessary falsification of financial statements as well as to minimize asymmetry of data between managers and stakeholders that are relevant to the degree of excellent of the data in monetary statements. also, deis and giroux (2002) argued that auditing high-quality is the auditor's capability to become aware of weaknesses and gaps in the accounting machine for the client and the reporting. however, copley and doucet (2013) went in some other course by means of defining the auditing excellent as the utility of expert standards associated to fieldwork and reporting standards. the audit satisfactory is a set of techniques and methods that work to reduce mistakes and fraud, and it is supported thru get admission to to ample and convincing evidence to defend the pastimes of applicable parties (abu, ijela & hamdan, 2010). the probability of detection is a count number of competence, whereas the likelihood of revelation depends on the independence of the auditor, i.e. his/her willingness to face the stress exerted via the producers of economic statements (piot &janin, 2005). there are many tries to define the notion of audit first-rate either on a professional business level, or academic level. on the expert enterprise level: for example, the international federation of accountants (ifac, 2009: 12) pointed to the idea of auditing first-class in the worldwide fashionable on quality control. it noted that "the goal of the audit association is to establish and hold a gadget of fantastic manage to furnish it with the practical assurance that: (a) the association and its personnel comply with professional requirements and relevant legal and regulatory requirements; and (b) reports issued through the company or engagement companions are fabulous in the circumstances” (ifac, 2009; 15). this capacity that the idea of fantastic from the viewpoint of (ifac) lies in compliance with professional requirements and criminal and regulatory requirements. furthermore, the public company accounting oversight board (pcaob, 2009) in auditing trendy no. 7 engagement satisfactory assessment and conforming modification to the board's interim best manipulate requirements mentioned that: (1)the engagement team failed to acquire enough suitable evidence below the standards of the pcaob; (2) the engagement group reached an inappropriate overall conclusion on the challenging matter of the engagement; (3) the engagement file is now not fantastic in the circumstances; or (4) the firm is not impartial of its consumer (pcaob, 2009). based on pcaob factors, affecting the excellent of the wellperformed audit engagement, audit quality can be considered as a method of gathering adequate proof based on professional requirements to gain appropriate standard conclusions about the firm's conformance with applicable reporting standards. moreover, the supreme audit institutions of the european union (2004) proposed the directions and practice about auditing quality, pointing out that the thought of auditing exceptional lies in the audit college attaining the following: excessive tiers of nice ineffectiveness of the planning and execution of auditing and different associated works, clear demonstration of audit reports, objectivity and fairness of the given estimates and opinions basis, the issuance of audit reviews at once to the needs of conceivable users, authenticity and sagir lawal (2023) 5 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe reliability of the views or results, and appropriateness of the pointers and other things blanketed in the audit reports (sais of european union, 2004). icaew (2002) suggested a definition for audit satisfaction by pointing out that, at its heart, audit best is about handing over a terrific expert opinion supported by the indispensable evidence and objective judgments. as lengthy as the auditors grant an impartial audit opinion that is supported by adequate audit evidence, the regulator assumes that such auditors have performed a firstclass auditing service. 2.3 empirical review 2.3.1 institutional shareholding and audit quality zuriegat (2011) investigated the effect of possession shape and audit pleasant among jordanian listed firms. usings pattern dimension consisted of one hundred and ninetyeighty (198) businesses out of the two hundred and sixty-two (262) listed companies on the amman stock exchange. the evaluation result using logistic regression in different to investigate the relationship between the audit characteristics measured primarily based on the audit company size as a dependent variable, and possession shape as unbiased variables. the outcomes exhibit a giant wonderful relationship between the audit first-class and that of the company's institutional possession and concluded that institutional traders tend to hire fantastic auditors. this study measured audit pleasant the use of firm dimension as the study proposes to, however, the used logit regression why this contemporary find out about will observe a couple of regression and there is the hassle of exterior validity since the previous find out about was carried out amman stock exchange whilst the study will be on the nigerian stock change specifically in oil and gasoline sector. khasharmeh and joseph (2017) ascertain the impact of possession structure on audit high-quality in a growing country, the case of bahrain. specifically, the study regarded ownership awareness and institutional shareholding as person explanatory variables for possession structure. the annual reports of listed businesses in bahrain for 2015 and unlisted businesses registered by using the central financial institution of bahrain in september 2016 have been used in the analysis. logistic regression was used to check the hypotheses. the results indicated that institutional shareholding has a wonderful but insignificant impact on audit firm size. this learn about was achieved in every other economic system different from the nigerian financial system so, a repetition of the usage of nigerian statistics is imperative. also, this modern-day learn about took a oneof-a-kind dimension, through interacting with the effect of a highquality audit committee, not just a direct relationship which makes for tons distinction between the studies. alzeaideen and al-rawash (2018) investigated the effect of extraordinary ownership constructions (concentration, foreign, and institutional shareholding) on audit nice of listed agencies in the amman inventory exchange. to take a look at each hypothesis; a model used to be described based on dependent variables employed to measure audit quality. the sample study consists of 132 corporations from 2005 to 2016. the evaluation of logistic regression was once used to inspect the relationship between the audit firstrate measured based totally on the audit firms’ size as a dependent variable and possession structure as independent variables. the outcomes supplied proof of an effective statistically giant relationship between the audit firstclass and that of agencies each with foreign and institutional shareholding. also, these outcomes indicate that overseas and institutional investors tend to rent super auditors. this study affords a hassle or gap in exterior validity and did not reflect on consideration on the audit committee as a thing that may want to affect the relationship between institutional possession and audit quality. akhidime (2015) examined the influence of the board structure of nigeria banks on their audit quality. the find out about is based totally on the posted audited bills of 19 banks that have been chosen through an easy sagir lawal (2023) 6 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe random sampling technique from the populace of the 25 nigerian banks over the banks' postconsolidation/reform over 5 years. the variables of the learn about had been analysed using binary logistic regression analysis. the hypotheses of the learn about had been examined using fratios. from the outcomes of the pooled binary regression of the pooled facts at a 5% degree of significance. the outcomes of the find out about verify that non-executive administrator positively impact the banks' audit quality. this study is on nigerian banks and used logit regression as a statistical technique for data evaluation whilst this cutting-edge find out about will be on oil and fuel organizations and will rent the use of multiple regression analysis as techniques for facts evaluation given us the problem of sectorial peculiarity and differences in statistical technique for analysis. ibrahim and jehu (2018) using statistics on 576 nigerian companies between 2011 and 2016 to look at the relationship between board composition and economic reporting quality, we underscored that the independence issue of board composition is twofold: director shareholding, and independent director shareholding. our multivariate regression results recommend that the proportions of the director shareholding, as well as that of the impartial director shareholding, have a poor and tremendous relation with odd accruals, which in flip improves the great of financial reporting. but the coefficient of board dimension did now not exhibit any significance. this is consistent with the prognosis of the employer theory. this study, therefore, contributes to present know-how with the aid of expanding the independence of the board of directors into two variable measures and mainly detecting the significant components. the learn about is restrained to our proxy of frq (abnormal accruals) and did not reflect on consideration on the sensitivity of contemporaneous ifrs adoption within the period. the present-day find out about offers a wider scenario than this current find out about in that it considers several different monitoring attributes which makes the study greater sturdy than the preceding study. 2.3.2 measures of audit quality although a number of studies have sought to measure “actual” audit quality, what has prevailed in the literature, considering that deangelo’s study (1981), are the metrics that try to capture “perceived” audit quality, such as: (i) the auditor’s size, specifically big-4, as in deangelo (1981), , david & ahmed (2020), ilaboya and ohiokha (2013), dang (2004), gu, lee and rosett (2005), behn, choi and kang (2008), kanagaretnam, krishnan and lobo (2010), and zagonov (2011); (ii) auditor specialization, as in behn et al. (2008), chambers and payne (2008), romanus, maher and fleming (2008) and kanagaretnam, krishnan et al. (2009, 2010); (iii) auditor issuing going subject opinion as in teoh and wong (1993) and ghosh and moon (2005); and (iv) accrual fashions as in dang (2004) and behn et al. (2008). for the reason of this study, audit firm measurement is used as a measure of audit quality. 2.3.3 agency theory agency theory connection is defined as a contract underneath which one or greater individuals (the principal) engage every other man or woman (the agent) to operate some provider on their behalf that entails delegating some decision-making authority. jensen and meckling (1976) truly describe the relationship between two parties: the owner as a principal and administration as an agent. the concept states that the separation of ownership from control of the modern commercial enterprise has become the relationship between the proprietors (shareholders) and controllers (managers) to that of an agent and a principal. as such the managers are supposed to treat this fiduciary link with the last sense of transparency and accountability. this capability that they are predicted to act in such a manner that benefits the shareholders as a substitute than pursuing their selfish interests. however, in practice, the existence of statistics asymmetry that gives the managers a piece of sagir lawal (2023) 7 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe privilege facts may additionally lead to the breach of the corporation association as the managers are tempted to use their positions for self-enhancement, subsequently the agency problem. similarly, fama and jensen (1983) suggest that agency troubles that occur from the separation of ownership and control may want to be decreased if the residual claimants (shareholders) and the choice marketers (managers) in a firm are the same. this is because the interests of shareholders and managers are carefully aligned. ownership structure involves a variety of each endogenous and exogenous company governance mechanisms that are put in place to mitigate this organization problem with the aid of tremendous monitoring of managers and hence minimize the employer cost. for instance, the inside governance mechanism presumed that, when the managers of a corporation also shape part of the fairness investors, it makes the managers act in the first-class hobby of the shareholders. while for external governance device, the existence of large shareholders is excellent for governance, because large shareholders play a more active role in monitoring and disciplining managers than small shareholders. in the identical vein, institutional shareholding is top for governance, for the reason that institutional investors have superior incentives and extra assets to selfdiscipline managers than small character investors. the enterprise issues concerning managers and investors may want to be lower in family firms. this is because, in family firms, the household usually owns a considerable element of the firm’s fairness and often continues to manipulate over the management. to habib (2005), in an association with diffuse possession shape and low degree of managerial shareholding, the managers may try to present the working result of the association in the most beneficial manner possible to keep away from shareholder unrest or to lessen the probability of takeover attempts. in contrast, in a firm with more targeted ownership, the managers do not need income manipulation as a job-preserving strategy, due to the fact the owners possess manage of the firm. 3.0 methodology the research made use of the research method ex-post facto. the research population comprises the ten (10) oil and gas companies listed as of 31 december 2019 on the nigerian stock exchange (nse). the wide number of companies was once limited to a working population of 9 (9). afroil plc used to be exempt from finding out about the population due to the fact that it had been deleted in 2008 and that no monetary results had been released for 20102019.the entire working population of nine (9) oil and gas organizations used to learn about the sample by thinking about the reality that the knowledge needed to find out about it is easy to find out from the published economic reports of the companies and the nse factbook for the years in question. two of the documents for this information were collected from a secondary source. secondary information was derived from the published annual reviews and debts of the organizations and the nse factbook for the years in force. the two methods to logistic regression have once been introduced. logistic regression is a methodology for making predictions where the structured variable is a dichotomy and the unbiased variables are non-stop or discreet. model specification and variables measurement adq 01insop 2fs t where: adq = audit quality insop=institutional shareholding fs= firm size μ = error term β1, β2, β3 > 0 ……... = coefficient sagir lawal (2023) 8 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe table of measurement of variables s/n variable measurement 1 audit quality(adq) this is a binary variable with score 1 if the company is audited by a big 4 audit firm and 0 otherwise; 2 institutional shareholding (insop) this is measured by the proportion of institutional shareholding to non-institutional shareholding on the board. 3 firm size (fs) this is measured as the natural log of the firm’s total assets 4.0 results and discussion in this section of the study, results are presented and discussed in light of the research findings. first, a set of descriptive statistics are presented, then followed by the logistic regression results. table 1: descriptive statistics variable obs mean std. dev. min max adq 120 .65 .4789695 0 1 insop 120 .6100883 .0962562 .25 .7528 fs 120 . .6777778 .4699457 0 1 source: stata output, 2020 table 1 shows that the sample oil and gas companies have employed the services of large global audit firms (big 4 as a measure of audit firm size) up to 68% of the total period of the study, from the mean of .6777778 with standard deviation of .4699457, and the minimum and maximum value of 0 and 1 respectively. the standard deviation suggests that the data is narrowly dispersed from the mean because the standard deviation is lower compared to the mean. in addition, the institutional shareholding (insop) and audit quality use as predictor variables. table 1 further reveals that institutional shareholding has a mean of .6100883 with a standard deviation of .0962562. this implies that on average institutional investors accounted for 61% in the sampled oil and gas companies in nigeria. institutional shareholding has a minimum value of .25 (25%) and a maximum value of .7528 (75%) respectively. the minimum value indicating that there was a particular firm in a certain year within the observations that have 25% institutional investors and 75% institutional investors respectively this means that on average of 65% of company composition explains the firms’ compliance with the sec (2011, 2018) revised code of corporate governance best practice for which requires a higher proportion of director shareholding against their executive counterparts for efficient monitoring. table 2: analysis of logistic regression coef. insow -5.548265 3.372138 -1.65 0.100 std. err. z p>|z| sagir lawal (2023) 9 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe fchi2(3) 15.62 prob-f > chi2 0.0000 pseudo r2 0.4338 source: stata output, 2020 the table presents the result of the logistic regression model. it shows that the model is capable of explaining 10% variations in audit quality measured by audit firm size by the variation of an institutional shareholding and the control variables of firm size. the f-statistics and its probability show that the logistic regression equation is wellformulated explaining that the relationship between the explanatory variables’ combination, (that is an institutional shareholding) and audit quality reporting of nigerian listed oil and firms are statistically significant (fstat = 15.62; f-prob. = 0.0000). the hypothesis states that an institutional shareholding has no significant effect on audit quality of listed oil companies in nigeria. the result of the logistic regression as presented in table 2 shows that the institutional shareholding is positively (.6100883 and statistically significant at (0.000) 5%. this provides the study with evidence of rejecting the null hypothesis. this implies that an institutional shareholding has the likelihood of influencing audit quality of listed oil companies in nigeria. the findings are compatible with abdumalik (2015), david, uche, and azah (2019), david and ahmed (2020) who also found a positive significant relationship between institutional shareholding and audit quality. the finding is contrary to the finding of akhidime (2015) who found negative significant association independent and audit quality. the result of the second hypothesis states that indicates an inverse relationship between director shareholding and audit quality of listed oil marketing companies in nigeria. from the result, in table 2 it can be seen that the coefficient of 2.625449 and significant level of 0.282. this means that director shareholding has the probability of influencing audit quality of listed oil company’s firms in nigeria negatively. in the same vein, a unit change in the non-executive director decreases the audit quality of listed oil companies in nigeria. this finding is consistent with akhidime (2015) and ibrahim and jehu (2018) who also found a negative association between a nonexecutive director and audit quality. the finding contradicts the finding of abdumalik (2015) who found a significant positive relationship between a non-executive director and audit quality. 5.0 conclusion and recommendations this study analyzed the influence institutional shareholding as important features of corporate governance on the quality audit reporting of oil and gas companies in nigeria. institutional shareholding was measured using the proportion of the institutional shareholding to the non-institutional shareholding of the board. the study concluded that the variables can be used to clarify the consistency of the audit however, on the basis of the individual explanatory variables, the study shows that the institutional shareholding is positively and substantially linked to the audit quality of the listed oil and gas companies in nigeria. the study concluded that institutional shareholding had a clear effect on the audit quality of the listed oil and gas companies in nigeria. this means that the higher the institutional shareholding, the higher the audit standard of the financial reports of the oil and gas companies in nigeria. the higher proportions of institutional shareholding on boards are expected to result in a more efficient oversight mechanism that will lead to more accurate financial statements of every company in the world. institutional shareholding is also a prerequisite for one of the most important duties of the board of directors, impartial supervision of management. sagir lawal (2023) 10 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe therefore, on the basis of these statements and the findings as well as the conclusions drawn from this review, it is suggested that the boards of oil and gas companies in nigeria should have a greater institutional shareholding, as this will boost the audit quality of their financial reports. references abdulmalik, s., ahmad, a.c. & aliyu, u.b. (2015), “financial reporting quality: the role of independent and grey directors, board continuous training and internal audit function”, ipbj, 7 (2), 40-57. abdullah, w.z.w. (2008), "the impact of board composition, ownership and ceo duality on audit quality: the malaysian evidence", malaysian accounting review, vo.7, no.2, pp.17-28 abolfazl, g.m; amir, noroozi s., mohammad, r., &sahraneshinb, m. (2015) adam, h., &bala, r. (2015). audit committee characteristics and earnings quality of listed food and beverages firms in nigeria. international journal of accounting, auditing and taxation, 2(8), 216227. al-nawaiseh, m.i. (2006), "factors affecting audit quality: an empirical study from the perspective of jordanian auditors", jordan journal of business and administration, vol.2, no.3, pp.390-415 akhidime, s. (2015) board structure, corporate characteristics and audit quality of nigerian banks. international journal of economics, commerce and management united kingdo m 3(6) 12-31. berle, a., means, g. (1932), the modern corporation and private property. new york: macmillan. david, uche &azah (2019) effect of institutional shareholding and ownership concentration on audit quality of listed oil and gas companies in nigeria. journal of accounting (joa) vol.8 issue 1pp 72. david m. c, uche, j.w &azah, s. (2020) effect of non-executive directors and independent directors on audit quality of listed oil and gas companies in nigeria. journal forensic accounting & fraud investigation (jfafi)vol.5, issue 1pp2659-1146 david, m.c., ahmed, m. m (2020) covid-19 pandemics and economic recession; implication for institutional shareholding and allied matters. international journal of sustainable development, vol.1 no.7. deangelo, l. (1981), auditor size and audit quality. journal of accounting and economics, 3(3), 183-199. demsetz, h. & k. lehn. (1983). the structure of corporate ownership: causes and consequences. journal of political economy, 93, 1155–1177. ibrahim & jehu (2018). evaluating the relationship between ownership structure as corporate governance mechanism and accounting earnings management tools on the financial performance. journal of emerging trends in economics and management sciences. anyr, vol.9 sagir lawal (2023) 11 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe jensen, &meckling, w. (1976). theory of the firm: managerial behaviour, agency costs and ownership structure. journal of financial economics, 3,305–360. klein, a. (2002): “audit committee, board of director characteristics, and earnings management”, journal of accounting and economics, 33, pp. 375-400. morey, m., gottesman, a., baker, e., godridge, b. (2008), does better corporate governance result in higher valuations in emerging markets? another examination using a new data set. journal of banking and finance, 33, 254262. qasim, m.z., (2011). the effect of ownership structure on audit quality: evidence from jordan. international journal of business and social science. vol. 2 no. 1 sulong, gardner, hussin, sanusi & mcgowan (2013), “the association between internal governance mechanisms and corporate value: evidence from bahrain”, asian academy of management journal of accounting and finance, 8 (1), 67-92. thomsen s., & t., pedersen. (2000). ownership structure and economic performance in the largest european companies. the strategic management journal 21: 689-705. titman, s., & trueman, b. (1986). information quality and the valuation of new issues. journal of accounting and economics, 8(2), 159-172. watts, r.l., zimmerman, j.l. (1986), positive accounting theory. englewood ciffs, nj: prentice-hall, inc. microsoft word a_new_approach_in_extendi final copy.docx american interdisciplinary journal of business and economics issn: 2837-1909| impact factor : 4.6 volume. 9, number 3; july-sept, 2022; published by: scientific and academic development institute (sadi) 8933 willis ave los angeles, california https://sadipub.com/journals/index.php/aijbe 32 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe forced ranking goes wrong: examining the disastrous effects of vitality curves van de poll, theo kroese managing director at transparency lab bv founder moving-as-one abstract: general electric’s jack welch introduced the 20-70-10 rule, also known as the vitality curve, which has become a widely used employee performance management technique. however, it has faced criticism for its negative effects on teamwork and the lack of correlation between individual employee ratings and team performance. this study explores the possibility of extending the vitality curve to team performance management and addressing the criticisms of the vitality curve. the study surveyed over 1,600 teams with over 110,000 employees using questionnaires and divided the employees into three groups (red, amber, and green) within each team, similar to the vitality curve. the results showed that 40% of the teams had predominantly green employees, 40% had mostly amber employees, and 20% had a large contingent of red employees. the study concludes that it is essential to evaluate teams separately to improve performance management. keywords: performance management, vitality curve, team performance, employee performance, performance evaluations, rank-order evaluations, forced ranking, teamwork, employee morale. introduction the introduction provides an overview of the origin and implementation of the vitality curve, including its strengths and weaknesses. some studies argue that the controversy surrounding the vitality curve is due to poor implementation rather than flaws in its design. others have explored the effects of rank-order evaluations on employee behavior and the relationships between employees and leaders. companies are shifting away from ratings-based performance management, and there is uncertainty about what happens after stopping the practice. the pros and cons of using the vitality curve in performance evaluations have been discussed, with some arguing that its negative effects on teamwork and employee morale outweigh the benefits of identifying and removing lower-performing employees. proof of the curve dick grote, a management consultant and former ge employee argues for the strengths of forced ranking as a performance management tool. he asserts that the strategy's controversy arises from poor implementation rather than flaws with its design. grote's research and experiences demonstrate how managers can use forced ranking fairly and effectively (grote, 2005). gill et al. (2019) studied how organizations using rank-order evaluations responded to the rank they received, mainly through the effort van de poll, theo kroese (2022) 33 interdisciplinary journal of educational practice | https://sadipub.com/journals/index.php/ijep they put into their jobs after being ranked. they found that the rank response function is u-shaped, meaning the hardest working employees were ranked first or last. kwak and choi (2015) researched how forced ranking performance appraisals influence employees, leaders, and organizations' relationships and how discrepancies in ratings relate to turnover intention and leader-member exchange. the results showed asymmetrical and nonlinear relationships. companies continue to shift away from ratings-based performance management, but there is uncertainty in what happens after the practice has been stopped. rock and jones (2015) researched 33 of the 52 largest companies that had thus far eliminated performance ratings to find out how those companies dealt with performance management afterward. cappelli and conyon (2018) recognize the disdain towards performance appraisals in general, but they argue their importance in determining merit pay and promotions, for example. their evidence indicates performance appraisals being a significant part of a "relational, openended view of employment," rather than to "simply settle-up contractually based employment relationships." discussing the advantages and disadvantages of using forced ranking to remove the lower performers in a company is futile if the process of identifying those performers is ineffective (lawler, 2002a). pros & cons; why companies have turned away from the curve while forced ranking may seem appealing, hazels and sasse (2008) point out that there are also consequences to using the system that may not be right for every company. in 2004, it was estimated that around one-third of employers use a forced ranking system. while it seems like a fair way to make cuts, bob rogers, president of development dimensions international, asserts that using forced ranking "has a tremendous downside in terms of teamwork, culture, competitiveness, and legal problems" (johnson, 2004). lipman, a mass mutual financial group manager, adds to the discourse around forced rankings as a leader who followed the system. however, he recognizes that while forced ranking has its benefits, the negative issues such as lowered employee morale were not worth it (lipman, 2012). stewart et al. (2010) took a closer look at the advantages and disadvantages of using a forced distribution system in performance evaluations. they concluded that an organization should assess whether such a system would be compatible with its organizational culture and be fully aware of the downsides that go along with its use. welch's performance management system that eliminates the bottom 10 percent of employees annually has been praised and implemented by many large corporations. on the surface, this seems like the most effective way to ensure a company consistently has the best employees, and welch reasons that those employees are also better off not staying in a company that is "bad for them." however, according to lawler's research, creating higher performance cannot be achieved through firing those at the bottom (lawler, 2002b). buckingham (2013) is vocal about forced rating systems not fulfilling the role they are intended to. he argues that forced ranking instead allows for fair compensation and valuealignment between employees and companies, but it is still a poor way of accomplishing these things. after compiling evidence that companies are dissatisfied with their ratings-based performance management systems, rock et al. (2014) conclude that these systems are overly convoluted and counter-productive. instead of improving practices, neuroscience research suggests that these performance management systems are grounded in a misconstrued understanding of human responses and damage employee performance. at the turn of the 21st century, a forced ranking created quite a controversy, with various lawsuits filed against large companies such as microsoft and conoco (boyle, 2001). stack ranking is widely discussed, with most people agreeing it has more negative attributes than positive ones. however, companies like ibm and amazon continue to use stack rankings. there are significant disadvantages to using the system in performance appraisals, primarily if an organization relies on creativity and innovation. however, positive outcomes depend on the type of company (performyard, 2019). forced ranking systems have been called out in various lawsuits as discriminatory, but gary (2001) makes a case for how forced rankings can be used more effectually. mulligan and schaefer (2011) stated van de poll, theo kroese (2022) 34 interdisciplinary journal of educational practice | https://sadipub.com/journals/index.php/ijep that "systems with probationary periods before termination may realize some of the gains in workforce performance potential that traditional 'rank and yank' systems pose, while also having the potential to increase fairness perceptions." at the society for industrial and organizational psychology 2015 conference (https://www.siop.org/), a lively debate was held on performance ratings. the panelists outlined the main points for eliminating the rating systems, including discrepancies between multiple raters on the same performance and inconsistencies in the appraisals' effects on performance. but they also indicated reasons for continuing the practice – such as understanding the need to improve performance management and recognizing that evaluating performance in some way is still necessary (adler et al., 2016). the future of performance management regardless of whether companies have official performance reviews or not, employees are still being rated one way or another. without a formal system, there is no transparent or fair way to decide whom to give raises and promotions. with data from facebook stating that 87% of their employees approve of keeping the rating system, goler et al. (2016) offer a defense for the ranked performance reviews, arguing that people want to know their place in a company. among employees in the australian public service, anxiety is the main feeling about performance evaluations. the research done by blackman et al. (2015) demonstrates the need to rethink how performance management is handled in these organizations to reduce anxiety among workers. even though the performance management revolution began years ago, many organizations still use traditional performance management like rankings and annual reviews. there are improvements, but according to performyard (2020), "what defines performance management as 'modern' is not your process, but your approach." various attempts have been made to improve performance management systems, but many still see it as a nuisance and ineffective towards what it is supposed to achieve. pulakos et al. (2015) outlined their reform to performance management, focusing on everyday practices and experiential learning. annual employee performance evaluations continue despite ongoing evidence of their ineffectiveness and the organizational shift in companies wanting different skill-sets that do not mesh with industrial-era performance management systems. according to ewenstein et al. (2016), the problem in adapting these systems lies with the uncertainty of what would come next. they offer insights into the origins of ranked performance management systems and suggestions on how companies may adapt to the future warning that it is necessary to do so quickly. can the vitality curve be extended to teams? in their new book teams that work (2020), tannenbaum and salas share how in a modern workplace that is all about teams, there are ways to drive a team's effectiveness whether a person is a team leader or a team member. in a study done by scott and einstein (2001) involving team-based organizations, they found that effective leadership is needed to make performance systems work in teams after identifying three types of teams and analyzing them based on performance appraisal characteristics. while many companies today praise teamwork, few have performance management systems that assess those teams. darino and johnson's (2020) research suggests that evaluating teams as a unit could improve performance management systems that organizations need. in a workplace study by google, it was found that when working in teams, individual ratings did not correlate to the team's performance as a whole (duhigg, 2016). deloitte's 2016 study showed that today's workplace is no longer based on hierarchy but a "network of teams." things have changed rapidly, with companies modifying everything from job descriptions to the role of leaders. moreover, companies' main issues revolve around these new work methods (bersin, 2016). in team-based organizations, forced ranking performance systems should be terminated, and instead, the adoption of new performance appraisals is needed that emphasize and promote the new team-based structures (dulebohn & murray, 2019). despite teams being far more prevalent in the workplace, they are often ineffective. aguinis et al. (2013) propose six ways performance management systems should be redesigned to fit both an individualand team-centered workplace such as measuring and rewarding both individual and team van de poll, theo kroese (2022) 35 interdisciplinary journal of educational practice | https://sadipub.com/journals/index.php/ijep performance and methods for implementation. summarizing the abovementioned authors, the vitality curve's positive contribution is its rule-of-thumb to segment the workforce in high-, medium-, and lowperformers. the main criticism is the unintended consequences of taking this rough 20-70-10 guideline as an iron principle for rewards and' punishments.' and then, management attention to teams is not only about rewarding. predominantly not. it's about understanding which team is moving well towards particular management objectives and which teams aren't. there is no firing of teams; there is an intervention, coaching, and, if needed, turn-around management. a performance rule-of-thumb for teams would be handy for dividing teams into high-, medium, or low-performing teams and focusing management attention. however, none of the abovementioned authors mention specific percentages as a basis for such a rule-of-thumb. objective this paper aims to derive a new rule-of-thumb percentage for dividing high-, mediumand low-performing teams: a vitality curve for teams. we based the division among teams on their relative position within strategic topics in their organization. and we tallied verifiable facts and behavior about the team's actual situation. method procedure and participants we deemed measuring team performance on financial indicators too tricky. a five percent increase in some indicator might be a low performance for one team but a stellar performance for another team. moreover, every team likely had its specific history and context. hence, we wanted to objectively compare teams on their activity towards a particular management objective rather than achieving it. so, we first designed an alternative scale based on the guttman scale (gutman, 1950), specifically designed for employee polling (van de poll, 2018 and 2021). next, we researched 328 relatively strategic assessments that would require focusing on management's attention. these assessments included topics on among others employee engagement, innovation, technology adoption, digital transformation, work pressure, value adoption, team effectiveness, diversity, purpose, it security, work processes, competencies, creative agency management, and marketing excellence. these assessments involved 1,671 teams from various industries (both profit and non-profit) in 18 countries. these teams comprised 113,454 employees, answering close to 5.8 million questions. measures comparing teams on their progress towards a management target require tallying verifiable facts or behavior, not gathering opinions or agreements with statements. hence, we replaced the traditional likert survey format in favor of a survey based on a guttman scale. guttman scaling works with "current-status data" (diamond, mcdonald, and shah, 1986): every following answer shows more progress than the previous answer. it's a scale from not so good to better to even better, so-called breaking points (uhlaner, 2002). q. how do you celebrate successes? 1. we don't 2. when there is an apparent reason to do so, with whoever is involved 3. we make it a habit to celebrate successes with the entire team as in this example, such answers can be considered 'objectively real' or 'a testable proposition' (ahrens & chapman, 2006). we eliminated adjectives and adverbs that cannot be verified (e.g., "good") to reduce interpretation bias. and we added proof-words" like, e.g., 'periodically,' 'formally,' 'measurable,' 'documented,' and 'described' to reduce self-reporting bias by the respondent (donaldson and gransvallone, 2002). additionally, such "proof-words" help with verification and prevent employees from adding cognitive or emotional meaning (frese & zapf, 1988). for tallying a team's progress, we need van de poll, theo kroese (2022) 36 interdisciplinary journal of educational practice | https://sadipub.com/journals/index.php/ijep 'binary (no/yes), numerical or categorical representations' for our intended clustering (plewis & mason, 2007). data analysis each guttman-poll question had three answers. the 'worst' answer of three (the current situation) was rated with 0—the 'middle' answer (the intermediate step) with a score of 5. and the 'best' answer (reflecting the content of the strategy that needed to be achieved) with a score of 10. an average score for a (part of a) team required averaging the respondents' scores on the individual questions. we refrained from weights among questions and answers. where welch's vitality curve focused on the ends of the performance bell-curve (the top 20% and the bottom 10%), we postulated that high performing individuals ('green') scoring 6.0 or higher on a scale of 0 to 10 (on average, slightly above the middle answer of three). low-performing employees ('red') scored 3.0 or lower (roughly halfway between the worst and middle answer), and the remainder of the team was 'amber' (scoring between 3.0 and 6.0). we described each team in three percentages (the % green, amber, and red employees). next, we clustered the 1,671 teams for these three percentages via a k-means algorithm (randomly initialized, 20,000 iterations) and repeated this for three, four, five, and ten clusters. we correlated some questionnaire specifics (e.g., number of respondents and questionnaire length) to verify whether these control variables influence the cluster scores. finally, we compared several scenarios to see which % green and % red would require management attention (to identify the leading and lagging teams, respectively). results table 1 shows the sample size, the division in green, amber, and red respondents, and the correlation of some questionnaire specifics that might have been influencing that division. in contrast with welch's 2070-10 vitality curve division, we tallied 32% green respondents, 51% amber respondents, and 17% red respondents. we then performed the k-means clustering on the 1,671 teams to see whether that would lead percentages to make up a vitality curve for teams. table 1 : sample size and correlations number of clusters n min max avg. stdev. 3 4 5 10 sample size number of questionnaires 328 number of teams 1,671 number of employees 113,454 teams per questionnaire 1 44 5.1 7.4 number of employees per team 3 834 68 71.2 % respondents per team % green respondents 1% 96% 32% 19% see table 2 van de poll, theo kroese (2022) 37 interdisciplinary journal of educational practice | https://sadipub.com/journals/index.php/ijep % amber respondents 2% 93% 51% 16% % red respondents 1% 82% 17% 13% correlation number of respondents in a team -0.02 -0.05 -0.05 0.06 number of questions in the questionnaire 0.01 0.02 0.02 -0.19 % anonymous respondents 0.02 -0.01 -0.01 0.12 % of respondents willing to share knowledge about the questionnaire 0.06 0.05 0.05 -0.09 min.: lowest number. max: highest number. avg: average number. stdev: standard deviation. note: this table has been submitted separately as an editable excel file the number of respondents fuels whether larger teams (with more diverse competencies) would perform better. the number of questions could indicate whether more extensive questionnaires make it difficult for respondents to achieve a 'green' score (as there is so much work to complete). furthermore, a high percentage of anonymous respondents and/or a low percentage of respondents willing to share knowledge about the questionnaire topics could indicate a culture of fear or a similar situation. such a situation would likely create more underperforming 'red' teams. however, these four assessment specifics did not correlate with the clusters. we have detailed the clusters in table 2, which shows for each cluster the class centroids. we have estimated a 'color verdict' per cluster based on these centroids. however, giving such a verdict remains a difficult task. for example, cluster 3 in the 10-cluster analysis has 35% green respondents, 30% amber, and 34% red respondents. would that be a draw? aware of a risk of overfitting, we assume the rule-of-thumb division of individual respondents as 30-50-20 (rather than 325117), as depicted in table 3. table 2: management scenarios, based on rag cut-offs scenario name employees % division of teams (%) green amber red green amber red double database actual average 32% 51% 17% 35% 38% 21% 5% rule-of-thumb 30% 50% 20% 40% 40% 20% management scenario ensure top-end alert on low-end 50% 30% 19% 18% both ends, heavier 25% 25% 32% 12% 4% both ends, lighter 15% 15% 31% 18% 11% employees %, green: the minium percentage of'green' respondents in a team, given a scenario. ditto for % amber and % red. double: the employee mix tags this percentage to more than one category, e.g., amber and red. note: this table has been submitted separately as an editable excel file we then counted the teams with at least 30% green respondents, the teams with at least 50% amber respondents, and those with at least 20% red respondents. we then came to a 35% green team division, 38% amber teams, and 21% red teams. another 5% of teams would qualify for more than one color. e.g., a team with 60% amber respondents and 40% red respondents would be eligible as both amber and red. further analyzing the 5% double-count and wanting to achieve a rule-of-thumb division (rather than overfitting our model), we arrive at our 40-40-20 division. the original vitality curve (for individuals) was developed to focus management attention (i.e., promoting and firing). a variety of reasons can drive management attention for teams. table 3 shows four different scenarios of how management would like to van de poll, theo kroese (2022) 38 interdisciplinary journal of educational practice | https://sadipub.com/journals/index.php/ijep focus their attention, scenarios that help deviate from the 'standard' 40-40-20 rule-of-thumb. for instance, management may focus on the teams where at least 50% of the respondents are green. in such a situation, they have to focus on 19% (say, a rule-of-thumb of 20%) of their teams. figure 1 helps identify the approximate percentage of teams given a starting percentage of either green, amber, or red respondents. figure 1. linking employees to teams discussion individual employees' percentual differences in the original vitality curve are based on a composite index of hard performance figures (say, reaching a sales target) and softer ones (e.g., client satisfaction or comparison with peers). as mentioned in the introduction, this has led to criticism about the ineffective identification of performers due to, among others, discrepancies between multiple raters on the same performance. hence, our use of a survey scale focused on verifiable facts and behavior comparable within and among teams. the consequences of this 40-40-20 rule-of-thumb are different from the original vitality curve. the main reason: teams as a whole – contrary to employees – do not get fired. firing the bottom 20% of the teams makes no sense. as mentioned before, individual ratings did not correlate to the team's performance as a whole (duhigg, 2016). maybe a manager gets replaced. in the long run, bad performing functions can be outsourced. yet, in all cases, this 40-40-20 rule-of-thumb helps to focus management attention, whatever their attention scenario. conclusions the original 20-70-10 vitality curve, developed for employee performance management, has done many good things (from an efficiency perspective) and many bad things (from a human perspective). although there is abundant literature suggesting that evaluating teams as a unit could improve performance management systems that organizations need, specific percentages to drive a team's effectiveness have not been proposed so far. in this study, the vitality curve for teams helps to focus management attention further. similar to jack welch's vitality curve for employee performance, we divide team performance into three groups as red, amber, green. roughly 40% of the teams had predominantly green employees, 40% mostly amber employees, and 20% had a large contingent of red employees. the number of teams, respondents, and countries represented in our database could indicate sufficiently broad applicability of this 40-40-20 rule-ofthumb. future studies will investigate whether technology-related questionnaires usually had 'greener' teams than processor people-related topics. acknowledgement we would like to thank dr. jasna duricic for her constructive comments. van de poll, theo kroese (2022) 39 interdisciplinary journal of educational practice | https://sadipub.com/journals/index.php/ijep references adler, s., campion, m., colquitt, a., grubb, a., murphy, k., ollander-krane, r., & pulakos, e. (2016). getting rid of performance ratings: genius or folly? a debate. industrial and organizational psychology, 9(2), 219-252. aguinis, h., gottfredson, r. k., & joo, h. (2013). avoiding a "me" versus "we" dilemma: using performance management to turn teams into a source of competitive advantage. business horizons, 56(4), 503-512. ahrens, t., & chapman, c. s. (2006). doing qualitative field research in management accounting positioning data to contribute to theory. accounting, organizations and society, 31, 819-841. doi: 10.1016/j.aos.2006.03.007 bersin, j. (2016). new research shows why focus on teams, not just leaders, is key to business performance. forbes. https://www.forbes.com/sites/joshbersin/2016/03/03/why-a-focus-onteams-not-just-leadersis-the-secret-tobusiness-performance/?sh=51ed44f424d5 blackman, d., west, d., o'flynn, j., buick, f., & o'donnell, m. (2015). performance management: creating high performance, not high anxiety. in j. wanna, h. lee, & s. yates (eds.), managing under austerity, delivering under pressure: performance and productivity in public service (pp. 79102). anu. press. boyle, m. (2001). performance reviews: perilous curves ahead. fortune magazine.https://money.cnn.com/magazines/fortune/fortune_archive/2001/05/28/303851/index.ht m buckingham, m. (2013). performance management and the pony express. harvard business review digital. https://hbr.org/2013/11/performance-management-and-the-pony-express cappelli, p., & conyon, m. j. (2018). what do performance appraisals do? ilr review, 71(1). darino, l., & johnson, c. (2020). from me to we: the next shift in performance management. mckinsey & company organization blog. https://www.mckinsey.com/businessfunctions/organization/ourinsights/the-organizationblog/from-me-to-we-the-next-shift-inperformance-management diamond, i. d., mcdonald, j.w., & shah, i.h. (1986). proportional hazards models for current status data: application to the study of age at weaning differentials in pakistan. demography 23(4), 607-620. donaldson, s. i., & grans-vallone, e. j. (2002). understanding self-report bias in organizational behavior research. journal of business and psychology 17(2), 245-260. duhigg, c. (2016). what google learned from its quest to build the perfect team. the new york times magazine. https://www.nytimes.com/2016/02/28/magazine/what-google-learned from-its-quest-tobuild-the-perfectteam.html?_r=0 dulebohn, j. h, & murray, b. (2019). leadership, performance management and team centric organizations: the importance of alignment. in d. l. stone, & j. h. dulebohn (eds.), the only constant in hrm today is change. iap. van de poll, theo kroese (2022) 40 interdisciplinary journal of educational practice | https://sadipub.com/journals/index.php/ijep ewenstein, b., hancock, b., & komm, a. (2016). ahead of the curve: the future of performance management. mckinsey quarterly, 2, 64-73 frese, m., & zapf, d. (1988). methodological issues in the study of work stress: objective vs subjective measurement of work stress and the question of longitudinal studies. in: c. l. cooper, & r. payne (eds.), causes, coping, and consequences of stress at work (pp. 375-411). wiley & sons, chichester. gary, l. (2001). the controversial practice of forced ranking. harvard management update, 6(10). https://hbswk.hbs.edu/archive/for-whom-the-bell-curve-tolls-the-controversial-practice-of-forced ranking gill, d., kissova, z., lee, j., & prowse, v. (2019). first-place loving and last-place loathing: how rank in the distribution of performance affects effort provision. management science, 65(2), 494. goler, l., gale, j., & grant, a. (2016). let's not kill performance evaluations yet. harvard business review, 94(11), 9094. grote, r. c. (2005). forced ranking: making performance management work. harvard business school press. guttman, l. (1950). chs. 2, 3, 6, 8 and 9 in sa stauffer, l. guttman, ea suchman, pf lazarsfeld, sa star and ja clausen. 1950. studies in social psychology in world war ii, 4, 46-90. hazels, b., & sasse, c. m. (2008). forced ranking: a review: quarterly journal. sam.advanced management journal, 73(2), 35. johnson, g. (2004). forced ranking: the good, the bad, and the alternative. training, 41(5), 24-34. kwak, w. j., & choi, s. b. (2015). effect of rating discrepancy on turnover intention and leader member exchange: apjm. asia pacific journal of management, 32(3), 801-824. lawler, e. e., iii. (2002a). getting rid of the bottom 10%, sounds good but... ceo publication. https://ceo.usc.edu/wpcontent/uploads/2018/03/8_getting_rid_of_the_bottom.pdf lawler, e. e., iii. (2002b). the folly of forced ranking. strategy+business (booz and company). https://www.strategy-business.com/article/20290?_ref=&pg=0 lipman, v. (2012). the pros and cons of forced rankings: a manager's perspective. forbes media llc http://www. forbes. com/sites/victorlipman/2012/07/19/the-pros-and-cons-of-forced-rankingsamanagers-perspective. mulligan, j. r., & bull schaefer, r. a. (2011). a new hope for rank and yank. journal of leadership & organizational studies, 18(3), 385-396. performyard. (2019). stack rankings: what they're good for and where they fail. https://www.performyard.com/articles/stack-rankings-what-theyre-good-for-and-where-they-fail# performyard. (2020). what is modern performance management. https://www.performyard.com/articles/what-is-modern-performance-management-1 van de poll, theo kroese (2022) 41 interdisciplinary journal of educational practice | https://sadipub.com/journals/index.php/ijep plewis, i., & mason, p. (2007). what works and why: combining quantitative and qualitative approaches in large-scale evaluations. international journal of social research methodology, 8(3), 185-194. pulakos, e. d., hanson, r., arad, s., & moye, n. (2015). performance management can be fixed: an onthe-job experiential learning approach for complex behavior change. industrial and organizational psychology, 8(1), 51-76. rock, d., & jones, b. (2015). what really happens when companies nix performance ratings. harvard business review digital. https://hbr.org/2015/11/what-really-happens-when-companies-nixperformance-ratings rock, d., davis, j., & jones, b. (2014). kill your performance ratings. strategy+business. https://www.strategy-business.com/article/00275?pg=all scott, s. g., & einstein, w. o. (2001). strategic performance appraisal in team-based organizations: one size does not fit all. academy of management perspectives, 15(2), 107-116. slater, r. (1998). jack welch and the ge way: management insights and leadership secrets of the legendary ceo mcgraw-hill. stewart, s., gruys, m., & storm, m. (2010). forced distribution performance evaluation systems: advantages, disadvantages and keys to implementation. journal of management & organization, 16(1), 168-179. tannenbaum, s., & salas, e. (2020). teams that work: the seven drivers of team effectiveness. oxford university press. uhlaner, l. m. (2002). the use of the guttman scale in development of a family business index. (no. h200203). eim business and policy research. van de poll, j. (2021). an alternative to the likert scale when polling employees. international journal of business and management, 9(5), 239-244. van de poll, jm (2018) ambition patterns in strategic decision-making, doctor of philosophy, industrial engineering and innovation sciences, technical university eindhoven welch, j., & byrne, j. a. (2001). jack: straight from the gut. warner books. welch, j., & welch, s. (2005). winning: the ultimate business how-to book. harper business. type of the paper (article american interdisciplinary journal of business and economics issn: 2837-1909| impact factor : 4.6 volume. 9, number 4; october-december, 2022; published by: scientific and academic development institute (sadi) 8933 willis ave los angeles, california https://sadipub.com/journals/index.php/aijbe 8 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe prophet model's efficiency in short-term covid-19 cumulative case projections: g7 countries yeliz zoğal ankara haci bayram veli university abstract: the covid-19 pandemic has had a significant impact on the health and well-being of people across the globe, as well as the global economy at large. it has become essential to predict the spread of infectious diseases like covid-19 to understand its impact on public health and the economy. this study analyzes shortterm predictions of covid-19 cases in g7 countries using the prophet model. the model uses a trend function, a seasonality function, and a holiday function to generate accurate short-term predictions. the study compares the predictions for g7 countries and finds that canada and germany had the lowest root mean square error (rmse) values. the economic and financial impacts of the pandemic on global supply chains, job losses, and business closures are also analyzed. the study highlights the significant increase in public debt due to largescale fiscal stimulus packages implemented by governments to mitigate the economic impact of the pandemic. the study emphasizes that accurate predictions of the spread mechanism are crucial for managing the pandemic effectively and mitigating its impact. the literature review of various models indicates the importance of accurate predictions and the difficulties in creating them. the study recommends the use of machine learning models like the prophet model to generate accurate short-term predictions to combat the covid-19 pandemic's spread. keywords: covid-19, prophet model, short-term predictions, g7 countries, root mean square error, economic impacts, global supply chains, fiscal stimulus packages, machine learning models. 1. introduction in december 2019, it was reported to the world that a virus associated with severe acute respiratory syndrome began to spread across china's wuhan city. this virus, later named covid-19, has started to spread worldwide, and cases have become unpreventable. in the who director general’s statement on covid-19 dated march 11, 2020, he stated that in two weeks, the number of covid-19 cases increased thirteen times, the number of affected countries tripled, there were more than 118,000 cases in 114 countries and 4,291 people died. the unpreparedness of countries for infectious diseases has caused them to struggle with a lack of capacity, resources, and determination in general, especially in the health sector. in addition to the severe impact of covid-19 on healthcare systems, the pandemic has had a significant and rapidly escalating impact on the world economy and businesses. the covid-19 pandemic has been ongoing for more than three years and continues to cause significant health and economic losses. according to official estimates, more than 6 million people have died from the virus, with studies estimating the actual death toll to be much higher, ranging from 16 to 20 million, which is approximately equal to that of world war i. according to the imf’s world economic outlook (2022), the cumulative output loss from the pandemic through 2024 is projected to be about $13.8 trillion and it is likely that the actual loss will be even higher. according to the world economic outlook (weo) report published in october 2021, the economic contraction for g7 countries is as follows: germany at 4.6%, france at 8%, italy at 8.9%, united kingdom at 9.8%, united states at 4.3%, canada at 5.3%, and japan at 4.6%. in g7 yeliz zoğal (2022) 9 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe countries, the pandemic has led to a significant increase in unemployment and a decrease in economic activity. g7 countries have also seen a decline in consumer spending, particularly in sectors such as travel and tourism. the economic impact of the covid-19 pandemic has been very severe and has occurred much more rapidly than the 2008 global financial crisis (gfc) and the great depression. the rapid spread of the virus and the measures put in place to control it have led to widespread job losses and business closures, disruptions in global supply chains, and a decline in economic activity. in the 2008 gfc and the great depression, stock markets collapsed by 50% or more, credit markets froze up, massive bankruptcies followed, unemployment rates soared above 10%, and gdp contracted at an annualized rate of 10% or more, but all of this took around three years to play out. while in the current crisis, similarly dire macroeconomic and financial outcomes have materialized in a much shorter period, in some cases, just three weeks. the speed of the economic downturn caused by the covid-19 pandemic is largely due to the rapid spread of the virus and the measures put in place to control it. the pandemic has also led to a significant increase in public debt as governments have implemented large-scale fiscal stimulus packages to mitigate the economic impact of the pandemic. the covid-19 crisis has brought an unprecedented shock to the labor market and has led to an unemployment crisis. restrictions and lockdowns implemented since march 2020, as well as the decline in demand caused by the pandemic, have led to millions of job losses around the world. although some measures taken to prevent the spread of the virus have allowed some people to work from home, in most countries it has caused unemployment. the visible contraction in the economy is reflected in the unemployment rates. according to the imf's report in 2021, the unemployment rate in g7 countries is germany at 3.8%, france at 8%, italy at 9.3%, united kingdom at 4.5%, united states at 8.1%, canada at 9.6% and japan at 2.8%. in addition to the hike in unemployment rates, the profound effect has started to increase income inequalities and poverty, which was estimated as more 71 million people as of march 2021. the outbreak of covid-19 has had a significant impact on global supply chains. the disruption of transportation and production caused by lockdowns and other measures taken to contain the spread of the virus has led to shortages of goods and materials, delays in delivery times, and increased costs for businesses. consumers have also been affected by the disruption of supply chains, with many facing shortages of essential goods and higher prices for products. the domino effect of broken supply chains is that it can cause a ripple effect throughout the economy, affecting not just producers and consumers but also other businesses that rely on them. this can lead to job losses, reduced economic activity, and other negative consequences. on the supply side, production chains have been disrupted, while on the demand side, consumption and investment spending have been negatively affected. this is likely to exacerbate the ongoing economic downturn, making it more pronounced. to address both the pandemic and economic downturn, governments have been urged to "go big. act fast. keep the lights on" by economist richard baldwin, who argues that combining restrictive policies that reduce production with stimulus policies that maintain spending will create supply-side problems and lead to cost-driven inflation [2]. in other words, the idea that the global downturn can be revived only by increasing credit and borrowing more heavily for consumption is an illusion. the covid-19 pandemic has had a significant impact on healthcare economics around the world. in the short run, healthcare facilities have been overwhelmed by the influx of patients, leading to increased costs for inpatient and outpatient care. this has been compounded by the need for additional resources such as personal protective equipment and additional staff to handle the increased workload. in the long run, the economic impact of the pandemic on healthcare systems may be even more severe. the prolonged disruption of healthcare services and the increased demand for care could lead to higher costs for both patients and healthcare providers, as well as longer wait times for appointments and procedures. additionally, the pandemic has led to a decline in revenue for many healthcare providers and hospitals, which could lead to financial difficulties and closures. this could lead to further strain on the healthcare system in the long run as the population increases and aging. the listed reasons above make understanding the spread mechanism and forecasting essential for effectively managing the pandemic and minimizing its impact on public health and the economy. in the literature, many studies deal with understanding the spread mechanism. for instance, the mathematical sir (susceptible, infected and recovered) model provides differential solutions by dividing the total yeliz zoğal (2022) 10 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe population into different groups. the model describes the flow of individuals between these compartments based on certain assumptions, such as the rate at which infected individuals infect susceptible individuals (the infection rate) and the rate at which infected individuals recover or are removed from the population (the removal rate). the sir model can be used to estimate the number of individuals who will be infected and recovered over time, as well as the peak of the epidemic. although the characteristics of the infectious disease shape the model, it does not provide satisfactory results in the early stages of the disease. the econometric time series model, arima (autoregressive integrated moving average), provides more realistic results as the data increase since it predicts the future of the variable with past values. the arima model can be used to model and forecast time series data with a trend and/or seasonality. the arima model is widely used in various fields such as finance, economics, engineering, and infectious diseases, and it is considered as one of the most powerful tool for time series forecasting. in addition, machine learning models (supervised learning, reinforcement learning models, deep learning models, ensemble models) are frequently used to predict infectious diseases. the present study aims to provide a five-day covid-19 prediction for g7 (canada, france, germany, italy, japan, japan, uk and usa) countries with the prophet model. moreover, it allows comparisons with the rmse (root mean square error) statistic to evaluate the performance of the analysis results. g7 countries were chosen because data sharing problems are less for these countries, and doubts about the accuracy of the number of cases announced are minimal. based on the results obtained with the prophet model, the results closest to reality with the lowest rmse value were obtained first for canada and then for germany. likewise, it was found that the prediction values for the first day generally have lower rmse. in other words, rmses increase as we move away from the actual data for prediction. the next section of the study presents the literature review and the theoretical framework for the model. in the third section, empirical findings will be presented. the last section of the study will provide a general evaluation of the research and analysis. 2. literature review and theoretical background 2.1. literature review it is explained the results of sir, seir, seiru, sird, sliar, arima, arima and sidarthe models used in the prediction of the spread mechanism, peak and decline of covid-19 cases and the difficulties in creating predictions. the results of studies conducted with these models for different countries are graphed, and the performance of the models are compared with actual values and deviation value of predictions. regarding this issue, it was shown that the highest deviation was found in the simple mathematical model and sird model for california. the study used arima model to forecast the trend of the covid-19 outbreak in italy, spain, and france, which are the countries that were most affected by the pandemic in europe, using data from the period of february 21 to april 15, 2020. the different past period arima models were compared with the mape performance value and the arima (0,2,1), arima (1,2,0), and arima (0,2,1) models were selected for the countries, respectively. with these selected models, short-term predictions were made for the period of april 16 to april 25, 2020. the study is showing that the arima models can be used to effectively predict the trend of the covid-19 outbreak, which can help governments and healthcare providers to prepare better and allocate resources more efficiently. it is aimed to obtain forecasts for two days, namely february 11 and 12, using an arima model with the covid-19 case counts for the period between january 20 and february 10, 2020, published by johns hopkins university. they emphasized that case definition and data collection for cases should be simultaneous to obtain more realistic predictions. it is aimed to predict the number of positive cases of different influenza (for h1n1 and h3n2 viruses) that may occur in 2016 with the number of pediatric cases of the influenza season between 2007 and 2015. to this end, they used both arima and seasonal arima, that is, sarima (an arima model that can capture seasonal effects-seasonal autoregressive integrated moving average). the prediction results of the models are evaluated according to performance criteria. accordingly, it is shown that the arima model gives better and more realistic results than the sarima model in case prediction. time series models are used (arima and sarima) and a machine learning model (prophet model). the prediction is based on daily and cumulative covid-19 data for the united states, india, and brazil, and they yeliz zoğal (2022) 11 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe obtain short-term prediction results. specifically, the prophet model, which can capture periodic features in the data, gives better results for the us forecasts, while the arima model gives better results for brazil and india, whose cumulative cases tend to grow. the sarima model also captures daily cases' seasonal characteristics and provides better prediction results it is used arima from time series models and prophet, glmnet (generalized linear model elastic net), random forest and xgboost from machine learning models to predict covid-19 cases. based on the results of the analysis, arima and prophet models are more appropriate and ideal forecasts for the countries in question, especially the arima model gives better results in afghanistan, bangladesh, india, maldives, and sri lanka. they explained that the random forest machine learning model was excluded due to its poor fit to the data set it is obtained short-term prediction results with covid-19 data for india for the period january 30 december 7, 2020. the results were obtained using arima and some machine learning models such as prophet, lstm (long short-term memory), rnn (recurrent neural network), gru (gated recurrent unit) and lstm-gru models. r2 and rmse values were obtained for numerical comparison of the performance of the models. in conclusion, it is shown that the lstm-gru model is superior to the others with high r2 and low rmse values [15]. it is used covid-19 data for twenty countries and obtained short and long-run predictions using seir, polynomial regression, arima and prophet model. according to the prediction results, the polynomial regression model gives the best short-term predictions, while the seir model gives the best long-term predictions it is developed a new exponential growth model in their study, arguing that improving epidemic models can be more helpful in explaining different periods of an epidemic. the model aims to characterize the stage of the epidemic, especially when it shows an upward trend, and to capture the changing epidemic profile for that period. to this end, the model is applied to eight different infectious diseases with various transmission routes in twenty different geographies and the same infectious disease (ebola) in different periods. the results show that the growth rate of the same infectious disease changes over time and how different geographical and social conditions affect the growth rate. it is explained that the epidemic growth rate is primarily influenced by limited population contact structure, behavioural change over time or early control interventions. in a study, the authors have highlighted the failures of models used to predict the spread of infectious diseases. the failure of models used to predict the spread of covid-19, has made this situation even more pronounced. the reasons for this failure are poor data input, poor modeling, inaccurate and inconsistent assumptions, the predictors being overly sensitive, the distinctive features of the outbreak not yet fully determined and included in the models, the lack of accuracy of existing prevention measures, lack of transparency of data, lack of determining parameters, and reporting errors. however, solutions for some of these issues have been proposed such as making wave predictions instead of point predictions and selecting models that are developed and expanded based on performance results in a study, the authors aimed to use various time series forecasting models such as prophet, holt-winters, lstm, arima, and arima-narnn to predict short-term daily and cumulative case forecasts of covid-19, model the general trend of the outbreak, and model the time series based on linear and non-linear features. the results obtained were compared with various statistical measurements. in this regard, it was reported that the models showed good performance, but the arima and narnn (arima-narnn) hybrid combination had the best performance in a study, the aim is to estimate the extent of the covid-19 outbreak in pakistan and case forecast predictions using arima, diffusion, sird and prophet models. the short-term forecast results obtained show similarities and indicated that the highest number of infectious cases could be reached between june 2020 and july 2020. due to this reason, it is conveyed that most of the population is under the threat of covid-19 and that the measures taken by the government should be reviewed and improved 2.2. theoretical background prophet model is a time series forecasting model developed by facebook's core data science team in 2018. it is designed to make forecasting future data points as simple as possible and is particularly well-suited for business time series data. prophet is a procedure for forecasting time series data based on an additive model yeliz zoğal (2022) 12 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe where non-linear trends are fit with yearly, weekly, and daily seasonality, plus holiday effects [13]. the model has three different components 𝑦�(𝑡�) = 𝑔�(𝑡�) + 𝑠�(𝑡�) + ℎ(𝑡�) + 𝜀�𝑡� (1) here, 𝑦�(𝑡�) is the number of cases, 𝑔�(𝑡�) is the trend, that is, the trend function that captures non-periodic changes in the time series, 𝑠�(𝑡�) is the seasonality, that is, the part of the time series that captures periodic (weekly or yearly) changes, ℎ(𝑡�) is the part that represents holidays that occur at irregular intervals, and 𝜀�𝑡� is the error term that includes specific changes that cannot be covered or handled by the model [17]. the functions handled in the model are as follows: 𝑔�(𝑡�) = 1 +𝑒�𝑥�𝑝�(−𝐶�𝑘�(𝑡�−𝑚�)) (2) as the growth in facebook is similar to growth in a natural ecosystem (just like the increase in cases), a logistic growth model was added to capture the increase in the trend. c denotes the carrying capacity, k denotes the growth rate, and m denotes the offset parameter. 𝑛�𝜋�𝑡� 𝑠� (3) 𝑝� 𝑝� time series are often susceptible to multi-period seasonality due to the human behaviour they represent. this can be a five-day working week, vacation schedules or school holidays that follow each year [17]. to capture these periodic effects, the fourier model is used. here p is the periodic term the time series is expected to have regularly. ℎ(𝑡�) = 𝑍�(𝑡�)𝜅� (4) 𝑍�(𝑡�) = [𝑖�(𝑡� ∈ 𝐷�𝑖�), … , 𝑖�(𝑡� ∈ 𝐷�𝑖�)] (5) new year holidays, religious holidays or events that may have a country-wide impact are predictable shocks for time series models. for this reason, the impact of such holidays on the model is included daily. 𝐷�𝑖� is defined for each holiday 𝑖� in the model. therefore, that time series interval represents the presence of that holiday if it coincides with that period. the 𝜅� parameter is defined as the corresponding change parameter in the forecast if the day of that holiday changes in the time series. since the prophet model includes both logistic and fourier, it captures periodic waves in the observations more efficiently, allowing for relatively better predictions with outliers in the data. it works best with time series that have strong seasonal effects and several seasons of historical data. prophet is robust to missing data and shifts in the trend, and typically handles outliers well [13]. one of the frequently used statistical values for comparing the performance of model results is the root mean square error (rmse). here, 𝑦�̂ is the prediction value, 𝑦� is the actual value, and n is the total number of observations. rmse is calculated as the square root of the mean of the squared differences between predicted values and actual values. the formula is as follows: √∑ (𝑦�̂−𝑦�)2 (6) 𝑛� the rmse value is expressed in the same units as the original data, so it can be directly interpreted in terms of the problem being solved. the smaller the rmse value, the better the model is at predicting the actual values. however, it should be noted that comparing rmse values between different datasets or problems can be misleading as the scale of the data and the specific problem objectives can be different. 3. empirical findings in the study, the daily number of covid-19 cumulative cases for g7 countries was obtained from our world in data for 180 days, starting with the day of the first occurrence. the date range for each country varies according to the day the case first started. in the prediction analyses for each country, the forecasted first day is the prediction for the 181st day, the forecasted second day is the prediction for the 182nd day, the forecasted third day is the prediction for the 183rd day, the forecasted fourth day is the prediction for the 184th day, and the forecasted fifth day is the prediction for the 185th day. table 1. forecast and actual values 1st day 2nd day 3rd day 4th day 5th day ( 𝑡 ) = � ∑ 𝑎 𝑛� cos 2 𝑛�𝜋�𝑡� + 𝑏 𝑛� sin 2 ∞ 𝑛� = 1 yeliz zoğal (2022) 13 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe 𝑦�̂ (forecasted) 112,220 112,754 113,281 113,779 114,163 canada 𝑦� (actual) 112,281 112,663 113,399 113,836 114,172 rmse 𝑦�̂ (forecasted) france 𝑦� (actual) 217,517 218,753 219,844 219,928 219,932 rmse 𝑦�̂ (forecasted) germany 𝑦� (actual) 204,964 205,269 205,609 206,242 206,926 rmse 𝑦�̂ (forecasted) italy 𝑦� (actual) 246,776 247,158 247,537 247,832 248,070 rmse 𝑦�̂ (forecasted) 𝑦� (actual) 25,680 26,312 27,107 28,088 28,867 rmse 𝑦�̂ (forecasted) usa 𝑦� (actual) 3,828,431 3,896,716 3,964,163 4,031,940 4,106,884 rmse 445.20 40.55 458.62 1,103.05 2,528.40 for g7 countries, the predictions of the number of cumulative cases for the 181st, 182nd, 183rd, 184th, and 185th day, the actual number of cumulative cases of these days, and rmses for each day are reported in table 1. for france, germany, italy, and the uk, the rmse increases with distance from the period used for the prediction between day one and day five, while for canada, japan, and the usa, the rmse varies. when analyzed in detail, the estimated number of coincidences for canada for the five days ranged from 112,200 to 114,163. the actual number of cases during this period ranges from 112,281 to 114,172. the lowest rmse value for canada was obtained on the fifth day. for france, predicted values ranged from 222,122 to 232,624, and actual values ranged from 217,517 to 219,932. the lowest rmse value for france was obtained on the first day and increased until the fifth day. for germany, the estimated number of cases ranged from 204,765 to 205,939, while the actual cases ranged from 204,964 to 206,926. the lowest rmse for germany was obtained on the first day. for italy, the predicted cumulative cases were 246,860 on the first day and 250,159 on the last day (the fifth day). the cumulative number of cases for the five days varies between 246,776 and 248,070. the lowest rmse for italy was obtained on the first day. the estimated cumulative number of cases for japan varies between 25,877 and 28,961. the cumulative number of cases ranges from 25,680 on the first day to 28,867 on the fifth day. the lowest rmse for japan was obtained on the fourth day. for the uk, the predictions for the number of cases ranged from 301,982 to 307,628 for the five days. the actual number of cases ranged from 301,455 to 304,685. the lowest rmse for the uk is obtained for the first day of the prediction. finally, the estimated cumulative data in the usa are 3,834,404 for the first day and 4,072,962 for the fifth day. the actual cumulative cases during this period vary between 3,708,557 and 3,708,557. the lowest rmse for the usa was obtained on the second day. japan rmse uk 𝑦�̂ (forecasted) 𝑦� (actual) 301,455 302,301 303,181 303,942 304,685 4.58 6.78 8.77 4.23 0.69 222,122 224,749 227,016 228,708 232,624 343.20 446.94 534.56 654.42 946.02 204,765 205,044 205,280 205,604 205,939 14.83 16.77 24.52 47.55 73.57 246,860 247,480 248,205 249,144 250,159 6.25 24.00 49.81 97.79 155.71 25,877 26,562 27,300 28,103 28,961 14.71 18.63 14.39 1.09 6.97 301,982 303,226 304,626 306,014 307,628 39.30 68.92 107.73 154.46 219.38 3,834,404 3,897,260 3,958,010 4,017,141 4,072,962 yeliz zoğal (2022) 14 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe the lower and upper bound predictions of the estimated numbers of cumulative cases according to the prophet model are reported in table 2. for canada, except for the fifth day, the predicted number of cases on all other days fell between the lower and upper bounds. for france, the number of cases on the fourth and fifth days was below the lower predicted value. in germany, the number of cumulative cases remained within the predicted range. the number of cumulative cases in italy on the first day only, in japan on the fourth day, and in the usa on the second day only was within the predicted range. for the uk, the number of cumulative cases on all days was below the lower bound of the prediction. table 2. interval of forecasted value 1st day 2nd day 3rd day 4th day 5th day 3,837,258 3,900,328 3,961,460 4,021,477 4,077,922 the graphs of actual and predicted predictions are presented in figure 1. it can be seen that the predicted values fit well with the actual values. the rmse values also support this. canada france germany italy japan uk usa forecasted 𝑦�̂ 𝑙�𝑜�𝑤�𝑒�𝑟� 𝑦�̂ 𝑢�𝑝�𝑝�𝑒�𝑟� forecasted 𝑦�̂ 𝑙�𝑜�𝑤�𝑒�𝑟� 𝑦�̂ 𝑢�𝑝�𝑝�𝑒�𝑟� forecasted 𝑦�̂ 𝑙�𝑜�𝑤�𝑒�𝑟� 𝑦�̂ 𝑢�𝑝�𝑝�𝑒�𝑟� forecasted 𝑦�̂ 𝑙�𝑜�𝑤�𝑒�𝑟� 𝑦�̂ 𝑢�𝑝�𝑝�𝑒�𝑟� forecasted 𝑦�̂ 𝑙�𝑜�𝑤�𝑒�𝑟� 𝑦�̂ 𝑢�𝑝�𝑝�𝑒�𝑟� forecasted 𝑦�̂ 𝑙�𝑜�𝑤�𝑒�𝑟� 𝑦�̂ 𝑢�𝑝�𝑝�𝑒�𝑟� forecasted 𝑦�̂ 𝑙�𝑜�𝑤�𝑒�𝑟� 𝑦�̂ 𝑢�𝑝�𝑝�𝑒�𝑟� 112,112 112,640 113,158 113,637 113,979 112,309 112,871 113,401 113,930 114,373 214,108 215,628 218,392 220,465 224,020 230,679 233,821 235,715 236,962 240,967 204,238 204,441 204,610 204,761 204,764 205,315 205,611 205,950 206,579 207,308 246,557 247,171 247,832 248,778 249,692 247,153 247,788 248,568 249,534 250,632 25,823 26,507 27,241 28,037 28,893 25,931 26,621 27,363 28,164 29,032 301,638 302,846 304,237 305,568 307,094 302,349 303,605 305,058 306,505 308,225 3,831,657 3,894,363 3,954,755 4,013,203 4,067,776 yeliz zoğal (2022) 15 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe figure 1. cumulative graph and forecasted trend of countries 4. conclusions the rapid spread of the covid-19 pandemic among countries has prompted the need for research on infectious diseases’ spread mechanism and predictions. this study aims to analyze covid19 five-day prediction forecasts for g7 countries using the prophet model, one of the machine learning models. for this purpose, five-day forecasts, five-day forecast intervals and rmse statistics for the results obtained with the prophet model were calculated. based on the forecasting results obtained using the prophet model, canada's closest predictions (lowest rmse) were obtained. canada and germany, italy, japan, italy, japan and the uk have particularly close predictions for the first day. the possible reasons for the close predictions are that these countries have implemented nationwide shutdowns and did not change their data enough to affect the results during the 180 days. the most distant predictions (highest rmse) are obtained for the usa. the reason for the highest rmse for the usa is the parameter added to the model for shutdown days. in the usa, closure decisions were made at the state and county level rather than the federal government at the beginning of the pandemic and were inconsistent. for france, which has the highest rmse results in predictions with the usa, the reason can be attributed to data corrections at the beginning of the pandemic. in light of these results, it is observed yeliz zoğal (2022) 16 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe that the prophet model as a machine learning model provides accurate predictions when the correct data is provided, the number of data-related corrections is reduced, and a regular shutdown regime is followed. forecasting the spread of covid-19 is important for policymakers because it helps them to make informed decisions about how to respond to the pandemic. accurate forecasts of the number of cases can inform decisions about lockdowns, school closures, and other public health measures. they can also help policymakers to plan for the distribution of vaccines and other medical resources. additionally, forecasts can help policymakers to identify areas of the population that may be at particularly high risk, so that they can target interventions to those groups. overall, the policy makers would consider the prophet model in forecasting the spread of infectious to limit the adverse effects on economies and businesses. funding: this research received no external funding. acknowledgments: the author is a phd student at institute of graduate programs, ankara haci bayram veli university. this article is partly derived from the phd thesis and extended with additional analyses. conflicts of interest: the author declares no conflict of interest. references anirudh, a. (2020). mathematical modeling and the transmission dynamics in predicting the covid-19 what next in combating the pandemic. infectious disease modelling. 5:366-74. baldwin, r. (2020). the supply side matters: guns versus butter, covid-style. retrieved from https://cepr.org/voxeu/columns/supply-side-matters-guns-versus-butter-covid-style benvenuto, d., marta g., lazzaro v., silvia a. and massimo c., (2020). application of the arima model on the covid-2019 epidemic dataset. data in brief. 29:105340. doi: 10.1016/j.dib.2020.105340. ceylan, z. (2020). estimation of covid-19 prevalence in italy, spain, and france. science of the total environment. 729:138817. doi: 10.1016/j.scitotenv.2020.138817. duman, a. (2020). covid-19 ile artan eşitsizlikler ve yoksulluk. retrieved from https://sarkac.org/2020/06/covid19-ile-artanesitsizlikler-ve-yoksulluk/ furtado, p., (2021). epidemiology sir with regression, arima, and prophet in forecasting covid-19. the 7th international conference on time series and forecasting. mdpi. he, z. and tao, h. (2018). epidemiology and arima model of positive-rate of influenza viruses among children in wuhan, china: a nine-year retrospective study. international journal of infectious diseases. 74:61-70. doi: 10.1016/j.ijid.2018.07.003. imf. (2021). world economic outlook. imf. (2022). world economic outlook. ioannidis, j. p. a., sally c., and martin a. t. (2022). forecasting for covid-19 has failed. international journal of forecasting. 38(2):423-38. doi: 10.1016/j.ijforecast.2020.08.004. malik, m. i. (2020). analysis and forecast of covid-19 pandemic in pakistan. medrxiv. doi: 10.1101/2020.06.24.20138800. prajapati, s., swaraj, a., lalwani, r., narwal, a. and verma, k. (2021). comparison of traditional and hybrid time series models for forecasting covid-19 cases. arxiv. doi: https://doi.org/10.48550/arxiv.2105.03266. robson, w. (2019). the math of prophet. retrieved from https://medium.com/future-vision/the-math-ofprophet-46864fa9c55a. yeliz zoğal (2022) 17 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe roubini, n. (2020). a greater depression?. retrieved from https://www.projectsyndicate.org/commentary/coronavirusgreater-great-depression-by-nouriel-roubini-2020-03 sah, s., surendiran, b., dhanalakshmi, r., mohanty, s. n., alenezi, f. and polat, k. (2022). forecasting covid-19 pandemic using prophet, arima, and hybrid stacked lstm-gru models in india. computational and mathematical methods in medicine. 2022:1 sardar, i., muhammad a. a., víctor l., ahmed a. and pradeep m. (2022). machine learning and automatic arima/prophet models-based forecasting of covid-19: methodology, evaluation, and case study in saarc countries. stochastic environmental research and risk assessment. doi: 10.1007/s00477022-02307-x. taylor, s. j. and letham, b. (2018). forecasting at scale. the american statistician 72(1):37-45. doi: 10.1080/00031305.2017.1380080. viboud, c., lone s., and chowell, g. (2016). a generalized-growth model to characterize the early ascending phase of infectious disease outbreaks. epidemics. 15:27-37. doi: 10.1016/j.epidem.2016.01.002. voyvoda, e., and yeldan, e. (2020). salgın, türkiye ekonomisi ve gerçekçi bir kamu politikası önerisi. retrieved from https://sarkac.org/2020/06/salgin-turkiye-ekonomisi-ve-gercekci-bir-kamu-politikasionerisi/ wang, y., zehui y., wang, d., yang, m., li, z., gong, x., wu, d., zhai, l., zhang, w. and wang, y. (2022). prediction and analysis of covid-19 daily new cases and cumulative cases: times series forecasting and machine learning models. bmc infectious who. (2020). who director-general’s opening remarks at the media briefing on covid-19. retrieved from https://www.who.int/director-general/speeches/detail/who-director-general-s-opening-remarksat-the-media-briefing-oncovid-19-11-march-2020 world bank. (2020). projected poverty impacts of covid-19 (coronavirus). microsoft word rjfa-vol.14 no.6 2023 american interdisciplinary journal of business and economics issn: 2837-1909| impact factor : 4.6 volume. 9, number 3; july-sept, 2022; published by: scientific and academic development institute (sadi) 8933 willis ave los angeles, california https://sadipub.com/journals/index.php/aijbe 71 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe using contextual teaching-learning for enhance competency, student achievement and learning outcome in developing the accounting information system in indonesia indrayati, widi dwi ernawati and kuni utami handayawati department accounting state polytechnic of malang, east java, indonesia abstract: this study aimed to investigate the effectiveness of the contextual teaching-learning method in enhancing students' competency, achievement, and learning outcomes in developing accounting information systems in indonesia. the research utilized a quantitative approach in the form of a questionnaire distributed to 200 students, and data obtained were analyzed using partial lease square (pls) statistics. the results showed that the contextual teaching-learning approach improved learning achievement, knowledge development, analysis, problem-solving, modern learning techniques, learning collaboration, and competence of all students. the findings of this research provide new theoretical and practical results in contextual learning and advance the reform of contextual learning. the study also discussed the principles and steps involved in implementing contextual teaching-learning, which includes formulating the problem, developing a hypothesis, testing tentative answers, drawing conclusions, and applying conclusions and generalizations. the conclusion highlights how the contextual teaching-learning approach improves student learning outcomes and fosters active and creative learning, transforming teacher-oriented learning to student-oriented. the limitations and recommendations section identified the need for further research to add samples in different subjects to generalize the results of this study. overall, this research concludes that contextual teaching-learning is an effective approach in improving learning achievement, student competence, and learning outcomes in accounting information systems courses at the state polytechnic of malang in indonesia. keywords: contextual teaching-learning, competency, student achievement, learning outcomes. introduction: the discovery method has recently been widely used in advanced schools as it is a way to develop active student learning, and it allows students to discover and investigate the concepts learned by themselves. the results obtained through this method are long-lasting in memory and not easily forgotten by students, and the self-discovered meanings are understandings that are truly mastered and easily used or transferred in other indrayati, widi dwi ernawati and kuni utami handayawati (2022) 72 interdisciplinary journal of educational practice | https://sadipub.com/journals/index.php/ijep situations. by using the discovery strategy, students learn to think analytically and try to solve the problems they face themselves, which enables them to develop habits that can be transferred in real life. based on the above description, this research aimed to evaluate the effectiveness of the contextual teachinglearning approach in enhancing students' competency, achievement, and learning outcomes in developing accounting information systems in indonesia. the study proposed using the contextual learning model teaching-learning in the sia course at the accounting department of the state polytechnic of malang indonesia to improve achievement, competence, and learning outcomes. the study utilized a quantitative research method, which involved a questionnaire distributed to 200 students who took sia courses. the data obtained were analyzed using statistics partial lease square (pls). the study focused on investigating the effectiveness of the contextual teaching-learning approach in improving competency in knowledge, students' skills in understanding concepts and theories of accounting information systems, and learning outcomes with innovative contextual learning and evaluation of application with survey questionnaires. this research aimed to provide new theoretical and practical results in contextual learning and advance the reform of contextual learning. the study also aimed to discuss the underlying principles and steps required to implement contextual teaching-learning successfully. overall, this research identified that contextual teaching-learning is an effective approach in improving learning achievements, student competence, and learning outcomes in accounting information systems courses. 2. theoretical framework 2.1. basic concepts of contextual teachinglearning the results of previous studies almost all show a significant effect of the contextual teaching learning method on student achievement and increase student competence and increase the impact of inquiry discovery on knowledge, skills, collaboration, modernization of learning methods, problem solving analysis and improving the learning process (nuraya, 2020; afriani 2018; auliya 2012; tib 2017; zahrani 2019; aprilia 2019; apriyanti 2015; aqib 2015; erickson 2001; prabawanto 2017; debora 2012; pujani 2017; osman 2018; kula 2013; gosong 2008; hamruni 2015; hartoyo 2009; hasibuan 2014; erwin 2018; nail 2016; liu 2020; indrayati 2017; indrayati 2019; indrayati 2021; indrayati 2020; indriani 2017; jauhari 2011; johnson 2007; hannum 2010; kadir 2013; amin 2011; komalasari 2012; lider 2018; manao 2013; muhlisin 2012; muslim 2009; nilasari 2018; novitasari 2014; nuzul 2014; putra 2017; budiharti 2010; manik 2013; saputra 2017; sariani 2012; emilia 2012; sudana 2019; sakti 2014; bettye 2006; suarjana 2017; mertesari 2005; sufianto 2019; sugiarti 2012; suhartono 2018; surdin 2018; susialita 2016; susila 2013; tantu 2018; tilaar 2019; trianto 2014; dantes 2014; martini 2015; desyandri 2019). 2.2. discovery contextual teaching-learning principles contextual teachinglearning refers to the following principles (trianto 2014) : 1. oriented to intellectual development. the main goal of contextual learning is the development of thinking skills. thus, this learning is not only oriented to learning outcomes but also oriented to the learning process. 2. principle of interaction. the learning process is basically an interaction process, both interactions between students and interactions between students and teachers, even interactions between students and the environment. learning as an interaction process means placing the teacher not as a source of learning, but as a regulator of the environment or a regulator of the interaction itself. 3. the principle of asking. the teacher's role that must be carried out in using this learning is the teacher as the questioner. because, the ability of students to answer each question is basically already part of the thinking process. in this case, the teacher's ability to ask questions in every step of inquiry is very necessary. indrayati, widi dwi ernawati and kuni utami handayawati (2022) 73 interdisciplinary journal of educational practice | https://sadipub.com/journals/index.php/ijep in addition, in this learning, students also need to develop a critical attitude by always asking and questioning the various phenomena they are studying. 4. the principle of learning to think. learning is not just remembering a number of facts, but learning is a process of thinking (learning how to think), namely the process of developing the potential of the whole brain. learning to think is the maximum utilization and use of the brain. 5. the principle of openness. meaningful learning is learning that provides various possibilities as hypotheses that must be proven true. the teacher's task is to provide space to provide opportunities for students to develop hypotheses and openly prove the truth of the hypotheses they propose. 2.3. steps to implement contextual teachinglearning the contextual teachinglearning process is carried out through the following stages: 1. formulate the problem; the skills required are: (a) awareness of the problem; (b) see the importance of the problem and (c) formulate the problem. 2. develop a hypothesis; the skills required in developing this hypothesis are: (a) testing and classifying the data that can be obtained; (b) see and formulate existing relationships logically; and formulate hypotheses. 3. testing tentative answers; the skills required are: (a) assembling events, consisting of: identifying required events, collecting data, and evaluating data; (b) compiling data, consisting of: translating data, interpreting data and classifying data; (c) data analysis, consisting of: looking at relationships, noting similarities and differences, and identifying trends, sequences, and regularities, (d) finding answers to hypotheses. 4. draw conclusions; the skills required are: (a) looking for patterns and meanings of relationships; and (b) formulate conclusions 5. apply conclusions and generalizations (hannum.2010) according to hosnan (2014) the characteristics or characteristics of contextual teachinglearning are (1) searching, investigating, exploring and solving problems to create, combine, and generalize knowledge, (2) student-centered, (3) activities to combine new knowledge and old knowledge. which have existed contextual teaching learning is learning that helps teachers relate the material being taught to students' real world situations and encourages students to make connections between their knowledge and its application to their daily lives. this involves seven main components of effective learning, namely; constructivism, asking (quetioning), finding (inquiry), learning community, modeling, reflection and actual research. this learning provides more opportunities for students to do, try, and experience for themselves (learning to do), students are not just passive listeners. this learning prioritizes real knowledge and experience (real word learning), high-level thinking, student-centered, active students, critical, creative, problem-solving, students learn fun, fun, not boring, (joyful and quantum learning) and uses various kinds of learning. learning resources. the hypotheses in this study are: h1: contextual learning has a significant effect on learning achievement h2: contextual learning has a significant effect on learning outcomes h3: contextual learning has a significant effect on student competence h4: learning achievement has a significant effect on learning outcomes h5: competence affects learning outcomes h6: contextual learning has an effect on learning outcomes through learning achievement. h7: contextual learning has an effect on learning outcomes through competence. the research model is: indrayati, widi dwi ernawati and kuni utami handayawati (2022) 74 interdisciplinary journal of educational practice | https://sadipub.com/journals/index.php/ijep y1 + y2 + y3 = a + b1 x1 + e figure 1. concept research model 3. research methodology 3.1. classroom action research classroom action research according to the lewis model which is interpreted by elliot (1991) includes aspects of planning, action, observation and reflection. classroom action research according to moleong (2015) is as follows: identify problems, discuss problems between researchers and those being studied, examine libraries and problems, redefine problems, choose change and evaluation methods, implement changes. the type of research is quantitative with the subject of 6 classes of students taking sia courses with a total of 200 active students in the accounting department of the state polytechnic of malang indonesia. the survey research method used data collection techniques by sending questionnaires to all students who took the sia course with a response rate of 98%. 196 questionnaires were answered. data processing with sem-pls. and measurement with a 5 point likert scale with 1 = strongly disagree, 2 = disagree, 3 = neutral, 4 = agree, 5 = strongly agree. 4. results and discussion descriptif analysisvariable contextual learning (x) table 1. descriptif analysis variable contextual learning (x) indicator minimu m maximu m avera ge std. deviation learning method scl, inquiry-discovery and cooperative learning (x1.1) 0 1,00 3,867 0,666 in the contextual learning (x) indicator, it is known that the minimum value is 2, the maximum value is 5, the average value (mean) is 3.867, and the standard deviation value is 0.666. table 2. descriptif analysisvariable achievement learning (y1) indicator minimum maximum average std. deviation achievement learning (y1) 2,00 5,00 3,714 0,781 in the achievement learning indicator (y1), it is known that the minimum value is 2, the maximum value is 5, the average value (mean) is 3.714, the standard deviation value is 0.781. indrayati, widi dwi ernawati and kuni utami handayawati (2022) 75 interdisciplinary journal of educational practice | https://sadipub.com/journals/index.php/ijep table 3. descriptif variable learning outcome (y2) indicator minimum maximum average std. deviation basic knowledge (y2.1) 1,00 5,00 4,029 0,753 analysis &problem solving (y2.2) 1,00 5,00 4,133 0,621 modern technical learnig (y2.3) 3,00 5,00 4,000 0,604 improvement learning (y2.4) 1,00 5,00 4,133 0,785 cooperation (y2.5) 3,00 5,00 4,343 0,569 descriptif analysis variable competency (y3) table 4. descriptif variable competency (y3) indicator minimum maximum average std. deviation competensy (y3) 2,00 5,00 4,257 0,772 in the competency indicator (y3), it is known that the minimum value is 2, the maximum value is 5, the average value (mean) is 4.257, and the standard deviation value is 0.772. 4.1. construct reliability validity test results evaluation of the validity of the measurement model can be done by looking at the results of the factor load estimates. a variable is said to have good validity to the construct or latent variable if the load is greater than the critical value (≥ 1.96) and/or the standard factor load is 0.50. while the evaluation of the reliability of the measurement model in pls can use constuct reliability (cr 0.70) and average variance extracted (ave) 0.50 (solimun, et al. 2020). the recapitulation of the results of the evaluation of validity and reliability can be seen in the following table: table 5. construct validity & reliability summary (outer model) latent variable observed variable partial validity (per indicator) overall validity (per construct) composite reliability (cr > 0,7) (lf > 0,5=valid) (ave > 0,5=valid) outer loading inf ave conclusion cr description contextual learning (x) x1.1 1,000 valid 1 1,000 valid 1,000 reliable achievement learning (y1) y1.1 1,000 valid 1 1,000 valid 1,000 reliable learning outcome (y2) y2.1 0,844 valid 2 0,642 valid 0,899 reliable y2.2 0,756 valid 4 y2.3 0,784 valid 3 y2.4 0,866 valid 1 y2.5 0,747 valid 5 competency (y3) y3.1 1,000 valid 1 1,000 valid 1,000 reliable based on the table above, it can be seen that the entire reflective indicator value loading factor 0.50 (valid), and the ave value 0.50 (valid) so that all indicators that measure it are declared valid, while the results of indrayati, widi dwi ernawati and kuni utami handayawati (2022) 76 interdisciplinary journal of educational practice | https://sadipub.com/journals/index.php/ijep the reliability calculation show that the composite reliability value ( cr) 0.70 (reliable). thus, it can be concluded that all these latent variables have good and proper indicators. in addition to evaluating the indicators of convergent validity, it is also necessary to test with discriminant validity, where the measurement model is assessed based on cross loading measurements with constructs. if the correlation of the construct with the main measurement of each indicator is greater than the other constructs, then the latent construct is able to predict the indicator better than the other constructs. table 6. test cross loading (discriminant validity) variable contextual learning (x) achievement learning (y1) learning outcome (y2) competency (y3) x1.1 1,000 0,240 0,526 0,235 y1.1 0,240 1,000 0,508 -0,005 y2.1 0,487 0,521 0,844 0,450 y2.2 0,299 0,317 0,756 0,429 y2.3 0,454 0,285 0,784 0,350 y2.4 0,402 0,470 0,866 0,434 y2.5 0,452 0,396 0,747 0,344 y3.1 0,235 -0,005 0,504 1,000 4.2. hypothesis testing (path analysis) this section deals with the evaluation of the coefficients or parameters that indicate a causal relationship or the effect of one latent variable on another latent variable. a causal relationship is declared insignificant if the critical ratio (c.r.) is between the ranges of -1.96 and 1.96 with a significance level of 0.05. with the help of the pls program application, the results of the critical ratio estimation of the structural model are obtained. in summary, the results of the calculation of these coefficients are presented in the following table: table 7. results path analysis sem-pls influence between latent variable h path coefficient t-value p-value conclusion cause var. consequency var. contextual learning (x) achieve ent learning (y1) h1 0,240 3,095 0,002 h1 accepted contextual learning (x) learning outcome (y2) h2 0,321 3,758 0,000 h2 accepted contextual learning (x) competency (y3) h3 0,235 2,612 0,009 h3 accepted achievement learning (y1) learning outcome (y2) h4 0,433 5,986 0,000 h4 accepted competency (y3) learning outcome (y2) h5 0,430 5,714 0,000 h5 accepted it is known that the contextual learning (x) variable has a positive influence on achievement learning (y1), meaning that the higher contextual learning (x) the result will be an increase in the achievement learning indrayati, widi dwi ernawati and kuni utami handayawati (2022) 77 interdisciplinary journal of educational practice | https://sadipub.com/journals/index.php/ijep variable (y1), where the path coefficient obtained is 0.24 with a t-value of 3,095. because the t-value is greater than the critical value (3.095 > 1.96), the statistical hypothesis states that h1 is accepted, meaning that the contextual learning (x) variable has a significant influence on the achievement learning variable (y1). it is known that the contextual learning (x) variable has a positive influence on learning outcome (y2), meaning that the higher contextual learning (x) the result will be an increase in the learning outcome variable (y2), where the path coefficient obtained is 0.321 with a t-value of 3.758. . because the t-value is greater than the critical value (3.758 > 1.96), the statistical hypothesis states that h2 is accepted, meaning that the contextual learning (x) variable has a significant effect on the learning outcome variable (y2). it is known that the contextual learning (x) variable has a positive influence on competence (y3), meaning that the higher the contextual learning (x) the result will be an increase in the competence variable (y3), where the path coefficient obtained is 0.235 with a t-value of 2.612. because the t-value is greater than the critical value (2.612 > 1.96), the statistical hypothesis states that h3 is accepted, meaning that the contextual learning (x) variable has a significant effect on the competence variable (y3). it is known that the achievement learning variable (y1) has a positive influence on learning outcome (y2), meaning that the higher achievement learning (y1), the result will be an increase in the learning outcome variable (y2), where the path coefficient obtained is 0.433 with a t-value of 5.986 . because the t-value is greater than the critical value (5.986 > 1.96), the statistical hypothesis states that h4 is accepted, meaning that the achievement learning variable (y1) has a significant influence on the learning outcome variable (y2). it is known that the competency variable (y3) has a positive influence on learning outcome (y2), meaning that the higher the competence (y3), the result will be an increase in the learning outcome variable (y2), where the path coefficient obtained is 0.43 with a t-value of 5.714. . because the t-value is greater than the critical value (5.714 > 1.96), the statistical hypothesis states that h5 is accepted, meaning that the competence variable (y3) has a significant effect on the learning outcome variable (y2). the path coefficients in the structural model as well as the weight value of the manifest variable factors in the measurement model can be described through the path diagram of the measurement model and the structural model below. figure 2. result path diagram y2 = 0,321 x + 0,433 y1 + 0,430 y2 y1 = 0,240 x y3 = 0,235 x based on the path diagram above, it can be seen that the most dominant variable in influencing learning outcome (y2) is achievement learning (y1) with the highest path coefficient of 0.433, while achievement indrayati, widi dwi ernawati and kuni utami handayawati (2022) 78 interdisciplinary journal of educational practice | https://sadipub.com/journals/index.php/ijep learning (y1) is more dominantly influenced by contextual learning (x) of 0.240, where the contextual learning (x) variable in this study is proxied (represented) on the measurement of the scl, inquirydiscovery and cooperative learning (x1.1) learning methods, so that the value of the loading factor in the construction of the contextual learning (x) variable is 1,000 or 100%, it means that the measurement of contextual learning (x) variable is fully represented by the measurement of scl, inquiry-discovery and cooperative learning (x1.1) learning methods. thus, if the management wants to increase the value of the learning outcome (y2) variable from contextual learning (x) through achievement learning (y1), statistical recommendations as material for evaluating strategic policies, especially regarding key indicators that need to be prioritized for improvement are the measurement of the scl learning method, inquirydiscovery and cooperative learning (x1.1). 4.3. analysis of mediation variables (indirect effect) the analysis of the mediating variable can be done through two approaches, namely the difference in coefficients and the multiplication of the coefficients. the coefficient difference approach uses an examination method by analyzing with and without involving mediating variables. while the multiplication method is carried out by the sobel method. in this case, the detection is done by using the coefficient multiplication approach and the sobel test. after going through the analysis process, the results of the coefficient multiplication are known as described below. table 8. indirect influence between latent variables indirect influence h count results t-count pvalue description contextual learning (x) on learning outcome (y2) through achievement learning (y1) h6 0,24 x 0,433 0,104 2,716 0,007 h6 accepted contextual learning (x) on learning outcome (y2) through competency (y3) h7 0,235 x 0,43 0,101 2,239 0,026 h7 accepted based on the table above, it can be seen that the indirect influence of latent variables on the intended latent variables is as follows: 1. the indirect effect of contextual learning (x) on learning outcome (y2) through achievement learning (y1) is 0.104 with a t value of 2.716 > 1.96 (significant). 2. the indirect effect of contextual learning (x) on learning outcome (y2) through competence (y3) is 0.101 with a t value of 2.239 > 1.96 (significant). from these results it can be concluded that the two mediating variables, namely achievement learning (y1) and competence (y3) are declared capable of mediating the effect of contextual learning (x) on learning outcomes (y2). 4.4. correlation analysis the results of the correlation analysis between latent variables are as in the following table. table 9. latent variable correlations indrayati, widi dwi ernawati and kuni utami handayawati (2022) 79 interdisciplinary journal of educational practice | https://sadipub.com/journals/index.php/ijep x1 y1 y2.1 y2.2 y2.3 y2.4 y2.5 y3 x1 1,000 0,240 0,487 0,299 0,454 0,402 0,452 0,235 y1 0,240 1,000 0,521 0,317 0,285 0,470 0,396 0,005 y2.1 0,487 0,521 1,000 0,568 0,550 0,644 0,538 0,450 y2.2 0,299 0,317 0,568 1,000 0,487 0,633 0,386 0,429 y2.3 0,454 0,285 0,550 0,487 1,000 0,628 0,531 0,350 y2.4 0,402 0,470 0,644 0,633 0,628 1,000 0,542 0,434 y2.5 0,452 0,396 0,538 0,386 0,531 0,542 1,000 0,344 y3 0,235 0,005 0,450 0,429 0,350 0,434 0,344 1,000 based on the table above, it can be seen the correlation between research variables. in general, all of the correlation values above are positive, meaning that the higher the causal variable, the higher the effect variable. 5. discussion this research is about the effect of contextual teaching-learning on the basis of student centered learning, inquiry and discovery learning to improve competency, student achievement and learning outcomes with the findings showing a significant effect of contextual teaching-learning on competency, achievement and learning outcomes as well as achievement learning and competency is successful as a mediating variable in the effect of contextual teaching-learning on learning outcomes with a significant effect. this research supports the results of previous studies, including nuraya, 2020; afriani 2018; auliya 2012; tib 2017; zahrani 2019; aprilia 2019; apriyanti 2015; aqib 2015; erickson 2001; prabawanto 2017; debora 2012; pujani 2017; osman 2018; kula 2013; gosong 2008; hamruni 2015; hartoyo 2009; hasibuan 2014; erwin 2018; nail 2016; liu 2020; indrayati 2017; indrayati 2019; indrayati 2021; indrayati 2020; indriani 2017; jauhari 2011; johnson 2007; hannum 2010; kadir 2013; amin 2011; komalasari 2012; lider 2018; manao 2013; muhlisin 2012; muslim 2009; nilasari 2018; novitasari 2014; nuzul 2014; putra 2017; budiharti 2010; manik 2013; saputra 2017; sariani 2012; emilia 2012; sudana 2019; sakti 2014; bettye 2006; suarjana 2017; mertesari 2005; sufianto 2019; sugiarti 2012; suhartono 2018; surdin 2018; susialita 2016; susila 2013; tantu 2018; tilaar 2019; trianto 2014; dantes 2014; martini 2015; desyandri 2019). 6. conclusion and implication the conclusion of this study is that the contextual teaching-learning method has a significant effect on learning achievement, learning outcomes and competency. and competency and achievement learning are successful as mediating variables that significantly affect contextual teaching-learning on learning outcomes. the implication of this research is that contextual teaching-learning can improve learning achievement, student competence and learning outcomes in learning accounting information systems courses at the state polytechnic of malang for the better. 7. limitations and recommendations the limitation of this study is that the population is only in the system . course accounting information at the state polytechnic of malang with a sample of 196 students. for future research is expected to add samples in the same study with different subjects to be able to generalize the results of this study. indrayati, widi dwi ernawati and kuni utami handayawati (2022) 80 interdisciplinary journal of educational practice | https://sadipub.com/journals/index.php/ijep references adim, m., herawati, e.s.b., & nuraya, n. (2020). the effect of the contextual learning model (ctl) using media scores on interest in learning science in fourth grade elementary school. journal of physics and science education (jpfs), 3(1), 6–12. http://journal.unucirebon.ac.id/index.php/jpfs/article/view/76 afriani, a. (2018). contextual learning (contextual teaching and learning) and student concept understanding. journal of al-muta'aliyah stai darul kamal nw kembang clam. http://ejournal.kopertais4.or.id/sasambo/index.php/mutaaliyah/article/view/3005 akmil, auliya. etc. implementation of ctl in understanding students' mathematical concepts. vol. 1 no. 1 (2012) : journal of mathematics education p. 24-29 al-tabany, t.i.b. (2017). designing innovative, progressive, and contextual learning models. prenada media. aningsih, a., & zahrani, m. (2019). increasing students' understanding of concepts in science subjects through the application of contextual teaching and learning (ctl) models. pedagogy (journal of primary school education), 7(1), 48–56. http://jurnal.unismabekasi.ac.id/index.php/pedagogic/article/view/1790 aprilia, d.a., et al. (2019). influence of contextual close in improving narrative writing skill. pulpit pgsd undiksha, 7. http://dx.doi.org/10.23887/jjpgsd.v7i3.19400 apriyanti, et al. development of contextual teaching and learning (ctl)-based modules equipped with audio visual media to improve high school students' physics learning outcomes. proceedings of the national physics seminar (e-journal) (2015).volume iv, october 2015 aqib, z. (2015). models, media, and contextual learning strategies (innovative). bandung: yrama widya. berns, robert g., and patricia m. erickson., contextual learning: preparing students for the new economy (2001), spotlight zone research @work. crawford, m (2001), 'contextual teaching and learning: strategies for creating constructivist classrooms', national technology preparation network, vol. 11, no. 6, pp. 1-6. d. selvianiresa and s. prabawanto, (2017)“a contextual learning approach to mathematics in elementary schools”, in journal of physics: conference series, 2017. debora, s.n., the influence of contextual teaching and learning (ctl) learning models on students' chemistry learning outcomes in the principal language of colloid system class xi methodist high school lubuk pakam t.a 2011/2012 (2012), thesis, fmipa unimed, medan. dewi, nlpr., suastra, iw, & pujani, nm (2017), ‘effectiveness of contextual science practicum modules for improving science process skills and environmental care characters, shs web of conferences, vol. 42, no. 00037, p. 1-6. indrayati, widi dwi ernawati and kuni utami handayawati (2022) 81 interdisciplinary journal of educational practice | https://sadipub.com/journals/index.php/ijep e. suryawati and k. osman, (2018) “contextual learning: an innovative approach to the development of scientific attitudes and students' science performance,” eurasia j. math. science. technology. education. elliot, john (1991), action research for educational change, philadelphia, open university press. ginting, kula. application of contextual teaching and learning models to improve social studies activities and learning outcomes for class v students at sd negeri 060885 medan. thematic journal, volume : 003/no.12/diksas/december 2013. gosong, (2008). "application of the contextual teaching and learning (ctl) approach to help students understand basic concepts of discourse in learning indonesian language discourse" scientific journal of education and learning "vol. 4 no. 2 page 869 hamruni. (2015). basic concepts and implementation of contextual learning. institutional repository uin sunan kalijaga yogyakarta, 12. https://doi.org/10.14421/jpai.2015.122-04 hartoyo, h. (2009). application of competency-based contextual learning model to improve learning effectiveness. journal of education: learning innovation research, 39(1), 67–78. https://doi.org/10.21831/jk.v39i1.233 hasibuan, m. i. (2014). ctl (contextual teaching and learning) learning model. logarithms: journal of educational sciences and science, 2(01). https://doi.org/10.24952/logaritma.v2i01.214 hasruddin, m. y. nasution, and s. rezeqi, “application of contextual learning to improve critical thinking ability of students in biology teaching and learning strategies class,” int. j. learn. teach. educ. res., vol. 11, no. 3, 2015. herlina erwin (2018) application of contextual approaches to increase student interest and learning. achievement in science lessons of basic education journal volume 4, number 1, april 2018 6) hosnan, m. (2014), scientific and contextual approaches in 21st century learning, bogor: ghalia indonesia. ilhan, nail et al., the effect of context-based chemical equilibrium on grade 11 students' learning, motivation and constructivist learning environment (2016), international journal of environment & science education, vol. 11, no. 9 ilyas, i., & liu, a. n. a. m. (2020). the effect of based e-learning contextual approach on student learning motivation. journal of science education research, 6(2), 184. https://doi.org/10.29303/jppipa.v6i2.425 indrayati, (2017), the implementation of paikem based on project basedlearning and cooperative learnig, iosr vol 22 (7version 12), 37-43, 2017. indrayati, (2020), implementation discussion learning in learning accounting information system course at state polytechnic of malang, journal of education and practice vol 11 no 36, page 81-87, 2020. indrayati, widi dwi ernawati and kuni utami handayawati (2022) 82 interdisciplinary journal of educational practice | https://sadipub.com/journals/index.php/ijep indrayati, (2021), an innovative learning in accounting information system course using discovery learning and project based learning at state polytechnic of malang, indonesia, palarch’s journal of archaeology of egypt vol 18 no 4, 6958-6970, 2021. indrayati, basuki rachmat, apit miharso, (2020), analysis of the effect between paikem implementation to the competency, quality, efficiency and effectiveness of learning, test engineerig and management vol 82 , 12332-12341, 2020. indrayati. (2019), the effect of implementing paikem using student-centered-learning, case based learning and cooperative learning on learning efficiency and effectiveness. erudio journal of educational innovation vol 6 no 1, page 83-94, 2019. indrayati. (2021), implementation of discovery learning method for enhance learning achievement student accounting practice manufacturing in accounting department state polytechnic of malang, international journal of science acadaemic research vol 2 no 3, 1220-1222, 2021. indriani, r. (2017). the activities of teachers and students in learning mathematics using contextual teaching and learning (ctl) in elementary schools. pendas : scientific journal of basic education, 2(2). https://doi.org/10.23969/jp.v2i2.841 j. moleong, m.a (2015), qualitative research methodology. publisher pt teen rosdakarya bandung, indonesia. jauhari, m., paikem implementation (2011), achievement pustakaraya, jakarta. johnson, eb (2002). contextual teaching and learning: what it was and why it still exists. california usa: corwin press. inc. johnson, eb (2007). contextual learning: make learning activities fun and meaningful. mizan learning center. juniar & hannum. (2010). application of the ctl approach in weblog-based e-learning to improve student learning outcomes in the subject of reaction rate. journal of the state university of medan; medan. kadir, a. (2013). the concept of contextual learning in schools. dynamics of science: journal of education, 13(1). https://doi.org/10.21093/di.v13i1.20 kamaruddin, nkm, bt jaafar., n, amin, zn (2011), 'a study of the effectiveness of the contextual approach to teaching and learning statistics at the university tun hussein onn malaysia (uthm)', us-china education review a, vol . 1, pp. 13-9. komalasari, k. (2010). contextual learning: concepts and applications. bandung: refika aditama. komalasari, k. (2012). the effect of contextual learning in civic education on students' civic skills. international journal for educational studies, 4(2), 179-190. lider, g. (2018). the influence of contextual learning approach containing cultural values and national indrayati, widi dwi ernawati and kuni utami handayawati (2022) 83 interdisciplinary journal of educational practice | https://sadipub.com/journals/index.php/ijep character on learning outcomes in terms of educators' democratic attitudes. indonesian values and character education journal, 1. http://dx.doi.org/10.23887/ivcej.v1i1.20301 manao, h. (2013). the influence of contextual teaching and learning (ctl) approach to problem solving ability and mathematical critical thinking ability of junior high school students (doctoral dissertation, unimed). muhlisin, a. (2012). development of integrated science learning devices based on contextual teaching and learning (ctl) with cooperative learning model type student teams achievement division (stad) with air pollution theme. journal of educational research and evaluation, 1(2), 139-145. muslim. (2009). competency-based and contextual learning. jakarta: bumi aksara. nilasari, e., et al. (2018). contextual-based thematic learning at sd muhammadiyah 9 malang. journal of social studies learning theory and practice. journal of social studies learning theory and practice, 3. 10.17977/um022v3i12018p019 novitasari, a. t. (2014). development of critical and creative thinking in economic learning with contextual teaching and learning models. in proceedings of the national seminar (vol. 9) in may 9, 2015. nurhadi (2003), contextual learning and its application in kbk, state university of malang, malang. nuzul, a. (2014). contextual teaching and learning effectiveness for increasing ability of open economic understanding journal of economics and business education (jpeb), 2(2), 27. https://doi.org/10.21009/jpeb.002.2.2 pujiasih, e. (2020). building a golden generation with variations of online learning during the covid-19 pandemic. ideguru: journal of teacher scientific work, 5(1), 42–48. https://doi.org/10.51169/ideguru.v5i1.136 purwanto, a., pramono, r., asbari, m., hyun, c. c., wijayanti, l. m., & putri, r. s. (2020). an exploratory study of the impact of the covid-19 pandemic on the online learning process in elementary schools. edupsycouns: journal of education, psychology and counseling, 2(1), 1–12. https://ummaspul.ejournal.id/edupsycouns/article/view/397 putra, f. g. (2017). experimental hands on activity (hoa) assisted contextual approach on mathematical problem solving ability. al-jabar: journal of mathematics education, 8 (1). https://doi.org/10.24042/ajpm.v8i1.1148 r. budiharti, learning physics with a ctl (contextual teaching and learning) approach through the demonstration method, national seminar on biological education of fkip uns 2010 san, s, ristiati, p, manik, w (2013), 'the influence of peer tutor assisted contextual learning models on biology learning outcomes viewed from learning motivation', e-journal of ganesha education university graduate program, vol.3, no.1, pp. 1-10. indrayati, widi dwi ernawati and kuni utami handayawati (2022) 84 interdisciplinary journal of educational practice | https://sadipub.com/journals/index.php/ijep saputra, w. d. (2017). the influence of contextual approaches on social studies learning outcomes for fifth grade students of sd negeri 1 gondangrejo. thesis final project. department of education, university of lampung. http://dx.doi.org/10.23960/jpp sariani, n. l. a. (2018). the influence of the tri kaya parisudha oriented ctl learning model on mathematics learning outcomes of class iii students. journal of education technology, 2, 95–102. http://dx.doi.org/10.23887/jet.v2i3.16372 satriani, i., & emilia, e. (2012). contextual teaching and learning approach to teaching writing. indonesian journal of applied linguistics, 2(1) 10-20. setiawan, p & sudana, i. d. n. (2019). application of contextual learning model to improve mathematics learning outcomes. scientific journal of teacher professional education, 2. http://dx.doi.org/10.23887/jippg.v1i2.16397 singaraja. 4) heri permana sakti (2014) contextual learning approach to increase interest in learning mathematics. union: journal of mathematics education vol 2 no. 3, november 2014 5) smith, bettye p. (2006). contextual teaching and learning practices in the family and consumer sciences curriculum. journal of family and consumer sciences education. vol. 24, no. 1 sri mertesari, (2005). improving the mastery of concepts and learning outcomes of children in biology in calculus i by applying contextual learning strategies with problem solving approaches. journal of education and teaching. no.2 th. xxxviii. pages 185-199. 8) suarjana, i. m., et al. (2017). application of contextual approach assisted by concrete media to improve activities and learning outcomes. international journal of elementary education. http://dx.doi.org/10.23887/ijee.v1i2.11601 sufianto. (2019). the effect of contextual teaching and learning (ctl) learning model on the ability of concept understanding class vii students of smp 16, kota bengkulu. jurnal pendidikan matematika raflesia, 4(1), 19–28. doi: 10.33449/jpmr.v4i1.7525. sugiarti, s. b. (2012). the influence of contextual learning model on critical thinking ability of class xi ia students of sma negeri 3 watansoppeng. chemica journal, 13(1), 77-83. suhartono, e. (2018). changes in the contextual pattern of civics learning patterns to contextual patterns (ctl). journal of social studies learning theory and practice, 3(1), 1–12. https://doi.org/10.17977/um022v3i12018p001 surdin. (2018). the effect of contextual teaching and learning (ctl) models on learning outcomes of social sciences of the material of forms the face of the earth on class vii of junior high school. international journal of education and research, 6(3), 57–64. susialita, t. (2016). the development of audio-visual student portfolios (lks) contextual teaching and learning-based (ctl) on sound chapter of science subject for deaf students. jurnal pendidikan ipa indonesia, 5(2), 192-198. indrayati, widi dwi ernawati and kuni utami handayawati (2022) 85 interdisciplinary journal of educational practice | https://sadipub.com/journals/index.php/ijep susila, et al. (2013). the effect of contextual learning approach on civics learning outcomes in terms of student interest. e-journal of ganesha university of education postgraduate program, 3. https://media.neliti.com/media/publications/119774-id-elektron-approach-pembelajarankonteks.pdf tantu, y. r. p. (2018). the application of contextual learning to improve critical thinking skills of grade xi students in chemistry lessons at uph college the implementation of contextual teaching and learning to increase critical thinking of grade 11 students studying chemistry. polyglot: scientific journal, 14(2), 209. https://doi.org/10.19166/pji.v14i2.1051 tilaar, a. l. (2019). the effectiveness of contextual learning in teaching mathematics. formative journal, 1, 186–191. http://dx.doi.org/10.30998/formatif.v1i3.72 trianto (2014), designing innovative, progressive, and contextual learning models: concepts, foundations, and implementation in the 2013 curriculum (integrative thematic curriculum/tki), prenadamedia group, jakarta. trianto. (2007). constructivistic oriented innovative learning models. jakarta: prest akmil, auliya. etc. implementation of ctl in improving students' understanding of mathematical concepts. vol. 1 no. 1 (2012) : journal of mathematics education p. 24-29 wayan sukreni, i wayan lasmawan, nyoman dantes (2014) contextual learning approach in group b ejournal postgraduate program at ganesha university of education basic education study program (volume 4) wulandari, l., van hayus, e. s., & martini, k. s. (2015). application of contextual teaching and learning (ctl) learning approach to improve critical thinking ability and student achievement in colloidal system principal material class xi science 2 even semester sma negeri gondangrejo 2013/2014 academic year. journal of chemical education, 4(1), 144-150. yesya, d. p., & desyandri, d. (2019). the effect of using the contextual teaching and learning (ctl) model in pkn learning in elementary schools. e-journal of innovation learning, scientific journal of basic education, 1(1). ztürk, a, doğanay, a (2019), ‘development of argumentation skills through socioscientific issues in science course: a collaborative action research’, turkish online journal of qualitative inquiry, vol. 10, no. 1, pp. 52-89. contents american interdisciplinary journal of business and economics issn: 2837-1909| impact factor : 4.6 volume. 9, number 2; april-june, 2022; published by: scientific and academic development institute (sadi) 8933 willis ave los angeles, california https://sadipub.com/journals/index.php/aijbe 10 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe analysing the relationship between covid-19 and corporate governance on the issuing date of uk nonfinancial firm's annual reports rateb m. alqatamin and mohammad k. shbeilat accounting department, faculty of business, tafila technical university, jordan abstract: this study examines the relationship between corporate governance factors, the covid-19 pandemic, and the timing of annual reports by uk non-financial companies. the study is based on data from companies listed on the london stock exchange from 2008 to 2021, and it employs a panel regression random effect model to analyze the data. the study finds that there is a significant association between corporate governance factors such as board size, independency of board, audit independence, audit experience, and the timing of annual reports. furthermore, the study reveals that the covid-19 pandemic negatively affects the corporate governance mechanisms that enhance the timing of annual reports. the findings of this study are consistent with prior research indicating that the quality of financial reporting should be a focus of policymakers and managers to enable investors to take timely and informed decisions. thus, timely submissions of financial reporting are vital for both external and internal users since they provide useful and updated information allowing them to make the right decisions. keywords: corporate governance, annual reports, financial reporting, board size, audit independence. introduction timely submissions of financial reports are regarded as essential for external and internal users, allowing them to make informed decisions. a considerable body of literature has identified corporate governance as a potential factor that influences the issuing date of annual reports. the board of directors is responsible for issuing a company's financial annual reports, which are disseminated to the public. several previous studies have investigated the relationship between the board of directors' characteristics and the timing of financial annual reports, but their findings are mixed. hence, it is crucial to explore further how the corporate governance structure can impact financial reporting. moreover, the covid-19 pandemic has presented a significant challenge to corporate governance mechanisms that enhance the timing of annual reports. given the unprecedented impact of the pandemic, it is essential to study the effect of covid-19 on financial reporting. therefore, this study aims to examine the relationship between corporate governance factors, the covid-19 pandemic, and the issuing date of annual reports by non-financial uk companies. this study adds to the existing literature by providing empirical evidence of the relationship between issuing date of annual reports, corporate governance, and the covid-19 pandemic. the study uses data from 2008 to 2021 and employs a panel regression random effect method to analyze the data. this study's findings can contribute to policymakers and managers' decision-making process by emphasizing the importance of the quality of financial reporting and timely submissions in enhancing transparency and accountability. rateb m. alqatamin and mohammad k. shbeilat (2022) 11 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe literature review the timeliness of submissions of financial reporting is considered vital for both external and internal users since it provides useful and updated information allowing them to make the right decisions (gunarsih 2011; beest et al. 2009). furthermore, previous literature reveals that the issuing date of annual reports is influenced by corporate governance. with respect to the board characteristics, several studies have investigated the association between the board of directors and issuing date of annual reports and found a strong correlation exists as it is the board of directors with the authority to issue company’s financial annual reports and thus disseminated to the public. for example, daoud et al. (2014a) investigated the relationship between the board of director’s characteristics and issuing date of annual financial reports among jordanian listed companies. their study concluded that firms with a smaller board size are willing to issue their financial reporting faster than those with a larger board. however, they fail to find evidence of independent directors and the timeliness of financial reporting. this result is in line with findings of ibadin et al. (2012), who confirmed that there is no association between board independence and issuing dated of financial annual reports. their results are consistent with the findings of nelson and shukeri (2011), who studied the effect of board independence on audit report timeliness among malaysian listed companies; they failed to find any association between board independence and audit report timeliness. similarly, ibadin et al. (2012) studied the relationship between corporate governance characteristics and the timeliness of financial reporting among nigerian companies. their study shows that there is no relationship between board independence and the timeliness of financial reporting. conversely, dimitropoulos and asteriou (2010) and persons (2009) find that independent board members have a positive and significant effect on the timeliness of financial reporting. in addition, abdullah (2006a), by using the sample of malaysian listed companies, examined the association between board of directors independence and timeliness of annual financial reports. his study documents a significant association between board of director independence and timeliness of financial reporting. furthermore, afify (2009) shows that board independence is significantly related to the timeliness of financial reporting. odit (2015b) states that board diversity reduces the number of days before information is announced, which improves the timeliness of financial reporting. the results of the study recommended that the quality of financial reporting should be a focus of policymakers and managers to allow investors to take timely and informed decisions. this finding confirms the conclusions by omoro et al. (2015), who found that gender diversity in top management increases financial reporting quality, including properness and accuracy of the information released. in a related to the audit committee characteristic, puasa et al. (2014) report that internal audit committee characteristics has an insignificant role in monitoring the issuing date of annual financial reporting process. for example, there is evidence showing that an independent audit committee is expected to be unbiased in achieving their responsibilities, whereas a lack of independence and autonomy within an audit committee has the potential to impact the shareholders’ best interests as the member act in a way which is self-serving, rather than for the overall benefit of the company. (hashim and abdul rahman 2011; fama and jensen 1983). abdullah (2006b) reveals that audit committee independence has a positive and significant association with the timeliness of financial reporting amongst malaysian companies during the period 1998 to 2000. the study’s results differed from those reported by naimi et al. (2010), who fail to find any association between audit committee independence and issuing date of annual financial reporting. however, a study conducted by hashim and rahman (2011) reveals that audit committee independence and financial reporting timeliness are negatively and significantly related. these findings explain the power of independent audit committees in achieving their aims more effectively. further, pervious literature has examined the relationship between audit committee size and financial reporting timeliness. nelson and shukeri (2011) reveal that the longer audit delay was negatively and significantly associated with audit committee size. however, it has been found that corporations that have larger audit committees in terms of personnel have more regular meetings and are therefore they are more likely to issue and publish timely audit reports (naimi et al. 2010). prior studies show that an audit committee member’s financial expertise positively and rateb m. alqatamin and mohammad k. shbeilat (2022) 12 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe significantly relates to financial reporting timeliness (abernathy et al. 2014). this finding suggests that those audit committees that have financial expertise members are more likely to lead companies to disclose their financial information sooner than later. by using a sample of tunisian listed companies, oussii and taktak (2018) conducted a study to investigate the association between audit committee efficiency and the issuing date of the annual financial reports. their results show that audit committees with members who have a financial background are more likely to publish their annual reports faster. this finding suggested that members who have financial background contribute to the enhancement of issuing date of annual financial reports. gunarsih (2011) studied the effect of ownership concentration by the domestic institutions on the timeliness of financial reporting among indonesian companies listed in the indonesian stock exchange during the period of 1999-2007. the result of the study shows that there is a positive relationship between corporate governance structure (ownership concentration by domestic institution) and issuing date of annual financial reports. considering the covid-19 pandemic studies, šušak (2020) examines the relationship between financial reporting timeliness and earnings management practices. the study reveals that there is a positive relationship between earnings management and financial reporting delay during the covid-19 pandemic, indicating that managers are more likely to engage in earnings management activities during the covid 19 pandemic. grossi et al. (2020) investigated the impact and nature of budgetary responses to the covid19 pandemic among united kingdom public sector financial management. their study shows that the pandemic period has had the greatest effect on the uk’s public finances in 2020-2021. priede bergamini et al. (2022) emphasise in their study how corporate governance practices can help companies survive during the covid-19 pandemic. the findings of the study reveal that companies subject to at least one of the corporate governance’s attributes, including board diversity, foreign investors’ independent directors, institutional ownership, and ownership concentration were more effective during the covid-19 pandemic. in relation to the control variables, previous literature reported that the timeliness of financial reporting is influenced by company’s characteristics such as size, leverage, profitability, and industry (e.g. ashton et al. 1989; cohen and leventis 2013; ismail and chandler 2004; al-ajmi 2008; afify 2009). for example, a study conducted by atiase et al. (1989) aims to examine the effect of company’s size on the timeliness of financial reporting. the study found that large firms are more likely to report earnings faster than small companies. furthermore, davies and whittred (1980) studied the relationship between selected companies’ characteristics and issuing date of the annual financial reports amongst australian companies. they found that large and small companies are more likely to publish their annual financial reports faster than medium size companies. in addition, afify (2009) reveals that company’s size, leverage, profitability, and industry positively and significantly affect the issuing date of annual financial reporting. research design 3.1 data and sample our sample period is from 2008 to 2021. we begin in 2008 since the corporate governance practices in the uk become mandatory from 2008; the most relevant data is obtained from annual financial reports. the initial sample included a total of 129 listed companies on the london stock exchange (lse) and 1806 firm-year observations. we excluded 13 companies because those companies were not listed on lse during the entire period of the current study; thus we deleted 182 firm-year observations from our initial sample. we then excluded 5 companies with 70 year-observations because they did not report the relevant information for this study. therefore, the final sample includes 1554 observations to test the study’s hypotheses. 3.2 regression model the current study used the following model to test hypotheses: auddalit = β0 + β1 bsizit + β2 bogenit + β3 bindit + β4 bomeetit + β5 audindeit + β6 audsizeit + β7 audexpeit + β8 ownconit + β9 fsizeit + β10 fprofit + β11 fleverit + β12 fdividit where: rateb m. alqatamin and mohammad k. shbeilat (2022) 13 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe auddal=audit daily, this figure represents the time that elapses in days between year-end and the date of the independent auditor's report for several uk companies as a proxy for financial reports timeliness. bsiz= board size, total number of board director’s members. bogen = gender diversity of the board, percentage of female members on the board directors. bind = board independency, the proportion of independent directors to the total number of directors on the board directors. bomeet = board meeting measured by the number of board directors’ meetings held during the year. audinde audit = independency measured by the proportion of independent directors to total number of directors on the audit committee. audsize = audit size measured by the total number of audit committee members. audexpe = audit experience measured by proportion of members with education/background in accounting or finance. owncon = ownership concentration which is the value of one if it is an external stakeholder who owns five per cent or more from the total firm’s outstanding shares; otherwise zero. fsize = firm size of a company generated by aggregate assets. fprof = firm profitability which is measured by return on assets calculated by net income before tax divided by aggregate assets. flever = leverage ratio, which is calculated by divided the aggregate liabilities by aggregate assets. fdivid = dividends ratio measured by cash dividends divided by net income for the same period. table 1 demonstrated variables definitions and measurements. table 1. variable definitions and measurements label variable description auddal audit daley measured by the time that elapses in days between yearend and the date of the independent auditor's report for several uk companies. bosize board size total number of board directors’ members. bogen board gender percentage of female members on the board directors. bomeet board meeting number of board directors’ meetings held during the year. audinde audit independence the proportion of independent directors to the total number of directors on the audit committee audsize audit size measured by the total number of audit committee members. audexpe audit experience the proportion of members with education/experience in accounting or finance. owncon ownership concentration which is the value of one if it is an external stakeholder who owns five per cent or more from the total firm’s outstanding shares; otherwise zero? fsize firm size firm generated by aggregate assets. fprof firm profitability measured by return on assets, the net income before tax divided by aggregate assets. flever leverage ratio aggregate liabilities divided by aggregate assets. fdivid dividends ratio cash dividends divided by net income for the same period. descriptive statistics table 2 sumarises the statistical properties of data used in this study in terms of observations, standard deviation, mean, coefficient of variation and median for all variables. this section reveals that the minimum value of audit delay is 22 days and the maximum value is 118 days with a 15.46 standard deviation, this rateb m. alqatamin and mohammad k. shbeilat (2022) 14 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe indicates a considerable distribution in the days. the mean value is 56.7487, which is similar to the results of odit (2015a), who found that the average length of time in days before financial annual reports of companies studied in nairobi are released is 58.2799. with regard to the board size, it was found that the small board has 5 members whereas the highest number of members was 17 members, it is surprising to note that, some uk firms ignore the uk corporate governance code number (21), which mentions that the number of board members should be no more than 15. this contravenes a section of the uk corporate governance code number 21. with respect to the gender diversity of the board, the minimum value is 0 and the maximum value is .29 with stander deviation .23. in relation to the board independence and board meetings, the minimum values are .375 and 6, while the maximum values are .5487 and 22 respectively. in addition, table 2 shows that zero is the minimum value of audit independency while the value of .3431 is the maximum value with standard deviation .2460 and mean value of .375. descriptive analysis reveals that audit size and audit expertise have the minimum values of 3 and 1 and maximum values of 5 and .4812 respectively. whereas, ownership concentration has a mean value of .869. moreover, the coefficient of company size is widely distributed and ranges from 11.735 to 18.9268. recording and analysis of profitability demonstrates that it varies between minimum values of 0.4816, which constitutes a loss, and a maximum value of 0.937, which indicates profit. there is a slandered deviation of 1.3297. additionally, table 2 indicates the leverage ratio ranges from 0.9531 and the mean value is 0.19726. the mean value of the dividends ratio is 0.2941, whereby the minimum is 0 and the maximum is 0.975 respectively with standard deviations of 0.2291. table 2. descriptive analysis variables observations minimum maximum mean std. deviation auddal 2109 22 118 56.7487 15.4692 bosize 2109 5 17 8 .9519 .4140 bogen boindp bomeet 2109 2109 2109 0 .3751 3 .2964 .5487 22 . 846 .323 8.7568 .2305 .5100 4.8733 audinde 2109 0 .3431 .3753 .2460 audsize 2109 3 5 1.8598 1.256 audexpe 2109 1 .4812 .3931 .2721 owncon 2109 0 1 .9094 .4711 fsize 2109 11.7355 18.9268 13.968 1.2997 fprof 2109 -.4816 .9377 1.3297 .08483 flever 2109 0 .9531 .19726 .3050 fdivid 2109 0 .9750 .2941 .22941 checking for multicollinearity two conventional methods to ensure instances of multicollinearity are minimal have been employed extensively in the previous literature, which are correlating tolerance values with matric and variable inflation factors (vif) (e.g. abdel-fattah, 2008). this study uses both to test whether the independent variables or the model suffer from multicollinearity. table 3 indicates the highest correlation, with a coefficient of 65% between the firm’s size and board meeting, which demonstrates that multicollinearity is not an issue within this date set. table 4 illustrates vif coefficients of each independent variable. according to gujarati (2003) when there is a vif of less than 10, there cannot be a multicollinearity issue. table 4 shows that the maximum vif is (1.68), and the mean is (1.14). table 3. pearson’s correlation rateb m. alqatamin and mohammad k. shbeilat (2022) 15 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe variab les bosi z bog en boin d bom eet audi nde auds ize aude xpe own con fsi ze fpr of fle ver fdi vid bosiz 1.000 boge n 0.183 7 1.000 boin d 0.026 4 -0.10 30 1.000 bome et 0.001 7 -0.08 14 0.013 2 1.000 audi nde -0.02 4 0.029 4** -0.029 5** -0.009 9** 1.000 auds ize -0.03 71** 0.206 ** 0.037 2 0.050 8* 0.0780 1.000 aude xpe 0.028 5 0.082 2 0.271* * 0.016 7 0.0910 -0.036 6 1.000 own con -0.03 83 -0.07 17** -0.015 7** -0.061 8* -0.035 1** 0.114 7 -0.036 6 1.000 fsize 0.264 4 0.439 5 -0.020 5 0.654 2 -0.042 0* -0.045 6 0.1147 0.0607 1.00 0 fpro f 0.096 3 -0.01 52 -0.123 1 -0.023 9** 0.0325 ** -0.012 0 -0.045 6 0.0134 0.05 22 1.00 0 flev er 0.007 1 -0.00 63* 0.002 3** -0.040 0* 0.0440 -0.015 9 -0.012 0 -0.058 3 0.25 34 0.03 99 1.000 fdivi d 0.036 7 -0.06 85 0.017 6* -0.009 5** -0.049 3 0.009 3 -0.015 9 0.5297 -0.0 475 0.23 564 -0.50 30 1.000 table 4. vif test results variable vif 1/vif bosize 1.68 .677 bogen 1.43 0.701338 boindp 1.20 0.830574 bomeet 1.20 0.834394 audinde 1.10 0.909320 audsize 1.10 0.909339 audexpe 1.09 0.913442 owncon 1.09 0.913587 fsize 1.06 0.945746 fprof 1.05 0.948349 flever 1.03 0.947968 fdivid 1.02 0.977192 mean vif 1.14 regression analysis in this section, panel regression analysis has been used. panel studies have previously been employed by practitioners, moreover, panel regression is recommended as an appropriate model for time series studies. it facilitates the removal of an unobservable heterogeneity amongst the sample. rateb m. alqatamin and mohammad k. shbeilat (2022) 16 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe the estimation confections of regression analysis in this study are shown in table 5. the dependent variable is the timeliness of financial reports, while the independent variable is the corporate governance factors. as can be seen in table 5, the finding reveals that the determination coefficient as measured by the values of adjusted r2 is 75.8%, the adjusted r2 show that the combination of independent variables used in the study model demonstrates 75.8% of the variation in the dependent variable. also in table 5 are the results of regression coefficients, which show the impact of corporate governance on the timeliness of financial reports. as expected, the regression results show that the coefficient of the bosize is negative and significant (p < -0.043) related to audit delay as a proxy for the timeliness of financial reports. these results confirm that companies with large boards are more like to disclose their financial reports than companies with small board sizes. this result suggests that numbers of directors enhance corporate governance mechanisms among uk non-financial companies. this finding is consistent with previous studies (krishnan, 2005). however, these results are inconsistent with a study conducted by daoud et al. (2014b), who found that companies with smaller board sizes tended to issue their financial reporting faster than those with larger board size. in related to the bogen, table 5 shows that the coefficient is negative and significant (p < -0.023). the result, therefore, suggests that board gender diversity improves the timeliness of financial reporting. the results indicate that the level of monitoring ability of the board of directors is different based on their member’s gender. it is therefore taken that corporate governance aspects including gender diversity in the board have greater power in improving the timeliness of submitting financial reports. this finding confirms the conclusions by liao et al. (2015) who found that gender diversity in top management increases financial reporting quality, including the properness of the information released. furthermore, the finding of the current study indicates that boindp is positively and significantly associated with timeliness of financial reporting at the level of (p < -0.03). the findings of the study are consistent with dimitropoulos and asteriou (2010) and persons (2009); these studies found that independent board members have a positive and significant effect on the timeliness of financial reporting. the implication is therefore that a company whose board contains a high percentage of outside directors is more likely to issue their financial reporting in a timely manner. this correlates with agency theory, suggesting that the independence of a board is determined by independent directors. however, table 5 shows no significant relationship between bomeet and timeliness of financial reporting; this finding confirms that strong corporate governance tools improve audit delay in the financial reporting processes and eventually increase the quality of financial reports. this result shows that audind is positively and significantly associated with the timeliness of financial reporting at the level of (p < -0.007). this evidences that companies with high audit committee independence have a shorter audit report lag than companies with less independency audit committees. this finding is consistent with previous studies such as (mohamad naimi et al. 2010). with respect to the audsize, the current study found a significant relationship with the timeliness of financial reporting which is inconsistent with nelson and shukeri (2011), who found negatively and significantly association between audit size and timeliness of financial reporting. table 5 shows that audit committee expertise has a negative and significant relationship between audexpe and the timeliness of financial reporting. this funding suggests that those audit committees who have members with financial expertise are more likely to lead companies to disclose their financial information sooner than later, which is consistent with the findings of (odit 2015a). the coefficient of fsize is significantly and negatively related to the timeliness of financial reports (p < 0.041). this finding indicates that large firms tend to disclose their financial reports faster than smaller companies. consistent with the view that small size companies are subject to less supervision from authority and therefore, large companies made significantly more timely reports than small companies. this suggests that small companies have more motivation to issue their financial reporting faster than large companies. concerning the coefficient of fprof, there is a negative and significant relationship (p < 0.030) between a company’s profitability and the timeliness of financial reporting. none of the coefficients of flever and rateb m. alqatamin and mohammad k. shbeilat (2022) 17 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe fdivid statistically is significantly related to the timeliness of financial reporting, suggesting that these variables do not affect the issuing of financial reporting. table 5. regression analysis predicted sign coeff. t-stat. p. value cons + .3289 2.58 0.054* bosize -11.1491 4.81 0.043** bogen% + -.0518 -1.16 0.023** boindp% + .8681 3.31 0.031** bomeet% + .0033 0.14 0.045* audinde% 13446 2.68 0.007*** audsize + -.33788 -0.75 0.451 audexpe% ? -12.004 -2.17 0.006*** owncon% ? .06438 0.32 0.749 fsize + -.0325 -0.94 0.041** fprof% ? -.0330 -2.02 0.03*** flever% ? .0120 -0.03 0.59 fdivid% ? -.0075 0.53 0.61 adjusted r2 75.8% f-stat. 17.62*** *** significant at the 0.01 level. ** significant at the 0.5 level. * significant at the 0.10 level. additional analysis further analyses were performed to examine the effect of corporate governance structure on the timeliness of financial reporting of uk, non-financial companies during the period of the covid-19 pandemic. the current study tests whether there is an effect of the covid-19 pandemic on the relationship between corporate governance structure and the timeliness of financial reporting by splitting the sample into two groups based on the year: before the covid-19 pandemic, and during the covid-19 pandemic. the year 2019 has been used as a point cut. to achieve this aim, the panel regression random effect method has been used. the estimation results of our random-effects panel regressions analysis are presented in table 6 panels a and b, where a shows the period before the covid-19 pandemic, and panel b presents the results of the period during the covid-19 pandemic. as can be noted from table 6 panels a and b, overall r2 for both panels are 64.6% and 68.3% respectively, relatively less than those of the primary analysis presented in table 5. the constants are positively significant at level (p< 0.00). table 6 panel a shows that the coefficient of bosize is negatively and significantly (p < -0.052) related to audit delay as a proxy for the timeliness of financial reports. these results confirm that companies with largesized boards are more like to disclose their financial reports than companies with smaller board sizes. this result suggests that the volume of directors on a board enhances the corporate governance mechanism amongst uk non-financial companies. this finding is consistent with previous studies, such as (krishnan, 2005). it is also supported by the results reported in table 5; while panel b shows that there is no effect between bosize and the timeliness of financial reports. furthermore, panel a indicates that bogen has a negative and significant relationship (p < -0.031) with timeliness of financial reports, which confirms the result reported in table 5. the result, therefore, supports the idea that board gender diversity enhances the timeliness of financial reporting. the results indicate that the level of monitoring ability of the board of directors is different based on their members’ gender prior to the covid-19 pandemic. it is, therefore, taken that aspects of corporate governance which include gender diversity in their boards have greater power in rateb m. alqatamin and mohammad k. shbeilat (2022) 18 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe improving the timeliness of submitting financial reports. this finding is consistent with previous results in table 5. moreover, the finding of panel a indicates that boindp is positively and significantly associated with the timeliness of financial reporting at the level of (p < 0.022, thereby consistent with our result reported in table 5. however, table 6 panel a shows no significant relationship between bomeet and timeliness of financial reporting. similarly the result of panel a shows no effect of audind and audsize on the timeliness of financial reporting in respect to the audexpe, table 6 panel a shows that audit committee expertise has a negative and significant relationship (p < -0.032) between audexpe and the timeliness of financial reporting. this finding suggests that those audit committees who have members with financial expertise are more likely to lead companies to disclose their financial information sooner than later. however, table 6 panel b shows that corporate governance factors except boindp and bomeet did not affect the timeliness of financial reports during the covid-19 pandemic. these results confirm that the impact of covid-19 appears significant in the relationship between corporate governance and timeliness of financial reporting. in adition, these findings suggest that the board oversight role leads to reduction in uncertainty following covid-19 pandemic. table 6. panel a. association between corporate governance and the timeliness of financial reports before the covid-19 pandemic. predicted sign coeff. t-stat. p. value cons + .3289 2.58 0.005* bosize -11.1491 4.81 0.052** bogen% + -.0518 -1.16 0.031** boindp% + .8681 3.31 0.022** bomeet% + .0033 0.14 0.675 audinde% 13446 2.68 0.567 audsize + -.33788 -0.75 0.451 audexpe% ? -12.004 -2.17 0.032*** owncon% ? .06438 0.32 0.658 fsize + -.0325 -0.94 0.041** fprof% ? -.0330 -2.02 0.03*** flever% ? .0120 -0.03 0.59 fdivid% ? -.0075 0.53 0.61 adjusted r2 64.6% f-stat. 16.87*** *** significant at the 0.01 level. ** significant at the 0.5 level. * significant at the 0.10 level. table 6. panel b. association between corporate governance and timeliness of financial reports during the covid-19 pandemic. predicted sign coeff. t-stat. p. value cons + .3289 2.58 0.026* bosize -11.1491 4.81 0.143 bogen% + -.0518 -1.16 0.413 boindp% + .8681 3.31 0.041** bomeet% + .0033 0.14 0.025* rateb m. alqatamin and mohammad k. shbeilat (2022) 19 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe audinde% 13446 2.68 0.307 audsize + -.33788 -0.75 0.451 audexpe% ? -12.004 -2.17 0.436 owncon% ? .06438 0.32 0.749 fsize + -.0325 -0.94 0.248 fprof% ? -.0330 -2.02 0.330 flever% ? .0120 -0.03 0.59 fdivid% ? -.0075 0.53 0.61 adjusted r2 24.3% f-stat. 9.72 *** significant at the 0.01 level. ** significant at the 0.5 level. * significant at the 0.10 level. conclusions and discussion the aim of the current study is to examine the effect of corporate governance structure on the timeliness of financial reporting of uk non-financial companies. this study provides empirical evidence that corporate governance mechanisms are statistically significant in influencing the timeliness of financial reporting. it has been demonstrated that better governed companies present more timely financial reports. to achieve this aim, further analysis was performed by splitting the sample into two groups based on the year, before the covid-19 pandemic, and during the covid-19 pandemic by using the year 2019 as a point cut. in general, the study’s findings show that there is a significant relationship between board size, board independency, audit independence, audit experience, and timeliness of financial reports. however, after splitting the study’s sample, the empirical results supported that the covid -19 pandemic affected corporate governance mechanisms in a way that improved the timeliness of financial reports. we found that the covid19 pandemic has affected all corporate governance attributes except board independence and board meetings, but not at a significant level as the difference between before and after covid-19 among uk listed companies. there was limited empirical data prior to this study and therefore, to the best of our knowledge, this study is amongst the first to examine the influence of covid-19 on the correlation between the timeliness of financial reporting and corporate governance. it can therefore be concluded that corporate governance and controls are associated with the levels of timeliness in reporting by uk listed companies. whilst acknowledging its contribution to the limited literature in this field, the current study is not without limitations, since the results of this study just reflect characteristics of the uk companies. hence, future studies may be focused on other markets. second, a sample of this study includes only non-financial companies; future studies could be focused on financial companies. more research in this field will only further our understanding of the impact covid-19 has had on financial reporting, its link to corporate governance, and the adequacy of these mechanisms in an unexpected and extraordinary event. there is limited empirical data on the scope of effect covid-19 has had on different corporations. further studies will need to consider a range of firm and country-level characteristics and the ways in which covid-19 has influenced organization outcomes. there is a vast opportunity for further research in this field, for which this study can provide a foundation. references abdullah, s.-n. (2006a). board composition, audit committee and timeliness of corporate financial reports in malaysia. corporate ownership and control, 4(2), 33-45. https://doi.org/10.22495/cocv4i2p3 rateb m. alqatamin and mohammad k. shbeilat (2022) 20 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe abdullah, s. n. (2006b). board structure and ownership in malaysia: the case of distressed listed companies. corporate governance: the international journal of business in society. https://www.emerald.com/insight/content/doi/10.1108/14720700610706072. abernathy, j. l., b. beyer, a. masli, & c. stefaniak. (2014). the association between characteristics of audit committee accounting experts, audit committee chairs, and financial reporting timeliness. advances in accounting, 30(2), 283-297. https://doi.org/10.1016/j.adiac.2014.09.001 afify, h. (2009). determinants of audit report lag. journal of applied accounting research. https://www.emerald.com/insight/content/doi/10.1108/09675420910963397. aktas, r., & m. kargin. (2011). timeliness of reporting and the quality of financial information. international research journal of finance and economics, 63(1), 71-77. al-ajmi, j. (2008). audit and reporting delays: evidence from an emerging market. advances in accounting, 24(2), 217-226. https://doi.org/10.1016/j.adiac.2008.08.002 almosa, s., & m. alabbas. (2007). audit delay: evidence from listed joint companies in saudi arabia. paper read at seminar saudi stock exchange: future prospective, king khalid university. https://www.researchgate.net/publication/348122200. ashton, r. h., p. r. graul, & j. d. newton. (1989). audit delay and the timeliness of corporate reporting. contemporary accounting research, 5(2), 657-673. https://doi.org/10.1111/j.19113846.1989.tb00732.x atiase, r. k., l. s. bamber, & s. tse. (1989). timeliness of financial reporting, the firm size effect, and stock price reactions to annual earnings announcements. contemporary accounting research, 5(2), 526-552. https://doi.org/10.1111/j.1911-3846.1989.tb00722.x beest, f. v., g. braam, & s. boelens. (2009). quality of financial reporting: measuring qualitative characteristics. cohen, s., & s. leventis. (2013). effects of municipal, auditing and political factors on audit delay. paper read at accounting forum. https://doi.org/10.1016/j.accfor.2012.04.002 daoud, k. a. a., k. ismail, k. n. izah, & n. a. lode. (2014a). the timeliness of financial reporting among jordanian companies: do company and board characteristics, and audit opinion matter? asian social science, 10(13), 191-201. https://doi.org/10.5539/ass.v10n13p191 daoud, k. a. a., k. n. i. ku ismail, & n. a. lode. (2014b). the timeliness of financial reporting among jordanian companies: do company and board characteristics, and audit opinion matter? asian social science, 10(13), 191-201. https://doi.org/10.5539/ass.v10n13p191 davies, b., & g. p. whittred. (1980). the association between selected corporate: attributes and timeliness in corporate: reporting: further analysis. abacus, 16(1), 48-60. https://doi.org/10.1111/j.14676281.1980.tb00085.x rateb m. alqatamin and mohammad k. shbeilat (2022) 21 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe dimitropoulos, p. e., & d. asteriou. (2010). the effect of board composition on the informativeness and quality of annual earnings: empirical evidence from greece. research in international business and finance, 24(2),190-205. https://doi.org/10.1016/j.ribaf.2009.12.001 dogan, m., e. coskun, & o. celik. (2007). is timing of financial reporting related to firm performance? an examination on ise listed company, 4(6). emeh, y., & e. appah. (2013). audit committee and timeliness of financial reports: empirical evidence from nigeria. journal of economics and sustainable development, 4(20), 14-25. fama, e. f., & m. c. jensen. (1983). separation of ownership and control. the journal of law and economics, 26(2), 301-325. https://doi.org/10.1086/467037 grossi, g., a. t. ho, & p. g. joyce. (2020). budgetary responses to a global pandemic: international experiences and lessons for a sustainable future. journal of public budgeting, accounting & financial management. https://www.researchgate.net/publication/346426174. https://doi.org/10.1108/jpbafm-12-2020-189 gunarsih, t. (2011). corporate governance structure and timeliness of financial report. journal of management and business, 10(1). https://doi.org/10.24123/jmb.v10i1.170 hashim, h. a., & m. s. a. rahman. (2011). multiple board appointments: are directors effective? international journal of business and social science, 2(17). hashim, u. j., & r. abdul rahman. (2011). audit report lag and the effectiveness of audit committee among malaysian listed companies. international bulletin of business administration, 10, 50-61. heald, d., & r. hodges. (2020). the accounting, budgeting and fiscal impact of covid-19 on the united kingdom. journal of public budgeting, accounting & financial management. https://doi.org/10.1108/jpbafm-07-2020-0121 ibadin, i. m., f. izedonmi, & p. o. ibadin. (2012). the association between selected corporate governance attributes, company attributes and timeliness of financial reporting in nigeria. research journal of finance and accounting, 3(9), 137-145. ismail, k. n. i. k., & r. chandler. (2004). the timeliness of quarterly financial reports of companies in malaysia. asian review of accounting. khatib, s. f., & a.-n. i. nour. (2021). the impact of corporate governance on firm performance during the covid-19 pandemic: evidence from malaysia. journal of asian finance, economics and business, 8(2),0943-0952. li, y., i. eddie, & j. liu. (2010). boards characteristics, audit committee, external auditor and earnings management: chinese evidence. corporate ownership & control, 8(1), 197-209. https://doi.org/10.22495/cocv8i1c1p4 liao, l., l. luo, & q. tang. (2015). gender diversity, board independence, environmental committee and greenhouse gas disclosure. the british accounting review, 47(4), 409-424. https://doi.org/10.1016/j.bar.2014.01.002 rateb m. alqatamin and mohammad k. shbeilat (2022) 22 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe mohamad naimi, m. n., s. rohami, & w. n. wan-hussin. (2010). corporate governance and audit report lag in malaysia. corporate governance and audit report lag in malaysia (october 20, 2010). asian academy of management journal of accounting and finance, 6(2). naimi, m., m. nor, s. rohami, & w. n. wan-hussin. (2010). corporate governance and audit report lag in malaysia. corporate governance and audit report lag in malaysia (october 20, 2010). asian academy of management journal of accounting and finance, 6(2). nelson, s. p., & s. n. shukeri. (2011). corporate governance and audit report timeliness: evidence from malaysia.research in accounting in emerging economies, 11(1), 109-127. https://doi.org/10.1108/s1479-3563(2011)0000011010 odit, m. (2015a). the effects of corporate governance on timeliness of financial reporting of companies listed at the nairobi scurities exchange, university of nairobi. odit, m. (2015b). the effects of corporate governance on timeliness of financial reporting of companies listed at the nairobi securities exchange. international journal of accounting and finance, 5(3),23-44. omoro, n., j. aduda, & k. okiro. (2015). demographic diversity in top management team and financial reporting quality in commercial state corporations in kenya. donnish journal of accounting and taxation, 1(1),1-16. oussii, a. a., & n. b. taktak. (2018). audit committee effectiveness and financial reporting timeliness. african journal of economic and management studies. https://doi.org/10.1108/ajems-11-20160163 persons, o. s. (2009). audit committee characteristics and earlier voluntary ethics disclosure among fraud and no-fraud firms. international journal of disclosure and governance, 6(4), 284-297. https://doi.org/10.1057/jdg.2008.29 priede bergamini, t., c. lópez-cózar navarro, & s. benito hernández. (2022). social responsability of small family firms as an advantage to face the threats of the envi-ronment. social responsability of small family firms as an advantage to face the threats of the envi-ronment, 1051-1068. https://doi.org/10.2307/j.ctv2s0j67b.47 puasa, s., m. f. m. salleh, & a. ahmad. (2014). audit committee and timeliness of financial reporting: malaysian public listed companies. middle-east journal of scientific research, 22(2), 162-175. šušak, t. (2020). the effect of regulatory changes on relationship between earnings management and financial reporting timeliness: the case of covid-19 pandemic·. zbornik radova ekonomski fakultet u rijeka, 38(2), 453-473. https://doi.org/10.18045/zbefri.2020.2.453 van beest, f., g. braam, & s. boelens. (2009). quality of financial reporting: measuring qualitative characteristics. nijmegen center for economics (nice). working paper, 09-108. interpersonal communication style of broken home in friendship: case study in yogyakarta american interdisciplinary journal of business and economics issn: 2837-1909| impact factor : 4.6 volume. 9, number 1; january-march, 2022; published by: scientific and academic development institute (sadi) 8933 willis ave los angeles, california https://sadipub.com/journals/index.php/aijbe 16 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe friendship functions and communication styles among broken home children in yogyakarta suciati, cahyaning pertiwi harya universitas muhammadiyah yogyakarta indonesia abstract: this case study examines the impact of divorce on the interpersonal communication styles of children from broken homes in yogyakarta, indonesia. using qualitative methods, in-depth interviews were conducted with informants who were selected using purposive sampling techniques. three communication styles were identified among broken home children and their friends: dominant, relaxed, and caring. the study also explored the factors influencing these communication styles, such as birth order and religiosity. the high divorce rate in yogyakarta was cited as a contributing factor to the prevalence of broken homes in the area. the importance of positive communication styles was highlighted, emphasizing the role of parents and families in developing healthy communication patterns. the study contributes to understanding the impact of divorce on children's communication styles in broken homes and highlights the role of friendship and interpersonal communication in the lives of these children. keywords: broken homes, divorce, communication styles, friendship, yogyakarta, indonesia, qualitative research, in-depth interviews, purposive sampling, birth order, religiosity, positive communication, parents, families, healthy communication patterns, impact of divorce. introduction the purpose of marriage in islam is to form a sakinah, mawadah, warahmah family. imam ibnu qoyyim rahimahullah revealed that the purpose of marriage includes three things, namely to protect offspring, lineage, and the glory of islam (yusuf, 2020). on the other hand, fitzpatrick explained that the definition of family can be seen from three points of view. the first point of view is a structural definition that focuses on anyone who can be said to be a family, by looking at the presence or absence of family members such as parents, children, and other relatives. based on this perspective, the notion of the family can emerge as families of origin, families of procreation, and extended families. the second point of view is a functional definition that focuses on tasks performed by the family such as caring for, and socializing children, providing emotional and material support, and fulfilling certain roles. this definition emphasizes the fulfillment of psychosocial tasks and functions. the third point of view is the transactional definition which considers a group that develops intimacy through behaviors that create a sense of identity as a family, in the form of emotional ties, historical experiences, and future aspirations (sri lestari, 2016). however, the increase in the number of husband and wife divorces is seen as an incident that indicates a decline in family values. in the context of a broken home caused by the divorce of both parents, conflicts usually occur between children and parents due to poor communication. in the large psychology dictionary, a broken home is defined as a broken family or messy household. more specifically, it can be interpreted with the family or without the presence of one of the parents (father or mother). it can be caused suciati, cahyaning pertiwi harya (2022) 17 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe by death, divorce, leaving the family, and others (chaplin, 2006). divorce cases that occur in indonesia are still relatively high. this can be seen from the data as follows: picture 1. divorce rate in indonesia in 2015 – 2020 source : (merdeka.com, 2020) based on the data above, the graph of the divorce rate in indonesia averages a quarter of the two million marriages in a year. many of these cases can be caused by incompatibility, infidelity, not having good communication with one another, or due to economic problems (agency, 2015). this condition of family disorganization due to divorce usually results in children feeling less attention from both parents and a lack of sense of value and norms from parents. even though things like this are not necessarily experienced by all children who experience broken homes, what needs to be considered is if the child seeks his identity so that a negative interpersonal communication style develops. there are many interpersonal communication styles of broken home in society. for example, a child dared to drown his friend to death because he was annoyed that his debt of one thousand rupiahs was not paid (merdeka.com, 2013), as well as a case of child abuse where two pedestrians were stabbed because they were offended by being glared at (ardhiangga, 2017). in both cases, children who are victims of broken homes tend to have an aggressive communication style. this is carried over to how they communicate in their environment. when interacting with someone, the victim becomes more emotional in communicating. the family problems they had since childhood traumatized them deeply. lack of parental attention tends to make these children more out of control. with an aggressive style, an individual always defends his rights and what he believes in, feels superior, often violates the rights of others, and often ignores the feelings of others (liliweri, 2011). some of the characteristics when someone has an aggressive communication style are dominating, demanding others to obey, stubborn, impulsive, competitive, authoritarian, heartless, and easy to label (rogacion in suciati, 2015). according to de bord, based on the results of several studies, the impact of divorce on children is almost always bad. meanwhile, demo & acock said that teenagers who experience broken homes tend to be more mature because these teenagers have experienced growth by going through various kinds of problems they are experiencing (ermilasari danik, 2019). events broken home in a family are very likely to have an impact on children, both physically and psychologically. a divorce of both parents will have a negative impact on the psychological development of children, such as loss of affection, loss of motivation, and depression, and it is not uncommon for them to experience disorientation in their lives (indra, 2017). in yogyakarta, the divorce rate reaches 23%. the high divorce rate is partly due to many factors, namely education level, financial condition, and the impact of information technology. this was revealed by the head of the marriage advisory, development and preservation agency (bp4), prof. soewadi. according to him, it is necessary to form a joint action forum between bp4, the indonesian mosque council, and the regional suciati, cahyaning pertiwi harya (2022) 18 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe office of the diy ministry of religion to reduce the divorce rate in yogyakarta (danar, 2021). based on research, most of the causes of divorce are due to constant fights due to jealousy and abandonment by their partners (ari, 2020). lots of researchers are interested in discussing the case of broken home. research by fitriyani, et al (2019) reveals that as a result of a broken home that has been experienced by a child since he was 4 years old, he feels jealous of his friends whose parents are still complete. he becomes a hater and even becomes a person who finds it difficult to believe and finds it difficult to forgive those who have wronged him. he felt his life was very unlucky. but with age, he began to realize his attitude and decided to get back up to live the days like any other child in general. aziz’s research (2015) with the title social behavior of adolescents victims of broken homes in various perspectives, shows that the average social behavior of troubled children is motivated by broken family factors. forms of their social behavior include talking or inviting friends to talk, like walking in class or occasionally asking permission to go out to the restroom, not understanding the lesson, not being polite to the teacher, not doing assignments, and having no desire to study likes to seek attention looks strange like spiky hair and dyed hair like a punk, dresses against school rules, and likes to annoy friends. research from fauzi (2020) shows that interpersonal communication in broken home that is not harmonious (negative) has a negative impact on children’s development. children feel uncomfortable communicating with divorced parents. unlike the case with broken home families which are harmonious (positive), children feel the love of their parents and have good communication with their parents even though they are divorced. for the life of a broken home child, the presence of friends is very important. there are at least 6 friendship functions, namely the function of togetherness, stimulation, physical support, ego support, social comparison, and intimacy. these functions will carry out their respective duties according to the needs and age development. friendship is also shown as an attitude of voluntary interdependence from time to time, familiar, based on affection and mutual assistance (miftakhuddin and rony, 2020). with the significance of a friendship with the continuity of the interpersonal communication process, the researcher wants to describe the communication style of broken home children in friendship circles in yogyakarta. this research contributes to being used as evaluation material for broken home and parents in order to have a positive communication style in their friendly environment. theory study interpersonal communication style miller (2015) in his book intimate relationship defines interpersonal communication as a communication that occurs on a certain basis with a certain number of participants that are established on the basis of intimacy. interpersonal communication occurs between two or more people when they have a close relationship so that they can convey immediate feedback in many ways. meanwhile, joseph a. devito (2013) in his book interpersonal communication defines interpersonal communication as verbal and nonverbal interactions between two or more people who are interdependent on one another. the concept of interdependent people is interpersonal communication that occurs between people who are interrelated where they mutually influence one another. for example interdependent people, such as the relationship between a father and a child, two people who are having sex, two close friends, and sometimes also communication between several people in small intimate groups such as family. bochner added that interpersonal communication is the process of sending messages by one person and receiving messages from other people or a small group of people with various impacts and opportunities to provide immediate feedback. meanwhile, r. wayne pace added that interpersonal communication is a communication process that takes place between two or more people face to face where the sender can convey messages directly and the recipient of messages can receive and respond to messages directly (ngalimun, 2018). in running life, communication is a very important component. a person’s communication style suciati, cahyaning pertiwi harya (2022) 19 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe can be seen when communicating verbally or nonverbally. norton, kirtley & weaver define communication style as a cognitive process that accumulates the form of content so that it can be micro-assessed. each style always reflects how each person accepts himself when he interacts with others. in addition, gudykunst & ting toomey see communication styles as meta-messages, namely secondary communication about how information is interpreted, which contextualizes how verbal messages are recognized and interpreted. this definition explains the reasons why someone communicates. the purpose of communication is none other than an effort to be able to reflect on one’s personal identity so that it can influence the perceptions of others (liliweri, 2011). according to wibowo (in suciati, 2015), communication style is a uniqueness that is owned by each individual. the difference in uniqueness can be seen in the communication style of each individual, including in the communication model, communication procedures, ways of expression, and the responses given or shown when communicating. various kinds of communication styles are displayed by each individual. heffner classifies mccallister’s communication styles (in liliweri, 2011) into three styles, namely: 1. passive style, namely, the way someone who tends to judge others is always right and more important than oneself. 2. assertive style, namely, the way someone communicates firmly and defends his own rights or opinions in order to defend the rights of others. 3. aggressive style, namely, the way of an individual who is very concerned with opinions or personal rights and often violates the rights of others, feels superior, and always ignores the feelings of others. these character differences can also be conveyed in different ways to their surroundings. in addition, communication experts have also grouped several other types or categories of communication styles as revealed by norton (in liliweri, 2011) into ten types, namely: 1. dominant style, the way individuals want to continue to control a situation that exists in their personal social environment. 2. dramatic style, an individual way that is always exaggerated in conducting a conversation. 3. controversial style, the way individuals always express opinions quickly to challenge other individuals’ conversations. 4. animation style, the way individuals who communicate tend to use body language (nonverbal). 5. impression style, a way of communicating with individuals by stimulating others so that they are easy to remember. 6. relaxed style, an individual’s way of communicating like someone who doesn’t have life’s problems, such as calm, happy, and full of smiles and laughter. 7. attentive style, the way individuals communicate by showing full concern for other individuals. 8. open style, an honest individual way of communicating. 9. friendly style, an individual way of communicating properly and sincerely. 10. precise style, the way in which the speaker conducts a discussion appropriately when conducting a communication. furthermore, gamble (2005) suggests three types of communication styles, namely assertive, non-assertive, and aggressive styles, namely: 1. assertive style, a person’s communication style that has the characteristics of being able to express feelings and self-esteem based on ethical thoughts and dare to act honestly and refuse a desire that might harm oneself personally. 2. non assertive style, is a communication style that is inversely proportional to the assertive style. this style allows others to be in a more dominant position, does not dare to tell the truth, and always puts aside one’s own desires. 3. aggressive style, is a person’s communication style who wants to always be in a dominant position and often takes actions that are detrimental to others to fight for personal desires. suciati, cahyaning pertiwi harya (2022) 20 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe this study uses the theory of communication style that was revealed by norton because in his theory norton explained that communication style is a process of gathering an event so that it can be assessed as a whole. norton explained more forms of communication styles, whereas if you look at mccallister and gamble’s communication styles they only focus on three styles. life out there is a lot of broken homes that experience various kinds of different problems with different characters and traits. research method type of research used in this research is descriptive qualitative with a case study method. according to denzin and lincoln (anggito, 2018) stated that qualitative descriptive research is a step in which a researcher must explain or describe an object, as well as phenomena that will be included in a narrative text. the contents of the writing include data and facts collected in words or pictures based on events in the field, the purpose of which is to provide support for what is presented in the report. the object of this research is a case study of broken home in friendship circles in yogyakarta. this study used data collection techniques through in-depth interviews. qualitative research is carried out based on the philosophy of postpositivism because it is used to research natural object conditions, where the researcher is the key instrument, sampling of data sources is carried out purposively and snowball, where the technique of sampling data sources is carried out by combined triangulation (anggito, 2018:8). however, in this study, researchers used a purposive sampling technique, because researchers appointed informants based on certain criteria. the criteria for informants in this study were: teenagers who have parents who have decided to separate for approximately 5 – 15 years (divorced), teenage age, not married, live at home with biological father or mother, domiciled in yogyakarta. the criteria for friend informants include: having been friends for more than 1 year, not married, and being domiciled in yogyakarta. the data validity technique used is triangulation. triangulation is seeing reality from various points of view or perspectives, from various aspects so that it is more credible and accurate (suparno, 2018). the data analysis technique used in this research is qualitative analysis. qualitative data analysis according to bodgan is the process of systematically searching for and compiling data obtained from interviews, and field notes so that it can be understood easily, and the findings can be informed to others (zakariah, 2020). qualitative data analysis techniques using the miles and michael huberman models (in nur sayidah, 2018) were carried out through the stages of data collection, data reduction, data presentation, and conclusions. discussion in this sub-chapter, the researcher analyzed the data based on the presentation of the data that had been obtained through in-depth interviews with informants who met the established criteria. the analysis is based on important points which are revealed as interview guide points as an operationalization of norton’s concept of communication style. the number of pairs of informants studied was 3 pairs, namely pairs of broken home children and their friends: st-aa, jf-db, and ds-fa. dominating behavior in communication seorang individu akan diterima oleh individu lainnya jika dirinya dapat menanamkan sikap untuk menjadi pendengar yang baik agar bisa mengambil manfaat dari apa yang telah didengarkan. individu yang selalu ingin berbicara dan selalu menjadi lebih adalah seorang individu yang enggan untuk didengarkan oleh individu lain (dian, 2020). berikut adalah data perilaku mendominasi dari ketiga informan: tabel 1 behavior of dominating broken home in communicating informant dominant behaviour st and aa st always talked a lot and did not give aa a chance to respond jf and db jf was able to create balanced communication with his friends ds and fa ds wanted to continue to be heard when there were family problems. suciati, cahyaning pertiwi harya (2022) 21 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe a person’s characteristics can be influenced by birth order, this was stated by several experts such as alfred, adler, kevin leman, and frank salloway. birth order can affect individuals in various conditions such as what role to play and how to adapt to social life. the eldest child is used to controlling his younger siblings, not infrequently when communicating, the eldest child always wants to speak and be heard, rather than listen to his younger siblings (fauziyyah, 2018). attitude bossy that displayed makes him the dominant child, therefore the eldest child is also known as the type of child who is in control and often wants to always dominate everything. such as when communicating and behaving (vitamind, 2003). factors that influence st’s dominant behavior in communication are because he is the first child in his family. in the communication style, st always wants to continue talking without listening to the other person. in fact, the creation of interactive communication is a communication model that considers feedback as important, so communication must be carried out in two directions (fakhruddin, 2013). jf performs communication by providing feedback to db. this makes their communication run smoothly. the more interactive the context of communication, the more activity in communication will result in the use of non-verbal cues, dynamics of communication, and in managing messages (ali, 2020). overacting behaviour in communication overacting behavior is a behavior that is far from reasonable limits. for example, showing exaggerated expressions and using a high tone when speaking. despite the fact that the expression generated by an individual is a form of conveying certain feelings or emotions. however, when showing expressions in an exaggerated way, can also create a quite strange and negative impression on the other person (sutari, 2016). in addition, a person’s tone is also very important and can even exceed the message to be conveyed. people who use a high tone of voice are usually done as a form of disagreeing with the topic of conversation (mira, 2019). the high and low voices can determine the meaning or meaning of someone’s speech. the following is data on the over-acting behavior of the informants: table 2 overacting behavior in communication informant overacting behavior st and aa st sometimes over-acts, by displaying exaggerated expressions and using high tones when speaking. he only did it when he wanted to break the ice. jf and db jf sometimes over-act by being more emotional only when they want to say certain things. ds and fa ds sometimes over acting, speaking passionately only when they are annoyed. if you look at the styles displayed by the three pairs of informants when communicating, there are only a few indicators of overacting. talking with an expression that doesn’t seem excessive, such as showing a natural smile and using a relaxed tone of voice, is the best way to build good communication, make friends, and cooperate with other parties (sutari, 2016). emotional control is also very much needed when doing a communication. in general, emotional means a reaction to something that is shown by individuals to other individuals (alfiyansyah, 2020). but sometimes communication that is done emotionally can cause communication failure because you cannot control your emotions and are wrong in conveying these emotions (widowati, 2005). efforts to convey something in a state of sadness, anger, disappointment, and so on will affect the use of language and one’s attitude when speaking in public, in scientific forums, or speaking in casual situations. when emotional control is well cared for, it will also produce good conversations (supriyadi and nursia 2019). attitude overacting of someone with high doses in a friendly environment can become a distortion or disturbance that damages the balance of the friendship environment itself (bartono, 2005). however, minimizing over-acting will help create effective communication which is marked by the exchange of information, ideas, feelings, and so on which will later result in changes in attitudes and views so that good relations are established between the sender and recipient of the message (hardianto alvian, 2020). suciati, cahyaning pertiwi harya (2022) 22 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe opposing behaviour in communication a communication that is carried out spontaneously, which is like refusing a conversation can also cause communication failure, causing problems (victoria, 2016). the following is data on the opposing behavior of the three informants: table 3 opposing behaviour in communication informant opposing behaviour st and aa sometimes argues with conversations that are not in accordance with his thoughts. jf and db always listen well to ds and fa always say sorry if they make a mistake based on the table above, only the st informant indicated that he denied the conversation, even though it was done occasionally. carrying out the behavior of refuting other people’s conversations is basically an attitude that is not good if done (abdillah, 2011). in communicating, empathy is also very necessary because empathetic listening means involving not only thoughts but also placing feelings in proportion. but to do that, every physical and psychological barrier must be removed and avoided, for example by not opposing the conversation or also maintaining physical distance from the other person (martoredjo, 2014). a requirement for good communication is when someone will try to be a good listener by carrying out the stages of communication such as listening, understanding, then responding to the conversation (chandra dewi, 2022). thus when you want to respond to the conversation, avoid being hasty in drawing conclusions. using body language in communicating when interacting with other people, we are required to understand every attitude and movement. in understanding the character or nature of other people, nonverbal communication or body language can be the medium. the results of the study show that nonverbal communication shown by someone can reach 80% of all communication made. when using body language, there are several body parts that can be seen, such as eye contact, facial expressions, body movements, and other body parts. in addition, body language can also be used to see and understand the condition of a person’s soul (budi, 2016). the following is data on the use of body language from the three pairs of informants: table 4 using body language in communicating informant body language st and aa expressions and emphasized intonation when they want to break the ice. jf and db show each other facial expressions when they are telling something. ds and fa use body language with gestures when they are tired, while facial expressions and funny tones are used when they want to be pampered. the three pairs of informants used body language when expressing something that complemented their verbal expressions. the two types of communication should ideally support each other to create an effective communication relationship (yulistiani, 2021). in communicating, an individual will mix verbal and nonverbal language so that it becomes a unified meaning. facial expressions are one of the nonverbal languages ??that can be used by someone. expressions in the form of facial expressions are used in communication as a response to situations, either emotionally or reacting through implied messages (budi, 2016). apart from using expressions, sign language is an expression that uses hand or arm movements that have been approved by the wearer and expressed in spoken language (nasir, 2021). in communicating, expressions can also display a situation or situation that an individual is experiencing (budi, 2016). suciati, cahyaning pertiwi harya (2022) 23 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe relaxed behaviour in communication emotional expression can be seen from the physiological changes that arise as a result of reactions to certain events or stimuli that cause emotions, these reactions, both internal and external, will bring up emotional expressions that are manifested in physiological appearance, including facial expressions, to attitudes and behavior. emotional expression is also influenced by experience in interacting with other people (darwis, 2006). the following is data on relaxed behavior from the three pairs of informants: table 5 relaxed behaviour in communication informant relaxed behaviour st and aa st did not do this because they often showed sour faces when they felt annoyed. jf and db both expressed opinions without pressure as if they had no burdens in life. ds and fa ds didn’t do it because they still showed annoyed faces and spoke in a high tone when there was a problem. the most important thing when communicating is how individuals convey the right message to the right person. of course, this is not easy, given the frequent occurrence of misunderstandings in the course of communication. therefore the speaker needs to express thoughts or feelings properly, regularly, and systematically, with the right choice of words, good sentence structure, and an orderly way of thinking (adawiyah, 202). based on table 5, only jf and db perform relaxed behavior when communicating, without the burden and without pressure. show concern in communication danim (in arianti, 2018) defines motivation as strength, encouragement, need, enthusiasm, pressure, or psychological mechanisms that encourage a person or group of people to achieve certain achievements according to what they want. in addition to giving encouragement, asking how the situation the other person is experiencing includes a positive attitude that can raise the spirit of the other person. it can build a comfortable communication relationship. the interlocutor will be happy if the communication is carried out in a healthy and effective manner (muhith abdul, 2016). these ara the data of showing concern from three informants: tabel 6 show concern in communication informan kepedulian st and aa st gave encouragement and asked how their friends were going through, especially when they were also having problems. jf and db jf did not show attention , and tended not to care about their friends ds and fa they always listened to their complaints, reminded them, starting from small things, and also carried out actions such as making food frequently. when problems occur in friendship or one individual has problems, other individuals can help solve problems and provide emotional support effectively (damayanti, 2017). in carrying out an activity, without realizing it, listening is the easiest activity and can have a big effect. effective listening is listening with sincere and honest intentions to gain understanding without intending to refute the words heard (ibrahim, 2011). based on table 6, it appears that the df and sa partners always care about their partners in all conditions. when someone has a deepening appreciation of the values ??of religious teachings, in other words having high religiosity will always be careful in thinking, speaking, and acting. thus he can avoid behavior that is not good according to religious teachings. it is in this development process that a kind of nature, attitude, and quality of religiosity will be formed which will be displayed in behavior in everyday life (purnamasari, 2014). the effect of religiosity is to measure the extent to which a person’s behavior is motivated by the teachings suciati, cahyaning pertiwi harya (2022) 24 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe of his religion in social life. for example, does someone do good by giving care to other people (yanuarti, 2018). this phenomenon can be seen in the behavior of ds in showing concern in communicating. ds has a highly sensitive person. he is very likely to behave very quickly angry about something that is not in line with his thoughts. however, because ds began to learn to worship and draw closer to allah swt, ds began to accept everything that happened in his life and became a better person. he realized that always behaving kindly to others was the value ??he had to develop. honest behaviour in communication when communicating, honesty is very important and becomes one of the national characteristics which is reflected in human values. honest behavior also underlies all other commendable behavior. honesty is the ability to convey the truth, admit mistakes, be trustworthy and act respectfully (wiseza, 2017). the following is the honesty data from the pairs of informants studied: table 7 honest behaviour in communication informan perilaku jujur st dan aa speak honestly by reprimanding friends when they are doing something wrong, and everything they think will be conveyed. jf dan db didn’t do it because they always held it in by not expressing what was on their minds. ds dan fa be honest when you make a mistake but don’t be too open when you want to share personal problem in communicating, the characteristics of effective communication are openness (devito, 2015). quality in openness at least shows three points of view, the first is that they are open to each other when communicating until a change of information occurs, making communication relationships honest, and an individual must be responsible for what has been conveyed. in addition to creating an effective communication, openness is an important aspect of social skills. openness can release feelings of guilt and anxiety (gainau, 2009). without openness, a person tends to get poor social acceptance so that it can affect communication and personality development. based on table 7, it can be seen that st develops honesty without having to feel uncomfortable in any communication behavior. behave well in communication as social beings, humans do not only rely on their own strength, but need other humans in certain ways, and must respect, love, and care for each other. it’s the same with friendship. friendship will last long when there is a concern between these friendships. from an islamic perspective, rasulullah saw invited his people to care for fellow creatures of allah, and work together to help each other. (tabi’in, 2017). the following is data on good communication behavior from informants: table 8 behave well in communication informant behave well in communication st and aa communicating by behaving positively to friends who have problems, but not always done. jf and db appreciate when other people talk by not interrupting, but also avoid when they don’t want to talk. ds and fa advise good things, but when they are not in a good condition they prefer to remain silent. when there is no sense of concern for friends, it will also cause a loss of harmony and trust in friends (andri, 2019). in the process of communication, respecting the interlocutor or other people is very important in living a life. respecting others means having to be able to equate yourself and others on an equal level. that is, if suciati, cahyaning pertiwi harya (2022) 25 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe someone feels important or valuable, that person must also be aware or understand that other people are also important in the sense that they are as important or valuable as themselves (panjaitan, 2014). just like what jf did with db, he would definitely listen to every conversation his friend had and didn’t interrupt the conversation. this will certainly make db feel valued when communicating with him. jf’s behavior caused him to be respected by others. in living life, an individual needs other people to advise good things. someone who is already good needs advice to be even better, while someone who is not good needs advice to be even better (pramono, 2017). ds will let you know when the fa starts to show arrogance. he will definitely advise the fa to be a little humble and try to lower the ego. ds certainly did this so that fa could become a better person. able to adjust the situation in communication when you want to start a communication, an individual needs to see the circumstances that you want to talk to when talking about a particular matter. this is known as social sensitivity. social sensitivity or social sensitivity can be interpreted as a person’s actions to react quickly and appropriately to objects or social situations in the surrounding environment. social sensitivity needs to be further developed to reduce egocentrism and develop a sense of empathy for other people around them (pitoewas, putri, and yanzi 2020). the following is the adjustment data for the three informants: table 9 able to adjust the situation in communication informant adjusting condition st and aa st includes being less sensitive to circumstances, usually telling stories directly without looking at friends’ conditions/conditions. jf and db jf didn’t really take the initiative to ask questions about friends’ problems. ds and fa ds will always be ready to provide feedback when friends ask to listen to their complaints based on the data above, it can be seen that the three informants have variations in terms of adjusting to the circumstances or communication situation. in building a relationship, an individual often considers himself to be the most important, while the interests of other people are secondary so people lose concern (alamsyah, 2016). an individual thinks too much of himself and doesn’t want to know about others. whereas humans always need other people. therefore, underestimating or caring about others can lead to the continuation or cessation of a relationship. jf often immediately spoke without seeing db’s state of readiness. jf only thought about his interests by continuing to talk about what jf was feeling, without looking at what db was feeling. this can make good or bad communication takes place. in a social or friendship sphere, an individual is required to be able to adapt not only to himself but also to his environment. self-adjustment demands to live and get along fairly with their environment so that teenagers feel satisfied with themselves and their environment (kumalasari, 2012). likewise, if the ds can adjust to see the state of the fa when speaking. fa started to show discomfort in the communication situation, ds will immediately say sorry to regenerate the comfortable situation when communicating. the following table describes the factors that influence the broken home child informant’s communication style in interacting with his friends. table 10 affecting factors of broken home’s communication style informant interpersonal communication style indicators affected factor suciati, cahyaning pertiwi harya (2022) 26 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe st dominant style – always asking friends about problems – always reprimanding friends for actions they don’t like the first child of three siblings. jf relaxed style conveying vent in a calm, happy, full of smiles and laughter.. an only child ds attentive style – listening to friends’ complaints – advise friends – make food during free time religious factor conclusion the interpersonal communication styles of broken homes from 3 pairs of informants in yogyakarta are very varied. based on the activities carried out with friends, their styles can be categorized as dominant style, relaxed style, and attentive style. the st informant, who has a dominant style of friend seen as a child who always wants to talk without giving other friends a chance when communicating. he also always wants to know the problems experienced by his friends, even reprimands the behavior of friends that he does not agree with. st’s communication style is because he is the first child of three siblings. this individual communication style is like someone who does not have life problems such as being calm, happy, and full of smiles and laughter. meanwhile, the jf informant has a relaxed style characterized by self-disclosure with smiles, laughter, and jokes, as if he felt no burden in life. this communication style is influenced by the status of jf who is the only child in his family. the personality of a person who is carried out to his friend can be influenced by birth order. only children usually tend not to lose their dominant position over their family, because they remain the focus and center of attention. the attention that an only child always gets makes this position a positive outlook such as leading to achievement and a pleasant personality when compared to the second child, and so on. in informant iii, ds has an attentive style such as always listening to complaints, reminding of small things, and often making food in his spare time. this can happen because it is influenced by religious factors. with high religiosity, ds carries out religious worship and rituals, reads the holy book, learns religious teachings and values, and lives up to religious doctrines and rites as his mother wants. in the end, this habit forms ds’ identity, understanding of his connectedness with the surrounding environment, and also the existence of a positive attitude as part of the existence of spirituality that occurs within him. research limitations based on the researcher’s direct experience in this research process, some limitations are experienced and can be a factor to pay more attention to for future researchers to perfect it. there are several limitations in this study, including: the number of informants, which was only three people, is of course still insufficient to represent the real situation. retrieval of informants with accidental sampling technique because not all broken home children are willing to be interviewed related to interpersonal communication styles with their best friends. thus researchers need to have emotional closeness so that they are willing to provide information. thus the purposive sampling technique (taking sampling into consideration) can be applied. suciati, cahyaning pertiwi harya (2022) 27 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe in the data collection process, the information provided by informants through interviews was sometimes not in-depth and not as expected, this was influenced by the closeness of the researchers to the informants and also the honesty factor of the informants. bibliography abdillah, al-hasyidiy abu. 2011. 35 cara menarik simpati. jakarta: cakrawala publishing. adawiyah, siregar rabiatul. 2021. keterampilan berbicara. sumatra barat: yayasan candekia muslim. agency, beranda. 2015. berpikirlah sebelum bercerai! yogyakarta: bisakimia. alamsyah, nurfajar. 2016. ketika hati nurani berbicara. yogyakarta: lintang rasi aksara books. alfiyansyah, fauzi. 2020. bicara esensi agama. jakarta timur: guepedia. ali, nurdin. 2020. teori komunikasi interpersonal disertai contoh fenomena praktis. jakarta: kencana. andri, isnaeni. 2019. peduli belum mati tumbuh suburnya apatisme dan tertidurnya peduli. bogor: guepedia. miftakhuddin dan rony harianto.2020. anakku belahan jiwaku: pola asuh yang tepat untuk membentuk psikis anak. sukabumi: cv jejak. anggito albi, setiawan johan. 2018. metodelogi penelitian kualitatif. jawa barat: cv jejak. bartono, dkk. 2005. 14 langkah meningkatkan karir dan jabatan tip mengenali dan merencanakan strategi cerdik meraih jabatan impian. jakarta: pt elex media kamputindo. budi, susilo. 2016. cerdas memengaruhi orang lain dari bahasa tubuh & karakternya. yogyakarta: diva press. chandra dewi, dkk. 2022. modul pembelajaran komunikasi antarpribadi. jawa barat: media sains indonesia. chaplin. 2006. kamus lengkap psikologi. jakarta: pt rajagrafindo persada. darwis, hude. 2006. emosi perjalanan religio-psikologis tentang emosi manusia di dalam alquran. jakarta: erlangga. devito, joseph. a. 2013. the interpersonal communication book. boston : pearson dian, nafi. 2020. sederas hujan seterang purnama. semarang: hasfa. gamble & gamble. (2005). communication work. united state of america:the mcgraw-hill companies. hardianto alvian, dkk. 2020. konsep & praktek berkomunikasi. surabaya: scopindo, media pustaka. ibrahim, al-nughaimish muhammad. 2011. terampil mendegarkan rahasia anda disukai siapa saja . jakarta: zaman. suciati, cahyaning pertiwi harya (2022) 28 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe liliweri, a. 2011. komunikasi serba ada serba makna. jakarta: kencana. ———. 2017. komunikasi antar-personal. jakarta: kencana. miftakhuddin dan rony.2020. anakku belahan jiwaku:pola asuh yang tepat untuk membentuk psikis anak. sukabumi: jejak miller, r.s. (2015). intimate relationships. new york: mcgraw-hill education. mira, fadilla. 2019. seni debat dan negosiasi. yogyakarta: araska. sri lestari. 2016. psikologi keluarga penanaman nilai dan penanganan konflik dalam keluarga. jakarta: kencana. american interdisciplinary journal of business and economics issn: 2837-1909| impact factor : 4.6 volume. 9, number 4; october-december, 2022; published by: scientific and academic development institute (sadi) 8933 willis ave los angeles, california https://sadipub.com/journals/index.php/aijbe 18 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe the significance of reputation in corporate financing: study of non-financial firms in pakistan bilal wei school of economics and finance, xi’an jiaotong university, xi’an, shaanxi, p.r. china abstract: this study investigates the impact of firm reputation on financing decisions in the non-financial sector of pakistan. it employs a fixed effect model to estimate the regression among variables and finds a positive and significant effect between price-earnings (p/e) ratio and firm financial leverage. in contrast, the study reveals a negative association between firm age and financial leverage, as older and better-reputed firms choose not to use trade credit during financial crises. the study also highlights the importance of tangible assets as loan collateral to obtain trade credit. the authors suggest that managers should consider the sensitivity of firm reputation when making financing decisions, as it can be used as an instrument of financing. the paper recommends that future studies should explore the effects of firm reputation on other business decisions such as investment and borrowing capacity. the study theoretically, empirically, and practically highlights the contribution of firm reputation in firm financing decisions, providing new understanding through different theories such as pecking order theory, trade-off theory, and agency cost theory. keywords: firm reputation, financing decisions, non-financial sector, pakistan, fixed effect model, priceearnings ratio, financial leverage, trade credit, tangible assets, loan collateral, investment, borrowing capacity. introduction firm reputation is a key factor that influences financing decisions, particularly during financial crises. it affects the availability and cost of funds for firms to finance their operations. while prior research has examined the relationship between firm reputation and financing decisions, the literature lacks comprehensive studies in developing countries such as pakistan. the purpose of this study is to investigate the impact of firm reputation on financing decisions in the non-financial sector of pakistan. specifically, this study aims to examine the relationship between firm reputation and financial leverage, trade credit, and tangible assets. the study employs a fixed effect model to estimate the regression among variables using ten years of data from 2010 to 2019. the sample consists of 337 listed firms of the non-financial sector of pakistan. the annual data were collected from thomson reuter datastream and financial reports that were published by state bank of pakistan. this study finds that firm reputation has a significant impact on financing decisions in the non-financial sector of pakistan. the study reveals a positive and significant effect between price-earnings (p/e) ratio and firm financial leverage. in contrast, firm age has a negative association with financial leverage, as older and betterreputed firms choose not to use trade credit during financial crises. the study also highlights the importance of tangible assets as loan collateral to obtain trade credit. the study contributes to the literature by providing a comprehensive understanding of the effects of firm reputation on financing decisions in developing countries. it provides insights for managers to consider the sensitivity of firm reputation when making financing decisions. the study recommends that future research should consider all proxies of firm reputation's effects on other business decisions such as investment and bilal wei (2022) 19 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe borrowing capacity. the significance of this study is not only theoretical but also practical. it provides new insights into the contribution of firm reputation in firm financing decisions, which may help firms to make informed financing decisions in pakistan. the decision regarding investment is considered a fundamental decision by the businesses and this decision is attached with upcoming growth and long-lasting success of the businesses (kannadhasan & aramvalarthan, 2011). the corporate sector plays a significant role in economic development because it introduces new opportunities and new avenues for investment. due to high world-wide competition, investors invest heavily in new machinery, infrastructure, product development, product management to meet their development needs. however, investment needs obtaining and utilization of resources from appropriate sources. hence, companies either use inner funds or go for outer financing by issuing shares or debt. the fresh and young companies build unique features that separate them from older and recognized firms. the firm age is the proxy of firm reputation. the firms tend to learn over the years, they gain skills in different fields and try to build a strong network of relationships with their stakeholders to gain legitimacy in front of them. this work contributes theoretically, practically, and empirically. theoretically, this study highlights the contribution of firm reputation in firm financing decisions by giving new understanding through different theories i.e., pecking order theory, trade-off theory, and agency cost theory. practically, study helps managers to choose an economic way of financing by considering firm reputation as a significant determinant of the firm financing. the study quantifies the reputation by using different proxies of firm reputation. a well-known firm may help a firm to arrange funds with minimum obstacles. empirically, this study has justified the impact of firm reputation impact on firm financing decisions by hypothesizing and applying different statistical techniques i.e., fixed effect model. the firm’s reputation helps us to choose the financing methods which may help to take the efficient financing decision for the firms. fortune magazine (international agency for evaluation of reputation) segregates a world-wide yearly score which is termed as the ‘world’ most venerated companies. the benchmark of fortune magazine to give rank to the companies include renovation, management efficiency, people management, financial dependability, social obligation, product & services quality and world-wide competitivness. fortune magazine often uses different criterias and methods. this study uses different proxies to measure the firm reputation. fortune magazine collects data from top 500 companies all over the world and issues reports annually by using these proxies (fortune magazine, 2019). this study attempts to find the impact of firm reputation on firm financing decisions. for this purpose, we have employed a fixed effect model to run the regression throughout 2010-2019 by considering the nonfinancial sector of pakistan. the statistical findings describe that the firm reputation is the significant determinant of the firm financing pattern. more specifically, there is a significant and negative liaison between firm age and firm financial leverage. however, there is a significant and positive link between price earnings ratio and decisions regarding firm financing. in brief, firm reputation plays an essential role in firm financing decisions. it has a very important role in firm financing decisions. moreover, the firms do not include the firm reputation in the form of tangible financial benefit and cannot take rational decisions about firm financing and thus bear high cost of financing and the problem of stringent covenants. by keeping the view of this, this study has identified the impact of firm reputation on firm financing decisions. the arrangement of the variables has never been arranged before in the prior literature. the section two highlights review of literature, theory and theorization, and theoretical framework. the section three discusses data, methodology, econometric equations, and variable specifications. the section four reports results in the tables i.e., descriptive statistics, correlation analysis, and regression analysis. similarly, section five explains the reported results. the section six depicts conclusion and policy recommendations. literature review the firm reputation is generally defined as the observations, emotions and feelings of multiple stakeholders about an organization (fombrun et al., 1997). the well reputed firms can accept more debt at lower costs because of their better reputations in the debt market. the work of kaur and sing (2018) used firm reputation as an independent variable in their study. most organizations use the importance of good corporate reputation bilal wei (2022) 20 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe through building a thought in the minds of stakeholders when they face an emergent situation (fombrun et al., 1997). the corporate reputation describes stakeholder’s hopes and future actions of an organization which occurred from past experience and perceptions. being trustworthy, a firm reputation can help to reduce the transaction cost. in this competitive era, firm reputation is an essential part of every business. according to our knowledge, there is a vast discussion of firm reputation practically but in literature, firm reputation is discussed a little bit. previous literature has conducted studies on different topics i.e., kaur and singh, (2018) worked on the topic “measuring the immeasurable corporate reputation”. pfister (2019) worked on the topic “corporate reputation and the future cost of equity”. anginer (2015) also worked on the topic “firm reputation and cost of debt capital”. chandler et al.(2013) described a positive relationship between firm reputation and status on inter organizational network structure. in contrast to common, there are few studies which have taken a firm reputation as a helping hand of financing. moreover, limited studies have taken the firm reputation as critical assets and instruments of financing. so, to eliminate the gap, this research will find out the connection between firm reputation and firm financing decisions. the firm reputation is measured with different proxies. the research of kaur and singh, (2018) used several proxies (price earnings ratio, market capitalization and firm age) to represent firm reputation. the work of chandler et al. (2013) showed financial soundness and long-term investment as proxies of firm reputation. the prior studies used these proxies i.e., price earnings ratio, market capitalization, firm age and longterm investment. the fortune magazine categorized firms on the basis of these proxies (firm age, market cap, longterm investment and price-toearnings ratio). the study of rashid (2014) used financial leverage as an external financing decision which is considered as a dependent variable and furthermore discussed that the external source of financing is firm financial leverage. ferrando et al. (2013) examined that the other external source of financing is equity financing and trade-credit, and it is an important secondary source of external financing. the finance managers give preference to other techniques that help to decide how, where, and when, to get finance to meet investment (bei & wijewardana, 2012). the reputation of the firm shows a very important role in firm financing decisions, and it mitigates agency problems between principal and agent. cao et al. (2015) documented adverse affiliation between firm reputation and the equity cost. the high reputations companies have minimum chances to error their financial annual statements. they agree to pay high audit fees and produce higher quality financial statements. karpoff at el. (2008) documented that high reputed firms avoid deceitful behaviour and thus have low cost of borrowing. the opinion and perception about a company is shaped on behalf of prior experience with the company, peer views, media coverage of a company, predictor’s comments and professional opinions about the company. the price-earnings ratio is an assessment method which prescribes the company’s existing financial position and informs about the company's upcoming growth prospects. afza and tahir (2012) examined that firm financial leverage is positively associated with price earnings ratio. there is a positive effect of financial leverage on price earnings ratio (arslan et al., 2017). investors are willing to invest and feel positive to invest their funds in high price earnings ratio companies. the firm reputation (measured by fortune’s reputation ratings) to be a significant factor in explaining variation in price-earning ratio. the two firms are parallel in all aspects and steps but they show several priceearnings ratios because variance in price-earning ratio was due to the control of some unique, inimitable, non-substitutable resources by the company and those resources revealing a high price-earning ratio. therefore, it was decided that a good reputation firm ranking leads to high price-earning ratio (little & little, 2000). price-earnings ratio has been used as a determinant of firm reputation in italy. the price-earnings ratio is adversely linked with financial leverage and firm size (afza & tahir, 2012). the study of tai (2017) showed that the market capitalization has positive association with debt rate in capital structure. the high market capitalization or high market value is connected to a good reputation. the investors prefer the large capitalization companies because those companies are attractive, suitable, having minimum hazard and having more liquidity. these companies are estimated to show performance far better in the near future as they are temporary to the market risk, give more dividends to stakeholders, and assure safety and liquidity of funds bilal wei (2022) 21 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe with a good outcome to investors (kaur & singh, 2018). there is a positive impact of market capitalization on capital structure (tai, 2017). the previous findings showed that the market capitalization is a crucial determinant of firm reputation (mcguire et al., 1990). there is enough empirical and theoretical proof that associates market capitalization to firm reputation and due to good reputation, the firms finance their assets easily. it can be conferred that market capitalization is a proxy for firm reputation. the managers try to select a minimum cost of financing for gaining more profit and in this way the managers can maximize the capital structure by minimizing the cost of financing (tang et al., 2012). some companies raise the cash inflow by over producing the goods, due to this strategy the price per unit will decrease in the market (fosu, 2013). parsons (2009) examined that it is not difficult for more tangibility firms to gain debt because they can easily use tangible assets as loan collateral. the relationship is not surprising between tangible assets and debt because mostly tangible assets may be used easily as loan collateral. myers (1977) noted that the loan taking ability of a firm may affect the investment. the research of singhania and seth (2010) explored adverse affiliation of firm financial leverage with investment. there is a negative association between firm financial leverage and firm long-term investment. john and muthusamy (2011) depicted significantly and positively the association of firm financial leverage with firm investment for greater growth firms. hence, research assumes both positive and adverse association of firm financial leverage with firm long-term investment. mukhtar et al. (2016) suggested firm financial leverage could have either negative or positive impact on long-term investment of firms. verwijmeren and derwall (2010) have shown that the employee well-being is positively affiliation with high credit ratings. there is an ambiguity between theoretically affiliation of firm capital structure and firm age. the age of the firm matters because with the passage of time mostly firms can stabilize themselves. there is a negative relation of firm age with short-term firm financing (hall et al., 2004). there is significant and empirical evidence of firm age and firm financing relations. the study of ezeoha and botha (2012) found a significant relationship between firm age and financial leverage. the aged companies have better access to finance their assets and have good connections with money financiers who always keep focus on companies’ reputation and financial record. the size of the firm, tangibility of total assets, profitability, and age of the firm are positively associated to total leverage (ikechukwu & cyril, 2017). the study further found negative effect of firm age on firm financial leverage. moreover, there is adverse and significant affiliation between age of the firm and smes financing. the firm age is significantly negatively related to the firm financial leverage. the study of hall et al. (2004) noted that firm age is linked with short-term debt. the market capitalization is positively allied with the percentage of debt in capital structure because the developed stock market guides the investors that they can spread the investments and, in this way, they can mitigate the hazard and asymmetric info which resulted in minimum lending cost. this will request the owners of the firms’ for increasing debt usage in capital structure (tai, 2017). the study of keshtkar (2012) used price-to-earnings ratio (pe) as a proxy of growth opportunities and showed an adverse affiliation between growth opportunities and firm financial leverage. the study concluded a negative relation between growth opportunities and short-term debt because high growth companies have high uncertainty and firms will not take high short-term debt. these studies have the same results i.e., (myers, 1977). there is an adverse link between price-earnings ratio and firm financial leverage. garcíaterue et al., (2010) found that the larger firms with greater growth opportunities and big investment in assets, get more finance from their suppliers, where firms have substitute sources of funding. the investment is a positive element of new debt financing which depicts the positive link of long-term investment with debt financing. the market value has a positive and significant relationship with trade credit (tai, 2017). li et al. (2019) noted that account payable and price earnings ratio are significantly and positively correlated. the bigger firms, with larger development opportunities and greater investment in assets, acquire more investment from their suppliers (teruel & solano, 2010). the investment decision has a positive effect on financing decision with less uncertainty whether financing is short-term or long-term. the smes financing has adverse and significant bilal wei (2022) 22 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe association with age of the firm. there is an adverse and significant connection between firm age and trade credit because aged firms have enough resources to finance their assets (kim, 2016). the study of nazir (2012) used market capitalization and size at the same time in the paper. large size firms can acquire funds from creditors, and a positive mark is anticipated between size of the firm and firm financial leverage (qureshi at al., 2012). according to pecking-order theory, the highly profitable company tends to minimize their exterior finance which gives indications of low bankruptcy risk to creditors (sheikh, 2011). the liquidity presents the aptitude of a firm to complete their current liabilities after maturity. the undue amounts of current assets possessed by a firm would maybe escalate the probabilities of interior financing resulting in an association between firm financial leverage and liquidity (qureshi at al., 2012). additionally, the abundant liquidity has an important effect on the financial strength of a firm (bei & wijewardana, 2012). the large volume firms of tangible assets are more able to guarantee their assets to develop additional funds with minor hazards due to the investment portfolio which shrinks the risk of insolvency (qureshi at al., 2012). hence, a positive signal is projected between firm financial leverage and tangibility of total assets. this study develops hypotheses between dependent variable and independent variable which is given below. h1: there is significant association between firm reputation and firm financing decision. theories and theorization the capital structure theories are related to firm reputation and reputation explains the impact of firm reputation on firm financing decisions. the size of the firm is associated with firm financing via agency cost theory because large size firms need more information and this info minimizes information asymmetries, and it makes it possible to acquire funds from money lenders (marete, 2015). the market capitalization is affiliated with firm financing via agency cost theory because in developing countries, development and an improvement in stock market helps the investors that they can diversify the investment. in this way they can reduce risk and information asymmetric and transaction cost (tai, 2017). the profitability of a firm is negatively associated with firm financing because firm profitability increases then the ratio of debt decreases. the pecking order theory shows adverse association between firm financial leverage and firm profitability, which gives high preference to retained earnings. the similar results in pakistani firms are also found by (rahman, 2016). de jong, (2008) examined that high tangibility firms give preference to debt financing over equity financing. according to agency cost theory, tangibility is used as loan guarantee, and it reduces the information asymmetries and clears the business matter which helps to get the debt easily. trade-off and agency cost noted positive relationship between leverage and assets tangibility (olakunle & oni, 2014). conceptual framework this framework shows explanatory and expliained variables. figure 1. conceptual framework financial leverage trade-credit data and methodology a research methodology is the process of collecting and analysing the information to test the hypotheses. this study took 10 years of data from 2010 to 2019. the research size consists of 337 listed firms of the nonfinancial sector of pakistan. the annual data were collected from thomson reuter datastream and financial reports which were published by state bank of pakistan. firms having missed financial information for five years were removed from final analysis. data availability statement lies as1 1 data availability statement firm specific financial data that have been used in this study retrieved from the statement bank of pakistan (official data site management by government of pakistan). bilal wei (2022) 23 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe methodology panel data estimation technique was used because the sample consists of both time series and cross sectional. it removes the problem of multi-colinearity. the data were analysed by using the fixed effect model (fem) due to possible problems of multi-co-linearity. the statistical test i.e., hausman test signifies the implication of a fixed effect model. when there is a high variance among the variables, then the study goes to use a fixed effect model. moreover, anginer (2015) used the fixed effect model to check the regression between firm reputation and debt cost. to hypothetically analyse which test is more appropriate, two hypotheses were developed. h1: the fixed effect model is more suitable. h0: the random effect is more appropriate. table 1 haussmann test test summary chi-sq. statics chi-sq. df prob. cross-section chi-square model(1) 671.382078 189 0.000 cross-section chi-square model(2) 690.874286 265 0.000 note. authors own calculations as the probability value is less than 0.05 which nullifies the null hypothesis and accepts the alternate hypothesis that fixed effect model is more appropriate. so, both literature and empirical findings support that fixed effect models should be applied. econometric equation between the variables can be expressed as 𝑛�𝑛� 𝑌�𝑌�𝑖�𝑖�𝑖�𝑖� = 𝛽�𝛽�° + 𝛽�𝛽�1 𝑋�𝑋�𝑖�𝑖�𝑖�𝑖� +∪𝑖�𝑖�𝑖�𝑖� (1) 𝑗�𝑗�=1 where, 𝛽�𝛽�1𝑋�𝑋�𝑖�𝑖�𝑖�𝑖� = vector of iv, s. yit= dependent variable 𝐹�𝐹�𝐹�𝐹�𝑖�𝑖�𝑖�𝑖� = 𝛽�𝛽�° + 𝛽�𝛽�1𝑃�𝑃�𝑃�𝑃�𝑃�𝑃�𝑖�𝑖�𝑖�𝑖� + 𝛽�𝛽�2𝑀�𝑀�𝑀�𝑀�𝑖�𝑖�𝑖�𝑖� + 𝛽�𝛽�3𝐹�𝐹�𝐿�𝐿�𝐿�𝐿�𝑖�𝑖�𝑖�𝑖� + 𝛽�𝛽�4𝐴�𝐴�𝐴�𝐴�𝑃�𝑃�𝑖�𝑖�𝑖�𝑖� + 𝛽�𝛽�5𝑆�𝑆�𝐿�𝐿�𝑆�𝑆�𝑃�𝑃�𝑖�𝑖�𝑖�𝑖� + 𝛽�𝛽�6𝐿�𝐿�𝐿�𝐿�𝐴�𝐴�𝑖�𝑖�𝑖�𝑖� + 𝜀�𝜀�𝑖�𝑖�𝑖�𝑖� (2) 𝐿�𝐿�𝑀�𝑀�𝑖�𝑖�𝑖�𝑖� = 𝛽�𝛽�° + 𝛽�𝛽�1𝑃�𝑃�𝑃�𝑃�𝑃�𝑃�𝑖�𝑖�𝑖�𝑖� + 𝛽�𝛽�2𝑀�𝑀�𝑀�𝑀�𝑖�𝑖�𝑖�𝑖� + 𝛽�𝛽�3𝐹�𝐹�𝐿�𝐿�𝐿�𝐿�𝑖�𝑖�𝑖�𝑖� + 𝛽�𝛽�4𝐴�𝐴�𝐴�𝐴�𝑃�𝑃�𝑖�𝑖�𝑖�𝑖� + 𝛽�𝛽�5𝑃�𝑃�𝑃�𝑃�𝑃�𝑃�𝐹�𝐹�𝑖�𝑖�𝑖�𝑖� + 𝛽�𝛽�6𝐹�𝐹�𝐿�𝐿�𝐿�𝐿�𝑖�𝑖�𝑖�𝑖� + 𝜀�𝜀�𝑖�𝑖�𝑖�𝑖� (3) fl stands for financial leverage, and it is used as a dependent variable, tc represents trade credit, and it is also used as a dependent variable. per means price earnings ratio and this is considered as an independent variable, mc shows market capitalization, lti abbreviations as long-term investment. tta shows tangibility of total assets, liq means liquidity, prof represents profitability, and age describes firm age. table 2 overview of variables variables name used as measurement references price earnings ratio iv market price per share/ earnings per share (kaur & singh, 2018) market capitalization iv market price * total number of shares outstanding (kaur & singh, 2018) long term investment iv log of lti (chandler et al. 2013) bilal wei (2022) 24 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe firm age iv current year – incorporation year (kaur, 2018) firm size cv log of total assets (alkhatib, 2012) profitability cv net profit after tax/total assets (alkhatib, 2012) liquidity cv current assets/current liabilities (alkhatib, 2012) financial leverage dv total debt / total assets (gill, 2012) variables name used as measurement references trade credit dv account payable/total assets (ahmed, et al., 2016) tangibility of total assets cv fixed assets/total assets (alkhatib, 2012) note. fl= financial leverage, tc= trade-credit, lti= long-term investment, mc= market cap, per= priceearnings ratio, tta= tangibility of total assets, liq= liquidity, prof= profitability source: previous literature results and discussion table 3 descriptive statistics variables mean median max min std. dev. skewness kurtosis fl 0.465 0.475 0.692 0.011 0.107 0.014 2.146 tc 0.336 0.230 0.599 0.010 0.207 0.830 0.410 lti 7.384 7.602 10.18 4.000 1.475 -0.206 2.514 mc 5.433 5.257 8.777 2.755 1.111 0.332 2.739 age 35.66 30.00 138.0 3.000 18.80 1.640 4.704 per 2.816 2.524 7.389 0.108 0.082 0.548 2.429 size 6.512 6.454 8.743 4.715 0.196 0.291 3.228 tta 0.540 0.567 0.684 0.051 0.161 0.871 3.593 liq 0.226 0.242 0.517 0.089 0.106 1.116 4.550 prof 0.035 0.035 0.824 -0.407 0.108 0.741 3.343 note. fl= financial leverage, tc= trade-credit, lti= long-term investment, mc= market cap, per= priceearnings ratio, tta= tangibility of total assets, liq= liquidity, prof= profitability source: author owns calculation the descriptive statistics portrays the overall image of firm responses. these responses are in the form of mean, median, and standard deviation which have been discussed in table 3. the mean value of financial leverage is 46.5 which shows about the average replies of the respondent firms. it also means that the average firms use 46.5 percent financial leverage to finance their assets. the median value of fl is 47.5 which means that mostly under analysis firms use 47.5 percent debt to finance their assets. this is good for the firms that use less debt, and they don’t have a lot of debt. the maximum value of fl is 69.2 and minimum value of fl is 1.1 percent which shows that there is a firm which uses 1.1 percent financial leverage to finance its assets, and this is good. the standard deviation value is 0.107 which shows the degree of variation from mean value. bilal wei (2022) 25 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe the value of skewness and kurtosis is 0.014 and 2.14 which show that the data are in normal shape. the mean value of tc is 33.6 percent which shows that average firms use 33.6 percent trade credit to finance their assets for the firms because it’s below than 50 percent. the median value of tc is 23 percent which means that most firms use 33.6 percent of trade credit to finance their assets which is less than 50 percent and it's good. the maximum value is 59.9 percent and minimum value of tc is 1 percent which means that one firm uses 1 percent trade credit. the value of standard deviation is 20.7 percent which means that the usage of trade credit can be increased 20.7 percent from mean value or 20.7 percent can be decreased from mean value. the value of skewness and kurtosis is 0.83 and 0.41 which show that the shape of the data is normal. table 4 correlation analysis variables fl tc lti mc age per size tta liq prof fl tc 0.31 lti 0.41 0.21 mc 0.45 0.37 0.16 age 0.41 0.45 0.54 0.20 per 0.64 0.51 0.46 0.11 0.47 size 0.59 0.10 0.34 0.22 0.37 0.21 tta 0.51 0.23 0.24 0.34 0.20 0.32 -0.31 liq 0.35 0.30 0.16 0.44 0.14 0.16 0.26 0.23 prof 0.36 0.40 0.26 0.27 0.19 0.44 0.14 0.17 0.10 note. fl= financial leverage, tc= trade-credit, lti= long-term investment, mc= market cap, per= priceearnings ratio, tta= tangibility of total assets, liq= liquidity, prof= profitability source: author owns calculation this correlation analysis describes the strength of association among the variables. the values of variables show the correlation strength. the correlation value of tc is -0.310 which means that there is weak association of tc with fl, but tc has an inverse relationship which means that when trade-credit will increase then the financial leverage will decrease and viceversa. the lti has correlation value 0.410 which means that there is moderate association of long-term investment with firm financial leverage. the correlation value of mc is 0.450 which shows that there is moderate correlation with financial leverage. the correlation value of age is -0.410 which describes that there is 41 percent degree of association of age with fl and its inverse affiliation. table 5 regression between firm reputation and firm financing decision model 1 model 2 coefficient t p coefficient t p models fl tc bilal wei (2022) 26 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe c -0.662 -2.165 0.0311 0.158 0.313 0.754 lti 0.017 2.439 0.015 0.013 1.223 0.221 mc 0.031 3.261 0.001 -0.022 -1.373 0.170 age -0.009 -3.370 0.000 -0.028 -5.572 0.000 per 0.008 1.913 0.056 0.001 0.138 0.889 size 0.179 3.468 0.000 0.173 2.084 0.037 tta -0.007 -0.176 0.859 0.101 2.270 0.023 liq 0.007 0.368 0.712 0.041 1.400 0.162 prof -0.333 -4.770 0.000 0.209 1.534 0.125 adj. r2 0.714 0.398 d.w statistics 1.806 1.587 prob. fstat 0.000 0.000 the regression shows the relationship between independent variables and dependent variables. it also briefs the nature of relationship between the explained and explanatory variables. the t-value of size is 3.46 which shows a positive and significant impact on financial leverage. big firms may have minimum deviations in earnings which leads to financial leverage as good selection of financing (baloch et al., 2015). the large firm needs more information which minimizes the information asymmetries in the market which indicates the possibility of obtaining resources from lenders (marete, 2015). the t-value of long-term investment is 2.439 which depicts a significant positive relationship with financial leverage. there is significant positive relationship long-term investment and leverage. the t-value of liquidity is 0.368 which describes insignificantly association between liquidity and firm financial leverage. the financial managers are worried about investment and do not consider liquidity in determining their capital structure (rizki et al., 2018). the t-value of tangibility of total assets is 0.176 which shows insignificant relationship with financial leverage. it was also noted that tangibility of total assets is adversely associated with the firm financial leverage (baloch et al., 2015). the t-value of market capitalization is 3.261 which shows significant and positive relationship with financial leverage (tai, 2017). the t-value of price earnings ratio is 1.913 which describes significant and positive association with financial leverage (tahir et al., 2017). this study hypothesized adverse affiliation between p/e ratio and firm financial leverage but according to results, there is positive affiliation between them. the cause behind this is that some managers are risk takers, and they believe in the agenda “high risk and high return”. the t-value of age is -3.379 which illustrates negatively significant affiliation between firm age and firm financial leverage. the t-value of profitability is -4.770 which depicts a significant and negative relationship with financial leverage (rahman, 2016). the t-value of firm age is -5.572 which shows significant and negative associated with trade credit (kim, 2016). the t-value of firm size is 2.084 which is significantly positively related with trade-credit. the t-value of tangibility of total assets is 2.270 which examines positive and significant relation with trade credit financing (j.o & olowoniyi, 2014). the t-value of profitability is 1.534 which means that there is insignificant relationship with trade-credit (khan, 2018). the liquidity has 1.40 its t-value which shows insignificant relationship with trade credit. the value of adj. r2 of model 1 is 71.40 which means that the dependent variable is 71.40 percent associated with independent variables. the value of durbin-watson stat is 1.80 which is greater than 1.7; it means that there is no serial correlation between the error terms and independent variables. the value of f-statistic is 0.000 which tells about the overall significance of the model. the value of adjusted r-squared of model 2 is 39.81 which explains that there is 39.81 percent affiliation among bilal wei (2022) 27 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe independent variables and dependent variables. the value of durbin-watson stat is 1.58 which shows that there is no serial correlation between the error terms. the value of f-statistic is 0.000 which shows the overall significance of the model. conclusion and policy recommendations the study finds that how firm reputation relieves firm financing decisions. the corporate reputation is a nonfinancial aspect, but it is linked with several types of business decisions. this study has demonstrated the affiliation of firm reputation with firm financing decisions. the outcomes point out that alternate hypothesis (h1) was accepted. the study signifies that there is significant affiliation between corporate reputation and firm financing decision. the well reputed firms fund their assets with economic financing and have easy access to financing institutions. the outcomes of the study answer all research questions by fulfilling the study gap. but there were some limitations which were time constraints and data shortage. some companies missed information about variables from balance sheets and income statements. in future, the researchers can be conducted by taking all proxies of firm reputation of fmac (fortune magazine’s most admired companies) list and their effect on other business decisions i.e., investment and borrowing capacity. the outcomes of the study mention financing policy for finance managers to ponder firm reputation when deciding about firm financing decisions. the results of research emphasised on cheap financing. mostly, the firms in underdeveloped areas need to consider their reputation while taking some crucial business decisions i.e., financing decisions. this research will help to use the firm reputation in monetary terms. overall, the corporate reputation will help to diminish financing cost. references afza, t., & tahir, s. (2012). determinants of price-earnings ratio: the case of chemical sector of pakistan. international journal of academic research in business and social sciences, 2(8), 331–343. ahmed, j., & khalid, j. (2016). determinants of bank loan availability: evidence from pakistani non-financial firms. romanian economic journal, 59, 61–72. alkhatib, k. (2012). the determinants of leverage of listed companies. international journal of business and social science, 3(24), 78–83. anginer, d. s. (2015). firm reputation and cost of debt capital. (mpra paper no. 64965). https://mpra.ub.unimuenchen.de/64965/1/mpra_paper_64965.pdf arslan, h., iltas, y., & kayhan , t. (2017). target p/e ratio determinants in the turkish stock market: earning volatility effect. theoretical and applied economics, 4(613), 65–74. baloch, q. b., ihsan, a., kakakhel, s. j., & sethi, s. (2015). impact of firm size, asset tangibility and retained earnings on financial leverage: evidence from auto sector, pakistan. abasyn journal of social sciences, 8(1), 143–155. barney, j. (1991). firm resources and sustained competitive advantage. journal of management, 17(1), 99–120. https://doi.org/10.1177/014920639101700108 bei , z., & wijewardana, w. (2012). financial leverage, firm growth and financial strength in the listed companies in sri lanka. procedia social and behavioral sciences, 40, 709-715. https://doi.org/10.1016/j.sbspro.2012.03.253 https://mpra.ub.uni-muenchen.de/64965/1/mpra_paper_64965.pdf https://mpra.ub.uni-muenchen.de/64965/1/mpra_paper_64965.pdf https://mpra.ub.uni-muenchen.de/64965/1/mpra_paper_64965.pdf https://mpra.ub.uni-muenchen.de/64965/1/mpra_paper_64965.pdf https://doi.org/10.1177/014920639101700108 https://doi.org/10.1177/014920639101700108 https://doi.org/10.1016/j.sbspro.2012.03.253 https://doi.org/10.1016/j.sbspro.2012.03.253 bilal wei (2022) 28 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe cao, y., myers, j., myers, l., & omer, t. (2015). company reputation and the cost of equity capital. review of accounting studies, 20(1), 42–81. https://doi.org/10.1007/s11142-014-9292-9 chandler, d., haunschild, p. r., rhee, m., & beckman, c. m. (2013). the effects of firm reputation and status on interorganizational network structure. strategic organization, 11(3), 217– 244https://doi.org/10.1177/1476127013478693 de jong, a. k. (2008). capital structure aroud the world: the roles of firm and country specific determinants. journal of banking & finance, 32(9), 1954–1969. https://doi.org/10.1016/j.jbankfin.2007.12.034 ezeoha, a., & botha, f. (2012). firm age, collateral value, and access to debt financing in an emerging economy: evidence from south africa. south african journal of economic and management sciences, 15(1), 55–71. ferrando, a., & mulier, k. (2013). do firms use the trade credit channel to manage growth? journal of banking & finance, 37(8), 3035–3046. https://doi.org/10.1016/j.jbankfin.2013.02.013 fombrun, c. j., & van riel, c. b. m.(1997). the reputational landscape. corporate reputation review, 1 (1/2), 5–13. fosu, s. (2013). capital structure, product market competition and firm performance: evidence from south africa. the quarterly review of economics and finance, 53(2), 140–15https://doi.org/10.1016/j.qref.2013.02.004 garcía-terue, p. j., & pedro martínez-solano, p. (2010). determinants of trade credit: a comparative study of european smes. international small business journal, 28(3), 215– 23https://doi.org/10.1177/0266242609360603 gill,, a., & obradovich, j. (2012). the impact of corporate governance and financial leverage on the value of american firms. international research journal of finance and economics (91), 46–56. hall, g. c., hutchinson, p. j., & michealas, n. (2004). determinants of the capital structures of european smes. journal of business finance & accounting, 31(5‐6), 711–728. https://doi.org/10.1111/j.0306686x.2004.00554.x ikechukwu, i. o., & cyril, u. m. (2017). effect of listing age on corporate financial leverage of oil and gas firms in nigeria. international journal of economics, finance and management sciences, 5(2), 92– 97. https://doi.org/10.11648/j.ijefm.20170502.12 j.o, o., & olowoniyi, o. (2014). the determinants of trade credit: evidence from nigeria. journal of finance and investment analysis, 3(4), 21–29. john, f., & muthusamy. (2011). impact of leverage on firms investment decision. international journal of scientific & engineering research, 2(4), 1–16. kannadhasan, m., & aramvalarthan, s. (2011). relationships among business strategy, environmental uncertainty and performance of firms operating in transport equipment industry in india. journal of emerging financial market, 2(2), 39–50. https://doi.org/10.1007/s11142-014-9292-9 https://doi.org/10.1007/s11142-014-9292-9 https://doi.org/10.1177/1476127013478693 https://doi.org/10.1177/1476127013478693 https://doi.org/10.1016/j.jbankfin.2007.12.034 https://doi.org/10.1016/j.jbankfin.2007.12.034 https://doi.org/10.1016/j.jbankfin.2013.02.013 https://doi.org/10.1016/j.jbankfin.2013.02.013 https://doi.org/10.1016/j.qref.2013.02.004 https://doi.org/10.1016/j.qref.2013.02.004 https://doi.org/10.1177/0266242609360603 https://doi.org/10.1177/0266242609360603 https://doi.org/10.1111/j.0306-686x.2004.00554.x https://doi.org/10.1111/j.0306-686x.2004.00554.x https://doi.org/10.1111/j.0306-686x.2004.00554.x https://doi.org/10.11648/j.ijefm.20170502.12 https://doi.org/10.11648/j.ijefm.20170502.12 bilal wei (2022) 29 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe karpoff , j., lee , s., & martin , g. (2008). the consequences to managers of financial misrepresentation. journal of financial economics, 88(2), 193-215. https://doi.org/10.1016/j.jfineco.2007.06.003 kaur, a., & singh, b. (2018). measuring the immeasurable corporate reputation. metamorphosis, 17(1), 53– 64. https://doi.org/10.1177/0972622518778210 keshtkar, r. v. (2012). determinants of corporate capital structure under different debt maturities: empirical evidence from iran. international research journal of finance and economics, 90, 46–53. khan, n. (2018). capital structure decision: which firm leveland country level factors are reliably important in non financial firms in pakistan. city university research journal, 8(1), 79–89. kim, w. s. (2016). determinants of corporate trade credit: an empirical study on korean firms. international journal of economics and financial issues, 6(2), 414–419. li, z., wang, b., xulin, t., fu, y., & liu, s. (2019). should energy corporations participate in fulfilling social responsibility? current analysis on economics & finance, 1(1), 1–10. fortune magazine. (2019). analysis of top 500 companies from all over the world. united states. fortune magzine. https://fortune.com/ranking/fortune500/ marete, d. (2015, october). the relationship between firm size and financial leverage of firms listed at nairobi securities exchange [master thesis, university of nairobi]. unieristy of nairobi researh archive. http://erepository.uonbi.ac.ke/handle/11295/94406 mcguire, j. b., schneeweis, t., & branch, b. (1990). perceptions of firm quality: a cause or result of firm performance. journal of management quality, 16(1), 167–180. https://doi.org/10.1177/014920639001600112 mukhtar, z., hashmi, s. h., & asad, m. (2016). are investment and financing decisions really independent? evidence from chemical sector of pakistan. jinnah business review, 4(1), 31–37. myers, s. (1977). the determinants of corporate borrowing. journal of financial economic, 5(2), 147–175. https://doi.org/10.1016/0304405x(77)90015-0 nazir, m. s. (2012). corporate payout policy and market capitalization: evidence from pakistan. journal of economics and behavioral studies, 4(6), 331–343. https://doi.org/10.22610/jebs.v4i6.333 olakunle, a. o., & oni, e. o. (2014). assessing the impact of asset tangibility on capital structure: choice for listed firms in nigeria. journal of applied economics and business, 2(3), 5–20. little, p. l., & little, b. l. (2000). do perceptions of corporate social responsibility contribute to explaining differences in corporate priceearnings ratios? a research note, 3(2), 137–142. https://doi.org/10.1057/palgrave.crr.1540108 parsons, c. t. (2009). empirical capital structure: a review. foundations and trends in finance, 3(1), 1–39. http://dx.doi.org/10.1561/0500000018 https://doi.org/10.1016/j.jfineco.2007.06.003 https://doi.org/10.1016/j.jfineco.2007.06.003 https://doi.org/10.1177/0972622518778210 https://doi.org/10.1177/0972622518778210 https://fortune.com/ranking/fortune500/ https://fortune.com/ranking/fortune500/ http://erepository.uonbi.ac.ke/handle/11295/94406 http://erepository.uonbi.ac.ke/handle/11295/94406 http://erepository.uonbi.ac.ke/handle/11295/94406 http://erepository.uonbi.ac.ke/handle/11295/94406 https://doi.org/10.1177/014920639001600112 https://doi.org/10.1177/014920639001600112 https://doi.org/10.1016/0304-405x(77)90015-0 https://doi.org/10.1016/0304-405x(77)90015-0 https://doi.org/10.1016/0304-405x(77)90015-0 https://doi.org/10.22610/jebs.v4i6.333 https://doi.org/10.22610/jebs.v4i6.333 https://doi.org/10.1057/palgrave.crr.1540108 https://doi.org/10.1057/palgrave.crr.1540108 http://dx.doi.org/10.1561/0500000018 http://dx.doi.org/10.1561/0500000018 bilal wei (2022) 30 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe pfister, b. s. (2019). corporate reputation and the future cost of equity. business research, 13, 343–384. https://doi.org/10.1007/s40685-0190092-8 qureshi, m. a., imdadullah, m., & ahsan, t. (2012). what determines leverage in pakistan? a panel data analysis. african journal of business management, 6(3), 978–985. https://doi.org/10.5897/ajbm11.1535 rahman, s. u. (2016). determinants of capital structure decision of pakistani insurance industry. abasyn journal of social sciences, 9(1), 221–232. rashid, a. (2014). firm external financing decisions:explaining the role of risks. managerial finance, 40(1), 97–116. https://doi.org/10.1108/mf02-2013-0049 rizki, z. w., mochammad, d., & mangesti , s. s. (2018). the effect of profitability, liquidity on capital structure and firm value: a study of property and real estate companies listed on indonesia stock exchange in 2013-2015. eurasia: economics & business, 2(8), 34–41. sheikh, n. a., & wang, z. (2011). determinants of capital structure: an empirical study of firms in manufacturing industry of pakistan. managerial finance, 37(2), 117–133. https://doi.org/10.1108/03074351111103668 singhania, m., & seth, a. (2010). financial leverage and investment opportunities in india: an empirical study. an empirical study. international research journal of finance and economics, 40(2), 215– 226. tahir, s. h., ullah, m. r., & shah, s. (2017). what determines price-toearnings ratios: an empirical evidence from banking sector of pakistan. journal of business and tourism, 3(1), 13– 22. https://doi.org/10.34260/jbt.v3i1.56 tai, l. m. (2017). impact of the financial markets development on capital structure of firms listed on ho chi minh stock exchange. international journal of economics and financial issues, 7(3), 510–515. tang, c. j. (2012). revisit to the determinants of capital strucutre:a comparison between lodging firms and software firms. hospitality management, 26(1), 175–187. https://doi.org/10.1016/j.ijhm.2005.08.002 teruel, p. j. g., & solano, p. m. (2010). trade credit policy and firm value. in creando clientes en mercados globales: building client relationships in global markets (p. 85). escuela superior de gestión comercial y marketing, esic. verwijmeren, p., & derwall, j. (2010). employee well-being, firm leverage, and bankruptcy risk. journal of banking & finance, 34(5), 956–964. https://doi.org/10.1016/j.jbankfin.2009.10.006 https://doi.org/10.1007/s40685-019-0092-8 https://doi.org/10.1007/s40685-019-0092-8 https://doi.org/10.1007/s40685-019-0092-8 https://doi.org/10.5897/ajbm11.1535 https://doi.org/10.5897/ajbm11.1535 https://doi.org/10.1108/mf-02-2013-0049 https://doi.org/10.1108/mf-02-2013-0049 https://doi.org/10.1108/mf-02-2013-0049 https://doi.org/10.1108/03074351111103668 https://doi.org/10.1108/03074351111103668 https://doi.org/10.34260/jbt.v3i1.56 https://doi.org/10.34260/jbt.v3i1.56 https://doi.org/10.1016/j.ijhm.2005.08.002 https://doi.org/10.1016/j.ijhm.2005.08.002 https://doi.org/10.1016/j.jbankfin.2009.10.006 https://doi.org/10.1016/j.jbankfin.2009.10.006 microsoft word rjfa-vol.14 no.6 2023 american interdisciplinary journal of business and economics issn: 2837-1909| impact factor : 4.6 volume. 9, number 3; july-sept, 2022; published by: scientific and academic development institute (sadi) 8933 willis ave los angeles, california https://sadipub.com/journals/index.php/aijbe 58 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe the effectiveness of zakat fund distribution in alleviating poverty (a case of zakat institutions in indonesia) titin vegirawati, endang kusdiah ningsih, esty naruliza and delfi panjaitan accounting department, iba university mayor ruslan street palembang, south sumatera indonesia management department, iba university mayor ruslan street palembang, south sumatera indonesia accounting department, universitas kristen musi charitas bangau street 60 palembamg, south sumatera, indonesia abstract: this paper explores the effectiveness of zakat fund distribution in poverty alleviation in indonesia. the study utilized content analysis of annual reports and website information from 14 national zakat institutions. the analysis revealed that all institutions prioritized social, health, education, and consumption programs; however, housing programs and house renovations were comparatively rare. zakat institutions also focused on building local economies and providing additional expertise through skills and leadership training. however, none of the institutions had developed a mustahiq network, created an enterprise zone or regional investment. the literature review highlighted the causes of poverty, including income uncertainty and limited income, and provided anti-poverty programs to reduce poverty. the research findings can support zakat institutions' contributions to poverty alleviation, and the government should use the study recommendations to develop a regulatory framework to grow zakat institutions and maximize zakat fund utilization. keywords: zakat, poverty alleviation, indonesia, content analysis, annual reports, website information, social programs, health programs, education programs, consumption programs, housing programs, enterprise zone, regional investment, mustahiq network. 1. introduction poverty is a persistent and chronic socioeconomic issue (dian fitriarni et al., 2019). it indicates a low ability to meet needs like food, clothing, healthcare, and education(abdelbaki, 2013); (parisi, 2017). income, consumption, and welfare are the three primary poverty indicators. in the past, poverty has been a significant social issue that has made other problems worse. a prophet's hadith claims that poverty might lead to a person's loss of faith. to achieve their necessities, poor people may act inappropriately or even injure others (manshor et al., 2020) . they are capable of horrible acts like stealing, prostitution, and trafficking in illegal substances. on the other hand, they resort to violence to sate their fundamental wants, such as by killing someone or by committing suicide, and so on (ridley et al., 2020). titin vegirawati, endang kusdiah ningsih, esty naruliza and delfi panjaitan (2022) 59 interdisciplinary journal of educational practice | https://sadipub.com/journals/index.php/ijep 1.1. background according to world population review data in 2022, the ten poorest countries based on their gross national income (gni) are burundi, somalia, mozambique, madagascar, sierra leone, afghanistan, eritrea, central african republic, liberia, and niger. meanwhile, indonesia is 73rd rank in the poorest countries' data. even though the poverty rate in indonesia has reduced to 9.71 percent of the population in the second semester of 2022, it remains above 10 percent in some areas. furthermore, the poverty rate in 10 regions ranges from 12 to 27 percent. the rates of poverty in the poorest provinces are in the following table: table 1 the poorest provinces in indonesia 2022 no province 1st semester (in percentage) 2nd semester (in percentage) 1 middle sulawesi 13.00 12.18 2 south sumatera 12.84 12.79 3 west nusa tenggara 14.14 13.83 4 bengkulu 15.22 14.43 5 gorontalo 15.61 15.41 6 aceh 15.33 15.53 7 maluku 17.87 16.30 8 nusa tenggara 20.99 20.44 9 papua barat 21.84 21.82 10 papua 26.86 27.38 source: bps 2022 we need to design a poverty model that contains causes and possible solutions. according to nasim and khan (nasim & khan, 2018), planning natural resources, unemployment, economic situations, and large populations are the reasons for poverty. the president or the king of the country should build proper planning to manage natural resources. sound natural resource planning would reduce poverty (shah, 2012). besides that, the unemployment problem is unsolved. the government, educational institutions, industry, and the public should solve this problem together. the government can support the people and drive to build new job opportunities through taxation and monetary policy. on the other hand, educational institutions can develop skill training or leadership training to produce professional employees to improve quality product sales. a large population probably emerges as another problem for the country. nigeria, one country of the ten countries with the largest population in the world, is one of the poorest countries. nonetheless, on the other, china, with the most significant population, has become the wealthiest country. this condition indicates that the most considerable population does not automatically cause poverty. the largest population can be critical human resources. we need professional management of natural resources and human resources to avoid poverty. furthermore, a country needs financial support from donor organizations. this role becomes an essential role for the zakat institution. this institution collects muzaki funds and distributes them to the needy (takril & othman, 2020). besides zakat, this institution collects infaq and sadaqah too. some research has discussed the effect of the zakat fund on economics. suprayitno investigated the impact of zakat on economic growth in selected countries. he concluded zakat fund influences economic growth (suprayitno, 2020). besides that, choiriyah et al.(2020) observed the effect of the zakat fund on poverty alleviation. they revealed that the zakat fund can alleviate poverty (choiriyah et al., 2020). titin vegirawati, endang kusdiah ningsih, esty naruliza and delfi panjaitan (2022) 60 interdisciplinary journal of educational practice | https://sadipub.com/journals/index.php/ijep however, the effect of zakat on economic growth or poverty alleviation is still low. zakat institutions, as zakat collectors and distributors, should arrange the best way to maximize zakat fund utilization. this institution should make the best innovation to drive productive economics, increase economic growth and reduce poverty. for example, in rural areas, zakat institutions should pay attention to increasing agriculture yields. brazil and china, implement agricultural productivity and technological innovation as strategies to reduce poverty (dhrifi, 2014); (si et al., 2020). meanwhile, in urban, this institution should pay attention to new job opportunities, lack of capital, and income resource access. i.2. objective this study aims to examine the effectiveness of zakat fund distribution in alleviating poverty. ii. literature review 2.1. background theory 2.1.1 poverty poverty is indicated by severe deprivation of basic human needs, including food, safe drinking water, sanitation facilities, health, shelter, education, and information. the poor have no sufficient income, the level that allows a person or household to meet basic needs such as food, clothing, and shelter (cobbinah et al., 2013). uncertain income and spending are the causes of poverty. they force the poor to reside in subpar homes in low-income areas, exposed to pollutants and sweltering temperatures at night. poverty can occasionally result in physical health issues, violence, and crime (ridley et al., 2020) according to the prophet's hadith, extreme poverty can occasionally cause someone to lose faith. they resort to immoral and criminal actions to meet their fundamental requirements. theft, fraud, prostitution, drug abuse, murder, and even suicide are crimes that poor people commit (manshor et al., 2020). several theories discuss the causes of poverty and how to overcome it. according to the theory of individual deficiencies, the poor are responsible for their poverty. this group stated that they prefer hard work, dislike the welfare system, and take personal responsibility. meanwhile, according to the theory of cultural belief systems, poverty is created and maintained in certain societies. according to this theory, the poor are the poor who learn poverty psychologically. on the other hand, they do not know to study hard, plan for the future, have protected sex, or spend money wisely. aside from that, the system can cause poverty. according to the theory of economic, political, and social distortions, economic, political, and social systems cause poverty. people have limited chances and resources to achieve well-being (bradshaw, 2006). moreover, poverty can be caused by geographical disparities. the theory of geographical differences explains rural poverty, ghetto poverty, urban disinvestment, southern poverty, and third-world poverty. the lack of redistribution power causes poverty. poverty, on the other hand, is caused by cyclical factors. according to the cyclical theory of poverty, poverty occurs suddenly due to cyclical events such as natural disasters, health challenges, lack of jobs, and income. these reasons make people have inadequate income, which leads to insufficient consumption and saving. they have inadequate income to invest in training, their children's education, or their own business (addae-korankye, 2019). some anti-poverty programs have been designed to reduce poverty based on the causes of poverty, as explained by five poverty theories. individual deficiencies theory holds that the poor are responsible for their poverty. the government threatens the poor by, for example, suspending aid for an extended time, causing them financial hardship. meanwhile, according to the theory of cultural belief systems, culture is the root cause of poverty. as a result, the government should redistribute the poor and teach them the value of money, investment, and saving. aside from that, the government can promote culture (bradshaw, 2006). titin vegirawati, endang kusdiah ningsih, esty naruliza and delfi panjaitan (2022) 61 interdisciplinary journal of educational practice | https://sadipub.com/journals/index.php/ijep economic, political, and social distortions can all lead to poverty alleviating through systemic changes. system changes are implemented at three levels. the first level is the fundamental level, carried out by social movements such as labor unions, which demand wage increases, or women's organizations, which appeal to job discrimination against women. at the second level, system changes are implemented through alternative institutions with access to poor people's welfare. policy-making institutions implement system changes at the highest levels. minimum wages, easy access to health care, special needs rights, and various insurance and safety nets can all be established for the poor. economic, political, and social distortions can all lead to poverty. while poverty can be caused by political economy and social distortions can be alleviated through systemic changes. system changes are implemented at three levels. the first level is the fundamental level, carried out by social movements such as labor unions, which demand wage increases, or women's organizations, which appeal to job discrimination against women. at the second level, system changes are implemented through alternative institutions with access to poor people's welfare. policy-making institutions implement system changes at the highest levels. minimum wages, easy access to health care, special needs rights, and various insurance and safety nets can all be established for the poor. according to a geographical theory of poverty, responses must be directed toward resolving the fundamental dynamics that lead to a decline in depressed areas while other areas grow. the geographical theory requires community developers to examine places and the processes that allow them to become self-sustaining. interestingly, a few disadvantaged communities worldwide are overcoming poverty and demonstrating it is possible. however, it isn't easy to achieve. government should build a more substantial geographic area. several actions have been taken to create more vital geographic regions, such as improving local industry competitiveness through cluster development, enterprise zone, downtown revitalization, infrastructure investment, community organizing, and national and regional reinvestment (addae-korankye, 2019). the cyclical theory of poverty describes the cycle of education and employment in the community and individual, which creates a spiral of disinvestment and decline. in contrast, on the other side create a progressive community and well-being. people who lack employment opportunities reduce their consumption, diminish the quality of their education, do not have access to health care, and do not invest. on the other hand, people with low education and skills are paid down, causing them to be unable to pay their living expenses. the results of the study show that increasing education through formal education or job training is proven to be able to increase income aiding the poor in becoming self-sufficient is an essential step in reducing poverty. some things and services required are income and economic assets, education and skills, housing and environment, access to medical and other social services, personal ties and networks, personal resources, and leadership skills. while (cobbinah et al., 2013) reveal their review result that poverty in developing countries includes a lack of basic social service, poor health, and poor quality of education. they suggested government and other institutions meet the poor's basic needs. the poor need shelter. sometimes the poor have no shelter or have low-quality housing, with bad sanitary and low-quality water. however, the government serves a low-cost housing program (tunas & peresthu, 2010). the government needs other institutions or organizations to help provide these facilities for the poor. 2.1.2.zakat institution zakat is obligatory muslim alms, one of islam's five pillars. zakat does have not only a personal dimension but also a social dimension (zaenal et al., 2017). in terms of theology, zakat refers to spiritual purity attained by zakat payment, while in terms of language, zakat refers to cleanliness or purification from impurities. titin vegirawati, endang kusdiah ningsih, esty naruliza and delfi panjaitan (2022) 62 interdisciplinary journal of educational practice | https://sadipub.com/journals/index.php/ijep legally, zakat is believed to be the transfer of property to a particular person under specific conditions. two primary zakats are zakat al maal or on wealth and zakat al fitr, which is obligated to all muslims (takril & othman, 2020). muslims are obligated to give zakat maal following their income and assets, such as gold, silver, harvests, or animals. zakat obligation arises when a muslim's wealth has reached the nisab and haul (santoso et al., 2021). the range of variable zakat rates is 2.5 to 10% (omar et al., 2012). besides zakat, alms that are not obligatory or recommended are further divided into two parts: alms ma'nawiyah and alms ma'diyah. ma'nawiyah alms are not always in material form, while ma'diyah alms are alms specifically in material form (belabes, 2019). zakat institutions collect and distribute not only zakat funds but also recommended alms. this institution collects zakat from muzaki and distributes them to eight asnaf as mentioned in al quran, surah at taubah verse 60, i.e. fakr, poor, amil, mualaf, to free slave, debtor, and ibn sabil and fii sabilillah person. zakat institutions act as amil, getting one eight of zakat collected funds. 2.2 previous study there is numerous research that discusses zakat. those studies examine muzaki trust and zakat institutions' contribution to poverty reduction and economic growth. the impact of this institution on converts' life is covered in several other studies. historically, prophet muhammad saw received zakat obligation on wealth in 9ah. in surah at tawbah verse 103, allah commands to take alms of muzaki wealth to purify and clean them. the word “take” means the command to certain people to take and distribute zakat to eight asnaf (nurjanah et al., 2019). in the khalifah era, umar ibn khatab and umar ibn abdul aziz appointed someone to become amil to collect and empower zakat funds. zakat empowerment in these eras successfully eliminated poverty. (omar et al., 2012). many muzaki believe amil zakat or zakat institutions. the numerous zakat institutions that have grown up in indonesia are evidence of this. there have been 91 laz and baznas in indonesia up to this point. muzaki supports zakat institutions for many reasons, including their management performance (vegirawati et al., 2022), transparency (aziz & anim, 2020), and muzaki satisfaction (ahmad & rusdianto, 2018). the institution grows due to the muzaki trust that drives their desire to pay zakat through it. al qur'an surah at tawbah verse 60, zakat distributed to eight asnaf, including the needy, the poor, the 'amil, mualaf, riqab, gharim, ibn sabil, and fi sabilillah (aisyah & ismail, 2019). there are eight asnaf. however, the zakat money does not have to be divided by eight equally. instead, the poor and the needy are prioritised regarding zakat contributions. poverty is indeed a complex issue that has remained unsolved worldwide. zakat institutions are available to assist in resolving this crucial issue (febriyanti, 2020); (aisyah & ismail, 2019). this institution's development immediately enhances its contribution to economic growth (suprayitno, 2020) and poverty alleviation (choiriyah et al., 2020); (abdelbaki, 2013);(dwi putri et al., 2020). the research result revealed zakat empowerment had proved less time for the poor to exit from poverty (dian fitriarni et al., 2019). however, zakat's contribution to economic growth and poverty alleviation is still low (dwi putri et al., 2020); (nurjanah et al., 2019). therefore, it is necessary to modify the distribution management of the zakat fund (rosli et al., 2018). giving zakat directly in the form of money only solves the problem temporarily; it does not address it permanently. zakat institutions must alter how it is distributed in the future to reduce poverty and create new muzaki. as a result, it's crucial to pinpoint the root causes of poverty and take action to eradicate them (omar et al., 2012). titin vegirawati, endang kusdiah ningsih, esty naruliza and delfi panjaitan (2022) 63 interdisciplinary journal of educational practice | https://sadipub.com/journals/index.php/ijep poverty theories such as the theory of individual deficiencies, the theory of cultural belief systems, the theory of economic, political, and social distortions, the theory of geographical disparities, and the cyclical theory of poverty reveal some basic needs to escape from poverty. the demand for income, resources, healthcare and other social services is excellent among the poor. in addition, they require training in leadership, various abilities, networks and education for children. the local economy, enterprise zone, and regional investment are all improving thanks to the government's and other stakeholders' strong backing (bradshaw, 2006). of course, poverty also occurs in rural and urban areas. therefore different actions are needed to solve the problem (addaekorankye, 2019). rural poverty is a challenge that requires unique solutions. shah (shah, 2012) looked into 4 indian states. he concluded that the availability of healthy natural resources influences rural communities' welfare. for farmers' agricultural revenues to remain stable or grow, the government and other stakeholders should protect the quality of the soil, water, and forests. urban poverty is a complicated issue as well. the government and other social-economic systems should use a different approach to solve this issue. aryaningsih (aryaningsih et al., 2018) created a model for reducing urban poverty. they concluded that the government must develop entrepreneurial spirit and business competence to eliminate poverty in metropolitan areas. many studies have examined how zakat money is managed to combat poverty. hoque et al. (hoque et al., 2015) looked into bangladesh's zakat fund management. they found most of the zakat fund had been distributed as asnaf consumption. besides consumption, the zakat fund is distributed as seed money (investment), like cattle, rickshaws, sewing machines, cloth, foodstuffs, tailoring training, financial support for starting a company, farming equipment, and scholarships for underprivileged students. zakat institutions supplied zakat funds for entrepreneur capital augmentation in addition to asnaf spending. a conclusion is drawn from the bangladeshi research. the authors concluded that adding zakat to entrepreneurs' capital had helped women business owners in the nation make more money (anis & kassim, 2016). iii. methodology 3.1. data in indonesia, there are 91 lazs, of which 32 are at the national level, 20 are at the province level, and 39 are at the district and municipal levels. meanwhile, our study uses national laz data that is made public through a website or an annual report. programs for distributing zakat funds served as the research data. this data will be gathered and put into groups before being examined to assess if the program is compatible with the principle of reducing poverty. according to the findings, only 14 of the 32 national lazs disclosed their operations via the website, annual reports, or financial reports. lazs which publish zakat distribution programs as shown in this below table: table 2 lazs which publish zakat distribution programs no name of zakat institution (laz) 1 laz yayasan rumah zakat indonesia 2 laz inisiatif zakat indonesia 3 laz yayasan lembaga manajemen infaq 4 laz yayasan lembaga amil infaq dan shadaqah nahdlatul ulama 5 laz yayasan baitulmaal muamalat 6 lazis muhammadiyah 7 laz perkumpulan persatuan islam (persis)/pusat zakat ummah titin vegirawati, endang kusdiah ningsih, esty naruliza and delfi panjaitan (2022) 64 interdisciplinary journal of educational practice | https://sadipub.com/journals/index.php/ijep 8 laz yayasan kesejahteraan madani 9 laz yayasan griya yatim dan dhuafa, 10 laz yayasan daarul qur'an nusantara 11 laz yayasan panti yatim indonesia al. fajr, 12 laz yayasan hadji kalla 13 laz daarut tauhid peduli/dpudt 14 laz yayasan telaga bijak el zawa, source: data processing result 3.2 analysis method this study used content analysis to analyze data. content analysis is applied to organize collected data, give it significance, and come to reasonable conclusions. the foundation of qualitative content analysis is social science. this approach allows researchers to classify comprehensive reports in various types and frequencies. data is provided in words and themes in qualitative content analysis, allowing for numerous interpretations of the findings (bengtsson, 2016). implementing content analysis involves four steps, the initial stage of context removal. the author defines a meaning unit in this stage, namely the definition of poverty and ways to end each sort of poverty. the second step is recontextualization, which entails including content while omitting waste. the third step is categorization, during which authors locate homogeneous groupings that researchers can triangulate. the final step is to make a compilation by reaching a reasonable conclusion, having members check their coworkers, or conducting an audit. iv. result and analysis according to surah at tawbah verse 60, the eight asnaf, including the needy, the poor, the 'amil, converts, riqab, gharim, ibn sabil, and fi sabilillah receive the money via zakat organizations. however, these eight asnaf groups are not required to get equal shares of the zakat funds. zakat institutions may prioritize the poor and the needy. on the other hand, zakat institution prefers to manage zakat fund to reduce poverty and, ultimately, produce new muzakki. furthermore, zakat institution management consequently regulates to meet consumption needs while funding various programs that will eventually help reduce poverty. poverty theories reveal some basic needs to escape from poverty. the demand for income, resources, healthcare and other social services is excellent among the poor. in addition, they require training in leadership, various abilities, networks, and education for children. the local economy, enterprise zone, and regional investment are all improving thanks to strong backing from the government and other stakeholders. of course, poverty also occurs in rural and urban areas. therefore different actions are needed to solve the problem. zakat institutions that distribute zakat have a variety of programs. these programs are divided into 3 categories in this study that deals with programs aimed at reducing poverty. consumption is the first program, which includes income, resources, medical care, and other social services. the second program, which is focused on education, provides training in leadership, a range of skills, networks, and children's education. the third program focuses on business and investment, including regional investment, enterprise zones, and local economies. the study's findings indicate that zakat organizations have implemented several measures to reduce poverty. this institution hasn't run many other programs, though. the following table contains information about the zakat institutions' program: titin vegirawati, endang kusdiah ningsih, esty naruliza and delfi panjaitan (2022) 65 interdisciplinary journal of educational practice | https://sadipub.com/journals/index.php/ijep r = resource or assets s = social activities h = health lt = leadership training sk = skill n = network ed = education ri = regional investment ez = enterprise zone le = local economic table 3 presented that no single amil zakat institution perfectly executes all projects to reduce poverty. amil zakat institutions run a maximum of seven programs; some only run three. all zakat institutions prioritize basic living expenses, social assistance programs, health, and children's education. essential living expenses are shared with asnaf who are in dire need, such as the needy and poor widows. in addition, the provision of living expenses is usually given at sacred moments, such as during ramadan and feast days. this type of assistance is also given to poor converts and gharim. aid programs that are also a priority are social programs, such as the elderly program and people with special needs, implementation of mass circumcision, delivery of corpses and ambulances, and disaster management. other priority programs are children's educational programs, such as student scholarships, tahfiz student scholarships, and school supplies such as school uniforms, bags, shoes, books, notebooks, etc., for needy and low-income families. recipients of this zakat fund are primary school to undergraduate level students. apart from that, this institution also provides coaching and seminars for teachers. titin vegirawati, endang kusdiah ningsih, esty naruliza and delfi panjaitan (2022) 66 interdisciplinary journal of educational practice | https://sadipub.com/journals/index.php/ijep health is a basic human need. a person can only work, study and worship optimally if physically healthy. some zakat institutions also provided ambulances, patient shelter homes, clinics, or integrated service posts for children to prevent stunting. especially during the pandemic, this institution also provides a package of health protocols. in addition to needing food, clothing, and education, everyone needs a place to live and a place to work. currently, housing is an expensive necessity. therefore, many mustahiq do not have a place to live. some zakat institutions have provided additional assets to mustahiq. laz baitul mall muamalat foundation has given a house to dai, while the zakat institution laz amil infaq and shadaqah nahdatul ulama foundation, lazis muhammadiyah, laz telaga bijak el zawa foundation have renovated the house so that it becomes a more livable house. zakat institutions understand that to get out of poverty, mustahiq must try or work. sometimes the mustahiq who wants to work does not get a job that fits his needs. opening your stall is the right choice. but they did not have a proper booth or cart. several institutions, such as the indonesian zakat initiative laz, muhammadiyah lazis, and the civil welfare foundation las had provided carts several zakat institutions have informed the public about the training activities to increase mustahiq skills. this training is expected to be able to forge mustahiq to have certain skills like training on shaving, sewing, animal development, smart farms, computer training, massage, cupping, digitization, and barista. this training is needed by mustahiq to increase their income. mustahiq does not only need certain skills but also requires leadership. laz baitul mal muamalat, the laz association of indonesian association (persis) ummah zakat center. laz daarut tauhid peduli provides leadership training such as entrepreneurship training, business models, and cost of goods sold calculation. several zakat institutions formed local enterprises, such as bummas, which laz rumah zakat initiated. organic community garden developed by laz baitulmal muamalat, business retail by laz amil infaq foundation and shadaqoh nahdatul ulama, small and medium enterprises in animal husbandry and agriculture by lazis muhammadiyah, madani micro enterprises built by laz civil welfare foundation, daqu agro formed by laz daarul qur'an nusantara, and empowerment of various local products carried out by laz hadji kalla foundation. 4.2 analysis the zakat institution has acted as a collector and distributor of zakat. maal and zakat fitrah. the results of this study indicate that all zakat institutions studied have carried out their role in distributing zakat funds through various program activities. this study's results align with the expression of takril & othman (takril & othman, 2020) that this institution, by using muzaki funds, becomes a donor organization and provides financial support in alleviating poverty. all zakat institutions studied prioritize basic needs, social, health, and educational programs. this priority selection follows the research results, which state that the poor in developing countries experience a shortage of basic needs, poor health, and poor education. (cobbinah et al., 2013). therefore, zakat institutions are here to help meet these basic needs regularly, for example, during ramadan and eid al-fitr. in addition to food and clothing, the poor need shelter. some mustahik own houses of low quality and have no guarantee of ownership. at the same time, others do not own a house at all. in line with tunas & peresthu research result, zakat institutions only give a few houses or renovate them. in a few numbers. the leading cause is the limited amount of funds, and houses and raw materials prices are very expensive. (tunas & peresthu, 2010). furthermore, the institutions care about education. this program has recent and future effects on mustahiq family. in this program, scholarships are given, ranging from primary education to higher education. the titin vegirawati, endang kusdiah ningsih, esty naruliza and delfi panjaitan (2022) 67 interdisciplinary journal of educational practice | https://sadipub.com/journals/index.php/ijep selection of this program is very appropriate. the theory of the cultural belief system revealed that the poor do not study hard and plan for the future. this behavior drives poverty. to exit from poverty, the poor and their young generations must change their way of life by studying hard and planning for the future (bradshaw, 2006). 6 of the 14 zakat institutions studied have implemented a program to provide skills training to mustahiq. this program requires mustahiq families to get specific additional skills. skills enhancement programs can have an impact on the ease of getting a job or getting an increase in income. this opinion is in line with the results of research (haveman et al., 2010), which states that job training can increase revenue by 15 to 25%. three zakat institutions have implemented leadership training programs. this kind of training is needed by certain mustahiq to get out of poverty and become new muzaki. this is in line with the cultural theory which states that the government or other institutions must instill an understanding of the mustahiq regarding the value of money, investment, and saving that entrepreneurs must have (bradshaw, 2006). several zakat institutions have established local economies such as bummas, micro-businesses, agroindustry, or retail businesses. this effort is recommended to be carried out because this program aims to empower society, increase job opportunities, and increase income. the development of this local economy can reduce poverty caused by geographical disparities. communities around this local economy will undoubtedly get various benefits and increase their revenue (addae-korankye, 2019). some programs that need to be carried out to reduce poverty have not been carried out by the zakat institutions studied. the program is to build a network, regional investment program, and enterprise zone. the government should have initiated this program because the government has the budget, and the community can indeed feel the impact of the redistribution of income and reducing inequality (addae-korankye, 2019). another cause is the minimal amount of zakat realization received compared to the potential of zakat itself (vegirawati et al., 2022), so zakat institutions can not implement some programs v. conclusion and recommendation zakat institution is an institution that collects and distributes zakat funds from muzaki to mustahiq. zakat funds are distributed to the eight asnaf listed in the qur'an. the main distribution is in two asnaf, namely the needy and the poor. using the content analysis method, the research results show that zakat institutions have implemented various programs to alleviate poverty, institutions prioritize programs to fulfill basic needs such as food, clothing, health, and education. this option is very appropriate to do in indonesia, because, in developing countries like indonesia, the poor have poor nutrition and low quality of health and education. various disasters often occur, so the institutions must carry out social programs to overcome pre-disaster, during a disaster, and post-disaster recovery. the results showed that the housing program was also conducted in a limited manner. to achieve the goal of reducing poverty, various training institutions are opened for zakat institutions for mustahik, which consists of skills training and leadership training. zakat institutions also developed a local enterprise. on the other hand several programs such as building a network, regional investment, and enterprise zone have not yet been implemented. the low realization of zakat receipts is one of the causes. the government should pay serious attention to the development of zakat institutions by building a regulatory framework that supports the progress of these institutions. muzaki should continue to strive to pay their zakat through zakat institutions so that they can solve the problem of poverty more broadly. reference abdelbaki, h. h. (2013). the impact of zakat on poverty and income inequality in bahrain. review of integrative business and economics research, 2(1), 133–154. titin vegirawati, endang kusdiah ningsih, esty naruliza and delfi panjaitan (2022) 68 interdisciplinary journal of educational practice | https://sadipub.com/journals/index.php/ijep addae-korankye, a. (2019). theories of poverty: a critical review. journal of poverty, investment and development, 48, 55–62. https://doi.org/10.7176/jpid/48-08 ahmad, z. a., & rusdianto, r. (2018). the analysis of amil zakat institution/lembaga amil zakat (laz) accountability toward public satisfaction and trust. muqtasid: jurnal ekonomi dan perbankan syariah, 9(2), 109. https://doi.org/10.18326/muqtasid.v9i2.109-119 aisyah, s., & ismail, n. (2019). the distribution of zakat at the time of caliph umar ibn khattab. aliktisab: journal of islamic economic law, 3(2), 71–78. https://doi.org/10.21111/al-iktisab.v3i2.3908 anis, f. m., & kassim, s. h. (2016). effectiveness of zakat-based programs on poverty alleviation and economic empowerment of poor women: a case study of bangladesh. journal of islamic monetary economics and finance, 1(2), 229–258. https://doi.org/10.21098/jimf.v1i2.539 aryaningsih, n., irianto, k., arsana, m. m., & suarbawa, k. j. (2018). model of urban poverty alleviation through the development of entrepreneurial spirit and business competence model of urban poverty alleviation through the development of entrepreneurial spirit and business competence. kthe 2nd international joint conference on science and technology (ijcst) 2017, 1–7. aziz, m. r. a., & anim, n. a. h. m. (2020). trust towards zakat institutions among muslims business owners. jurnal ekonomi & keuangan islam, 6(1), 1–9. https://doi.org/10.20885/jeki.vol6.iss1.art1 belabes, a. (2019). zakat as a pluridimensional concept. international journal of zakat, 4(1), 67–75. https://doi.org/10.37706/ijaz.v4i1.165 bengtsson, m. (2016). how to plan and perform a qualitative study using content analysis. nursingplus open, 2, 8–14. https://doi.org/10.1016/j.npls.2016.01.001 bradshaw, t. k. (2006). theories of poverty and anti-poverty programs in community development theories of poverty and anti-poverty programs in (issues 06–05). choiriyah, e. a. n., kafi, a., hikmah, i. f., & indrawan, i. w. (2020). zakat and poverty alleviation in indonesia: a panel analysis at provincial level. journal of islamic monetary economics and finance, 6(4), 811–832. https://doi.org/10.21098/jimf.v6i4.1122 cobbinah, p. b., black, r., & thwaites, r. (2013). dynamics of poverty in developing countries: review of poverty reduction approaches. journal of sustainable development, 6(9). https://doi.org/10.5539/jsd.v6n9p25 dhrifi, a. (2014). agricultural productivity and poverty alleviation: what role for technological innovation. journal of economic and social studies, 4(1), 131–151. https://doi.org/10.14706/jecoss11418 dian fitriarni, s., irfan syauqi, b., & wiwiek rindayati. (2019). investigating the impact of zakat on poverty alleviation : a case from west sumatra, indonesia. international journal of zakat, 4(2), 1–12. https://doi.org/10.37706/ijaz.v4i2.180 titin vegirawati, endang kusdiah ningsih, esty naruliza and delfi panjaitan (2022) 69 interdisciplinary journal of educational practice | https://sadipub.com/journals/index.php/ijep dwi putri, y., kartika, r., & aprayuda, r. (2020). apakah dana zakat dapat mengurangi tingkat kemiskinan ?: studi kasus provinsi sumatra barat. jurnal tabarru’: islamic banking and finance, 3(2), 248–261. https://doi.org/10.25299/jtb.2020.vol3(2).5818 febriyanti, n. (2020). the review of islamic law on the distribution of zakat directly by muzaki to mustahik in the sunan ampel religious tourism area in surabaya. iqtishaduna, 11(2). https://journal.uinmataram.ac.id/index.php /iqtishaduna/ article/view /2845 haveman, r., blank, r., maffirt, r., smeeding, t., & wallace, g. (2010). the war on poverty: 50 years later. journal of policy analysis and management, 34(3), 593–638. https://doi.org/10.1002/pam hoque, n., khan, m. a., & mohammad, k. d. (2015). poverty alleviation by zakah in a transitional economy: a small business entrepreneurial framework. journal of global entrepreneurship research, 5(1). https://doi.org/10.1186/s40497-015-0025-8 manshor, z., abdullah, s., & hamed, a. b. (2020). poverty and the social problems. international journal of academic research in business and social sciences, 10(3), 614–617. https://doi.org/10.6007/ijarbss/v10i3/7076 nasim, z., & khan, i. (2018). solving poverty using ontology. the 10th international joint conference on knowledge discovery, knowledge engineering and knowledge management, september 2019, 271– 278. https://doi.org/10.5220/0006944102710278 nurjanah, f., . k., & . j. (2019). the impact of economic growth and distribution of zakat funds on poverty (survey in the third district of west java province period 2011-2016). the 2nd international conference on islamic economics, business, and philanthropy, 2, 55–70. https://doi.org/10.18502/kss.v3i13.4195 omar, n., hanapi, m. s., & khusyairi, a. (2012). zakat and poverty alleviation: roles of zakat institutions in malaysia related papers t he zakat fund and non-muslims in malaysia. international journal of arts and commerce, 1(7), 61–72. parisi, s. al. (2017). overview of forecasting zakat collection in indonesia using multiplicative decomposition. international journal of zakat, 2(1), 45–59. https ://ijazbaznas.com/ index.php /journal /article/view/14 ridley, m., rao, g., schilbach, f., & patel, v. (2020). poverty, depression, and anxiety: causal evidence and mechanisms. science, 370(1289), 1–14. https://doi.org/10.1126/science.aay0214 rosli, m. r., salamon, h., muhamad, n. h. n., zulkifli, a. h., & ahmad, s. m. s. (2018). modification of zakat distribution management for muslim community well-being. international journal of academic research in business and social sciences, 7(12), 1257–1264. https://doi.org/10.6007/ijarbss/v7-i12/3761 santoso, s., cahyono, y., wafirotin, k. z., dessy, r., & ayutika, n. (2021). an analysis of muzaki’s behavior in paying zakat mal and factors influencing it: the perspective of the theory of planned behavior. journal of islamic finance and accounting, 4(2). https://doi.org/10.22515/jifa.v4i2.4912 titin vegirawati, endang kusdiah ningsih, esty naruliza and delfi panjaitan (2022) 70 interdisciplinary journal of educational practice | https://sadipub.com/journals/index.php/ijep shah, a. (2012). poverty and natural resources: understanding the dynamics in the content of dryland regions in western india. ssrn electronic journal, bilsborrow, 1–28. https://doi.org/10.2139/ssrn.1756848 si, s., ahlstrom, d., wei, j., & cullen, j. (2020). business, entrepreneurship and innovation toward poverty reduction. entrepreneurship and regional development, 32(1–2), 1–20. https://doi.org/10.1080/08985626.2019.1640485 suprayitno, e. (2020). the impact of zakat on economic growth in 5 state in indonesia. international journal of islamic banking and finance research, 4(1), 1–7. https://doi.org/10.46281/ijibfr.v4i1.470 takril, n. f., & othman, n. f. (2020). effectivenes of zakat collection and distribution of zakat counter at higher learning institution. international journal of islamic economics and finance research, 3(2), 2636–9419. tunas, d., & peresthu, a. (2010). the self-help housing in indonesia: the only option for the poor? habitat international, 34(3), 315–322. https:/ /doi.org/10.1016/j. habitatint.2009.11.007 vegirawati, ti., junaidi, & meirawati, e. (2022). motivational reasons and muzaki intention to pay through zakat institution. akuntabilitas, 16(1), 61–82. zaenal, m. h., choirin, m., tsabita, k., astuti, a. d., & sadariyah, a. s. (2017). principles of amil zakat and best practice recommendations for zakat institutions. in baznas working paper series (issue december).http://www.puskasbaznas.com/publication/index.php/workingpaper/article/view/19%0a http://www.puskasbaznas.com/publication/index.php/workingpaper/article/download/19/15 contents american interdisciplinary journal of business and economics issn: 2837-1909| impact factor : 4.6 volume. 9, number 2; april-june, 2022; published by: scientific and academic development institute (sadi) 8933 willis ave los angeles, california https://sadipub.com/journals/index.php/aijbe 23 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe new insights into the determinants of the urban-rural income gap in china 1chen li and 2xong wu 1school of economics, nankai university, china 2university of birmingham, uk abstract: this article analyzes the determinants of the urban-rural income gap in china by taking the endowment structure as a starting point. the paper proposes a theoretical hypothesis and proves it with a mathematical model, demonstrating that policy measures can effectively narrow the urban-rural income gap by narrowing the urban and rural endowment structure gap. the authors used china's provincial panel data from 2006 to 2019 to empirically test the theoretical model. the paper also summarizes previous literature on the impact of industrial structure upgrading on the urban-rural income gap and unifies the impact of policy factors and economic factors on the upgrading of the endowment structure to provide a general analytical framework for studying their relationship. the study concludes that the fluctuation of the endowment structure difference in urban and rural areas fundamentally determines the urban-rural income gap. overall, the article highlights the importance of narrowing the urban and rural endowment structure gap through policy measures to reduce the urban-rural income gap in china. keywords: china, endowment structure, urban-rural income gap, policy measures, industrial structure upgrading, comparative advantage. introduction china's rapid economic growth has led to a significant urban-rural income gap, which has become a major challenge to the sustainability of its development. the impact of urbanization and industrialization on the urban-rural income gap has been widely discussed, but the role of the endowment structure in determining the gap has not been fully explored. this article aims to analyze the determinants of the urban-rural income gap in china by taking the endowment structure as a starting point. the paper proposes a theoretical hypothesis and proves it with a mathematical model, demonstrating that policy measures can effectively narrow the urban-rural income gap by narrowing the urban and rural endowment structure gap. the study also used china's provincial panel data from 2006 to 2019 to empirically test the theoretical model. the paper summarizes previous literature on the impact of industrial structure upgrading on the urban-rural income gap and unifies the impact of policy factors and economic factors on the chen li and xong wu (2022) 24 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe upgrading of the endowment structure to provide a general analytical framework for studying their relationship. overall, the article highlights the importance of narrowing the urban and rural endowment structure gap through policy measures to reduce the urban-rural income gap in china. the study is significant in advancing the understanding of the determinants of the urban-rural income gap in china and provides insights for policymakers to effectively address this challenge. 2. theoretical hypothesis in new structural economics, endowment structure represents the economic resources that an economy can use at a certain point, and it is the basis for establishing the industrial structure. at the same time, heterogeneous industries have heterogeneous demands for endowment, so the need for different levels of industrial structure for endowment structure is different. only when the demand for endowment structure matches its supply, can the optimal industrial structure that maximizes labor productivity be established. justin yifu lin (2019) regards the per capita capital stock as the core of the endowment structure, this paper also uses it to express the endowment structure. this choice conforms to the reality and theoretical logic of the urban sector. for the rural sector, the reason for choosing per capita capital stock are as follows: on the one hand, the land endowment can be regarded as exogenous which is difficult to accumulate; on the other hand, the rapid economic growth depends fundamentally on the accumulation of capital factor, the latter can increase the capital investment to purchase equipment and improve the production efficiency. therefore, this paper chooses per capita capital stock to represent the endowment structure to explain the fluctuation of the urban-rural income gap. on this basis, the accumulation of endowment structure refers to the increase of per capita capital stock through investment, and the flow of endowment structure refers to the flow of capital and labor between urban and rural areas, which causes the change of per capita capital stock. first, it is assumed that at an initial time point, there is no accumulation and flow of endowment and policy influence. the initial endowment structure of urban and rural sectors determines the initial optimal industrial structure and then determines the initial output level of urban and rural sectors, which determines the initial urban-rural income gap. specifically, in the initial state, the rural sector is relatively scarce in capital and rich in labor, so the per capita capital stock is relatively low. the urban sector is relatively rich in capital and scarce in labor, and the per capita capital stock is relatively high. therefore, under the theoretical framework of optimal industrial structure, the optimal industrial structure in the rural area is labor-intensive, which determines the relatively low output level of the rural area. however, the optimal industrial structure of the urban sector is capital-intensive, which determines the relatively higher output level of the urban area. thus, the first hypothesis of this paper is obtained: hypothesis 1: the initial difference in the level of endowment structure fundamentally determines the difference in per capita output between the urban and rural areas, and thus determines the initial urban-rural income gap. second, relax the assumption that there is no endowment accumulation, and consider the change of urbanrural income gap determined by the difference of initial endowment structure and endowment accumulation. according to the solow model, the growth of per capita capital stock depends on the output level, savings rate, and depreciation rate, assuming that there is no difference in depreciation rate between two areas. among them, the output level is fundamentally determined by the initial endowment structure level. the savings rate depends on the capital income, and the latter is endogenously and determined by the initial endowment structure. therefore, the savings rate is fundamentally determined by the initial endowment structure level, and the higher the latter, the higher the savings rate. therefore, under the condition that both urban and rural chen li and xong wu (2022) 25 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe areas conform to the comparative advantage to establish the optimal industrial structure, the capital accumulation level of urban sectors is higher. 2. it is assumed that the growth rate of the labor force in the two areas is the same. the change in the ratio of capital stock to labor force determines the level of endowment accumulation. the endowment structure of the urban area accumulates relatively faster, which aggravates the urban-rural output gap and the urban-rural income gap. this leads to the second hypothesis. hypothesis 2: when the urban and rural sectors are separated from each other and conform to their comparative advantage to establish industry, the initial endowment structure gap determines that the endowment accumulates faster in the urban area, expanding the urban-rural output gap, and ultimately expanding the urban-rural income gap. third, relax the assumption that there is no endowment flow. 1. consider capital flow. under the condition that capital can flow freely between urban and rural areas, the direction of capital flow depends on the difference in capital return between the two sectors. the amount of capital flow depends on the level of capital accumulation and the flow ratio, which is positively related to the absolute amount of the urban-rural income gap. as the capital income level in the urban sector is higher, the capital will flow from rural to urban. the income level, savings rate, and flow ratio of the rural sector jointly determine the amount of capital flow from rural to urban. 2. consider labor mobility. when the labor force can flow freely, the urban-rural income gap determines that the labor force flows from the countryside to the city. the quantity of labor mobility depends on the quantity of rural labor and the proportion of rural labor mobility, which is positively related to the urban-rural income gap. under the influence of economic factors, the capital and labor force will both flow from the countryside to the city. therefore, it is impossible to determine the impact of endowment flow on the difference in the upgrading speed of the endowment structure between two areas through qualitative analysis, and it is impossible to determine the direction of its impact on the urban-rural output gap and the urban-rural income gap. this needs to be further analyzed in combination with policy factors. fourth, relax the assumption that there is no policy impact. 1. the endowment flow is affected not only by economic factors, but also by policy factors, and the effect of the latter is often greater than that of the former. in china's economic reality, urban-biased policies have existed for a long time since the three major reforms, including the registered residence system, the urban-biased welfare system, and fiscal policies. these urbanbiased policies will accelerate the capital flow from rural to urban areas, and limit or promote the labor flow according to the need of urban development: labor flow will be restricted when there is too much labor supply in cities, and labor flow will be promoted when labor is inefficient in cities. urban-biased policies and economic factors jointly promote the capital flow from rural to the urban areas, while the regulation of the labor force fluctuates, it will promote the upgrading of the urban endowment structure in general, which will be compounded with the endowment accumulation to expand the urban-rural income gap. when the urban-biased policy leads to a large income gap between urban and rural areas, there are sometimes rural biased policies, including increasing the purchase price of agricultural products, relaxing the household registration system, and increasing government subsidies, which are mixed with economic factors to reduce or reverse capital transfer, accelerate the labor flow to cities, and make the output growth of rural area faster than that of cities in a certain period time. it can offset the expansion of the urban-rural output gap caused by the effect of endowment accumulation to a large extent, thereby narrowing the urban-rural income gap. based on hypothesis 1 and hypothesis 2, the core hypothesis of this paper is obtained by adding the effect of endowment flow. hypothesis 3: the fluctuation of the difference in the endowment structure, which is jointly determined by the difference in the initial endowment structure, the effect of endowment accumulation and endowment flow, chen li and xong wu (2022) 26 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe fundamentally determines the fluctuation of the output gap between urban and rural sectors, and ultimately determines the fluctuation of the urban-rural income gap. this is the core theoretical hypothesis of this paper, which is then demonstrated by a mathematical model and empirical test respectively. 3. mathematical model 3.1 theoretical basis: endowment structure, industrial structure, and optimal per capita income 3.1.1 profit maximization and optimal per capita income set the production function and per capita output function as: y = f(k, l) = akαl1−α，y = f(k, l) = akα (1) assume that the factor density feature is α and it is constant, technology progress rate a is exogenous, p is the exogenous price of products, and the profit function of per capita output is: 𝜋�(𝑥�) = 𝑝�𝑦� − 𝑟�𝑥� − 𝑤� (2) w is the wage per worker and r and x represent respectively the unit price and quantity of per capita capital. suppose that the per capita income of the previous period is all used for the production activities in the next period, that is rx + w = py0. py is the per capita nominal income of the current period, π(x) represents the new value created by the unit labor force, and the per capita income of the current period is equal to the per capita income of the previous period determined by exogenous factors plus the new value created by personal labor of the current period: py = π(x) + rx + w (3) the logic of neoclassical economic theory is that a single department chooses the input level of factors to pursue the maximization of profits: 𝑚�𝑎�𝑥�*𝜋�(𝑥�) = 𝑝�𝑦� − 𝑟�𝑥� − 𝑤�+ (4) (5) under the given exogenous conditions that y0 = rx + w, the maximization of profit in the current period is equivalent to the maximization of per capita income in the current period, that is, the optimal per capita income is: 𝑚�𝑎�𝑥�*𝑝�𝑦� = 𝜋�(𝑥�) + 𝑟�𝑥� + 𝑤�+ (6) 3.1.2 optimal industrial structure and optimal per capita income relax the assumption that the feature of factor density α is exogenous, and establish the optimal industrial structure by selecting the feature of factor density. let the value creation function of the labor force be: (7) the optimal industrial structure is determined by making the supply and demand of the endowment structure equal, that is x = k, to maximize the value created by the labor force, that is, maximize the labor productivity: (8) (9) the structure change equation is obtained: (10) the per capita income function is: pf(α(k)) = π(x) + rk + w = pakα (11) (12) the supply of endowment structure is given as k, and ， because 1 ≥ α ≥ 0, so k ≥ e and the above function can be written as: (13) chen li and xong wu (2022) 27 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe given the level of price p and endowment structure k, the optimal per capita income increases with the increase of factor density α. at this time, the maximization of the value created by the labor force is realized at the same time as the maximization of the profit, the latter is equivalent to the maximization of the per capita income. the structural change equation reveals that the level of the endowment structure determines the optimal industrial structure which is the result of labor productivity maximization. 3.1.3 endowment structure level and optimal per capita income relax the assumption that k is exogenous: (14) (15) therefore, given the price and technology level, the optimal per capita income is fundamentally determined by the level of the endowment structure, and the above reveals the path that the endowment structure determines the optimal per capita income. 3.2 initial endowment structure of two sectors, endowment accumulation and the widening of the urbanrural income gap 3.2.1 initial endowment structure, endowment accumulation and optimal per capita income in the rural area suppose that the production function of the rural sector and per capita production function is: yr = fr(k, l) = ark αl1−α, yr = fr(k, l) = arkr α (16) the initial endowment structure supply of the rural sector is kr, and the optimal production structure to maximize the value of rural labor is . therefore, the initial optimal per capita income in the rural sector is: (17) the price level and technical level are exogenous. relax the assumption that there is no endowment accumulation, consider the accumulation effect based on the initial endowment structure, and consider the impact of the endowment accumulation on the optimal per capita income growth. first, consider the change in the capital stock in the rural sector: ∆kr = srf r(α(k)) − δrkr (18) sr represents the savings rate of the rural sector, fr(α(k)) represents the total output of the rural sector, δrkr represents the capital depreciation and assumes that the depreciation rate is exogenous. the steady state of capital, consumption, and gold saving rate is available: (19) (20) (21) (22) therefore, the level of the savings rate is fundamentally determined by the level of the endowment structure, which rises with the accumulation of the endowment structure. then, consider the change in the labor force in the rural sector: ∆lr = nrlr (23) nr represents the net growth rate of the rural labor force that is exogenous. thus, the accumulation level of the endowment structure can be obtained: (24) chen li and xong wu (2022) 28 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe then we can get the growth rate of the endowment structure: (25) the growth rate of the endowment structure increases with the increase of the savings rate, while the savings rate increases with the accumulation of the endowment. therefore, given the exogenous depreciation rate and the net growth rate of labor, the accumulation level of the endowment is fundamentally determined by the level of the initial endowment structure. then consider the upgrading of the industrial structure of the rural sector: (26) (27) (28) (29) μαkr represents the elasticity of α and kr. it can be seen that the upgrading speed of the industrial structure depends on the accumulation speed and supply level of the endowment structure. finally, consider the optimal per capita income change in the rural sector. per capita output growth in the rural sector: lnyr = αlnkr (30) (31) therefore, the growth rate of per capita output is equal to the growth rate of the endowment structure. the latter is determined by the level of the savings rate, which is fundamentally determined by the supply level of the initial endowment structure. therefore, the optimal per capita output growth rate of the rural sector is fundamentally determined by the supply level of its endowment structure. the initial optimal per capita income of the rural area is known as: (32) after considering the accumulation of endowment, the optimal per capita income of the rural sector in the first period is: (33) 3.2.2 initial endowment structure, endowment accumulation, and the optimal per capita income of the urban sector set the urban sector production function and per capita production function as: yu = fu(k, l) = auk βl1−β，yu = fu(k, l) = auku β (34) the initial endowment structure supply of the urban sector is ku > kr. thus, the optimal industrial structure of the urban sector can be obtained as: (35) the initial optimal per capita income of the urban sector is: (36) the price level and technical level are exogenous. the change in total capital in the urban sector is: ∆ku = suf u(β(k)) − δuku (37) su represents the savings rate of the urban sector, fu(β(k)) represents the total output of the urban sector, and δuku represents the depreciation of capital, assuming that the depreciation rate is exogenously given. the saving rate that maximizes steady-state consumption is: (38) chen li and xong wu (2022) 29 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe next, consider labor force changes in the urban sector: ∆lu = nulu (39) nu represents the net growth rate of the labor force in the urban sector. thus, the accumulation and growth rate of the endowment structure can be obtained: (40) (41) consider the upgrading of the industrial structure of the urban sector: (42) (43) considering the optimal per capita income growth of the urban sector, the optimal per capita output growth rate of the urban sector is: (44) the initial optimal per capita income of the city is: (45) after considering the accumulation of endowment, the optimal per capita income of the urban sector in the first period is: ) (46) 3.2.3 the change in urban-rural endowment structure difference and the widening of the urban-rural income gap the initial endowment structures of urban and rural sectors are kr and ku respectively. the difference in the initial endowment structure is ku − kr. after the accumulation of endowment structure, the urban-rural endowment structures are ) and respectively. since the level of the endowment structure determines the level of the saving rate, the gap of the initial endowment structure determines the difference in the saving rate and endowment accumulation, which expands the gap of endowment structure between the two areas. the gap in endowment structure in the first period is: (47) the widening gap in endowment structure brings about the widening of the urban-rural income gap: (48) 3.3 the endowment flow of the two sectors and the fluctuation of the urban-rural income gap 3.3.1 the endowment flow of the rural sector and the optimal per capita income the direction of capital flow depends on the urban-rural capital income gap and policy impact. the amount of capital flow depends on the savings rate, output level, and capital flow rate. the capital flow rate depends on the urban-rural income gap and policy impact. first, consider capital flows. the capital gains of urban and rural sectors are: (49) the gap in the endowment structure of urban and rural sectors determines that the level of capital returns of urban sectors is higher: ru > rr (50) chen li and xong wu (2022) 30 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe therefore, under the influence of economic factors, capital flows from rural to urban areas. this is different from the traditional conclusion. according to neoclassical economics, when other factors remain unchanged, marginal productivity decreases with the increase of capital investment. therefore, capital will flow from urban areas with low capital prices to rural areas with high capital prices. this analysis only considers the supply and demand factor of the endowment structure but neglects the influence of structural factors. in the theory of optimal industrial structure, the per capita capital price r depends on the combined effect of the supply and demand factors of the endowment structure and the level of industrial structure. the increase in capital investment in urban areas will not lead to the decline of the marginal price, on the contrary, its marginal contribution will increase, which makes the per capita capital price higher in the urban sector with abundant capital. in addition, in the presence of policy impact, urban-biased policies and urban-rural capital income gap will compound to accelerate the flow of capital from rural to urban areas. the impact of rural-biased policy on capital flow is opposite to the impact of the urban-rural capital income gap, and the former will reverse the direction of capital flow, making capital flow from cities to villages. second, consider the amount of the capital flow. the change of rural capital after considering capital flow is: ∆kr = srf r(α(k)) − (φsrf r(α(k)) − ϵsuf u(β(k))) − δrkr (51) φsrf r(α(k)) represents the capital transferred from the countryside to the city, and ϵsuf u(β(k)) represents the capital transferred from the city to the countryside. srf r(α(k)) − δrkr represents the capital accumulation effect and (φsrf r(α(k)) − ϵsuf u(β(k))) represents the net outflow of capital from the rural sector. it reflects the compound effect of capital flow and accumulation. under the influence of purely economic factors, (φsrf r(α(k)) − ϵsuf u(β(k))) is positive, which means capital flow from rural to urban areas. φ is positively related to the level of the urban-rural income gap, and ϵ is negatively related to the amount of the urban-rural income gap. then we consider the influence of policy factors. when the policy is urban-biased, the amount of net capital outflow is positively related to the policy strength, φ is positively related to the policy strength, and ϵ is negatively related to the policy strength. the urban-rural income gap and policies will compound to increase net capital outflows. when the policy is rural-oriented, the net capital outflow quantity is negative, and the net capital outflow quantity is negatively correlated with the policy intensity, φ is negatively correlated with the policy intensity, and ϵ is positively correlated with the policy intensity. since china is a socialist country, policy factors will play a more important role than economic factors and bring net capital inflow to the countryside. the direction of labor mobility depends on the urban-rural wage gap and policy impact, the number of labor mobility depends on the number of rural laborers and the proportion of migration, and the proportion of migration depends on the urban-rural wage gap and policy impact. first, consider the direction of labor mobility. wages of urban and rural departments are respectively: (52) wu > wr (53) therefore, under the influence of economic factors, the direction of labor flow is from the rural areas to urban areas. second, consider the number of rural labor flows. the change in rural labor after considering labor mobility is: ∆lr = nrlr − ωlr = (nr − ω)lr (54) ω indicates the proportion of labor mobility. under normal circumstances, there is almost no labor flow from cities to villages, so it is not considered. the quantity of labor transfer depends on the total amount of labor and the mobility ratio, which is positively related to the urban-rural wage gap. when the policy is urban biased, chen li and xong wu (2022) 31 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe ω may be negatively related to the policy intensity or positively related to the policy intensity, because the demand for urban labor will fluctuate in different stages. when the policy is rural biased, it is positively related to the policy intensity and accelerates the transfer of the labor force. third, consider the growth of rural endowment structure that joins in the flow of endowment structure. the growth formulas of rural capital and labor force are: ∆kr = srf r(α(k)) − δrkr − (φsrf r(α(k)) − ϵsuf u(β(k))) (55) ∆lr = (nr − ω)lr (56) the modified endowment structure growth formula is obtained: (57) is the difference between the unmodified endowment structure growth formula and the modified endowment structure growth formula, which represents the flow effect of the endowment. the first item is the decrease of per capita capital caused by capital outflow from rural sectors, the second item is the increase of per capita capital caused by the capital inflow, and the third is the increase of per capita capital caused by labor outflow. the growth formula of the endowment structure reflects the combined effect of the accumulation effect and the flow effect of the endowment. the growth rate of the endowment structure is: (58) the optimal per capita income in rural areas is determined by the accumulation effect and mobility effect of the endowment: (59) the flow effect will fluctuate with policy bias, and the direction of its influence cannot be analyzed in a blanket way. when the policy is rural-biased, the outflow effect of the endowment structure is small or even negative. under the compound effect of the endowment accumulation effect and flow effect, the endowment structure and the optimal per capita income of rural areas increase rapidly. when the policy is urban-biased, the outflow effect of the endowment is positive, which will offset the accumulation effect of endowment in the rural areas, hindering the upgrading of rural endowment structure and the growth of optimal per capita income. 3.3.2 flow of urban sector endowment and optimal per capita income the formulas for the growth of capital and labor in the urban sector with capital flows are: ∆ku = suf u(β(k)) − δuku + φsrf r(α(k)) − ϵsuf u(β(k)) (60) ∆lu = nulu + ωlr (61) the modified endowment structure growth formula of the urban sector is: (62) compared with the unmodified growth formula of urban endowment structure, there are three different items, which represent the flow effect of the endowment. the first item is the increase of per capita capital caused by rural capital inflow, the second item is the decrease of per capita capital caused by urban capital outflow, and the third item is the decrease of per capita capital caused by population inflow. then we can get the growth rate of the endowment structure: (63) the optimal per capita income of the urban sector in the first phase determined by the accumulation effect and mobility effect of the endowment is: chen li and xong wu (2022) 32 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe } (64) generally, the two effects strengthen each other to promote the growth of the endowment structure and optimal per capita income. however, if the policy is rural biased, the flow effect of the endowment will be negative, which will offset the accumulation effect of endowment and inhibit the growth of the endowment structure and the optimal per capita income. 3.3.3 the flow of endowment and the fluctuation of the urban-rural income gap the gap in the endowment structure in the first phase after joining the endowment flow is: (65) the urbanrural income gap in the first phase after joining endowment flow is: (66) assuming that the policy is urban-biased, the mobility effect of endowment in urban and rural sectors is positive, and both are positively related to the urban-rural income gap and policy strength. the combination of the accumulation effect and the mobility effect of endowment further expands the urban-rural output gap. when the policy is rural biased, the mobility effect of endowment in the two sectors is negative, which makes the endowment structure gap between the two sectors and the urban-rural income gap smaller than when only considering the accumulation effect of the endowment. when the effect is large enough, it can make the urbanrural income gap smaller than the initial income gap. therefore, the urban-rural income gap fluctuates with the fluctuation of the endowment structure gap in different economic development stages. considering the above analysis, this paper verifies the core hypothesis through mathematical models: without considering the price factor, the initial endowment structure gap and the accumulation effect of endowment expand the income gap between urban and rural sectors. the combination of economic factors and policy bias determines the mobility effect of the endowment. the combination of the accumulation effect and the mobility effect of endowment determines the optimal industrial structure of urban and rural sectors, and ultimately determines the fluctuation of the urban-rural income gap in different economic development stages. 4. regression model, variables, and data 4.1 model settings in the mathematical model, hypothesis 1 and hypothesis 2 are the basis of hypothesis 3, and hypothesis 3 is the modeling of economic reality, which is the theoretical core of this paper. the core explanatory variable is the per capita capital stock, which represents the level of the endowment structure. the per capita capital stock data displayed in the statistical yearbook is the final result of the combined effects of the initial endowment structure, the accumulation effect of the endowment structure, and the flow effect of the endowment structure. therefore, it can be directly used as an indicator to measure the level of the endowment structure in the urban and rural sectors. according to the theoretical model and hypothesis 3, this paper believes that the per capita capital stock will have a positive impact on the urban-rural income gap, which is the conclusion to be demonstrated by the empirical test in this part. the following will study the impact of per capita capital stock on china's urban-rural income gap based on provincial panel data from 2006 to 2019. the benchmark regression model is set as follows: gapit 0 1lnk 4xit i it (67) chen li and xong wu (2022) 33 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe i represents the province and t represents the year. gapit represents the urban-rural income gap, lnk represents the logarithm of the ratio of urban-rural per capita capital stock, xit represents control variables, γi is the provincial fixed effect, εit is a random perturbation term. 4.2 variable description 4.2.1 explained variable this paper chooses theil index to measure the urban-rural income gap. theil index refers to the weighted average sum of the logarithms of the ratio of income share and population share in urban and rural areas, where the weight is the income share in urban and rural areas. thiel index is more sensitive to the income changes of people in both the low-income and high-income groups, which is in line with the changes in the urban-rural income gap reflected primarily in the high-income and low-income groups in china. therefore, this paper uses the thiel index to measure the urban-rural income gap. its expression is as follows: (68) y1 and y2 respectively represent the proportion of urban and rural income in total income; p1 and p2 respectively represent the proportion of urban and rural population in total population; x1 and x2 represent the per capita income of the urban and rural population; n1 and n2 represent the number of the urban and rural population. (69) when there is no income gap between urban and rural areas, the income share is equal to the population share, and the theil index is 0, that is, y1=p1, y2=p2. (70) when there exists an income gap between urban and rural areas, the expressions p1, p2, y1 and y2 are substituted into theil index calculation formula to obtain: (71) (72) (73) the greater the urban-rural income gap, the greater the theil index. 4.2.2 explanatory variable this paper selects the logarithm of the ratio of urban and rural per capita capital to measure the difference between urban and rural endowment structures. the perpetual inventory method is adopted to measure the physical capital stock in urban and rural areas of each province. the calculation formula for the physical capital stock is: (74) ki2006 represents the capital stock of region i in the base year 2006, ii2006 represents the fixed asset investment of region i in the base year 2006, g and δ represent the investment growth rate and depreciation rate respectively. among them, the data of ii2006 is taken from the china statistical yearbook, and the value of g is calculated by the formula: (75) and the depreciation rate refers to the data used in the literature. then we can calculate the capital stock of each region in 2006. based on the data in 2006, we can calculate the capital stock for the following years: chen li and xong wu (2022) 34 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe (76) pit refers to the fixed asset price index of year t in region i. this paper selects the provincial consumer price index (last year=100) to measure the price change. this is because the common price change in urban and rural areas can explain the income gap to a certain extent on the one hand, and is conducive to the simplified expression of the equation on the other hand. therefore, this paper selects the consumer price index of each province. 4.2.3 control variables first, the degree of opening up, which is measured by the proportion of total imports and exports of each province in gdp. second, the government's support for agriculture, which is measured by the proportion of the local government's expenditure on supporting agricultural production in local fiscal expenditure. third, the degree of industrialization, which is measured by the proportion of the added value of the secondary industry in gdp. fourth, the urbanization rate, which is measured by the proportion of the urban population in the total population. 4.3 data source the data used in this paper are mainly from the china statistical yearbook, the china rural statistical yearbook, and the database of the national bureau of statistics. among them, beijing, shanghai, tianjin, and chongqing are special samples of municipalities that are not included in this empirical test. at the same time, interpolation and extrapolation are used to supplement some missing data. the sample period of selected data is 2006-2019. 5. empirical results and analysis 5.1 benchmark regression in the analysis of panel data, it is necessary to test the model setting to determine the empirical analysis form of the model. therefore, mixed effect regression is made at first. secondly, the fixed effect regression is carried out. the p value in f test is 0, indicating that fixed effect regression is better than mixed effect regression. thirdly, the random effects model is tested. the lm test rejected the original hypothesis that there are no individual random effects, indicating that the random effect regression is better than the mixed-effect regression. at last, the hausman test indicates that fixed effect regression is better than random effect regression, and we choose the fixed-effect model. next, we will examine the impact of the ratio of urban and rural per capita capital on the urban-rural income gap. table 2 shows the results of benchmark regression from 2006 to 2019. it can be found that the goodness of fit of the model (3) is more ideal which adds control variables and fixed effects of year and provinces. according to model (3), the marginal effect of the endowment structure on the urban-rural income gap is 0.015, which is significant at the level of 5%, indicating that under the control of other factors, the net effect of the endowment structure on the urban-rural income gap is significantly positive, and a 1% increase in the endowment structure will lead to a 0.015 increase in the urban-rural income gap. so hypothesis 3 is verified. table 2. benchmark regression variables (1) theil index (2) theil index (3) theil index lnk 0.019** 0.017*** 0.016** (0.009) (0.004) (0.007) cpi 0.003* 0.002*** 0.003*** (0.002) (0.000) (0.001) chen li and xong wu (2022) 35 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe trade -0.033* -0.062*** (0.019) (0.014) gov 0.118 0.238** (0.106) (0.104) industry 0.456*** -0.054 (0.086) (0.088) constant item -0.213 -0.328*** -0.214 (0.172) (0.054) (0.145) year fixed effect not control not control control province fixed effect not control not control control observation numbers 378 378 378 r2 0.784 0.539 0.814 note: t values are in parentheses; * ,＊＊, and＊＊＊represent the significance levels of 10%, 5%, and 1%, respectively. the below is the same. 5.2 robustness test 5.2.1 instrumental variable when the urban-rural income gap expands to a certain extent, the government will increase its support for the development of the rural area through rural biased policies, thus increasing the per capita capital stock in the rural areas, which may lead to the emergence of reverse causal problems and result in inconsistent estimates. for example, during 2004-2012, in response to the three rural issues of "agriculture, rural areas, and farmers", the central "no. 1 document" made strategic arrangements and instructions around increasing farmers' output and income, forming a systematic policy framework for strengthening, benefiting and enriching farmers. taking agriculture as an example, the land contract law of the people's republic of china was implemented in 2003, the minimum purchase price policy for rice, wheat, and other agricultural products was introduced in 2004, the direct subsidy policy for grain planting was implemented in 2004, the fine seed subsidy for livestock products was implemented in 2005, the comprehensive subsidy for agricultural materials was implemented in 2006, and the agricultural tax was completely abolished in 2006. during this period, the urban-rural income ratio shrunk from 3.23 in 2004 to 3.10 in 2012. to avoid the endogenous problem caused by the above reverse causality, this paper uses two-stage least squares regression to test the relationship between the endowment structure and the urban-rural income gap. since the urban-rural income gap in each year does not affect the ratio of urban and rural per capita capital stock in the past and meets the exogenous assumption of instrument variables and disturbance terms, this paper uses the ratio of urban and rural per capita capital stock that lags behind two periods as the instrumental variable for 2sls regression and the result is listed in column (4) of table 4. the test of the correlation between instrumental variables and endogenous variables can be identified by the following two tests: first, the value of kleibergen-paap rk lm statistic is 62.011, and the p value is 0.0000<0.01, which strongly rejects the original hypothesis, indicating that tool variables are related to endogenous variables. second, the wald f statistic of the weak instrumental variable test is 541.528, strongly rejecting the original hypothesis, indicating that the instrumental variable is not a weak instrumental variable. according to the results in column (4) of table 4, the marginal effect of the endowment structure on the urbanrural income gap is significantly positive at the level of 1%. at the same time, the regression coefficient of the endowment structure that lags behind two periods is greater than the benchmark case, indicating that the lag chen li and xong wu (2022) 36 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe effect of the endowment structure gap on the income gap may be more important, and hypothesis 3 is still valid. 5.2.2 indicator replacement this paper conducts a robustness test by replacing the thiel index with the logarithm of the ratio of the urbanrural per capita income gap. the results are shown in column (5) of table 4. it can be seen from the results that the marginal effect of the endowment structure on the urban-rural income gap is significantly positive at the level of 1%. hypothesis 3 is still valid. 5.2.3 adding control variable this paper further conducts a robustness test by adding the control variable of urbanization rate, and the results are shown in column (6) of table 3. it can be seen from the results that the marginal effect of the endowment structure on the urban-rural income gap is positive, but its significance has decreased, and it is significant at the 10% level. hypothesis 3 is still valid. table 3. robust test variables (4) iv(2sls) (5) indicator replacement (6) adding control variable lnk 0.031*** 0.040*** 0.014* (0.005) (0.011) (0.007) cpi 0.008*** 0.004 0.003** (0.003) (0.003) (0.001) trade -0.005 -0.172*** -0.044** (0.012) (0.027) (0.019) gov 0.292*** 0.645*** 0.232** (0.088) (0.145) (0.102) industry 0.043 -0.382*** -0.084 (0.033) (0.092) (0.080) urban -0.149 (0.090) constant items -0.890*** 0.707** -0.077 (0.309) (0.340) (0.118) year fixed effect control control control province fixed effect control control control observation numbers 324 378 378 r2 0.530 0.882 0.819 5.3 heterogeneity test this paper examines the impact of the endowment structure gap on the urban-rural income gap in provinces with different government support for agriculture. we calculate the average of government support to agriculture in each province from 2006 to 2019, and take the average of government support to agriculture in the national sample from 2006 to 2019 as the dividing line, then divide the sample into two groups and conduct regression respectively. according to the results in table 4, on the one hand, the impact of the endowment structure gap on the urban-rural income gap is significant at 5% and 10% levels respectively. on the other chen li and xong wu (2022) 37 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe hand, in regions with less government support for agriculture, the regression coefficient of the endowment structure is higher and the impact is more significant, which indicates that the income gap effect caused by the endowment structure change due to policies is higher in these areas. table 4. heterogeneity test variables (7) areas with less support for agriculture (8) areas with great support for agriculture lnk 0.022** 0.013** (0.008) (0.006) cpi 0.003* 0.005** (0.001) (0.002) trade -0.036*** -0.164*** (0.007) (0.041) gov 0.015 0.354*** (0.073) (0.086) industry -0.133 0.004 (0.121) (0.054) constant item -0.164 -0.349* (0.131) (0.211) year fixed effect control control province fixed effect control control observation numbers 196 182 r 0.919 0.778 6. conclusion based on the basic principle of new structural economics, this paper conducts mathematical and empirical analysis of the fundamental determinants and transmission paths of urban-rural income gap fluctuations. first of all, through theoretical analysis and mathematical model, this paper draws the following conclusions: the initial endowment structure determines the accumulation effect of endowment, the mobility effect of the endowment depends on the combined impact of economic factors and policy bias, the effect of accumulation and mobility of endowment jointly determine the change of the endowment structure, the latter determines the upgrading of the optimal industrial structure, and ultimately determines the per capita income level, therefore, the fluctuation of the endowment structure gap in two sectors determines the fluctuation of output growth rate, and ultimately determines the fluctuation of the urban-rural income gap. as a result, this paper answers the question raised earlier: policy factors and industrial structure are upgrading at different economic development stages in china. the fundamental focus of the policy factor is to determine the flow of endowment, which together with the accumulation of endowment determines the upgrading of the industrial structure. the establishment of the optimal industrial structure ensures the improvement of production efficiency and affects the urban-rural income gap by affecting per capita output growth. secondly, this paper uses the provincial panel data of china from 2006 to 2019 to empirically test the relationship between the endowment structure and the urban-rural income gap. the study found that the fluctuation of the endowment structure will determine the fluctuation of the urban-rural income gap. it can be chen li and xong wu (2022) 38 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe seen from the research that the urban-rural income gap in china is not an overnight result, nor is it kuznets's "inverted u" model, but the result of economic factors and policy adjustments in different periods, which is a constantly fluctuating process. economic development itself is not the reason for the widening of the urbanrural income gap. it cannot be expected that the urban-rural income gap will automatically close with economic development like a set procedure. it depends on the industrial structure level of the urban and rural sectors and fundamentally depends on the difference in the endowment structure of the urban and rural sectors. to effectively promote the upgrading of industrial structure and narrow the urban-rural income gap, we must give full play to the role of policies, and promote the upgrading of rural endowment structure by influencing the flow and accumulation of endowment. references buera, f. j., j. p. kaboski, & r. rogerson. (2022). skill biased structural change. review of economic studies, 89(2), 592-625. https://doi.org/10.1093/restud/rdab035 cai fang. (2007). the rural-urban income gap and critical points of institutional change. economic change & restructuring, 40, p189-206. https://doi.org/10.1007/s10644-007-9009-1 chen binkai, & justin yifu lin. (2014). development strategy, urbanization and the urban-rural income gap in china. social sciences in china, 35(01), 81-102+206. https://doi.org/10.1080/02529203.2013.875651 duffy, j., papageorgiou, c., & perez-sebastian, f. (2004). capital-skill complementarity? evidence from a panel of countries. review of economics and statistics, (1), 327-344. https://doi.org/10.1162/003465304323023840 guo ziyi. (2021). out-of-sample performance of bias-corrected estimators for diffusion processes. journal of forecasting, 40(2), 243-268. https://doi.org/10.1002/for.2720 justin yifu lin, cai fang, & li zhou. (1999). the china miracle: development strategy and economic reform. shanghai: gezhi press. justin yifu lin, & fu caihui. (2019). introduction to new structural economic. beijing: higher education press. krusell, p., ohanian, l. e., roís, & rull j. v., etal. (2000). capital‐skill complementarity and inequality: a macroeconomic analysis. econometrica, (5), 1029-1053. https://doi.org/10.1111/1468-0262.00150 lu ming, & chen zhao. (2004). urbanization, urban-biased economic polices, and urban-rural inequality. economic research journal, (06), 50-58. piketty, t. (2019). capital accumulation, private property and rising inequality in china 1978-2015. american economic review, (7), 2469-2496. https://doi.org/10.1257/aer.20170973 wang, y., & x. m. tang. (2019). human capital, industrial dynamics and skill premium. inse working paper no. e2019009. https://x.cnki.net/read/article/javascript:void(0) https://x.cnki.net/read/article/javascript:void(0) https://x.cnki.net/read/article/javascript:void(0) https://x.cnki.net/read/article/javascript:void(0) https://x.cnki.net/read/article/javascript:void(0) https://x.cnki.net/read/article/javascript:void(0) https://x.cnki.net/read/article/javascript:void(0) chen li and xong wu (2022) 39 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe wang, y. (2019). a model of industrialization and rural income distribution. china agricultural economic review, (3), 507-535. https://doi.org/10.1108/caer-02-2019-0030 wang shaoping, & ouyang zhigang. (2007). the rural-urban income disparity and its effect to economic growth in the case of china. economic research journal, 42(10), 44-55. zhang guiwen, & wu liang. (2019). the evolution of income distribution in the dual economic transformation. beijing: social sciences academic press. microsoft word submission final_1.docx american interdisciplinary journal of business and economics issn: 2837-1909| impact factor : 4.6 volume. 9, number 3; july-sept, 2022; published by: scientific and academic development institute (sadi) 8933 willis ave los angeles, california https://sadipub.com/journals/index.php/aijbe 10 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe the impact of the spiral of knowledge framework on innovation quality and cross-regional integration in international r&d teams thompson n department of economics, university of campania l. vanvitelli abstract: the role of knowledge in generating sustainable competitive advantage and innovation is wellrecognized in the literature. however, efficient innovation strategies require a balance between local and nonlocal exploration for new knowledge. in this context, the transfer and integration of tacit and explicit knowledge play a fundamental role in the integration of knowledge across regions. this study proposes a dynamic approach that highlights the importance of the conversion process that expands tacit and explicit knowledge in both quality and quantity. adopting a mixed design method of qualitative and quantitative research methodology, this study verifies the role of the spiral of knowledge in the internationalization of r&d teams, cross-regional integration, and the quality of innovation. the framework of knowledge management process adopted in this research is a revised form of the nonaka and takeuchi model supported by empirical verification. the empirical study focuses on u.s. manufacturing firms. our research aims to expand empirical research related to the role of intellectual capital in the generation of innovation and identifies in detail the factors of the seci model that positively influence the effectiveness and efficiency of innovation. keywords: knowledge management, spiral of knowledge, innovation, internationalization, r&d teams, cross-regional integration, tacit knowledge, explicit knowledge, intellectual capital, seci model. introduction the ability to generate innovation and to protect and use intangible knowledge assets are critical factors for the superior performance of firms. knowledge as a source of sustainable competitive advantage is wellrecognized in the literature. innovation is not only generated endogenously by the enterprise but also derives from the combination of internal ideas with external ones. therefore, an efficient innovation strategy must balance the exploitation of existing knowledge generated by local research with non-local exploration for new knowledge. access to knowledge dispersed in a globalized world requires r&d teams. however, crossregional transfer of tacit knowledge is quite hard even within firm boundaries. the formal and informal mechanisms of transfer and integration of tacit and explicit knowledge within the company play a fundamental role in the integration of knowledge across regions. strong interpersonal relationships between international r&d teams are an important mechanism that facilitates the flow of knowledge in companies. the ways in which these relationships must be developed in order to combine tacit and explicit knowledge involve the thompson n (2022) 11 interdisciplinary journal of educational practice | https://sadipub.com/journals/index.php/ijep knowledge management process. the objective of this research is to verify the role of the spiral of knowledge in the internationalization of r&d teams, cross-regional integration, and the quality of innovation. the framework of knowledge management process adopted in this research is a revised form of the nonaka and takeuchi model supported by empirical verification. this study proposes a dynamic approach that highlights the importance of the conversion process that expands tacit and explicit knowledge in both quality and quantity. 2. literature review the knowledge-creation process knowledge is an important intangible asset of an entity that includes know-how (functional knowledge), know-what (tactical knowledge), and know-why (hypothetical knowledge) (campanella et al., 2014; sanchez and heene, 1997). knowledge can be combined with the already available knowledge or transformed into new knowledge and improved capabilities (chen and huang, 2009). this process is known as knowledge management. indeed, according to other authors, knowledge management is related to innovation (dahiyat, 2015) because it can stimulate the creation of new intellectual capital (du plessis, 2007; huang and li, 2009). for this reason, knowledge and, mainly, the capability to create and utilize knowledge are considered the most important source of a firm’s sustainable competitive advantage (nonaka and toyama,2013). furthermore, some scholars identified knowledge management as a process that turns tacit knowledge in explicit knowledge (li & gao, 2003). the process of transforming tacit knowledge into explicit has been described in the seci model (socialization, externalization, combination, internalization) by nonaka and takeuchi (1995). in the knowledge management literature this model is known as a "spiral of knowledge". socialization is the process through which the tacit knowledge generates new tacit knowledge within physical social relations. this phase is essential to activate the externalization process. externalization is the process through which tacit knowledge becomes explicit through formalization in written documents and operational procedures. in this phase the individual is extracted from the social group and makes his knowledge available to everyone, using the most appropriate tools. combination is the process through which knowledge is transformed from explicit to explicit. in this phase, explicit knowledge is combined with new contents becoming more complex. at this stage some tools facilitate the combination, such as indexing and storage software. internalization is the phase in which knowledge is transformed from explicit to implicit. this phase is an individual process by which the individual enriches and broadens his tacit knowledge. the tool through which this process is called is defined "learning by doing" (nelson, 1982). at this point, after the process of internalization, the individual re-socializes his knowledge and the process resumes from socialization.thus,the movement through the four modes of knowledge conversion forms a spiral, not a circle, because the knowledge is constantly regenerating. this process takes place continuously, generating the spiral of knowledge. distributed r&d and value of innovation although the knowledge is generally intangible in nature, it is becoming widely accepted as a major corporate asset capable of generating sustainable competitive advantage in a business (barney, 1991). the knowledge and capabilities-based views (kbv) has emerged from the resource based view (penrose, 1959) by focusing on intangible resources, rather than on physical assets. in this perspective, knowledge is the most important resource in strategy underlying new value creation (grant, 1996; kogut & zander, 1992). in particular, kogut and zander (1996) define the firms as “a social community specializing in the speed and transfer of knowledge” (p. 503). in literature, there are some basic assumptions concerning knowledge and its role in production. several studies have argued that novel innovations often derive from combination of accessible pieces of knowledge thompson n (2022) 12 interdisciplinary journal of educational practice | https://sadipub.com/journals/index.php/ijep base (arora and gambardella, 1990; nonaka, 1994; utterback, 1994; hargadon and sutton, 1997). diverse knowledge provides more elements useful for new innovative combinations, which gives the opportunity not only for important progress, but also for innovations that suffer from low evaluations as the combinations have unforeseen faults (fleming, 1999).this means that producing a good or service typically requires the combination of multiple types of knowledge (kogut and zander, 1993; lin, wu, chang, wang & lee, 2012). but the main assumption concerning the knowledge is its limited transferability. indeed, while explicit knowledge is easily communicated between individuals and organizations, tacit knowledge is manifest only in its practice. key element to sharing the tacit knowledge are the willingness and capacity of individuals to share with others what they know and to use what they learn (holste & fields, 2010; h.f. lin, 2007; lee endres, endres, chowdhury & alam, 2007). thus, its transfer is costly and slow.in order to overcome this problem, the knowledge integration process allows individuals to apply their specialized knowledge to the production of goods and services (demsetz, 1991). the importance of integrating knowledge, particularly technical knowledge is well established in the field of strategic management, in particular it appears as a unique source of value creation (bartlett and ghoshal, 1989; cantwell and piscitello, 2007; mcevily et al., 2004). in the contemporary business context, innovation represents, especially in some sector, a key source in order to achieve a sustainable position in markets. in this sense, organizational theories agreed that businesses have to develop both exploitative (incremental) and exploratory (radical) innovation (duncan 1976; gupta, smith & shalley, 2006; tushman and o’reilly,1996). according to march’s pioneering paper (1991), firms have to choose between structures that facilitate exploitation (the use of existing knowledge) and those that facilitate exploration (the search for new knowledge). this shows organizational ambidexterity from a trade-off perspective. thus, some authors suggest that in order to achieve an effective strategy for innovation, a balance must be found between the exploration of new and non-local knowledge and the exploitation of existing knowledge (volberda,baden-fuller & van den bosch, 2001). indeed, especially in the actual business context, which is characterized by globalization and international markets, in the management literature increased attention has been paid to involvement of both internal and external sources of knowledge within firm innovation processes to enhance innovation itself (cassiman and veugelers,2006; enkel.,gassmann, & chesbrough 2009; rosenzweig,2016). thus, novel innovations result not just from combining ideas within the firms but from their capacity to share, combine and create new knowledge outside the boundaries of the company (teece,2007). in industries characterized by regime of rapid technological development, the exploration of new, external and differentiated technologies constitutes an important component to have a competitive advantage.trough exploitation mechanism, firms to access ideas, knowledge, skills and technologies within an external environment is commonly called as quadruple helix (carayannis and rakhmatullin, 2014). indeed, in these ever-changing sectors the exploitation of new knowledge and skills is necessary to put in place a true competitive strategy (amburgey, dacin & singh 1996; brockhoff, 1992; calabrese,baum & silverman 2000). thus, biotechnology sector no single firm has internally existing capabilities necessary for innovation success (baum, calabrese & silverman; 2000; gemser , leenders, m. a., & wijnberg; 1996; powell 1996; koput & smith-doerr; shan and song; 1997). according to debresson, and amesse (1991), more significant innovation resources reside in a network and not in the firm alone; and thus firm collaboration for innovation has taken on a global imperative in order to achieve competitive advantage in international markets and manage some of the more complex aspects of innovation projects (hoegl & proserpio, 2004; shan et al., 1994). håkansson and snehota (2002) highlighted the importance of firm collaborations. the authors noted that while a company is a clearly defined within clear boundaries from an organizational point of view, from a resource and activity point of view it is different. an important body of research argued that most significant innovations are not created in isolation, but developed within of a broader context of a network of interdependent relationships (bower, 1993; snehota and håkansson, thompson n (2022) 13 interdisciplinary journal of educational practice | https://sadipub.com/journals/index.php/ijep 1995; du chatenier, verstegen, biemans, mulder & omta,2009).consequently, a company should not be seen as an island, but as a part of a mainland-a network. it is self-evident that technology is becoming increasingly globalized, and this is also evident in the related literature (clark and slotta., 2000; herstad, aslesen & ebersberger, 2014; sørensen and sorenson, 2003).indeed, firms are more likely to increase their reliance on external knowledge in order to achieve innovations for different factors, such as vertical disintegration pressures (langlois, 2003), the difficult appropriation of investments in intangibles (chesbrough, 2003), and also the growth of specialised technology markets (arora, fosfuri & gambardella; 2001).alongside the increasing technology globalization, r&d is currently undergoing a process of globalization (singh,2005) although progress does vary considerably across different sectors and more or less developed countries (asakawa and som, 2008; chen,2003). within such a process, firms have placed increasing focus on establishing networks, leveraging and aligning both their internal and external r&d units around the world (demirbag & glaister, 2010; feinberg and gupta, 2003; perks,2006; watanabe, tsuji & griffy-brown,2001). thus, internationalization of r&d has become important in recent years in response to the increase in technological sophistication. in the internationalization of r&d process, firms reach outside of their boundaries to gain access to knowledge and capabilities that are geographically bound in a foreign location. so, the acquisition of skills is subordinated on the underlying technological capabilities that foster the acquisition of external technologies. thus, only undertaking international r&d activities is not sufficient to achieve increased innovative outcomes. because in r&d process increments to an existing stock of knowledge are facilitated by possessing high levels of existing knowledge stock (ma & lee, 2008), firms with significant amounts of basic r&d may generate greater innovative output through external collaborations. many previous studies have shown the importance of basic r&d when firms expand overseas, acquiring new external knowledge (zahra, ireland, & hitt; 2000). in other words, to be successful, firms must possess existing research capabilities that are complementary capabilities that are to ones they seek in foreign nations and they do own (teece, 1987). according to dyer & singh (1998), complementary resources are “distinctive resources of alliance partners that collectively generate greater rents than the sum of those obtained from the individual endowments of each partner” (pp. 666-667). in the knowledge creation process, it is important being in a network. to date, the literature concerning the question of what factors facilitate or impede the integration of knowledge in firms with global technology strategies is growing (gupta and govindarajan, 2000; håkanson and nobel, 2001, singh, 2008), but the findings of empirical studies are still controversial (chen, huang & lin, 2012; penner-hahn & shave, 2005; selmi 2013; singh 2008; song,2011;thompson,2006). despite these differences,prior studies argued that integration of scientific knowledge across sources in multiple locations (leiponen & helfat,2010) requires the firm’ ability and willingness to assimilate diverse knowledge and skills associated with dispersed r&d. the literature on knowledge integration stated it is possible to define the correlation between the elements concerning the "effectiveness and efficiency of innovation". in fact, while the cross regional and the distribution refer to the efficiency of innovation, the value of innovation refers to the effectiveness of innovation. according to the literature, innovation efficiency is a measure of innovation performance, and it is determined by the cost and the time involved in the innovation project (brown and eisenhardt, 1995; wheelwright and clark, 1992;valle and avella, 2003). instead, the effectiveness of innovation is related to the organizational and managerial characteristics or factors that allow company to grow and innovate (jerezgómez, céspedes-lorente & valle-cabrera, 2005). instead, firms that remain confined to a single location should have an disadvantage respect to firms that use multiple r&d locations, accessing more and more diverse knowledge sources (tzabbar and thompson n (2022) 14 interdisciplinary journal of educational practice | https://sadipub.com/journals/index.php/ijep vestal,2015). frost and zhou (2005) stated that mechanisms useful to the integration of knowledge may increases levels of absorptive capacity among participating units. drawing on the knowledge-based view of the firm, the aim of this research is to find evidence for the following research hypotheses: hypothesis h.1. the factors of the spiral of knowledge positively and significantly influence the quality of innovation hypothesis h.2. the factors of the spiral of knowledge positively and significantly influence the geographic distribution of r&d hypothesis h.3. the factors of the spiral of knowledge positively and significantly influence the crossregional integration 3. sample and methods our analysis is based upon successful patents applied for during between 2016 and 2019. our empirical study focuses on 432 u.s. manufacturing firms.. the sample of patents was obtained from uspto and nber dataset. therefore, according to the literature review, three dependent variables (y) have been identified: value of innovation (y1), geographic distribution of r&d (y2), and cross regional knowledge integration (y3). these variables measure the value of innovation, the r&d distribution and knowledge integration of firms. to investigate the research hypotheses, the relationships between these three variables and 15 independent variables (x) were analyzed by measuring the spiral of knowledge which was proposed by nonaka and takeuchi. the 15 independent variables are factors that affect the knowledge-conversion process in the banking system and can be grouped into the four modes of knowledge conversion using the following classification: socialization: promotion of periodic brainstorming (x1), periodic promotion of internal conferences on specific financial issues (x2), information networking (x3), awards as a means of stimulating knowledge sharing (x4), community of practice (x5), and knowledge sharing fair (x6). externalization: existence of an enterprise content management system (x7), existence of a business process management system (x8), knowledge mapping (x9), and publishing and describing information through metadata (x10). combination: indexing (x11), digital storage (x12), and skills management (x13). internalization: internal staff training system (x14) and storytelling management (x15). finally, the following two control variables that represent the size of team and r&d expenses are: team size (x16), r&d intensity(x17). the definition of each variable is provided in annex 1. hypotheses 1, 2 and 3 are tested by the following models: value of innovation (y1) = f (socialization; externalization; combination; internalization; control variables) geographic distribution of r&d (y2) = f (socialization; externalization; combination; internalization; control variables) cross regional knowledge integration (y3) = f (socialization; externalization; combination; internalization; control variables). the values of the variables were obtained from the following sources: 1) u.s. patents and trademarks office (uspto) with 2) additional data fields made available in a national bureau of economic research (nber) database described by jaffe and trajtenberg (2002) and also used by singh (2008), and 3) questionnaires directly administered to the firms through a computer-aided telephone interviewing (cati) system. thompson n (2022) 15 interdisciplinary journal of educational practice | https://sadipub.com/journals/index.php/ijep the questionnaires were submitted to the same sample of 432 staff directors each year from 2016 to 2019. the use of the cati system enabled a large amount of information on a significant sample of firms to be collected over a four-year period. the questionnaire consisted of 15 closed-ended questions and only two yes / no responses. the simplicity of the electronic questionnaire allowed for a high response rate and the collection of homogenous remarks over the study period. the questions relate to the following information: 1) the periodic promotion by the management of brainstorming among employees, 2) the periodic promotion of internal conferences on specific financial issues, 3) the existence of formal informational networking, 4) the existence of premiums for bank employees with the best innovative ideas, 5) the existence of incentives for bank employees for the creation of a community of practice, 6) the existence of knowledge sharing fairs for bank employees, 7) the existence of an enterprise content management system, 8) the existence of a business process management system, 9) the existence of software for the bank's knowledge mapping, 10) the use of publishing and describing information through metadata, 11) the use of indexing for information created by employees, 12) the use of digital information storage, 13) the existence of a systematic evaluation system and planning of individual members' skills within an organization, 14) the existence of staff training offices, and 15) the use of the storytelling technique for disseminating knowledge in the bank. the model includes a number of binary variables, aimed at taking into account factors that have not been measured by the other variables. the statistical models generally applied for estimating equations where the underlying dependent variable has a non-negligible probability of zero and has a discrete nature are applications and generalizations of the poisson distribution (hausman et al., 1984). with regard to the methodology, hypothesis demonstration was carried out using a fixed negative binomial regression on a set of variables, which is desirable given overdispersion of data. indeed, our data show extra variation that is greater than the mean. the negative binomial model is an generalization of the poisson model that allows the variance of the distribution to grow faster than the mean. in addition, the negative binomial model generates correct standard errors for count data that is overdispersed (cameron and trivedi, 1986). the same methodological approach is used by other authors in similar works (gittelman and kogut,2003; singh,2008) in order to exploit the longitudinal nature of the data. to analyze data we used stata 15. results in order to investigate the relationship between the variables under investigation and to address the research hypotheses, a negative binomial analysis was performed (table 1). the next section contains the discussion about the empirical results, with theoretical and practical implications. table 1. negative binomial regression models (fixed effects) y1 y2 y3 𝑋! 0.096 (8.37)*** 0.001 (0.02) *** 0.017 (1.53) *** 𝑋" -0.062 (-5.35) *** 0.014 (1.05) 0.047 (4.61) *** 𝑋# 0.036 (3.13) ** 0.018 (1.37) 0.015 (1.51) 𝑋$ -0.006 (-0.41) -0.019(-1.39) 0.007 (0.64) 𝑋% -0.036 (-0.81) 0.033(2.51) *** 0.017 (1.68) *** 𝑋& 0.016(1.31) -0.029 (-2.24) *** -0.026(-2.77) *** 𝑋’ 0.140(11.78) *** -0.029 (-2.17) *** -0.096 (-9.48) *** 𝑋( 0.128 (11.5)*** 0.028 (2.06) *** 0.043 (4.33) *** 𝑋) -0.005 (-0.07) 0.050(3.61) * 0.080 (7.85) *** 𝑋!* 0.035(0.002) *** -0.085 (-6.42) ** -0.021 (-2.10) ** thompson n (2022) 16 interdisciplinary journal of educational practice | https://sadipub.com/journals/index.php/ijep 𝑋!! -0.003 (-0.11) 0.047(4.61) *** 0.018(1.78) * 𝑋!" 0.121(10.23) *** -0.009 (-0.68) -0.009 (-0.95) 𝑋!# -0.008(-0.40) 0.028(2.06) ** 0.097(9.71) *** 𝑋!$ -0.009 (-0.46) 0.021(1.54) 0.001(0.01) 𝑋!% -0.004 (-0.14) 0.006(0.61) 0.013(0.71) 𝑋!& 0.002(0.11) 0.006(0.34) -0.000 (-0.04) 𝑋!’ -0.008 (-0.44) -0.003 (-0.19) 0.012(0.71) log likelihood -4,055 -3,736 -5,113 ***correlation is significant at the 0.01 level **correlation is significant at the 0.05 level *correlation is significant at the 0.10 level 4. discussion and conclusion considering these results, it seems that nonaka and takeuchi’s spiral of knowledge has a positive influence on the quality of innovation, the geographic distribution of r&d and the cross-regional integration in the business context, but there is some criticality about the internalization process. not all 15 selected variables have a positive influence on the three dependent variables of innovation (partially confirmed hypotheses). therefore, by excluding factors that have a negative influence or are not significant, it is possible to formulate an empirical model for the relationship between the spiral of knowledge and the innovation’ effectiveness and efficiency, as defined in the related literature (alegre and chiva, 2013). figure 1 – empirical model this empirical model shows the relevance of knowledge sharing, knowledge externalization and knowledge combination in order to improve the efficacy and effectiveness of innovation. although the literature about knowledge and innovation is copious, the relationship between nonaka and takeuchi’s spiral of knowledge and the efficacy and effectiveness of innovation has not been examined systematically. numerous factors in our empirical model measuring knowledge sharing, knowledge externalization and knowledge combination in companies positively influence the dependent variables that measure efficacy and effectiveness of innovation. particularly, our findings provide new evidence regarding the importance of intellectual capital on innovation, showing what factors positively impact on the efficiency (represented by the cross regional and the distribution r&d) and the effectiveness of innovation (namely value of innovation). as shown in figure 1, some element referring to knowledge socialization (information networking,brainstorming, community of practice, internal conferences), to the knowledge externalization (existence of an enterprise content management system, publishing and describing information through metadata, existence of a business process management system; knowledge mapping) and to the knowledge combination (indexing, skills knowledge socialization information networking brainstorming community of practice knowledge externalization bpm systeknowledge mapping knowledge combination indexing skills management businesses value innovation distribution ofr&d cross regional integration positively affect thompson n (2022) 17 interdisciplinary journal of educational practice | https://sadipub.com/journals/index.php/ijep management) generate a new innovation spiral that promotes and encourages efficacy and effectiveness of innovation with a spiral movement. more generally, this empirical research shows that the transformation of tacit knowledge into explicit knowledge and the diffusion of knowledge are not to be underestimated in the firms. indeed, some factors of the spiral of knowledge have a key role in the internationalization of r&d teams, in cross-regional integration and in the quality of innovation. this process should be included in the new best operative practices of businesses. indeed, introducing our empirical model in the managerial best practices, firms may improve innovation quality, as well as crossregional knowledge integration and r&d teams for innovation quality. in this way and according to the literature (barney, 1991; kogut and zander, 1992), intellectual capital management may allow firms to grow and develop, gaining a competitive advantage in markets and manage some of the more complex aspects of innovation projects (hoegl and proserpio, 2004; shan, walker & kogut, 1994). we believe our proposed model will enhance scholars' ability to study the relationship between intellectual capital management and innovation (1) encouraging new theorizing about the causes, effects, mechanisms of seci model; (2) providing a new empirical model that can be used ex ante for new research designs, as well as post hoc for re-interpretations of previous research. this empirical research not only confirms some statements made in the existing literature on the role of intellectual capital in the enhancement of innovation (cooke, and wills,1999) but also addresses a gap in the existing empirical research. indeed, compared to the existing literature, this research proposes an operational framework supported by an empirical verification using a large (432 firms) and geographically diverse (24 oecd countries) sample. moreover, compared to other studies that are limited to investigating the relationship between knowledge and innovation, this research is based on the broader concepts of nonaka and takeuchi's spiral of knowledge. therefore, this research proposes a "dynamic approach" that highlights the importance of the conversion process that expands tacit and explicit knowledge in both quality and quantity. concluding this study proposes an innovative approach for the business sector, particularly for works related to the creation of innovation. annex 1 y1 = value of innovation = this variable measures the number of citations received by a patent. numerous studies have shown that the number of citations of a patent is an efficient proxy for the value of innovation (abraham and moitra, 2001; ahuja and lampert, 2001; argyres and silverman, 2004; lee, yoon & park, 2009; rosenkopf and almeida, 2003). similarly to singh (2008) the measurement of citations includes both self-citations and external citations. y2 = r&d dispersion = this variable is measured by adopting the r & d dispersion index. this index is defined as one minus the herfindahl of geographic concentration of the firm’s (singh, 2008). using the definition of singh (2008), dispersion index is calculated as follows: where: n is the number of patents that the firm has successfully applied for in the recent 4 years, and nk refers to the subset of patent developed by the first inventor in geographic “region” k. y3 = cross-regional knowledge integration = this variable is a dummy that has value 1 if the focal patent makes a backward citation to a patent originating in another geographic unit of the same firm (jaffe and trajtenberg, 2002; singh, 2008); otherwise the variable has a value of 0. this variable has been used to capture within-firm knowledge flow. x1 = promotion of periodic brainstorming. this variable has the value of one if the firm periodically promotes brainstorming aimed at exchanging and creating new knowledge to generate new financial products; otherwise, the variable has a value of 0. thompson n (2022) 18 interdisciplinary journal of educational practice | https://sadipub.com/journals/index.php/ijep x2 = periodic promotion of internal conferences on specific issues. this variable has the value of one if the bank promotes periodic employee conferences to enhance their skills related to specific issues; otherwise, the variable has a value of 0. x3 = information networking. this variable has the value of one if the firm adopts informal dissemination systems by promoting informal meetings in the company or on leisure time; otherwise, the variable has a value of 0. this variable is a proxy for the firm's ability to promote an informal community of knowledge sharing. x4 = awards as a means of stimulating knowledge sharing. this variable has the value of one if the firm promotes premium competitions for the best innovative ideas for introducing product or process innovations; otherwise, the variable has a value as 0. x5 = community of practice. this variable has the value of one if the firm promotes the emergence of informal communities where work practices are shared; otherwise, the variable has a value of 0. x6 = knowledge sharing fair. this variable has the value of one if the firm promotes internal fairs (even on-line events) for sharing knowledge. otherwise, the variable has a value of 0. x7 = existence of an enterprise content management system. this variable has the value of one if the firm uses software to control and verify the integrity of the acquired information; otherwise, the variable has a value of 0. x8 = existence of a business process management system. this variable has the value of one if the firm uses information technology systems that allow managers to use analytics and change either technology or the organization based on the acquired information; otherwise, the variable has a value of 0. x9 = knowledge mapping. this variable has the value of one if the firm conducts knowledge mapping to develop encoded knowledge that is accessible to everyone; otherwise, the variable has a value of 0. x10 = publishing and describing information through metadata. this variable has the value of one if the firm has a system that transforms tacit knowledge into explicit information by publishing it; otherwise, the variable has the value of 0. this variable is a proxy of the level of information encoding. x11 = indexing. this variable has the value of one if the firm uses software that can briefly describe the content of the information, making it easier for employees to search for and combine explicit knowledge. otherwise, the variable has a value of 0. this variable is a proxy for the level of information availability. x12 = digital storage. this variable has the value of one if the firm uses software that can quickly store and combine the content of information; otherwise, the variable has the value of 0. this variable is a proxy of the firm's ability to combine explicit knowledge. x13 = skills management. this variable has the value of 1 if the firm periodically performs a systematic assessment and assesses the competences of staff members. this variable is a proxy of the bank’s ability to combine explicit knowledge. x14 = internal staff training system. this variable has the value of one if the firm has a staff training system in place; otherwise, the variable has the value of 0. this variable is a proxy for the firm's ability to increase the cultural level of employees to increase the potential for knowledge generation. x15 = storytelling management. this variable has the value of one if the firm applies the principles of a pedagogic narrative in the enterprise as a means to transform explicit knowledge into tacit knowledge; otherwise, the variable has the value of 0. x16 = control variable for the team size = this variable measures the effect of the size of the team on the econometric model. this variable is measured by the natural logarithm of the the number of researchers in the innovating team for the focal patent. x17 = control variable for r&d intensity = this variable is the ratio of r&d to sales for the firm. thompson n (2022) 19 interdisciplinary journal of educational practice | https://sadipub.com/journals/index.php/ijep references abraham, b. p., & moitra, s. d. (2001). innovation assessment through patent analysis. technovation, 21(4), 245-252. ahuja, g., lampert, c.m., 2001. entrepreneurship in the large corporation: a longitudinal study of how established firms create breakthrough inventions. strategic management journal 22, 521–543. alegre, j., & chiva, r. (2013). linking entrepreneurial orientation and firm performance: the role of organizational learning capability and innovation performance. journal of small business management, 51(4), 491-507. amburgey, t. l., dacin, t., & singh, j. v. (1996). learning races, patent races, and capital races: strategic interaction and embeddedness within organizational fields. advances in strategic management, 13, 303. argyres, n.s., silverman, b.s., 2004. r&d, organization structure and the development of corporate technological knowledge. strategic management journal 25 (8–9), 929–958. arora, a., & gambardella, a. (1990). complementarity and external linkages: the strategies of the large firms in biotechnology. the journal of industrial economics, 361-379. arora, a., fosfuri, a., & gambardella, a. (2001). markets for technology and their implications for corporate strategy. industrial and corporate change, 10(2), 419-451. asakawa, k., & som, a. (2008). internationalization of r&d in china and india: conventional wisdom versus reality. asia pacific journal of management, 25(3), 375-394. baum, j. a., calabrese, t., & silverman, b. s. (2000). don't go it alone: alliance network composition and startups' performance in canadian biotechnology. strategic management journal, 21(3), 267-294. brockhoff, k. k. (1992). instruments for patent data analyses in business firms. technovation, 12(1), 4159. brown, s. l., & eisenhardt, k. m. (1995). product development: past research, present findings, and future directions. academy of management review, 20(2), 343-378. calabrese, t., baum, j.a.c., silverman, b.s., 2000. ‘canadian biotechnology startups,1991-1997: the role of incumbents’ patents and strategic alliances in controlling competition’. social science research 28, 503–534. campanella, f. (2014). assess the rating of smes by using classification and regression trees (cart) with qualitative variables. review of economics & finance, 4(3), 16-32. candelin-palmqvist, h., sandberg, b., & mylly, u. m. (2012). intellectual property rights in innovation management research: a review. technovation, 32(9-10), 502-512. cantwell, j., & piscitello, l. (2007). attraction and deterrence in the location of foreign-owned r&d activities: the role of positive and negative spillovers. international journal of technological learning, innovation and development, 1(1), 83-111. thompson n (2022) 20 interdisciplinary journal of educational practice | https://sadipub.com/journals/index.php/ijep carayannis, e. g., & rakhmatullin, r. (2014). the quadruple/quintuple innovation helixes and smart specialisation strategies for sustainable and inclusive growth in europe and beyond. journal of the knowledge economy, 5(2), 212-239. cassiman, b., & veugelers, r. (2006). in search of complementarity in innovation strategy: internal r&d and external knowledge acquisition. management science, 52(1), 68-82. chen, j.j. (2003). “determinants of capital structure of chinese-listed companies”. journal of business research, vol. 57, 1341-1351. chen, c. j., huang, y. f., & lin, b. w. (2012). how firms innovate through r&d internationalization? an s-curve hypothesis. research policy, 41(9), 1544-1554. chesbrough, henry william (2003). open innovation: the new imperative for creating and profiting from technology. boston: harvard business school press. clark, d. b., & slotta, j. d. (2000). evaluating media-enhancement and source authority on the internet: the knowledge integration environment. international journal of science education, 22(8), 859871. darroch j., (2005). knowledge management, innovation and firm performance. journal of knowledge management, 9(3), 101-115. debresson, c., & amesse, f. (1991). networks of innovators: a review and introduction to the issue. research policy, 20(5), 363-379. demirbag, m., & glaister, k. w. (2010). factors determining offshore location choice for r&d projects: a comparative study of developed and emerging regions. journal of management studies, 47(8), 1534-1560. demsetz, h.: 1991. ‘‘the theory of the firm revisited’’, in o. williamson and s. winter (eds.), the nature of the firm: origins, evolution and development (oxford: oxford university press), pp. 159–178. du chatenier, e., verstegen, j. a., biemans, h. j., mulder, m., & omta, o. (2009). the challenges of collaborative knowledge creation in open innovation teams. human resource development review, 8(3), 350-381. duncan, r. b. (1976). the ambidextrous organization: designing dual structures for innovation. the management of organization, 1, 167-188. dyer, j. h., & singh, h. (1998). the relational view: cooperative strategy and sources of interorganizational competitive advantage. academy of management review, 23(4), 660-679. enkel, e., gassmann, o., & chesbrough, h. (2009). open r&d and open innovation: exploring the phenomenon. r&d management, 39(4), 311-316. evangelista, r., iammarino, s., mastrostefano, v., & silvani, a. (2001). measuring the regional dimension of innovation. lessons from the italian innovation survey. technovation, 21(11), 733-745. thompson n (2022) 21 interdisciplinary journal of educational practice | https://sadipub.com/journals/index.php/ijep feinberg, s. e., & gupta, a. k. (2004). knowledge spillovers and the assignment of r&d responsibilities to foreign subsidiaries. strategic management journal, 25(8-9), 823-845. fleming, l. 1999. recombinant uncertainty in technological search. management science, 47: 117-132. frost, t. s., & zhou, c. (2005). r&d co-practice and ‘reverse’knowledge integration in multinational firms. journal of international business studies, 36(6), 676-687. gemser, g., leenders, m. a., & wijnberg, n. j. (1996). the dynamics of inter-firm networks in the course of the industry life cycle: the role of appropriability. technology analysis & strategic management, 8(4), 439-454. grant, r. m. (1996). prospering in dynamically-competitive environments: organizational capability as knowledge integration. organization science, 7(4), 375-387. jerez-gomez, p., céspedes-lorente, j., & valle-cabrera, r. (2005). organizational learning capability: a proposal of measurement. journal of business research, 58(6), 715-725. kogut, b., zander, u., 1993. knowledge of the firm and the evolutionary theory of the multinational corporation. journal of international business studies, 625–645. hansen, m.t., 1999. the search-transfer problem: the role of weak ties in sharing knowledge across organization subunits. administrative science quarterly 44, 82–111. hansen, m.t., lovas, b., 2004. how do multinational companies leverage technological competencies? moving from single to interdependent explanations. strategic management journal 25, 801–822. gupta, a. k., & govindarajan, v. (2000). knowledge flows within multinational corporations. strategic management journal, 21(4), 473-496. gupta, a. k., smith, k. g., & shalley, c. e. (2006). the interplay between exploration and exploitation. academy of management journal, 49(4), 693-706. håkanson, l., & nobel, r. (2001). organizational characteristics and reverse technology transfer. mir: management international review, 395-420. håkansson, h., & snehota, i. (2002). 1.3 the imp perspective: assets and liabilities of business relationships. understanding business marketing and purchasing: an interaction approach, 35-50. hamel, g. & prahalad, c. k., (1994). competing for the future. boston, ma: harvard business school press. hargadon, a., & sutton, r. i. (1997). technology brokering and innovation in a product development firm. administrative science quarterly, 716-749. hennart, j. f., & park, y. r. (1994). location, governance, and strategic determinants of japanese manufacturing investment in the united states. strategic management journal, 15(6), 419-436. herstad, s. j., aslesen, h. w., & ebersberger, b. (2014). on industrial knowledge bases, commercial opportunities and global innovation network linkages. research policy, 43(3), 495-504. thompson n (2022) 22 interdisciplinary journal of educational practice | https://sadipub.com/journals/index.php/ijep hoegl, m., & proserpio, l. (2004). team member proximity and teamwork in innovative projects. research policy, 33(8), 1153-1165. holste, j. s., & fields, d. (2010). trust and tacit knowledge sharing and use. journal of knowledge management, 14(1), 128-140. inkinen, h. t., kianto, a., & vanhala, m. (2015). knowledge management practices and innovation performance in finland. baltic journal of management, 10(4), 432-455. itami, h., & roehl, t. (1987). mobilizing invisible assets. boston, ma: harvard business school press. jaffe, a. b., & trajtenberg, m. (2002). patents, citations, and innovations: a window on the knowledge economy. mit press. jayasundara, c. (2008). knowledge management in banking industries: uses and opportunities. journal of the university librarians association of sri lanka, 12. kogut, b., zander, u., 1992. knowledge of the firm, combinative capabilities, and the replication of technology. organization science 3(3), 383–397. kogut, b., zander, u., 1993. knowledge of the firm and the evolutionary theory of the multinational corporation. journal of international business studies, 625–645 kogut, b., & zander, u. (1996). what firms do? coordination, identity, and learning. organization science, 7(5), 502-518. langlois, r. n. (2003). the vanishing hand: the changing dynamics of industrial capitalism. industrial and corporate change, 12(2), 351-385. lee, s., yoon, b., & park, y. (2009). an approach to discovering new technology opportunities: keywordbased patent map approach. technovation, 29(6-7), 481-497. lee endres, m., endres, s. p., chowdhury, s. k., & alam, i. (2007). tacit knowledge sharing, self-efficacy theory, and application to the open source community. journal of knowledge management, 11(3), 92-103. leiponen, a., & helfat, c. e. (2010). innovation objectives, knowledge sources, and the benefits of breadth. strategic management journal, 31(2), 224-236. li, m., & gao, f. (2003). why nonaka highlights tacit knowledge: a critical review. journal of knowledge management, 7(4), 6-14. lin, h. f. (2007). knowledge sharing and firm innovation capability: an empirical study. international journal of manpower, 28(3/4), 315-332. lin, c., wu, y. j., chang, c., wang, w., & lee, c. y. (2012). the alliance innovation performance of r&d alliances—the absorptive capacity perspective. technovation, 32(5), 282-292. ma, z., & lee, y. (2008). patent application and technological collaboration in inventive activities: 1980– 2005. technovation, 28(6), 379-390. thompson n (2022) 23 interdisciplinary journal of educational practice | https://sadipub.com/journals/index.php/ijep march j. (1991), exploration and exploitation in organizational learning, organization science, 2, 71-87. mcevily, s. k., eisenhardt, k. m., & prescott, j. e. (2004). the global acquisition, leverage, and protection of technological competencies. strategic management journal, 25(8-9), 713-722. nelson, r. r. s. g. winter (1982). an evolutionary theory of economic change. nobel, r., & birkinshaw, j. (1998). innovation in multinational corporations: control and communication patterns in international r&d operations. strategic management journal, 19(5), 479-496. nonaka, i. (1994). a dynamic theory of organizational knowledge creation. organization science, 5(1), 1437. nonaka, i., byosiere, p., borucki, c. c., & konno, n. (1994). organizational knowledge creation theory: a first comprehensive test. international business review, 3(4), 337-351. nonaka, i., & takeuchi, h. (1995). the knowledge-creating company: how japanese companies create the dynamics of innovation. new york, ny: oxford university press. nonaka, i., & toyama, r. (2003). the knowledge-creating theory revisited: knowledge creation as a synthesizing process. knowledge management research & practice, 1(1), 2-10. penner-hahn, j., & shave, j. m. (2005). does international research and development increase patent output? an analysis of japanese pharmaceutical firms. strategic management journal, 26(2), 121– 140. penrose, (1959) the theory of the growth of the firm, john wiley & sons, new york perks, h., & jeffery, r. (2006). global network configuration for innovation: a study of international fibre innovation. r&d management, 36(1), 67-83. powell, w. w., koput, k. w., & smith-doerr, l. (1996). interorganizational collaboration and the locus of innovation: networks of learning in biotechnology. administrative science quarterly, 116-145. rosenkopf, l., almeida, p., 2003. overcoming local search through alliances and mobility. management science 49 (6), 0751–0766. rosenzweig, s. (2016). the effects of diversified technology and country knowledge on the impact of technological innovation. the journal of technology transfer. singh, j., 2005. collaborative networks as determinants of knowledge diffusion patterns. management science 51 (5), 756–770. singh, j. (2008). distributed r&d, cross-regional knowledge integration and quality of innovative output. research policy, 37(1), 77-96. selmi, n. (2013). the difficulties of achieving technology transfer: issues of absorptive capacity. communications of the ibima, 2013, 1. thompson n (2022) 24 interdisciplinary journal of educational practice | https://sadipub.com/journals/index.php/ijep shan, w., & song, j. (1997). foreign direct investment and the sourcing of technological advantage: evidence from the biotechnology industry. journal of international business studies, 28(2), 267284. shan, w., walker, g., & kogut, b. (1994). interfirm cooperation and startup innovation in the biotechnology industry. strategic management journal, 15(5), 387-394. snehota, i., & hakansson, h. (eds.). (1995). developing relationships in business networks. london: routledge. song, j., asakawa, k., & chu, y. (2011). what determines knowledge sourcing from host locations of overseas r&d operations?: a study of global r&d activities of japanese multinationals. research policy, 40(3), 380-390. sorenson, o., rivkin, j. w., & fleming, l. (2006). complexity, networks and knowledge flow. research policy, 35(7), 994-1017. sørensen, j. b., & sorenson, o. (2003). from conception to birth: opportunity perception and resource mobilization in entrepreneurship. in geography and strategy (pp. 89-117). emerald group publishing limited. szulanski, g., 1996. exploring internal stickiness: impediments to the transfer of best practice within the firm. strategic management journal 17, 27–43. takeuchi, h., & nonaka, i. (2004). knowledge creation and dialectics. hitotsubashi on knowledge management, 1-27. teece, d.j., 1977. technology transfer by multinational firms: the resource cost of transferring technological know-how. economic journal 87 (346), 242–261. teece, d. j. (1987). technological change and the nature of the firm. produced and distributed by center for research in management, university of california, berkeley business school. teece, d. j. (2000). strategies for managing knowledge assets: the role of firm structure and industrial context. long range planning, 33(1), 35-54. teece, d. j. (2003). essays in technology management. river edge, nj: world scientific publishing co. teece, d. j. (2006). reflections on profiting from innovation. research policy, 35(8), 1131-1146. teece, d. j. (2007). explicating dynamic capabilities: the nature and microfoundations of (sustainable) enterprise performance. strategic management journal, 28(13), 1319-1350. thompson, p. (2006). patent citations and the geography of knowledge spillovers: evidence from inventorand examineradded citations. the review of economics and statistics, 88(2), 383-388. tushman, m. l., & o'reilly iii, c. a. (1996). ambidextrous organizations: managing evolutionary and revolutionary change. california management review, 38(4), 8-29. thompson n (2022) 25 interdisciplinary journal of educational practice | https://sadipub.com/journals/index.php/ijep tzabbar, d., & vestal, a. (2015). bridging the social chasm in geographically distributed r&d teams: the moderating effects of relational strength and status asymmetry on the novelty of team innovation. organization science, 26(3), 811-829. utterback, j. (1994). mastering the dynamics of innovation: how companies can seize opportunities in the face of technological change. valle, s., & avella, l. (2003). cross-functionality and leadership of the new product development teams. european journal of innovation management, 6(1), 32-47. volberda, h., baden-fuller, c., & van den bosch, f. a. j. (2001). mastering strategic renewal: mobilizing renewal journeys in multi-unit fi rms. long range planning, 34, 159–178. watanabe, c., tsuji, y. s., & griffy-brown, c. (2001). patent statistics: deciphering a ‘real’versus a ‘pseudo’proxy of innovation. technovation, 21(12), 783-790. wheelwright, s. c., & clark, k. b. (1992). competing through development capability in a manufacturingbased organization. business horizons, 35(4), 29-43. zahra, s. a., ireland, r. d., & hitt, m. a. (2000). international expansion by new venture firms: international diversity, mode of market entry, technological learning, and performance. academy of management journal, 43(5), 925950. american interdisciplinary journal of business and economics issn: 2837-1909| impact factor : 4.6 volume. 9, number 4; october-december, 2022; published by: scientific and academic development institute (sadi) 8933 willis ave los angeles, california https://sadipub.com/journals/index.php/aijbe 31 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe navigating the turbulent adolescence stage: the role of parental presence and absence in bulilima and mangwe districts, zimbabwe e. sharai faculty of education, zimbabwe open university abstract: this study aims to examine the psychological effects of parental labour migration on adolescent children left behind in the bulilima and mangwe districts of zimbabwe. a multi-dimensional theoretical framework encompassing bio-ecological, socio-cultural, and pathway model perspectives is utilized to explore the topic. the study reveals that the most significant psychological effects of parental migration on adolescents left behind are negative, including depression, aggressiveness, sadness, stress, loneliness, rebellion, and abuse. data are collected from 18 adolescents and 16 stakeholders, including teachers, nurses, and caregivers, who provided rich data to authenticate contributions from adolescents. the study proposes practical recommendations to different players directly and indirectly involved in child care practices to minimize the negative psychological effects associated with parental migration. bronfenbrenner`s ecological systems theory is used to explore how adolescence is a stage epitomized by turbulence, and systems like meso, exo, and macro systems are involved in actors' roles in the children's well-being. furthermore, the chrono system dimension considers changes over time, and how they promote breakups among married couples can have potential negative effects on children left behind's psychological well-being. keywords: parental migration, psychological well-being, adolescent, bulilima district, mangwe district, zimbabwe, multi-dimensional theoretical framework, bronfenbrenner's ecological systems theory, negative effects, practical recommendations. introduction the effects of labour migration on the children left behind have caused serious concern all over the world.this concern is sensible seeing that labour migration often implies the splitting up of families consequently producing several negative outcomes on the psychological well-being of households left behind. several scenarios where parental separation occurs have been identified by psychological health research as having negative effects on the psychological wellbeing of children left behind (amato & cheadle, 2005; huurre, junkkari, & aro, 2006). psychologists also agree that adolescence is a developmental stage marked by significant physical, emotional, psychological, and social transformations (marcell & halpern-felsher, 2007). as a result, the parental absence could become particularly traumatic. in light of this psychological effects of migration on children left behind have become a topical subject for numerous studies. for instance, graham & jordan (2011) conducted a comparative study of indonesia, the philippines, thailand, and vietnam to determine the effects of parental migration on the psychological well-being of children left behind. the study produced some intriguing findings. according to the study, children abandoned in indonesia had a higher likelihood of experiencing emotional discomfort than children raised by both parents (graham et al, 2011). however, neither did i it appear in thailand nor vietnam that there were meaningful disparities between children who lived with both parents and children who were raised in left-behind households. results for the philippines suggested that some children’s psychological wellbeing was less negatively impacted by migration e. sharai (2022) 32 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe (graham et al, 2011). other researchers, however found that parental relocation had detrimental effects on the mental health of the children left behind (gao et al., 2010). according to a study by filippa (2011), the experiences of teenage children left behind in zimbabwe were comparable to those discovered in studies conducted in other continents like asia. filippa (2011) found out in her research that in response to the negative effects of migration, children who were left behind developed defence mechanisms. the rationale for conducting this research was the surprising lack of meaningful similar research in the bulilima-mangwe districts, which have arguably one of the long histories of labour migration in the country. this research examined how labour migration affects the psychological health of adolescents who are left behind and attend secondary schools in the bulilima and mangwe districts. research question what are the effects of parental migration on the psychological well-being of adolescent children left behind? objective of the study to ascertain how parental migration affects the psychological well-being of adolescent children left behind? theoretical framework bronfenbrenner’s bio-ecological perspectives urie bronfenbrenner`s ecological systems theory was the primary informant of this research. this theory avows that adolescents experience interactions similar to bandura`s reciprocal determinism. bandura (2001 as cited in kosslyn & rosenburg, 2008, p.21) avers that there exists in human behaviour an interaction process involving both psychological and social forces that affect the environment and behaviour. in turn behaviour affects the environment and personal factors. this implies that the psychological well-being of adolescents left behind is influenced by their developmental stage as well as the environment they grow in such as that of migrant households. indeed, this theory sees development of adolescent children left behind, as being influenced by five subsystems namely; micro, meso, exo and macro systems. by micro system bronfenbrenner referred to adolescent children left behind’s proximate relationships or systems they interact with, such as their immediate family, school, peers, neighbours, and caregivers. within the microsystems of the home, adolescent children left behind may find themselves in child headed like family situations where they are forced to take up parenting roles in the absence of migrant parents thereby incurring heightened psychological strain(de la garza, 2010). swartz et al., (2011) assert that in almost all cultures adolescence is a stage epitomised by turbulence. similarly, erickson (1993, as cited in sun & sun, 2021, p. 268) describes this stage as one in which adolescents experience identity crisis. this crisis can better be managed by healthy micro relations likely to be fostered by a “complete available family”, failure to which many adolescents become predisposed to heightened levels of stress and emotional turmoil with potential to degenerate into undesirable and destructive behaviours such as drug abuse, teenage pregnancies, sexually transmitted infections inter alia (chingwe, 2022). moreover, stressful life events caused by absence of a partner and shouldering double parenting duties by the remaining parent may erode the remaining parent’s coping behaviour, creating emotional distress and marital disharmony. such a development may equally promote parenting practices that are uninvolving and harsh which may potentially negatively affect the psychological well-being of adolescents left behind (chingwe, 2022). the mesosystem which bronfenbrenner (2008) defined as an assortment of linkages between two or more systems in which adolescent children left behind actively participate is where we find systems like the local community, religious organisations and friends. this implies that neighbours, friends or teachers may offer adolescent children left behind emotional care and guidance as they undergo ‘storms and stresses’ of adolescence thereby mitigating the effects of both adolescence and parental migration. inversely, actors in the mesosystem may take advantage of the vulnerability of budding adolescent girls left behind by sexually abusing them hence worsening the turbulences of both adolescence and parental absence. exo systems denote the presence of one or more settings in which adolescents left behind do not necessarily actively participant but still influence their psychological well-being (donald et al., 2010). examples of such alike systems include migrant parent’s workplaces and foreign communitie sin which they live. although migrant parents’ workplaces and foreign communities in which they live are remote, occurrences in these settings significantly affect the psychological well-being of adolescents left behind. for example, the outbreak e. sharai (2022) 33 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe of covid-19 and xenophobic attacks on zimbabweans in south africa left some migrants jobless and others dead creating psychological strain on families left behind in zimbabwe. in one highly publicised incident in april 2022, a 43-year-old zimbabwean, a father of four children was burnt alive in diepsloot south africa by a group of people ordering foreigners to produce valid visas (ohchr, 2022). one can only wonder the psychological strain suffered by the bereaved back home. incidents like these equally have potential to negatively affect the psychological well-being of children left behind who are not in any way directly or indirectly related to the bereaved as they send waves of fear for the security and safety of migrant parents living in the same communities or country where such incidents are occurring. macro-systemssignify the wider community comprised of the economy, culture, laws, beliefs, expectations, and lifestyles (oswalt, 2008). for example, cultural values that consider every adult to be a parent of all children in the community may promote care and nurturance of children left behindthereby helping to lessen the negative psychological effects of being left behind. community aunts may for example offer guidance to budding girls hence limiting the effects of storms and stresses of adolescence as well as of parental absence. at the end of the ecological system is the chrono system, referring to the role played by the time dimension in human development. here emphasis is put on changes or consistencies in relationships overtime. such alike changes maybe parental divorce, historical events, or social condition as well as changes, like life transitions within the developing person (bronfenbrenner, 2008). for example, it has been observed that migration tends to promote breakups among married couples which in themselves have potential to negatively affect the psychological well-being of children left behind (zhao et al., 2018; crush et al., 2010). in addition, parents who spend longer periods of time abroad and visit their children less tend to worsen the psychological wellbeing of children left behind than those who occasionally visit their families back home. equally important in this theory is the role played by gender and age (ettekal & mahoney, 2017). some studies have shown that girls appear to be more emotionally affected by parental migration than boys (botezat, 2018). erikson’s psychosocial perspectives related to the ecological systems theory is the psycho-social analytic theory by erick erickson who fused together psychoanalytic concepts with social perspectives. like bronfenbrenner erickson regards adolescents as active participants in their own development (snowman and biehler, 2012). erickson asserted that human beings developed in social stages rather than sexual stages as was asserted by sigmund freud. these stages include; trust versus mistrust, autonomy versus shame and doubt, initiative versus guilt, industry versus inferiority, identity versus identity confusion, intimacy versus isolation, creativity versus stagnation, ego integrity versus despair (lahey, 2009). of greater relevance to this study is the fifth stage, identity versus role confusion because it coincides with the developmental stage of the majority of research participants. erikson averred that adolescents encounter a crisis where they must develop an identity, meaning determining who they really are and where they are going. successful realisation of an identityleads to identity accomplishment whereas failure to achieve an identity will lead to identity confusion (donald et al., 2010). it is generally agreed that the period called adolescence is usually eventful and associated with great turbulence. one scholar has suggested that this period is characterised by storms and stresses of life, which if not properly managed, may lead to challenges for the individual, the family, schools and society at large (swartz, et al., 2011). parents, teachers, caregivers are therefore crucial at this stage for the provision of guidance and control in the lives of the growing children. human development as illustrated by this psychosocial theory is characterised by a series of crises linked to emotional needs and nested social relations (berk, 2007). adolescent children left behind also face these crises but how they resolve them may undoubtedly be influenced by this situation of being left behind which they find themselves in. rutter’s pathway model perspectives to augment the two theories above the researcher considered views of rutter who suggests that some people are naturally resilient. resilience here is taken to mean an individual’s ability to manage stress and adversity (unger, 2008). some authorities have suggested that resilience may be an outcome of a person`s capability to interrelate with their settings and this nurtures their psychological well-being against the crushing effects of parental migration (rutter, 2005; ward & eyber, 2009). it follows therefore that some adolescent children left behind may thrive under the negative effects of parental absence while others may develop psychological imbalance leading to behaviours such as drug abuse, emotional distress and such alike. as with the ecological e. sharai (2022) 34 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe and psycho-social theories above where significant others such as teachers, neighbours, members of the extended family and faith leaders may help to mediate the effects of parental migration lessening anxiety, stress, depression and trauma associated with being left behind rutter avers that given support, children experiencing strenuous situations such as those posed by being left behind may develop healthy psychological outcomes even with parents away (rutter, 2008). it is imperative to note that some adolescents may naturally be psychologically, emotionally or mentally resilient than others hence parental migration may produce varying psychological outcomes. it is equally important to note that significant others can offer a life-line to adolescents left behind so as to promote their psychological wellbeing and protect them from the negative effects of being left behind. research methodology the key intention of this study was to ascertain effects of parental migration on adolescent children left behind in bulilima and mangwe districts, zimbabwe. the researcher adopted the phenomenological research methodology cast in a descriptive case study design. phenomenology is a qualitative approach focusing on exploring, understanding, bringing to the surface deep subjective issues, and making voices heard (greening, 2019). the researcher endeavoured to gain access into adolescent’s world of being left behind. as such therefore using this design entailed providing a descriptive account of adolescent children left behind’s lived experiences within left behind households. phenomenology enabled the researcher to gain access into adolescents’ lived experiences while shutting out taken-for-granted assumptions and common ways of perceiving (tufford, et al., 2010). this case study entailed exploring a bounded system, either by time, context, single or multiple cases spanning over a period of time (coombs, 2022).the psychological well-being of children left behind was one such case that was seen to be bound by time and context where time here referred to a period when parental migration has been on the rise, where covid-19 was ravaging the world, when xenophobic attacks where on the rise in neighbouring countries, while context referred to the developmental stage of main participants characterised by ‘storms and stresses’ of life (swartz, et al., 2011). the case study design was preferred for this study because of its inherent flexibility to adapt to various approaches such as phenomenology, in which it strives to describe, analyse and interpret the psychological effects of parental migration on adolescents left behind. in this case study, the researcher undertook to explore a variety of left behind cases spanning over varying time periods by way of comprehensive data collection using various informants, two data collection tools and a sample made up of 18adolescents left behind and 16 stakeholders. sampling of participants three high schools were purposefully selected since it had been observed that a sizeable number of students enrolled there lived in migrant households. from each of the 3 high schools (2 urban and 1 rural, 2 boarding and 1day and all mixed schools)6 students (giving a total of 18 students, 9males and 9 females), 2caregivers (giving a total of 6 caregivers, 4 females and 2 males) and 2 teachers (giving a total of 6 teachers, 3 males and 3 females) were purposefully selected. in addition, 4 nurses (3 females and 1 male) from clinics within the vicinity of the schools (rural and urban) were selected to participate in the study giving a total of34 participants. since all the 3 schools had more than one class with prospective participant’s simple random selection was done to come up with a single class from which the 6 adolescents left behind were purposefully sampled. expert sampling a form of purposive sampling was used in selecting teachers and nurses who had experience and expertise in dealing with adolescents. the researcher tried to make the sample as small as could be possible in order to create sufficient room for participants to narrate their life experiences. sample size is an integral aspect of the sampling process. while quantitative researchers calculate the sample size before the start of the study and maintain it throughout the study, (creswell, 2014) qualitative sampling involves a series of decisions throughout the study aimed at reaching saturation (emmel, 2013 cited in guetterman, 2015). in other words, there is no prescriptive sample size in a qualitative study since saturation guides both data collection and analysis hence sample size is decided on throughout the process (saunders et al., 2018). despite this a qualitative researcher is recommended to come up with an approximate sample sufficient to allow for collection of rich descriptive data (merriam, 2009 cited in guetterman, 2015). simple random sampling methods were used in this study in order make certain that the sample was representative enough and reduce bias whereas purposive sampling was done to ensure e. sharai (2022) 35 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe that participants matched the attributes desired for achieving the objective of the study (noor et al., 2022). using purposive sampling allowed for the inclusion of various migrant household characteristics such as; those with both parents abroad, with either only father or mother away, those left in the care of hired personnel or members of the extended family and those left alone. 3.3 data collection before visiting the 3 schools, 2 clinics and 6 households, the researcher sought permission to carry out the study in bulilima and mangwe districts. using a letter providing permission and introducing the researcher from zimbabwe open university (zou), the researcher sought further permission which was granted without difficulty from the two district administrators (da’s), the ministry of primary and secondary education (mopse) and ministry of health and child care. having obtained permission, the researcher visited the schools, homes and clinics where with the help of teachers 3 separate focus group discussion interviews were conducted with adolescents while interviews were convened with teachers, nurses and caregivers. data analysis in order to make sense of data collected the researchers made use of braun & clarke’s reflective thematic analysis (rta)shown on figure 1 below (braun & clarke, 2022). figure 1: reflexive thematic analysis process (adapted from braun and clarke, 2020) reflective thematic analysis has been defined as an adaptable interpretative approach to qualitative data analysis that enables the detection and scrutiny of patterns in a data set (braun & clarke 2013). rta emphasises a researcher’s active role in the generation of knowledge (braun & clarke 2019). here codes are taken to epitomise a researcher’s analyses of patterns of meaning within the dataset. put differently, rta is seen as a mirror of a researcher’s interpretive analysis of data, made within the framework of a dataset; theoretical assumptions of the analysis, and researcher’s investigative skills (braun &clarke 2019). as such it may not be expected for two different researchers to produce similar codes or themes even when using the same dataset. rta follows 6 stages namely; data acquaintance with data; preliminary generation of codes; preliminary generation of themes; appraisal of themes; definition and naming of themes and consequently report production (campbell, 2021). these stages are however not necessarily linear and are illustrated on figure 1 below. as such in line with rta before the researchers attempted to acquaint themselves with the dataset, they were involved an iterative process of reflexivity with an objective of comprehending prior individual biases which could affect the research process (berger, 2015). the researchers engaged in numerous discussions throughout the research process where they tried to bring out their own biases to the fore before familiarising with the dataset. eventually it was agreed that data analysis will be based on both data and theoretical frameworks explained above. this was followed by familiarisation of data in a bid to examining data for any possible patterns leading to preliminary stages of data coding. using a diagram where codes where initially formulated researchers then came up withinitial themes. using the coded data, the two researchers tried to describe each theme together. e. sharai (2022) 36 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe for instance, describing the effects of parental migration on the mental state of adolescents connected well with the psychological well-being of adolescents and it was concurred that issues such as loneliness, depression, anxiety, feelings of hopelessness, sadness and having suicidal thoughts were commonly raised in the interviews and focus group discussions and hence to capture all these under one name the theme was named emotional effects. secondly it was observed that there were behaviours which could be direct offshoots of the psychological state of adolescents and some of these like rebelliousness, petty crime, smoking appeared in the interviews carried out. in order to capture all these together a theme social effects was coined. it was indeed imperative for the researchers to continuously review both the codes and themes so as to ensure that emerging themes mirrored exactly what was in the dataset. satisfied with the work done so far it became necessary for generated themes to be named in a most descriptive and representative manner reflecting contents of the themes. as outlined on figure 1 the final stage involved writing of the report. ethical considerations conscious of the need for adherence to research ethics the researchers had to consider several ethical issues such as voluntary participation, informed consent, seeking permission, confidentiality, anonymity, inclusive language and privacy all in the bid to safeguard participants especially that most of them were children (ketefian, 2015).participants were provided sufficient information about the study and thereafter were requested to volunteer taking part in the study by signing assent and consent forms(manandhar & joshi, 2020).furthermore, recognising that this study entailed reliving social realities with potential to raise sensitive and emotional experiences basic counselling services were given to participants before, during and after the study with the help of guidance and counselling teachers and nurses who had earlier on been appraised on some of these ethical considerations. in respect of principles of anonymity, confidentiality and privacy pseudonyms and codes were used to conceal the identities of participants. the researchers were always cognisant of the need to use inclusive language throughout the study and during the writing of the final report. research findings and discussion this study endeavoured to establish effects of parental migration on the psychological well-being of adolescents left behind. using rta researchers distilled data into three main themes namely; emotional effects, social effects and resilience. the study established that the most noticeable psychological effects of migration were negative than positive. indeed, data overwhelmingly revealed that parental migration exposed adolescents left behind to heightened levels of; depression, hopelessness, sadness, suicidal thoughts, anger and anxiety. such mental conditions were found to easily degenerate into undesirable behaviour such as smoking, drinking, violence and petty crime. interestingly, irrespective of the confirmed negative effects of parental migration other adolescents appeared to thrive under such adverse conditions. emotional effects here emotional well-being was taken to mean adolescents feelings and thoughts.it was uncovered that quite a huge number of left behind adolescents reported often feeling lonely, unloved and unhappy. similarly, it was revealed that left behind adolescents showed signs of depression as evidenced by feelings of hopelessness, sadness and having suicidal thoughts. indeed, slightly over 80% of adolescents reported having felt lonely on several occasions while lightly over 60% reported having felt that nobody loved them in a period of 3 months before the study. in addition, about 50% of adolescents confirmed having been unhappy on several occasions in the past 3 months before the study. only about 30% confirmed having felt that nobody understood them on several occasions in the past 3 months whereas times about 80% recounted having once considered committing suicide. all adolescent participants reported having felt sad and hopeless on several occasions in the past 3 months.interestingly, about 90% of adolescents reported having experienced some form of abuse.the following excerpts from two adolescents left behind confirm these findings; “living without your parents is painful and sad. you have no one to tell your needs and fears. even if you live with relatives still you need your parents who can love you and understand you unconditionally”. (participant fgdz5; an adolescent) “there is usually no one to stand up for you. even if you are living with relatives at times they consider their own children first. that’s why sometimes you end up thinking that it’s better to die because you won’t have someone to look out for you”. (participant fgdx1; an adolescent) e. sharai (2022) 37 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe “being left behind does increase adolescent children’s chances of being bullied, teased or stigmatised. this is most common where it is the father who migrated unless maybe there is an adult male who happens to live in the family”. (participant fgdy6; an adolescent) these results confirmed observations by zhou et al., (2019) that being left behind increased the risk of suicide among left behind children due to heightened stress, depressive symptoms, mental disorder and decreasing social support. the findings were equally consistent with erickson’s psycho-social analytic theory whose fifth stage avers that adolescents may experience heightened stress which may lead to suicidal thoughts (swartz et al, 2011). this human developmental stress is worsened by separation anxiety and diminishing social support related to parental migration. in studies carried out in ecuador, mexico, moldova and the philippines it was shown that migrant children are usually negatively judged, or even stigmatized in some communities thereby worsening their psychological well-being (cortes, 2007). in conversations of a large number of adolescents left behind with their parents abroad adolescents reported often telling migrant parents that they missed them and wanted them to come back home. this was a clear reflection of the negative emotional effects of parental absence. this situation may also have been worsened by strained parental relations. the current study revealed that relations between migrant parents were not always good and thus had potential to negatively affect the psychological well-being of the left behind children. zhao et al., (2018) observed that the negative effects of parental migration may be worsened by other dilemmas such as parents’ misunderstanding which could in some cases lead to divorce. a study carried among zimbabwean migrants by pasura (2008) uncovered that many diasporic marriages were failing and breaking up. it was observed that emotional and psychological migration induced strain did not only affect adolescent children but also left behind carers most of whom where mothers who had to carry a double burden of raising children almost alone. stakeholders revealed that it was common for migrant husbands to start new families abroad and these strained relationships with wives left behind. strained relationships between parents created situations where left behind parents vented their anger, frustrations and stress on adolescent children whom they expected to fully assist them in shouldering extended household responsibilities. such a development occurred in the context of turbulence associated with adolescence. in terms of gender, left behind female adolescents appeared to be most emotionally affected by parental absence especially where it was the mother who migrated. studying the effects of parental migration on children left behind in tajikistan catrinescu et al., (2011) also uncovered that female respondents aged between 15 and 18 were the most affected by sadness and depression and this manifested as aloofness, rebelliousness, aggressiveness and other anti-social behaviours. girls in left behind situations reported experiencing increased household workload as they took over some of the responsibilities left by the migrant parent. in worst cases adolescent girls in such households had little time to sleep doing household chores and preparing siblings for school before they could do the same for themselves while others had to take care of sick siblings or left behind parent. prolonged nursing of the sick has often resulted in burnout for family caregivers (lindgren, 1990; angermeyer et al., 2006). both adolescent girl children left behind and mothers left behind proved to be more susceptible to burnout in cases where they took care of the sick, elderly parents or handicapped children left behind. one left behind adolescent girl shared her experiences below; “i often cry when i think about my mother who works in south africa. it’s ok for her to work for us there but i miss her often especially when i see what others do with their mothers”. ( participant fgdx 3; an adolescent) it is interesting to note that exposure to bullying, abuse and stigmatisation had the effects of producing negative mental and emotional outcomes for those affected. indeed, some studies also have revealed that left behind children are indeed prone to all forms of abuse. a study in the philippines by scalabrini migration centre (2004) concluded that left behind children suffered more physical abuse than their counterparts in non-migrant households. similarly, salah (2008) explored the effects of migration in moldova and concluded that children left behind were at risk of abuse, violence and trafficking. however, these findings are in conflict with a study carried out in romania which concluded that differences in the level of exposure to verbal abuse, humiliation, threats, physical abuse and neglect between left behind children and children from non-migrant households was negligible (toth, 2007). all the same it can be concluded that being exposed to abuse does indeed negatively affect the mental and emotional state of those affected. e. sharai (2022) 38 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe social effects in coming up with this theme the researchers considered the behaviour adolescents exhibited which were seen to be closely linked with their emotional and mental states. the researchers observed that the negative psychological outcomes of parental migration usually degenerated into undesirable behaviour patterns such as petty crime and violence. about 30% of adolescents reported having been involved in disciplinary cases at school which necessitated the summoning of caregivers to school while about 5% reported usually staying beyond 2100hrs without the knowledge of caregivers. additionally, only about 10% of adolescents reported being regular smokers of tobacco whereas only about 5% confirmed being regular takers of drugs. finally, about 15% of adolescents reported having attended wild parties ever since their parent(s) migrated while about 20% reported having once been in conflict with the law. these occurrences were portrayed by two stakeholders below; “ukugcina abantwana babazali abasemazweni kunzima bavame ukungahloniphi, ukulwa, ukungathumeki lokwenza njee okungamacala okuncane ikakhuklu nxa kungabafana abalobaba ongekho”. taking care of children whose parents work outside the country is difficult, they are usually disrespectful, violent; refuse to be sent, rebellious and prone to doing petty crimes especially boys whose father is away. (participant zcm; a caregiver) “as i have said before adolescent children in migrant households are likely to be more depressed and this manifests as anti-social and violent behaviour especially among boys”. (participantxut1; a teacher) the findings above are similar to those by rudatsikira et al., (2009) and mabharani, (2014) as cited in tawodzera & themane, (2019) which observed that some adolescents left behind resorted to petty crimes under the influence of illicit drugs such as marijuana, while others drowned their sorrows in smoking cigarettes and drinking alcohol as a way of dealing with stress induced by parental absence. it is interesting to note that resorting to illicit drugs, unbecoming and risky behaviours was discerned among adolescents left behind in the current study. however, adolescents in some studies have lamented the way caregivers and some teachers falsely accuse them of drinking beer, smoking, stealing and intending to impregnate other people’s children. such adolescents have even suggested that these false accusations tormented them so much that to the extent of being on the edge of engaging in the very vices for which they were regularly accused of planning to engage in (kufakunesu, et al., 2013). unger (2008) alleges that none of such stereotypes are accurate when objectively scrutinized among today’s adolescents. it is however interesting to note that in the current findings both adolescents and caregivers appear to agree that left behind children are more prone to exhibiting violent behaviour and be in conflict with the law while others confirmed being involved in drinking and smoking practices. findings above are equally consistent with erickson’ theory of development which avers that adolescents may generally experience turbulences during this phase. concurring with erickson, meyers (2018) asserted that adolescence was characterised by storms and stresses of life, which if not properly managed, may lead to challenges for the individual, the family, schools and society at large. a good example of an adolescent bound crisis is puberty. girls and boys undergoing puberty suffer unpredictable mood swings as a result of hormonal changes. it is these hormonal changes which may prompt adolescents to rebel and disobey household authority systems especially in the case of boys (leong, 2015). studies in moldova and ecuador revealed that children left behind were generally regarded as ‘arrogant, aggressive and rude’ (unicef, 2006). indeed, during interviews, caregivers re-counted how adolescent children mostly boys became disrespectful and rebellious as narrated by one caregiver below; “ukugcina abantwana babazali abasemazweni kunzima bavame ukungahloniphi, ukulwa, ukungathumeki lokwenza njee okungamacala okuncane ikakhuklu nxa kungabafana abalobaba ongekho”. taking care of children whose parents work outside the country is difficult, they are usually disrespectful, violent; refuse to be sent, rebellious and prone to doing petty crimes especially boys whose father is away. (participant zcm; a caregiver) it is sad that most people in the two districts appear to prefer leaving their children alone or with hired personnel than with members of the extended family. such a tendency could also help account for the higher levels of emotional distress and vulnerability among adolescents left behind. leaving children in extended families could indeed help lessen the emotional distress of parental absence as was uncovered by coe (2011). e. sharai (2022) 39 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe similarly, findings from a recent comparative study of georgia and moldova by cebotari et al., (2018) revealed the utility of members of the extended family in mitigating negative effects of being left behind. resilience interestingly, findings above do not imply that all adolescent children left behind suffered the same emotional strain and exhibited similar undesirable behaviours, motivated by this strain. indeed a few other lefts behind children remained thrived in the face of migration related challenges. of interest is an example given by one adolescent of a female student who grew up in a migrant family but has done well to the extent of enrolling for a degree in medicine at a local university. academic success was seen as evidence of healthier psychological outcomes. adolescents concurred that such an achievement could only have been made possible by a healthier mind. this is explained in an excerpt below. “kayisiwo wonke umntwana othwalanzima njengabanye. ukhona engimaziyo ngithemba lani liyamazi usewaphumelela ezifundweni zakhe waze waya fundela ubudhokotela.ngibona lokho kutshengisa ukuthi abanye akubahluphi kangako ukusala bodwa. uyasikhuthaza kakhulu’’. it is not everyone child left behind you may suffer the negative psychological effects of parental migration. others do well in such situations. am sure you know one such girl who has done well in her studies and has even enrolled for medicine. she is our role model. (participant fgdy2; an adolescent) such adolescents could be said to be endowed with what bronfenbrenner referred to as competencies, which mediated interactions within their proximal ecologies (ettekal & mahoney, 2017). findings from a study by rutter et al., (2008) reveal that resilient children are predisposed to doing better in some risky contexts in contrast with children with all parental support. this shows that not all left behind adolescent children will be emotionally unstable. perhaps this could be the reason why some studies carried out in the philippines implied that migration was less detrimental to the psychological wellbeing of some children (graham et al., 2011). however, this is not an excuse to deliberately expose children to risks because all children deserve to live in a safe, supportive environment. indeed, while results above may look hopeless it is interesting to note that there is a window of hope brought in by regular communication between adolescents left behind and their migrant parents. such communication could also help build resilience among children left behind. this uncovered that communication with migrant parents was largely through whatsapp for most of participants. if it were possible intensification of communication could perhaps lessen the negative emotional effects of parent absence. frequent communication with parents has been confirmed by several studies such as by parennas (2002) who observed that constant communication between migrant parents and left behind children in philippines helped to ease the negative effects of parental separation. similarly, maruja (2006) uncovered that regular communication between migrant parents and children left behind lessened the intensity of anxieties and loneliness. modern technology has been acknowledged by lin & wen (2012) for positively contributing to the emotional wellbeing of children left behind. indeed, graham & jordan aver that novel communication systems play a crucial task of keeping the absent parent ‘virtually present’. improvement in telecommunications has improved the regularity of contact between left-behind children and their parents. however, some researchers observe that the quality of such communication is seldom high as some parents narrowed their communication to just instructions on how remittances sent should be used (carrillo, 2006).the existence of at least one parent left behind in most migrant households could also greatly also mediate in the emotional well-being of adolescents and help make the children more resilient. it is unfortunate that some left behind households were left in the care of hired personnel and other children whose capacity to nurture and guide adolescents undergoing storms and stresses of life is questionable.such situations created conducive ecologies for child abuse as perpetrators took advantage of the vulnerable children. recommendations in light of observations made above and in the pursuit of improved child care practices it is recommended that all stakeholders come aboard where; e. sharai (2022) 40 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe government reviews social protection services and migration policies so as to broaden it and expressly include protection of vulnerable people, inclusive of children left behind. key community stakeholders should work together and revive the traditional role played by extended families in the care and protection of children. schools reinvigorate and realign curriculums to foster teaching of parenting skills to children left behind and offer tailor-made guidance and counselling services. health institutions extend their loco-parentis duties to afford vulnerable left behind adolescent children care and support such as through domiciliary visits, continuously reinvent the concept of adolescent friendly clinics to meet novel developments with regards adolescent child care. future studies consider focusing on localised ways of building resilience among children in undesirable circumstances such as those faced by some left behind adolescents and country specific migration management policies can be reviewed with an objective to promote best care of left behind families. conclusions the study concluded that effects of labour migration on adolescent children’s psychological well-being are complex and varied depending on factors, such as gender, societal values and individual competencies to manage turbulences associated with adolescence as well as parental absence. additionally, psychological effects of migration on adolescents left behind equally depend on migration features such as who migrates, whether the migrant parent is legally or illegally resident in the host country, whether parental migration is seasonal or long term as well as family dynamics such as the size of family and existence of the extended family. this empirical study revealed that adolescents left-behind are exposed to adverse psychological and developmental experiences. some measures can be taken to mitigate these adverse effects through resilience building, intensification of communication through the use of modern technologies and cost effective social media platforms and widespread use of members of the extended family in the care and protection of children left behind. references amato, p. r., & cheadle, j. (2005). the long reach of divorce: divorce and child well-being across three generations. journal of marriage and family, 67(1), 191–206. angermeyer, m.c., bull, n., bernert, s., dietrich, s., & kopf, a. burnout of caregivers: a comparison between partners of psychiatric patients and nurses. archives of psychiatric nursing 20(4):158-65. berger, r. (2015). now i see it, now i don’t: researcher’s position and reflexivity in qualitative research. qualitative research, 15(2), 219–234. berk, l. (2007). development throughout the lifespan. pearson, ally and bacon. botezat, a. (30 november, 2018). parental migration and the children left behind. https://bold.expert/parentalmigration-and-the-children-left behind/#:~:text=such%20issues%20are% 20more%20prevalent,emotional% 20and%20mental%20health%20problems.%e2%80%9d braun, v., & clarke, v. (2022). conceptual and design thinking for thematic analysis. qualitative psychology, 9(1), 3–26. braun, v., & clarke, v. (2013). successful qualitative research: a practical guide for beginners. sage. 8. braun, v., & clarke, v. (2019). reflecting on reflexive thematic analysis. qualitative research 9. in sport, exercise and health, 11(4), 589-597. bronfenbrenner, u. (2008). ecology of human development. harvard university press. e. sharai (2022) 41 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe campbell, k. a., orr, e., durepos, p., nguyen, l., li, l., whitmore, c., gehrke, p., graham, l., & jack, s. m. (2021). reflexive thematic analysis for applied qualitative health research. the qualitative report, 26(6), 2011-2028. catrinescu, n., willis, j., macauslan, i., barca, v. & sandu, v. (2011). impact of labour migration on “children left behind” in tajikistan. unicef. cebotari, v., mazzucato, v., & appiah-denkyira, e. (2018). a longitudinal analysis of well-being of ghananian children in transnational families. child development, 89(5), 1768-1785. chingwe, e. (2022). effects of parental migration on educational outcomes of adolescent children left behind in bulilima and mangwe districts, zimbabwe. indiana journal of human social science, 3(12), 19-26. coe, c. (2008). the structuring of feeling in ghanaian transnational families. city & society, 20, 222-250. coombs, h. (2022). case study research: single or multiple?. southern utah university. cortes, r. (2007). remittances and children’s rights: an overview of academic and policy literature. unicef. creswell, j.w. (2014). research design: qualitative, quantitative and mixed methods approaches (4 th ed.). sage. de la garza, r. (2010). ‘migration, development and children left behind: a multidimensional perspective’, unicef working paper. unicef. donald, d., lazarus, s. & lolwana, p. (2010). educational psychology in social context: ecosystemic applications in southern africa. oxford university press southern africa (pty) ltd. ettekal, a.v. & mahoney, l.j. (2017). ecological systems theory. in k. peppler, the sage encyclopedia of out-of school learning (pp. 239-241). sage publications, inc. filippa, o.m. (2011). zimbabwe adolescents’ experiences of their parental absence due to diaspora. unpublished master of education thesis. university of south africa. gao, y., li, l.p., kim, j.h., congdon, n., lau, j. & griffithss, s. (2010). the impact of parental migration on the health status and health behaviours among left behind adolescent children in china. biomed central public health, 10(56), 1471-2458. graham, e., & jordan, l.p. (2011). migrant parents and the psychological well-being of left-behind children in southeast asia. journal of marriage family, 73(4), 763-787. greening, n. (2019). phenomenological research methodology. scientific research journal, 7(5). guetterman, t.c. (2015). descriptions of sampling practices within five approaches to qualitative research in education and the health sciences. forum qualitative sozialforschung / forum: qualitative social research, 16(2). huurre, t., junkkari, h., & aro, h. (2006) long-term psychosocial effects of parental divorce. european archives of psychiatry and clinical neuroscience, 256, 256-263. jones a., sharpe j., &sogren, m. (2004). children’s experiences of separation from parents as a consequence of migration. caribbean journal of social work, 3, 89-109. e. sharai (2022) 42 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe ketefian, s. (2015). ethical considerations in research. focus on the vulnerable groups.investigacion y educacion en enfermeria, 164-172. kosslyn, s.m. & rosenberg, r.s. (2008). psychology in context. pearson education, inc. kufakunesu, m., ganga, e., chinyoka, k., hlupo, t. & denhere, c. (2013). viewed with skewed lenses? adolescents’ perceptions on the treatment they receive from parents and teachers in masvingo urban, zimbabwe. international journal of innovative research & development, 2(4), 225242. lahey, b. (2009). psychology: an introduction. mcgraw-hill higher education. lin, d. & wen, m. (2012). child development in rural china: children left behind by their migrant parents and children of non-migrant families. child development 83(1), 120-136. lindgren c.l. (1990). burnout and social support in family caregivers. western journal of nursing and research, 12(4), 469-82. leong, n. (2015). negative identity. southern california review, 88(1357), 14-55. manandhar, n. & joshi, s.k. (2020). importance of consent in the research. international journal of occupational safety and health. 10(2). 89-91. marcell, a.v., & halpern-felsher, b.l. (2007). adolescents’ beliefs about preferred resources for help vary depending on the health issue. journal of adolescent health, 41(1), 61-8. maruja, m. (2006). living with migration. asian population studies, 2(1), 45-67. noor, s., tajik, o., & golzar, j. (2022). simple random sampling. international journal of education & language studies, 1(2), 78-82. office of the high commissioner for human rights is the leading united nations. (2022, 15 july). south africa: un experts condemn xenophobic violence and racial discrimination against foreign nationals. https://www.ohchr.org/en/press-releases/2022/07/southafrica-un-experts-condemnxenophobic-violence-and-racial oswalt, a. (2008). urie bronfenbrenner and child development retrieved from http://www.mentalhelp.net/poc/view_doc.php?type=doc&id=7930 pasura, d. (2008). “gendering the diaspora: zimbabwean migrants in britain” african diaspora. a journal of transnational africa in a global world 1(1-2), 86-109. save the children insri lanka. (2006). left behind, left out: the impact on children and families of mothers migrating for work abroad. save the children. rudatsikira, e., maposa, d., mukandavire, z., muula., a.s., & siziya, s. (2009). prevalence and predictors of illicit drug use among school-going adolescents in harare, zimbabwe. annals of african medicine, 8(4), 215-220. rutter, m. (2005). how the environment affects mental health. the british journal of psychiatry, 186, 4-6. rutter, m., rozek, m., & stobaus, c.d. (2008). rutter’s child and adolescent psychiatry. wileyblackwell. salah, m. a. (2008). the impact of migration on children in moldova. unicef. saunders, b., sim, j., kingstone, t., baker, s., waterfield, j., bartlam, b., burroughs, h., & jinks, c.(2018). saturation in qualitative research: exploring its conceptualization and operationalization. quality quantity, 52(4),1893-1907. http://www.ohchr.org/en/press-releases/2022/07/south-africa-un-experts-condemnhttp://www.ohchr.org/en/press-releases/2022/07/south-africa-un-experts-condemnhttp://www.ohchr.org/en/press-releases/2022/07/south-africa-un-experts-condemnhttp://www.ohchr.org/en/press-releases/2022/07/south-africa-un-experts-condemnhttp://www.ohchr.org/en/press-releases/2022/07/south-africa-un-experts-condemnhttp://www.ohchr.org/en/press-releases/2022/07/south-africa-un-experts-condemnhttp://www.ohchr.org/en/press-releases/2022/07/south-africa-un-experts-condemnhttp://www.ohchr.org/en/press-releases/2022/07/south-africa-un-experts-condemnhttp://www.ohchr.org/en/press-releases/2022/07/south-africa-un-experts-condemnhttp://www.ohchr.org/en/press-releases/2022/07/south-africa-un-experts-condemnhttp://www.ohchr.org/en/press-releases/2022/07/south-africa-un-experts-condemnhttp://www.ohchr.org/en/press-releases/2022/07/south-africa-un-experts-condemnhttp://www.mentalhelp.net/poc/view_doc.php?type=doc&id=7930 http://www.mentalhelp.net/poc/view_doc.php?type=doc&id=7930 e. sharai (2022) 43 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe scalabrini migration centre. (2003). hearts apart: migration in the eyes of filipino children. scalabrini migration center. snowman, j. & biehler, r.(eds). 2011. psychology applied to teaching. houghton mifflin. swartz, l., de la rey, c, duncan, n., townsend, l. & o’neill, v. (2011). psychology: an introduction. oxford university press. sun, x., & sun, t. (2021). research on lifelong education based on erikson’s psychosocial development theory. advances in social science, education and humanities research, 582, 267-270. tawodzera, m.c., & themane, m. (2019). schooling experiences of children left behind in zimbabwe by emigrating parents: implications for inclusive education. south african journal of education, 39(1), 2-13. tevera, j., & crush, d. (2009). exiting zimbabwe. samp. toth, g. (2007). effects of migration: the children left behind. soros foundation. tufford, l., & newman, p. (2010). bracketing in qualitative research. qualitative social work, 11(1), 80-96. unger, m. (2008). resilience across cultures. british journal of social work, 38 (2), 218-235. ward, l.m. & eyber, c. (2009). resiliency of children in child-headed households in rwanda: implications for community based psychosocial intervention. the international journal of mental health, psychosocial work and counselling in areas of armed conflict, 7(1), 17-33. zhao, c., wang, f., zhou, x., jiang, m. & hesketh, t. (2018). impact of parental migration on psychosocial well-being of children left behind: a qualitative study in rural china. international journal for equity in health, 17-80. zhou, l., wang, g., jia, c., & ma, z. (2019). being left-behind, mental disorder, and elderly suicide in rural china: a case-control psychological autopsy study. psychological medicine, 49(3), 458-464. type of the paper (article american interdisciplinary journal of business and economics issn: 2837-1909| impact factor: 6.72 volume. 10, number 2; april-june, 2023; published by: scientific and academic development institute (sadi) 8933 willis ave los angeles, california https://sadipub.com/journals/index.php/aijbe | editorial@sadipub.com 20 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe exploring the mediating role of emotional exhaustion in employee burnout fariha zahra bahria university, islamabad, pakistan abstract: this study investigates the role of ethical leadership in preventing employee burnout caused by work overload. the aim is to explore how work overload results in emotional exhaustion, which leads to burnout, and how ethical leadership can moderate the relationship between emotional exhaustion and employee burnout. survey responses were gathered from 385 faculty members of pakistani public higher educational institutions (heis), and statistical analysis was performed using spss software. the study confirms that work overload causes emotional exhaustion, which leads to employee burnout, and that ethical leadership moderates the relationship between emotional exhaustion and employee burnout. organizations that prioritize ethical leadership reduce stress and burnout among their employees. ethical leadership is associated with various positive outcomes, including increased employee well-being, work performance, job satisfaction, dedication and efficiency, voice behavior, and psychological safety. the study concludes that ethical leadership plays a significant role in preventing employee burnout, and fostering superior ethical leadership practices and behaviors can improve organizational culture and outcomes for both employers and employees. the study further recommends exploring the moderating role of ethical leadership on employee burnout in other contexts. keywords: ethical leadership, employee burnout, emotional exhaustion, work overload, organizational culture, job satisfaction. introduction: employee burnout is a growing concern for both employers and employees as it negatively impacts employee well-being, work performance, and organizational outcomes. work overload is one of the key contributors to employee burnout, causing emotional exhaustion, which leads to exhaustion, cynicism, and decreased job performance. to prevent burnout, organizations need to prioritize ethical leadership that promotes the wellbeing and satisfaction of its employees. ethical leadership has been associated with various positive outcomes, including increased work performance, job satisfaction, dedication and efficiency, voice behavior, and psychological safety. however, the moderating role of ethical leadership on the relationship between emotional exhaustion and employee burnout remains unclear. this study aims to explore this relationship and suggests that ethical leadership can moderate the relationship between emotional exhaustion and employee burnout. this study uses survey responses from pakistani public higher educational institutions (heis) faculty members, and the findings show that ethical leadership significantly reduces burnout caused by emotional exhaustion. the study concludes that fostering ethical leadership practices and behaviors can improve mailto:editorial@sadipub.com fariha zahra (2023) 21 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe organizational culture and outcomes for both employees and employers. future research should explore the moderating role of ethical leadership on employee burnout in other contexts. 1.2 significance of the study the current study seeks to contribute to the emerging body of research on ethical leadership and human resource management (hrm) with the main objective of enhancing workplace practices and outcomes for both employers and employees by exploring moderating role of ethical leadership in preventing employee burnout. the employee burnout is considered to be an important concept for the organizations because of its significant implications such as emotional exhaustion. thence, this study is set out to help organizations and their management in improving organizational culture or environment by fostering superior ethical leadership practices and behaviors, and in preventing employees from experiencing burnout in the workplace. 1.3 problem statement the alarming issue of employee burnout has become a worldwide epidemic. however, the literature available on what kind of relationship ethical leadership forms with employee burnout is still limited. the employee burnout is the emerging and salient phenomenon for the organizations but no research has been done to explore how ethical leadership acts as a moderator on the direct effect that exists between emotional exhaustion and employee burnout. specifically in pakistan no study has been conducted of this sort. therefore, this study aims to fill this research gap. 2. literature review and theoretical framework 2.1 work overload work overload has become a serious and critical issue for organizations now a days that demands immediate attention. this upsurge in work overload causes alarming increase in stress, exhaustion and work-life conflict among employees, decreases their morale and motivation to work which ultimately leads towards poor job performance and low employee engagement. these factors further leads to low job satisfaction among employees. the employees rarely have enough time to relax or function properly while working because of extra work or work overload combined with emotional or mental exhaustion (ali & farooqi, 2014). this is backed by previous researches that overload in work increases occupational stress in employees causing them to have trouble focusing. this results in compromised job performance of the employees which ultimately leads towards lower levels of satisfaction related to one’s job (ali et al., 2014). the studies have proved that factors that contribute to occupational stress include increased workload, which is also strongly positively associated with job dissatisfaction (paktinat & rafeei, 2012). another study conducted by obiora & iwuoha, (2013) claims that the critical issue of work overload is a very serious problem not only for the employee himself but for the organizations as well. they also go on and report that work overload is the primary reason of stress in job that further leads employees towards job dissatisfaction (obiora & iwuoha, 2013). work overload has been explained as the “greatness of job tasks and might cause mental distress for employees” (johari, ridzoan & zarefar, 2019). additionally, this is the phenomena that points out to the amount of assignments and activities that exceeds the designated responsibilities of an employee. (ali & farooqi, 2014) this aspect refers to the degree of work stress experienced by employees because of conception that they are unable to handle or be active with the amount of tasks or work assignments they have been given (idris, 2011). work overload can also exist because of factors that include long hours and time pressure. the previous literature suggests that pressure that stems from extra workload is considered to be a reason behind compromising employees’ performance significantly (schultz et al., 2015). the pressure also tend to increase as employees go up the employment stairs and began to acquire senior level positions. the reason for an increase in pressure is more responsibilities and work overload which in return influences the employee’s job performance (schultz & schultz, 2015). hence, the problem of work overload concerns the organizations which are these days seeking only employees with high performance (malta, 2004). fariha zahra (2023) 22 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe 2.2 emotional exhaustion maslach, leiter & schaufeli, (2001) defines emotional exhaustion employees experience at workplace as “feelings of being overextended and depleted of one’s emotional and physical resources”. emotional exhaustion means reduction in emotional resources (ertop, 2019). it refers to the feelings of emotional void followed by intense mental pressure, and severe reduction in abilities to cope up with side effects of being exposed to scenarios for a prolonged period that cause constant stress (maslach et al., 2016). this causes a great decline in the mental, physical and emotional strength and energy level of employees (leiter, maslach & frame, 2015). emotionally exhausted individuals experience depletion of energy and feel that all of their resources are diminished. emotional exhaustion also causes employees to feel tensed and frustrated. feelings of tension and frustration are often combined with feelings of extreme tiredness. when employees feel extremely tired and exhausted, they are not being able to focus properly on their work and start to withdraw from assigned tasks to protect themselves from burning out (ertop, 2019). to study the concept of emotional exhaustion is crucial because it is linked to various relevant outcomes for instance job satisfaction, intention to quit (skaalvik & skaalvik, 2017), and job performance (huyghebaert et al., 2018). past studies indicate that emotional exhaustion has a significant influence on both employee and his or her respective organization (halbesleben and buckley 2004). research shows that it has a significant negative impact on the mental as well as physical health of an employee and can lead to poor and compromised well-being (chughtai, byrne, & flood, 2014), job dissatisfaction and lower job commitment, high turnover rates and lower job performance (maslach et al. 2001; lee & ashforth, 1996). 2.3 employee burnout employee burnout at workplace has become a critical issue worldwide that requires immediate attention. employees at all levels report that they feel insecure, undervalued, stressed out, alienated, and misunderstood at their workplace (maslach & leiter, 1997). although the phenomenon of job burnout is not new but the term recently grabbed the attention of scholars. the initial studies were conducted in the year 1975 by a notable psychiatrist named freudenberger who was carrying out his research at an agency that specialized in medical care, followed by another wellknown scholar maslach (1976), who was a social psychologist studying emotions at work. freudenberger (1975) described effects of the burnout as experiencing mental exhaustion as well as feeling less enthusiastic and committed to one’s job. maslach et al. (2001) defines employee burnout as prolonged response to chronic mental, emotional and interpersonal stressors at work, and is comprised of three key dimensions i.e. emotional exhaustion, feelings of cynicism, and diminished personal accomplishment. exhaustion is referred to as a root cause of employees’ burnout and it is the first indication that individual is suffering from the burnout syndrome (seidler, et al., 2014; maslach et al., 2001; maslach et al., 2015). it is the most essential criterion of occupational burnout (maslach et al., 2001). the second aspect, cynicism causes employees to psychologically distance. it leads them to experience negative feelings toward their work and feel detached and alienated (maslach et al., 2015). the third dimension, feelings of reduced personal accomplishment basically means losing confidence in one’s capabilities to efficiently carry out the task and considering their contributions to be worthless. employees start to view themselves as incompetent for the job (maslach et al., 2001; maslach et al., 2015). employees experience burnout because of the problematic relationships that exist between them and their employed organizations. when organizational processes and structures do not align with the tendencies and capabilities of their employees it causes them to feel stressed out, tensed and frustrated. the stress and tension leads the employees to feel depletion of energy and results in significantly reduced participation. they end up feeling incompetent and inefficient for the job and give up (maslach & leiter, 1997). 2.4 ethical leadership ethical scandals in corporates worldwide (mehta, 2003; colvin, 2003; revell, 2003) have brought attention of organizations to realize the need for ethical leadership (resick et al., 2011). the corporate scandals concerning ethical conduct have shed light on the importance of the role leadership plays in forming a fariha zahra (2023) 23 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe workplace culture that promotes ethical values and principles (trevino, brown, & harrison, 2005). previous research points to the fact that most employees tend to look outwards for inspiration of moral conduct rather than inside (bassberg, 1969; treviño, 1986). thus, leaders can be a primary and main provider of such assistance and counselling at work (trevino, brown, & harrison, 2005). the importance of moral leadership for leading effectively in the organization has been a topic of interest for decades (bass & steidlmeier, 1999). this concept emphasizes dignity, being wellinformed about ethical duties, integrity, inclination toward collectivism, preference for civilized conduct, perceptive and considering of the needs and rights of others, and accountability management (trevino, brown, & harrison, 2005; trevin˜o et al., 2006; gini, 1997; fluker, 2002; kanungo & mendonca, 1996; gottlieb & sanzgiri, 1996). brown et al. (2005, p. 120) describes ethical leadership as ‘‘the demonstration of normatively appropriate conduct through personal actions and interpersonal relationships, and the promotion of such conduct to followers through twoway communication, reinforcement, and decision-making’’. basically it focuses on the way managers utilize the given authority by not only practicing the ethical values in their professional life but in their personal life as well. hence, they are the ethical persons as well as the ethical supervisors (resick et al., 2006; de hoogh et al., 2008; trevin˜o et al., 2003; brown & trevin˜o, 2006). 2.5 work overload and emotional exhaustion the type of relation employees form with their respective jobs and the problems or hardships that emerge as this working relation start to become worse or even unhealthy for the employees, have been recognized as an important phenomena of the contemporary times (maslach, schaufeli & leiter, 2001). the changing working conditions and work overload to be specific is the main source of stress and exhaustion in the workplace (laurence, fried, & raub, 2016). the work overload may occur because of many reasons, some of them include advancement in the technologies, new and challenging market demands, staff restructuring and adjustments (garcía-arroyo & segovia, 2019), and too much extra work (ali & farooqi, 2014). this changing environment of work that involves more challenging and greater demands from employees and especially the culture of work overload has put the employees under so much pressure and is affecting their work situation (garcía-arroyo & segovia, 2019). these changes can cause the employees to experience symptoms of stress and emotional exhaustion (maslach et al., 2001; 2015; garcía-arroyo & segovia, 2019). emotional exhaustion is said to be the central aspect of the employee burnout and also the most commonly and widely complained about symptom of the employee burnout syndrome (maslach et al., 2001; 2015; garcía-arroyo et al., 2019). the findings of previous studies show that exhaustion that employees experience because of demanding and extra workload negatively affect employees’ satisfaction, commitment and performance (paktinat & rafeei, 2012). the stress at work due to work overload can become a serious and harmful issue not only for the employee himself or herself but also for the organization he or she works at as well (ali & farooqi, 2014). stress that results from various job related elements points to the aspects and elements that job entails, as well as the activities and duties performed by employees at workplace (nguyen et al., 2018; garcía-arroyo & segovia, 2019). it manifests itself in the form of both qualitative and quantitative terms, particularly in the case of work overload specific situations (garcía-arroyo & segovia, 2019). previous literature reports that work overload contributes to many serious psychological and physical health issues (maslach et al., 2001; garcía-arroyo & segovia, 2019) such as fatigue, insomnia, tension, anxiety, lower self-esteem and depression etc. (maslach et al., 2001; 2015). carballo-penela, varela & bande (2018) describes work overload as a job stressor that refers to such work related situations where job responsibilities surpasses the resources available to perform them (shrimon, gilboa, fried, & cooper, 2008). on the other hand, exhaustion is among the very first symptoms of burnout syndrome which results due to chronic stress caused by work related stress factors such as work overload followed by feelings of reduced energy (maslach & leiter, 1997; lewin & sager, 2009; leiter, maslach & frame, 2015). fariha zahra (2023) 24 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe intense and extra workload along with chronic fatigue and emotional exhaustion causes employees to be less committed and engaged in their work (qaiser, gulzar, hussain & shabbir, 2015). work overload not only adversely affect employee’s well-being as well as in the context of work it causes them to perform their job ineffectively, commit mistakes and errors, and make poor decisions related to work. these negative effects become the reason of their compromised and poor health and well-being (qaiser, gulzar, hussain & shabbir, 2015). emotional exhaustion is not merely something that employees experience but rather it brings about set of actions one take to distance himself emotionally and cognitively from his job, most likely to deal with increased work demands that extra workload imposes. previous research indicates that most of the studies that have been conducted to examine the phenomenon of mental exhaustion was done on the workers who were doing “people work”. the people work means employees working in human services and health care, whose job requires them to deal with people on everyday basis (maslach & schaufeli, 1993; maslach, leiter & schaufeli, 2001). maslach et al., (2001) reports in his study that emotional work is more draining especially for situations where the role demands from the employees to portray emotions that are not consistent with their feelings. the growing demands of the today’s work can cause the employees to feel exhausted and can damage their capacity to respond to the changing needs their work demands. because of such reasons, employees start to use cognitive distancing as a coping mechanism when they feel exhausted and emotionally drained. exhaustion is the ultimate response of work overload that manifests itself in many forms including physiological and psychological problems that were discussed above i.e. tension, fatigue, stress, anxiety, insomnia, cognitive distancing and so forth (maslach, leiter & schaufeli, 2001; maslach & frame, 2015). therefore, the following hypothesis can be developed: h1: there is a significant positive effect of work overload on emotional exhaustion experienced by employees. 2.6 emotional exhaustion and employee burnout seidler, et al. (2014) refers to emotional exhaustion as “the heart of the burnout”. it is the most commonly reported issue among those who experience job burnout (leiter & maslach, 2016; leiter, maslach & frame, 2015). it is thought to be most obvious manifestation of occupational burnout (leiter et al., 2015). some scholars because of this significant association that emotional exhaustion has with employee burnout even claim that remaining components do not hold much importance as they seem unnecessary and irrelevant (shirom, 1989). they have labeled this model as “exhaustion-only” model (maslach et al., 2015). emotional exhaustion demonstrates the stress dimension of the employee burnout syndrome (maslach et al., 2001). it includes feelings of drained physical, mental and cognitive energy and can be manifested in the form of lack of resources one needs to efficiently carry out the assigned tasks in the workplace (maslach et al., 2015). previous studies indicate that employees who show signs and symptoms of chronic emotional exhaustion display destructive behaviors (maslach et al. 2001; lee & ashforth, 1996; janssen, lam & huang, 2010). maslach et al., (2001) describe in their study that exhausted employees tend to be less responsive and involved with the demands of their job and have trouble focusing on tasks due to drained out energy levels. a predicament with overwhelming job demands that leads employees towards chronic exhaustion is most likely going to negatively affect one’s job efficacy. further, emotional exhaustion disrupts employees’ job effectiveness. it seems hard to have a sense of effectiveness and accomplishment when employees are stressed out as well as drained (maslach, leiter & schaufeli, 2001). employee burnout is the ultimate response exhibited by employees experiencing feelings of emotional exhaustion and lack of physical and mental energy (maslach, 1997; maslach et al., 2001; 2015). freudenberger, (1974) defines employee burnout as “mental and physical exhaustion” that occurs in the work settings. the intensity of burnout can vary from person to person, and different people can claim different symptoms (freudenberger, 1974) but emotional exhaustion is always common (maslach et al., 1993; 2001; 2015). therefore, the following hypothesis can be derived: fariha zahra (2023) 25 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe h2: there is a significant positive effect of emotional exhaustion on employee burnout. 2.7 the moderating effect of ethical leadership on the relationship between emotional exhaustion and employee burnout the leadership style has a significant impact on the effectiveness and performance of the both employees and organization (de hoogh & den hartog, 2008; ahmadi, ahmadi & zohrabi, 2012). the leadership plays an immense and critical role in shaping and encouraging ethical environment in the organization. leaders have a crucial impact in determining the conduct of employees and the organization (trevino, brown, & hartman, 2003; kanungo, 2001; aronson, 2001). ethical leadership is linked to various significant and positive consequences that are of interest to the organizations, some of the outcomes include leaders’ effectiveness, employee’s contentment related to job (trevino, brown, & harrison, 2005; de hoogh et al., 2008), work passion (ahadiat & dackopikiewicz, 2020), commitment (ahmadi, ahmadi & zohrabi, 2012), engagement, readiness to put forward issues in front of concerned authorities (trevino, brown, & harrison, 2005), positive employee voice behavior (walumbwa & schaubroeck, 2009), organizational citizenship behavior (brandon, 2013) and so forth. the ethical leadership has also been linked with employee’s overall well-being (chughtai, byrne, & flood, 2014), trust and organizational optimism (de hoogh et al., 2008). it is evident from above mentioned positive outcomes of ethical leadership that leaders who prioritize ethical behaviors and practices in the workplace, allow employees to exhibit positive attitude toward their job and hence prevent them from experiencing negative feelings and ultimately exhaustion. research indicates employees tend to trust the leaders who show great concern for their followers and emphasize ethical attributes and characteristics (brown et al., 2005). the trust on leadership is manifested in advantageous consequences i.e. improved employees’ behaviors and attitudes (burke et al. 2007) and better job performance (trevino, brown, & harrison, 2005; neves & caetano, 2009). previous studies reveal that employees feel less exhausted and have higher level of satisfaction when their leader is ethical, thus, lowering their chances of burnout. in light of above arguments, the following hypothesis can be developed: h3: ethical leadership negatively moderates the relationship between emotional exhaustion and employee burnout such that when ethical leadership is high then it weakens the relationship between emotional exhaustion and employee burnout. 2.8 the mediating effect of emotional exhaustion on the relationship between work overload and employee burnout as noted above, previous studies on the topic of work overload has positively related work overload with chronic stress at workplace and feelings of severe emotional exhaustion (laurence, raub, & fried, 2016; abbas & roger, 2013; pienaar, rothmann, & de beer, 2016). research has proven that fatigue and anxiety caused at work because of reasons such as work overload leads the employee toward burnout. maslach et al. (2001) argue that exhaustion is mostly experienced with the combination of feelings of alienation and depersonalization which basically works as a defense mechanism for the employee dealing with extra burden that is imposed on the employee. it is very critical for organizations and management to know when employees are feeling exhausted and stressed out so they could take important measures to treat the problem otherwise if left untreated exhaustion can further lead to burnout (maslach, 1997; maslach et al., 2001; 2015). there has been tremendous studies done on burnout that states that there are some situational factors i.e. work overload that correlates to employee burnout. in fact extra workload and strict deadlines are the main reasons of job-related stress (malach et al., 2015). especially for employees whose jobs are demanding and oftentimes require them to deal with job overload. such employees are more likely to experience burnout (maslach et al., 2001). in view of these arguments, following hypothesis can be formulated: h4: the emotional exhaustion mediates the relationship between work overload and employee burnout such that work overload leads toward heightened emotional exhaustion and presence of emotional exhaustion leads toward increased employee burnout. fariha zahra (2023) 26 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe 2.9 research model 3. research methodology 3.1 data collection the study is cross-sectional in nature. the convenience sampling method is used for data collection. the survey responses were collected from faculty members of 17 public heis operating in islamabad and wah cantt, pakistan. the reason for choosing this as target population is that research has proved that teachers working in a public sector heis of pakistan are more dissatisfied with their jobs as compared to the teaching staff working in a private sector heis of pakistan. the stress and exhaustion are the major reasons for this job dissatisfaction (ayub, 2010). the sample size is about 385 at the confidence level of 95% and confidence interval or margin of error of 5%. as the population size is unknown; it is safe to take sample size of 385. 3.2 instrument selection the questionnaire used for data collection was subdivided into two parts, the first part was related to participant’s demographics and second one consisted of all the variables of the study i.e. work overload, emotional exhaustion, ethical leadership, and employee burnout. the demographics portion of the survey questionnaire included items such as age, gender, designation, qualification and experience etc. the section after that enlisted all the variables. work overload is evaluated by utilizing four items derived from buckingham (2004) scale. the items are assessed by utilizing four point likert scale response that ranged from “strongly disagree” to “strongly agree”. emotional exhaustion was measured using 7 items, and employee burnout was assessed with 11 items extracted from the “the measurement of experienced burnout” (maslach, & jackson, 1981). the items were listed with 7-point likert scale response that ranged from “1= strongly disagree” to “7= strongly agree”. to measure ethical leadership, brown and trevino et al.’s (2005) ten item scale was used. in order to evaluate the response given by the participants, five-point likert scale response was used in which 1 was for “strongly disagree”’ and 5 for “strongly agree”. 3.3 analytical procedure to ensure the internal consistency or reliability of the scales, cronbach’s alpha’s values were examined. skewness, kurtosis and graphical methods i.e. scatter plot, histogram, and normal p-p plot etc were looked at to ensure the normality of the data. correlation analysis was used to measure how the variables of the study were related to each other. different types of regression analysis i.e. simple linear, mediation analysis, moderation analysis, and moderated mediation analysis (using process macro) were conducted to test the hypotheses of the study. figure 1 : research model work over load emotional exhaustion ethical lead ership employee burnout h1 h2 (h4) h 3 fariha zahra (2023) 27 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe 4. results and analysis 4.1 normality test table 1. normality analysis of the variables variables skewness kurtosis statistic s.e statistic s.e work overload -.290 .124 .475 .248 emotional exhaustion -.923 .124 -.360 .248 employee burnout -.158 .124 -1.097 .248 ethical leadership .360 .124 -1.412 .248 generally to test the normality of the sample data, the shapiro-wilk test or kolmogorovsmirnov test is performed. but for the sample data (n) larger than 300, such tests may seem to be proven unreliable. in such case, normality is ensured by assessing skewness and kurtosis (kim, 2013). the acceptable value range for the skewness and kurtosis in order for the sample data to be considered normally distributed is between -2 and +2 (george et al., 2010). the statistics for all the variables lie between the acceptable ranges. the skewness values for all the variables lie between -1 and +1 and are really close to 0 which indicates data is moderately normally distributed. 4.2 reliability analysis table 2. reliability statistics variables cronbach's alpha cronbach's alpha based on n of items standardized items work overload .623 .668 4 emotional exhaustion .968 .968 7 employee burnout .926 .926 11 ethical leadership .978 .978 10 the cronbach’s alpha for all four variables’ scales of the study is gr which represents internal consistency. thus, data set can be consid 4.3 simple linear regression analysis 4.3.1 regression analysis for hypothesis 1 table 3. residuals statisticsa minimum maximum predicted value 1.7332 7.4211 mean std. deviation 5.2998 1.18103 385 n fariha zahra (2023) 28 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe residual std. predicted value std. residual a: dependent variable: emotional exhaustion first, the linear regression is run to test the first hypothesis. in order to perform the linear regression analysis, there are certain assumptions that need to be met i.e. there should be a linear relationship between variables, there should not be an outlier etc. the minimum and maximum value for standardized residual should lie between -3.29 or +3.29 respectively. the minimum standardized residual value was -2.787 and maximum was +2.013, which satisfies the criteria that there are no outliers in the data. to make sure that the relationship among the variables was linear, the scatter plot was computed. the following scatter plot graph confirms the linearity among respective variables. figure 1. scatterplot the third assumption is that the data should have independence of observations which is indicated by durbinwatson value or statistic. it should be between 1 and 3. the value of durbin watson is 1.137, so the assumption has been met. the assumption of normality has also been met, as graphs i.e. pp plot, histogram and scatter plot etc. given below illustrate that data is normally distributed. figure 2. normal pp plot figure 3. histogram figure 4. scatterplot table 4. correlations for work overload and emotional exhaustion emotional exhaustion work overload pearson correlation emotional exhaustion 1.000 .688 work overload .688 1.000 -3.47969 2.51372 .00000 1.24704 385 -3.020 1.796 .000 1.000 385 -2.787 2.013 .000 .999 385 fariha zahra (2023) 29 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe sig. (1-tailed) emotional exhaustion . .000 work overload .000 . table 5. model summary model r r square adjusted r square std. error of the estimate durbin watson 1 .688a .473 .471 1.24867 1.137 a: predictors: (constant), work overload dependent variable: emotional exhaustion table 6. anovaa a. dependent variable: emotional exhaustion b. predictors: (constant), work overload the pearson correlation value is 0.688, which indicates that work overload and emotional exhibit a moderately strong positive correlation. the r square is .473, which means that 47.3% variance in one’s level of emotional exhaustion can be predicted from the degree of work overload. the significance value is 0.000 which indicates that the variables work overload and emotional exhaustion form a significant relationship with each other, confirming the formulated hypothesis. the standardized coefficient is 0.688, which indicates the model demonstrates a strong relationship. the standardized coefficient beta suggests that for every one standard deviation increase in work overload will be followed by 0.688 of a standard deviation increase in emotional exhaustion. the sign of unstandardized beta is positive, it means that emotional exhaustion among employees increases as the work overload increases. hence, it can be said that, for every 1 unit increase in the work overload, the emotional exhaustion increases by 1.896 points. table 7 . coefficients a a. dependent variable: emotional exhaustion 4.3.2 regression analysis for hypothesis 2 table 8. residuals statisticsa model sum of squares df mean square f sig. 1 regression 535.617 535.617 343.527 .000b model unstandardized coefficients standardized coefficients t sig. b std. error beta ( 1 constant) .163 .302 .540 .590 work overload 1.896 .102 .688 18.534 .000 residual 597.163 383 1.559 total 1132.781 384 fariha zahra (2023) 30 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe minimum maximum mean std. deviation n predicted value 1.3443 5.7414 4.4954 1.25868 385 residual -3.01819 2.09086 .00000 .93886 385 std. predicted value -2.503 .990 .000 1.000 385 std. residual -3.042 2.224 .000 .999 385 a: dependent variable: employee burnout the linear regression analysis is performed to check the relationship between emotional exhaustion and employee burnout. in order to satisfy the assumption criteria required for running the linear regression, first scatter plot has been constructed on the spss. the results confirm that there is a linear relationship between the variables. the minimum standardized residual value is -3.042 and maximum one is 2.224, which implies the data does not have any outliers. figure 5. scatterplot the durbin watson value is 1.145, so it can be assumed that data meets the criteria of independence of observations as the value is greater than 1 and less than 3. the normal p-p plot shows that dots are lined up along a 45-degree line that indicates that the data has normality of residuals. the histogram shows that employee burnout that is dependent variable is normally distributed. for normality, these three graphs were constructed i.e. histogram, normal p-p plot, and scatter plot. graph 6. normal pp plot graph 7. histogram graph 8. scatterplot the pearson correlation is 0.802 which suggests that higher level of emotional exhaustion indicates increased chances of employee burnout, as both variables depicts an extremely strong positive correlation. the sign is positive which means that as the emotional exhaustion increases so does the employee burnout. the significance is 0.000 that implies the model is highly significant. table 9. correlations for emotional exhaustion and employee burnout fariha zahra (2023) 31 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe employee burnout emotional exhaustion pearson correlation employee burnout 1.000 .802 emotional exhaustion .802 1.000 sig. (1-tailed) employee burnout . .000 emotional exhaustion .000 . table 10. model summaryb model r r square adjusted r square std. error of the estimate durbin-watson 1 .802a .643 .642 .94008 1.145 a: predictors: (constant), emotional exhaustion b: dependent variable: employee burnout table 11. anovaa model sum of squares df mean square f sig. 1 regression residual total 608.357 1 608.357 688.375 .000b 338.479 383 .884 946.837 384 a: dependent variable: employee burnout b: predictors: (constant), emotional exhaustion table 12 . coefficients a model unstandardized coeff. standardized coeff. t sig. b std. error beta the r-square is 0.643 that means that 64.3% variability in the employee burnout can be predicted or explained by the emotional exhaustion. the p value or significance value is 0.000 that means that the model is significant as p value is smaller than 0.005. the standardized coefficient beta is 0.802, this value indicates a highly strong relationship among emotional exhaustion and employee burnout. by looking at the value it can be said that for every one standard deviation increase in emotional exhaustion, employee burnout increases by 0.802 of a standard deviation. the sign of unstandardized beta is positive, it means that employee burnout increases as the emotional exhaustion increases. hence, it can be said that, for every 1 unit increase in the emotional exhaustion, the employee burnout increases by 0.733 points. 1 constant ) ( .612 .156 3.930 .000 emotional exhaustion .733 .028 .802 26.237 .000 a: dependent variable: employee burnout fariha zahra (2023) 32 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe 4.4 mediation analysis the process model 4 of process macro by andrew hayes is run to test the mediation effect. model: 4 y: employee burnout x: work overload m: emotional exhaustion table 13. total effect of x on y effect se t p llci ulci c_cs 1.7052 .0949 17.9744 .0000 1.5187 1.8917 .6764 table 14. indirect effect(s) of x on y effect bootse bootllci bootulci emotional exhaustion 1.1062 .0854 .9459 1.2798 the above table (indirect effect(s) of x on y) demonstrates the indirect effect of work overload on employee burnout through emotional exhaustion. the effect (co-efficient) value is 1.1062, and that is significant. because the bootstrap confidence intervals indicate that both values i.e. lower and upper bound do not include zero, both are higher than zero as the effect is positive. the values are 0.9459 to 1.2798. thus, it concludes that mediation effect exists and it is significant. the significance value that is 0.0000 also confirms this conclusion. the “total effect of x on y” table 13 shows the total value of co-efficient which is 1.7052. and the indirect effect is 1.1062. the indirect effect accounts for a certain percentage of the total effect that x has on y. in order to understand that, the calculation is done by dividing indirect effect from total effect (1.1062/1.7052=0.6487). the value computed after calculation is 0.6487 or 64.87%, it basically indicates that the proportion of the total effect of work overload on employee burnout that operates indirectly is 64.87%. the remaining percentage that is (100-64.87) 35.13% of the relationship operates directly. so the work overload accounts 35.13% of the outcome of the employee burnout but 64.87% is managed through the emotional exhaustion. 4.5 moderation analysis in order to test the third hypothesis of the study, the moderation analysis was performed using process macro by andrew f. hayes. model: 1 y: employee burnout x: emotional exhaustion w: ethical leadership table 15. covariance matrix of regression parameter estimates .2727 -.0414 -.0657 emotional exhaustion -.0414 .0065 .0101 -.0016 ethical leadership -.0657 .0101 .0170 .0026 int_1 .0098 -.0016 -.0026 .0005 table 16. model summary .0098 constant emotional exhaustion ethical leadership int_1 constant fariha zahra (2023) 33 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe table 17. model unstandardized se co-efficient t p llci ulci constant 2.6478 .5222 5.0706 .0000 1.6211 3.6745 emotional exhaustion .6453 .0809 7.9771 .0000 .4862 .8044 ethical leadership -.2708 .1302 -2.0792 .0383 -.5268 -.0147 int_1 -.0637 .0213 -2.9881 .0030 -.1056 -.0218 int_1 : emotional exhaustion * ethical leadership table 18. model summary r2 change f df1 df2 p x ×w .0050 8.9286 1.0000 381.0000 .0030 the above tables show the results of regression that are generated after executing moderation analysis in spss. the value of r-square is 0.7857 which basically means that 78.57% variance in employee burnout is explained by the interaction between emotional exhaustion and ethical leadership. the overall value of significance (pvalue) is 0.0000 which implies that the model is significant. to check the moderation effect, the interaction term is examined and individual values of coefficients and p are usually ignored. the interaction term indicates the interaction between emotional exhaustion and ethical leadership on employee burnout. the interaction term is significant which suggests that effect of emotional exhaustion on employee burnout is moderated by ethical leadership, thus confirming the hypothesis 3. the unstandardized coefficient is -.0637, negative sign implies that when the ethical leadership is practiced in the workplace, it weakens the relationship between emotional exhaustion and employee burnout. hence again, it confirms our hypothesis. the same sign of llci and ulci points out that our hypothesis of moderation effect is accepted. 4.6 moderated mediation analysis the process model 14 of andrew hayes is used to test the moderated mediation effect on the model of the study. model: 14 y: employee burnout x: work overload m: emotional exhaustion w: ethical leadership outcome variable: emotional exhaustion r r square mse f df1 df2 p .8864 .7857 .5325 465.7109 3.0000 381.0000 .0000 fariha zahra (2023) 34 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe table 19. model summary r r square mse f df1 df2 p .6876 .4728 1.5592 343.5266 1.0000 383.0000 .0000 table 20. model unstandardized coefficient se t p llci ulci constant -5.4626 .3015 18.1170 .0000 -6.0555 4.8698 work overload 1.8960 .1023 18.5345 .0000 1.6948 2.0971 outcome variable: employee burnout table 21. model summary r r square mse f df1 df2 p .8963 .8034 .4898 388.2479 4.0000 380.0000 .0000 table 22. model unstandardized co efficient se t p llci ulci constant 3.0475 .2366 12.8832 .0000 2.5824 3.5126 work overload .4665 .0798 5.8465 .0000 .3096 .6233 emotional exhaustion .3756 .0365 10.2916 .0000 .3039 .4474 ethical leadership -.5754 .0409 -14.0743 .0000 -.6558 -.4950 int_1 -.0723 .0205 -3.5280 .0005 -.1126 -.0320 int_1 : emotional exhaustion x ethical leadership the above given model table 22 shows that work overload emerged as a significant and positive predictor of employee burnout as value of significance (p-value) is 0.000. the unstandardized coefficient is 0.4665 which suggests that for every 1 unit increase in work overload, the employee burnout level rises by 0.4665 points. the significance value of emotional exhaustion and ethical leadership indicates that both variables are significant predictor of employee burnout as their pvalue is 0.0000. the unstandardized co-efficient statistic for the interaction term is -0.0723. the significance (p-value) is 0.0005 which is less than 0.05, thus indicates that the model is significant. this implies that it is evident from the co-efficient of the interaction term (.0.0723) that ethical leadership is moderating the effect of emotional exhaustion on employee burnout. table 23. test(s) of highest order unconditional interaction(s) fariha zahra (2023) 35 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe r2-chng f df1 df2 p m*w .0064 12.4468 1.0000 380.0000 .0005 m = focal predict: emotional exhaustion w= moderating variable: ethical leadership table 24. conditional effects of the focal predictor at values of the moderator(s) ethical leadership effect se t p llci ulci -1.2388 .4652 .0524 8.8793 .0000 .3622 .5682 .0000 .3756 .0365 10.2916 .0000 .3039 .4474 1.2388 .2860 .0348 8.2274 .0000 .2177 .3544 indirect effect: work overload -> emotional exhaustion -> employee burnout table 25. conditional indirect effects of x on y ethical leadership effect bootse bootulci bootllci -1.2388 .8820 .0892 .7330 1.0875 .0000 .7122 .0658 .5965 .8533 1.2388 .5423 .0637 .4203 .6687 table 26. index of moderate d mediation index bootse bootllci bootulci ethical leadership -.1371 .0331 -.2081 -.0773 the results shown in “index of moderated mediation” table 26 determine that whether the moderated mediation is taking place in the model or not. in order to confirm this, the bootstrap confidence intervals are examined. the values of llci and ulci (confidence intervals) lies outside of the zero or are a nonzero value as the values are -0.2081 and -0.0773, which indicates that moderated mediation effect is significant. as the upper bound (ulci) is negative it can be concluded that indirect effect through mediating variable is being negatively moderated by ethical leadership. the index value (which is co-efficient value) of moderated mediation effect is -0.1371. the negative sign of index indicates that indirect effect of work overload on employee burnout through emotional exhaustion decreases with higher levels of ethical leadership. 5. conclusion the main purpose of this study was to examine the moderating role of ethical leadership on the relationship between emotional exhaustion and burnout among employees. the primary data was collected and then examined in order to draw conclusions. the sample chosen for the study was teaching staff of public heis, as public universities’ teachers were assumed to be more prone to burning out because of the demanding and increased work load, and they exhibited lower levels of job satisfaction according to research (ayub, 2010). there were four variables in total in the study, and the conceptual model constituted moderated mediation relationship among variables. all four hypothesis were proven to be true after running regression analysis. the first hypothesis was confirmed by running simple linear regression, and it was deducted that work overload causes employees to feel emotionally exhausted. both variables formed positive relationship, which suggested that when work load increases, so does levels of emotional exhaustion experienced by employees. second hypothesis was also approved as the results of the simple linear regression for the second hypothesis fariha zahra (2023) 36 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe implied that emotional exhaustion is positive significant predictor of employee burnout. for the third hypothesis, the mediation analysis using process macro was run. this hypothesis was also validated as both the confidence intervals (llci and ulci) were non-zero (both were lower than zero), thus, the mediation effect of emotional exhaustion was significant. the moderation analysis confirmed that ethical leadership was acting as a moderator on the relationship between emotional exhaustion and employee burnout such that when ethical leadership was high it weakened the relationship between the two and when it was low the relationship was stronger. in order to test the conceptual model of the study, which was whether the indirect effect of work overload on employee burnout differs as the levels of ethical leadership varies, where ethical leadership is acting as a moderator on the relationship between emotional exhaustion and employee burnout, the moderated mediation analysis was performed. the test results indicated that the model was significant. so the conclusion can be made that indirect effect through emotional exhaustion was being moderated by ethical leadership. 5.1 practical implications the findings of this study will help the managers to better understand the concepts of work overload and the direct and serious effect it has on the mental health of employees. it will allow them to take necessary steps i.e. practicing ethical leadership to avoid employees from burning out so their satisfaction and productivity can be enhanced. the managers can learn from these insights and can formulate better and effective strategies to make the workload more manageable for their employees so that they won’t feel stressed out. 5.2 limitations like most studies, this research has certain limitations. first, the sample chosen for the study was teaching faculty working at public heis, and this restricts us from making generalizations about other occupations or professions. then the data was collected from the public sector universities of two cities of pakistan only i.e. islamabad and wah cantt, this also imposes some limitations. as there was a time constraint and sample size could not be expanded. future studies could try to be more inclusive of other occupations and they can reach other cities or countries as well. 5.3 future research and recommendations the future research can focus on including occupations other than teaching faculty of public heis. the future work should explore the conceptual model of this research in different work contexts so that external validity of the results of this research can be enhanced. the future studies could conduct research including the sample from all the cities of pakistan to make the findings more generalizable. the future research should also explore other determinants of employee burnout i.e. ostracism, depersonalization etc. the future studies can be longitudinal study in nature. as the concepts of emotional exhaustion and employee burnout are difficult to assess, studying these behaviors at different points in time would allow to draw more significant and meaningful conclusions. funding: this research received no external funding. references ahadiat, a., & dacko-pikiewicz, z. (2020), effects of ethical leadership and employee commitment on employees’ work passion, polish journal of management studies 21(2), 24-35. doi: 10.17512/pjms.2020.21.2.02 ahmadi, s., ahmadi, f., & zohrabi, m. (2012). effect of the leadership styles on the organizational commitment given the staff personality traits (the case study: iran's state retirement organization. interdisciplinary journal of contemporary research in business, 4(1), 247-264. aronson, e. (2001). integrating leadership styles and ethical perspectives. canadian journal of administrative sciences, 18, 244-256. https://doi.org/10.1111/j.1936-4490.2001.tb00260.x ayub, n. (2010). difference in job satisfaction between private and public universities teachers of karachi, pakistan. journal of alternative perspectives in the humanities and social sciences, 86-95. bass, b. m., & steidlmeier, p. (1999). ethics, character, and authentic transformational leadership behavior. the leadership quarterly, 10(2), 181-217. fariha zahra (2023) 37 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe brandon, d. (2013). ethical leadership and its impact on organizational citizenship behavior. doctoral dissertation, university of florida state, usa. brown, m. e., & l. k. trevin˜o (2006), ethical leadership: a review and future directions. the leadership quarterly, 17, 595–616. brown, m. e., trevino, l. k., & harrison, d. (2005). ethical leadership: a social learning perspective for construct development and testing. organizational behaviour and human decision processes, 97, 117–134. doi: 10.1016/j.obhdp.2005.03.002 buckingham, d. a., (2004). associations among stress, work overload, role conflict, and self-efficacy in maine principals, doctor of education thesis, university of maine, usa burke, s. c., sims, d. e., lazzara, e. h., & salas, e. (2007). trust in leadership: a multi-level review and integration. the leadership quarterly, 18, 606–632. https://doi.org/10.1016/j.leaqua.2007.09.006 chughtai, a., byrne, m. & flood, b. (2014). linking ethical leadership to employee well-being: the role of trust in supervisor. journal of business ethics, 128, 653–663. https://doi.org/10.1007/s105510142126-7 colvin, g. (2003). corporate crooks are not all created equal. fortune, october, 27, 64 de hoogh, a. h. b. &s den hartog, d. n. (2008). ethical and despotic leadership, relationships with leader’s social responsibility, top management team effectiveness and subordinates’ optimism: a multi-level study. the leadership quarterly, 19(3), 297–311. https://doi.org/10.1016/j.leaqua.2008.03.002 ertop, d. (2019). the perceived impact of ethical leadership on employees’ burnout feeling and intention to quit. uluslararası liderlik çalışmaları dergisi: kuram ve uygulama , 2 (2) , 120-140 . fluker, w. (2002), roundtable 3: ethics and leadership. conversations on leadership (president and fellows of harvard college, cambridge, ma). freudenberger h. j. (1975). the staff burnout syndrome in alternative institutions. psychother. theory res. pract., 12(1), 72–83. garcía-arroyo, j. a., & segovia, a. o. (2019). work overload and emotional exhaustion in university teachers: moderating effects of coping styles. universitas psychologica, 18(2), 1-12. doi: 10.11144/javeriana.upsy18-2.woee gini, a. (1997), moral leadership: an overview. journal of business ethics, 16, 323–330 gottlieb, j. z., & sanzgiri, j. (1996). towards an ethical dimension of decision making in organizations. journal of business ethics, 15(12), 1275-1285. halbesleben, j. r. b., & buckley, m. r. (2004). burnout in organizational life. journal of management, 30, 859–879. huyghebaert, t., gillet, n., beltou, n., tellier, f., & fouquereau, e. (2018). effects of workload on teachers’ functioning: a moderated mediation model including sleeping problems and overcommitment. stress and health. journal of the international society for the investigation of stress, 34(5), 601-611. https://doi.org/10.1002/smi.2820 idris, m. (2011). over time effects of role stress on psychological strain among malaysian public university academics. international journal of business and social science, 4(1), 44-48. janssen, o., lam, c. k., & huang, x. (2010). emotional exhaustion and job performance: the moderating roles of distributive justice and positive affect. journal of organizational behavior, 31(6), 787-809. johari, r. j., ridzoan, n. s., & zarefar, a. (2019). the influence of work overload, time pressure and social influence pressure on auditors’ job performance. international journal of financial research, 10(3), 88–106. https://doi.org/10.5430/ijfr.v10n3p88 kanungo, r. n., & mendonca, m. (1996), ethical dimensions of leadership (sage publications, thousand oaks, ca). fariha zahra (2023) 38 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe kanungo, r.n., (2001). ethical values of transactional and transformational leaders. canadian journal of administrative sciences, 18, 257265. kim, h. y. (2013). statistical notes for clinical researchers: assessing normal distribution (2) using skewness and kurtosis. restorative dentistry & endodontics, 38(1), 52-54. kohlberg, l. (1969). state and sequence: the cognitive-development approach to socialization. handbook of socialization theory and research, 347, 480. laurence, g. a., fried, y., & raub, s. (2016). evidence for the need to distinguish between self-initiated and organizationally imposed overload in studies of work stress. work & stress, 30(4), 337-355. https://doi.o rg/10.1080/02678373.2016.1253045 lee, r. t., & ashforth, b. e. (1996). a meta-analytic examination of the correlates of the three dimensions of job burnout. the journal of applied psychology, 81, 123–133. leiter, m. p., maslach, c., & frame, k. (2015). burnout. the encyclopedia of clinical psychology, 1– 7. doi: https://doi.org/10.1002/9781118625392.wbecp142 malta, m. (2004). stress at work, a concept in stress human factors limited. business psychology strategy, 33(6), 125-133. maslach, c., & jackson, s. e. (1981). the measurement of experienced burnout. journal of occupational behavior, 2, 99–113. maslach, c., & jackson, s. e. (1984). burnout in organizational settings. applied social psychology annual, 5, 133–153. https://psycnet.apa.org/record/1985-24012-001 maslach, c., & leiter, m. p. (1997). the truth about burnout: how organizations cause personal stress and what to do about it. san francisco: jossey-bass maslach, c., w.b. schaufeli & m.p. leiter (2001). job burnout, annual review of psychology, 52, 397–422. mehta, s. (2003). mci: is being good good enough?. fortune, 27, 117– 124 mo, s., & shi, j. (2017). linking ethical leadership to employee burnout, workplace deviance and performance. journal of business ethics, 144(2), 293–303. neubert, m. j., & roberts, j. a. (2013). the influence of ethical leadership and regulatory focus on employee outcomes. business ethics quarterly, 23, 269–296. neves, p., & caetano, a. (2009). commitment to change: contributions to trust in the supervisor and work outcomes. group and organization management, 34, 623–644. obiora, c. a., & iwuoha, v. c. (2013). work related stress, job satisfaction and due process in nigerian public service. european scientific journal, 9(20). paktinat, d., & rafeei, i. (2012). studying the effect of stress factors of on the amount of customers dissatisfaction with using structural equation model (a case from insurance companies in kerman). interdisciplinary journal of contemporary research in business, 3(12), 108-116. qaiser, s., gulzar, a., hussain, w., & shabbir, h. (2015). influence of work overload, work-family conflicts and negative affectivity on job embeddedness and emotional exhaustion: the moderating role of coworker support (case of health management). journal of scientific research & reports, 7(1), 75-85. resick, c. j., martin, g. s., keating, m. a., dickson, m. w., kwan, h. k., & peng, c. (2011). what ethical leadership means to me: asian, american, and european perspectives. journal of business ethics, 101, 435-457. resick, c. j., hanges, p. j., dickson, m. w., & mitchelson, j. k. (2006). a cross-cultural examination of the endorsement of ethical leadership. journal of business ethics, 63(4), 345-359. resick, c. j., mitchelson, j. k., dickson, m. w., & hanges, p. j. (2009). culture, corruption, and the endorsement of ethical leadership. in advances in global leadership, 5, 113-144. emerald group publishing limited. fariha zahra (2023) 39 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe resick, c. j., whitman, d. s., weingarden, s. m., & hiller, n. j. (2009). the bright-side and the dark-side of ceo personality: examining core self-evaluations, narcissism, transformational leadership, and strategic influence. journal of applied psychology, 94(6), 1365–1381. revell, j. (2003). the wres that won’t go out. fortune, 13, 139. rizwan, m., zeeshan, c., & mahmood, s. (2017). the impact of perceived ethical leadership and organizational culture on job satisfaction with the mediating role of organizational commitment in private educational sector of islamabad, pakistan. journal of intercultural management, 9, 75-100. doi: 10.1515/joim-2017-0004. schaufeli, w. b., & bakker, a. b. (2004). job demands, job resources, and their relationship with burnout and engagement: a multi-sample study. journal of organizational behavior, 25, 293–315. doi: 10.1002/job.248 schultz, d., & schultz, s. e. (2015). psychology and work today: pearson new international edition coursesmart etextbook. routledge. sharif, m. m., & scandura, t. a. (2013). do perceptions of ethical conduct matter during organizational change? ethical leadership and employee involvement. journal of business ethics. doi:10. 1007/s10551-013-1869-x sharif, m. m., & scandura, t. a. (2013). do perceptions of ethical conduct matter during organizational change? ethical leadership and employee involvement. journal of business ethics. doi: 10.1007/s10551-013-1869-x shirom, a. (1989). burnout in work organizations. in international review of industrial and organizational psychology, ed. cl cooper, i robertson, 25–48. new york: wiley skaalvik, e. m., & skaalvik, s. (2017). motivated for teaching? associations with school goal structure, teacher selfefficacy, job satisfaction and emotional exhaustion. teaching and teacher education, 67, 152-160. https://doi.org/10.1016/j.tate. 2017.06.006 trevino, l. k., brown, m., & hartman, l. p. (2003). a qualitative investigation of perceived executive ethical leadership: perceptions from inside and outside the executive suite. human relations, 56, 5–37. treviño, l. k. (1986). ethical decision making in organizations: a person-situation interactionist model. academy of management review, 11, 601–617. toor, s. u. r., & ofori, g. (2009). ethical leadership: examining the relationships with full range leadership model, employee outcomes, and organizational culture. journal of business ethics, 90, 533-547. walumbwa, f. o. and j. schaubroeck (2009). leader personality traits and employee voice behavior: mediating roles of ethical leadership and work group psychological safety. journal of applied psychology, 94, 1275–1286. microsoft word 02_22_working_capital_management_hernandez_alvarez_roscigno_piluso.docx american interdisciplinary journal of business and economics issn: 2837-1909| impact factor : 4.6 volume. 9, number 3; july-sept, 2022; published by: scientific and academic development institute (sadi) 8933 willis ave los angeles, california https://sadipub.com/journals/index.php/aijbe 1 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe investigating the factors influencing working capital and profitability in chilean smes: a statistical analysis santiago chalmers department of management and innovation systems, university of salerno abstract: this study investigates the relationship between working capital and profitability of chilean companies. a sample of manufacturing companies from the metropolitan region of santiago was selected for the survey. the data covered five years to allow a sufficiently significant observation time horizon. the generalised least squares method was used to develop the analysis to obtain more reliable results. the empirical results suggest that the relationship between the single elements of working capital and firms' profitability presents a non-linear trend, confirming the results obtained in previous research. therefore, for chilean manufacturing companies, it is worth investing in the individual elements of working capital until the optimal size is reached, as the investment positively impacts profitability. after exceeding the optimal threshold, the ratio reverses, increasing the risks of financial difficulties. keywords: working capital, profitability, manufacturing companies, chile, non-linear trend, financial difficulties. introduction the management of working capital (wcm) has become increasingly important for companies of all sizes due to the various crises of a financial and non-financial nature that have occurred globally in recent decades. the short-term financial equilibrium can affect the medium and long-term financial management and economic stability, affecting the firm's ability to survive. in the context briefly outlined, the management policy of each component of working capital determines an impact on short-term financial flows, affecting at the same time the future economic-financial equilibrium. the literature has extensively studied the issue of working capital management. however, scholars have focused mainly on companies in developed economies. over the last decade, the literature has shifted the focus on companies in emerging economies. therefore, studies on working capital management in smes in emerging economies deserve attention from researchers. furthermore, the smes of these economies often represent the backbone of the country's economic and social development, making a significant contribution to employment and gdp. in the context outlined, this research analyses the relationship between the determinants of working capital and profitability in the context of chilean smes to enrich the literature on the subject and provide helpful santiago chalmers (2022) 2 interdisciplinary journal of educational practice | https://sadipub.com/journals/index.php/ijep information to the managers of these companies. the paper is organised as follows. the second section develops the literature review. the third section illustrates the research methodology, while the next section highlights and analyses the results. finally, the last section contains the concluding remarks. 1. literature review the general business and financial literature investigating the relationship between working capital and business performance are extensive (fazzari and petersen, 1993; deloof, 2003; filbeck and krueger, 2005; gill et al., 2010; bagchi and khamrui, 2012; sensini, 2020; chalmers et al., 2020; hernandez et al., 2021). the researchers focused their attention on different aspects in different economic contexts, depending on the research perspective sought. however, the prevailing literature has highlighted the need to focus attention on its determinants, namely liquidity, credits, inventories and debts (chen et al., 2014; sanchez and sensini, 2017; mannetta et al., 2013; kumar and sun, 2022). the management of these variables affects the short-term financial equilibrium, also affecting the future survival prospects of the company. in any case, the efficient and effective management of working capital requires that current assets content the company with sufficient cash flows to pay short-term debts, aiming to optimise the relationship between risk and profitability (mannetta, 2014; chalmers et al., 2020). any choice regarding any variable of working capital necessarily impacts all the others, influencing the financial and economic dimension of the company and, therefore, the risk of financial difficulties and, more generally, the business risk (sen and oruc, 2009; alipour, 2011; alvarez et al., 2021). increasing sales through a longer extension to customers can help increase turnover and profitability. however, the possible consequences of this expansionary policy must also be carefully considered. extending customer collection times can cause economic tensions if actions are not taken to balance the extension of the entry financial cycle. furthermore, the shift in sales collection times can lead to an increase in the level of risk due to possible financial difficulties for customers (mannetta et al., 2013; sensini, 2016; diaz and vazquez, 2019; shan et al., 2019; chalmers and diaz, 2022; kumar and sun, 2022). this reasoning can also be extended to the other components of working capital. for example, warehouse management policies, which represent the link between production and sales (sensini, 2020), also significantly impact the company's financial flows. consequently, the choice of greater or lesser supplies in specific periods and the stock management policy must be carefully considered. likewise, debt management deserves the same attention. the extension of the payment time of debts, if on the hand it can favour the availability of more significant financial resources in the short term; on the other hand, it can worsen relations with suppliers (campos et al., 2014; chalmers et al., 2014; chen et al., 2014; chalmers and diaz, 2022). concerning each of the working capital variables mentioned, the literature has often found conflicting results. the company's size, the different economic contexts, and the different survey perspectives used from time to time are the cause of these divergences in the corporate and financial literature. in this regard, scholars have suggested that negative, positive and non-linear relationships can emerge between the individual determinants of working capital and profitability. in particular, some authors have suggested a negative relationship between the cash conversion cycle (ccc) and profitability, measured by roa and roe, also finding a negative relationship between the ccc and the other determinants of working capital. (wang, 2002; nobanee et al., 2011; tauringana and afrifa, 2013; ching et al., 2011; mannetta and zhang, 2014: chalmers and diaz, 2022). other studies have suggested a positive relationship between working capital management and corporate profitability (gill et al., 2010; sharma and kumar, 2011). santiago chalmers (2022) 3 interdisciplinary journal of educational practice | https://sadipub.com/journals/index.php/ijep finally, other studies have highlighted a non-linear relationship between the determinants of working capital and profitability, suggesting identifying an optimal level of working capital (diaz and vazquez, 2019). 2. research methodology to achieve our research objectives, we have selected a sample of manufacturing companies with registered offices in the metropolitan region of santiago. we have chosen this region because it is the most representative of the economic and social dimensions of the country. the sample was drawn with a random sampling technique. overall, 200 manufacturing companies were selected. the data was collected through a questionnaire to gather the financial information necessary to calculate the individual components of working capital. the survey refers to 5 years and covers the years from 2015 to 2019. a total of 120 companies participated in the survey. this level of participation can be considered satisfactory. table 1 shows how we determined the individual variables under investigation. tab. 1 –variables of interest dependent variable profitability roa net income/average total assets independent variables inventory inv log (average ages of inventories x 365/cost) account receivables ar log (ar x 365/turnover) account payables ap log (ap x 365/cost) cash conversion cycle ccc log (inv + ar) ap control variables current ratio cr total current assets/ total current liabilities assets turnover ratio atr total fixed assets/total assets we developed the research using two different models. the first model (1) was developed to investigate the influence of every single element of working capital on profitability. the model assumes the individual determinants as independent variables and profitability as a dependent variable, as highlighted below: 𝑅𝑂𝐴!" = 𝛽# + 𝛽$𝐼𝑁𝑉!" + 𝑎%𝐶𝑅!" + 𝑎&𝐴𝑇𝑅!"+𝜖!" (1a) 𝑅𝑂𝐴!" = 𝛽# + 𝛽$𝐴𝑅!" + 𝑎%𝐶𝑅!" + 𝑎&𝐴𝑇𝑅!"+𝜖!" (1b) 𝑅𝑂𝐴!" = 𝛽# + 𝛽$𝐴𝑃!" + 𝑎%𝐶𝑅!" + 𝑎&𝐴𝑇𝑅!"+𝜖!" (1c) 𝑅𝑂𝐴!" = 𝛽# + 𝛽$𝐶𝐶𝐶!" + 𝑎%𝐶𝑅!" + 𝑎&𝐴𝑇𝑅!"+𝜖!" (1d) the model just highlighted (1) allows us to identify only linear relationships between the individual elements of working capital and profitability. therefore, we have developed a second model (2) to verify whether there are non-linear relationships between the variables under study. the second model (2) uses a quadratic relationship and is highlighted below: 𝑅𝑂𝐴!" = 𝛽# + 𝛽$𝐼𝑁𝑉!" + 𝛽%𝐼𝑁𝑉(2)!" + 𝑎%𝐶𝑅!" + 𝑎&𝐴𝑇𝑅!"+𝜖!" (2a) 𝑅𝑂𝐴!" = 𝛽# + 𝛽$𝐴𝑅!+ 𝛽%𝐴𝑅(2)!" + 𝑎%𝐶𝑅!" + 𝑎&𝐴𝑇𝑅!"+𝜖!" (2b) 𝑅𝑂𝐴!" = 𝛽# + 𝛽$𝐴𝑃!+ 𝛽%𝐴𝑃(2)!" + 𝑎%𝐶𝑅!" + 𝑎&𝐴𝑇𝑅!"+𝜖!" (2c) 𝑅𝑂𝐴!" = 𝛽# + 𝛽$𝐶𝐶𝐶!+ 𝛽%𝐶𝐶𝐶(2)!" + 𝑎%𝐶𝑅!" + 𝑎&𝐴𝑇𝑅!"+𝜖!" (2d) santiago chalmers (2022) 4 interdisciplinary journal of educational practice | https://sadipub.com/journals/index.php/ijep the analysis was developed with the generalised least squares method. we have chosen this set because this method gives more reliable results. table 2 shows the results derived from this method. table 2 – descriptive statistics variables mean std. dev. min max roa 0.063 0.079 -0.194 0.384 inv 4.175 1.876 -4.437 6.163 ar 4.356 1.212 1.243 7.571 ap 3.436 1.131 -3.918 5.918 ccc 4.987 1.154 -3.363 7.633 cr 2.108 1.901 0.345 14.845 atr 0.211 0.223 0.001 0.959 next, we developed the correlation analysis. as is evident from table 3, there are no multicollinearity problems; therefore, the results are reliable. table 3 – correlation matrix roa inv ar ap ccc cr atr roa 1 inv -0.231 1 ar -0.310 0.235 1 ap -0.291 0.291 0.475 1 cr 0.291 -0,121 -0.041 -0.027 0.027 1 atr 0.049 -0.257 -0.291 -0.012 0.031 -0.141 1 3. research results and discussion after verifying the results of the descriptive statistics and their reliability, in this section, we first developed the first regression model 1. the results of the first regression model are highlighted in table 4. table 4 – model 1 variables 1a 1b 1c 1d inv -0.00459*** ar -0.0194*** ap -0.0919*** ccc -0.0136*** cr 0.00155*** 0.00185*** 0.00009 0.00217*** atr 0.00000 -0.0218*** 0.0007 0.0221*** c 0.0343** 0.0843*** 0.0431*** 0.0618*** significance levels: * < 0.05; **p < 0.01; ***p < 0.001. the results showed that the individual determinants and working capital have a negative and significant impact (1%) on the profitability of companies. in this regard, the cash conversion cycle suggests that companies that manage to reduce working capital management times perform better than other companies. these results are consistent with those obtained in previous studies (wang, 2002; dang and tran, 2019). in line with the chosen research methodology, we subsequently developed model 2 to verify the presence of any non-linear relationships between the elements of working capital and the performance of companies. the results of the first regression model are highlighted in table 5. santiago chalmers (2022) 5 interdisciplinary journal of educational practice | https://sadipub.com/journals/index.php/ijep table 5 – model 2 variables 2a 2b 2c 2d inv 0.00116** inv(2) -0.00693*** ar 0.0137*** ar (2) -0.0371*** ap 0.00583*** ap (2) -0.00251*** ccc 0.0119*** ccc(2) -0.00289*** cr 0.00169*** 0.00187*** -0.00105** 0.00229*** atr -0.00579 -0.0235*** -0.00541 -0.0267*** c 0.0231 0.0122 0.0251 -0.00493 significance levels: * < 0.05; **p < 0.01; ***p < 0.001. the quadratic variables of the model show a non-linear relationship between the individual components of working capital and profitability. this circumstance indicates that an investment in working capital produces a positive effect until the optimal level is reached, which corresponds to the curvature point evaluated at –β1 / 2β2. after exceeding this level, the investment in working capital produces an opposite effect, negatively affecting the performance of the firm. therefore, the results suggest that expansionary policies produce positive effects until working capital reaches its optimal size. after this threshold, investments in current assets negatively affect company performance, leading to an increase in costs and greater sensitivity to risk. (peterson and rajan, 1997; emery, 1984; kim & chung, 1990; amendola et al., 2020). 4. concluding remarks this paper aimed to investigate the relationships between working capital, its components and the profitability of companies, taking as a study reference the business context of an emerging economy, such as the chilean one. to carry out the survey, we selected a sample of manufacturing companies from the metropolitan region of santiago, the liveliest area of the country, from both an economic and social point of view. the data covered five years to allow a sufficiently significant observation time horizon. we used the generalised least squares method to develop the analysis. this method has the advantage of obtaining more reliable results than other methodologies. the empirical results suggest that the relationship between the single elements of working capital and firms' profitability presents a non-linear trend, confirming the results obtained in previous research. therefore, it is worthwhile for chilean manufacturing companies to invest in the individual elements of working capital until the optimal size is reached, as the investment positively affects profitability. after exceeding the optimal threshold, the relationship is reversed, leading to an increase in the risks of financial difficulties. the results of this research contribute first to enriching the existing literature, broadening the view on the companies of an emerging economy that is still little studied. furthermore, the results can provide helpful food for thought for business managers, helping guide their management choices. references afeef, m. (2011). analyzing the impact of working capital management on the profitability of sme’s in pakistan, international journal of business and social science 2 (22): 175-183. santiago chalmers (2022) 6 interdisciplinary journal of educational practice | https://sadipub.com/journals/index.php/ijep afrifa, g.a. (2013). working capital management practices of smes: the role of education and experience, international journal of academic research in accounting, finance and management sciences 3 (4): 185-196. alipour, m. (2011). working capital management and corporate profitability: evidence from iran. world applied sciences journal, 12(7), 1093–1099. alvarez, t., sensini, l., & vazquez, m. (2021). working capital management and profitability: evidence from an emergent economy. international journal of advances in management and economics, 11(1), 32-39. aktas, n., croci, e., petmezas, d. (2015). is working capital management value-enhancing? evidence from firm performance and investments, journal of corporate finance, 30, 98-113. amendola a., boccia m., mele g., sensini l. (2017). an assessment of the access to credit-welfare nexus: evidence from mauritania, international journal of business and management, 12 (9), 7793. amendola a., candila v., sensini l., storti g. (2020). corporate governance, investment, profitability and insolvency risk: evidence from italy, advances in management and applied economics, vol. 10 (4), 185-202. amendola a., boccia m., mele g., sensini l. (2021). tax policy and firms' financing decisions: empirical evidence from the dominican republic, wseas transactions on business and economics, vol. 18, 732-749. bagchi, b., khamrui, b. (2012). relationship between working capital management and profitability: a study of selected fmcg companies in india, business and economics journal, vol. 2012: bej-60. boisjolya, r.p., conine jr, t.e., mcdonald iv, m.b. (2020). working capital management: financial and valuation impacts, journal of business research, (108), 18. bunte, j. (2011). why does the severity of the dutch disease vary across countries ? in international political economy society conference, 1-29. campos a., chen j., ferri g., parisi m., sanchez j.a., sensini, l. (2014). business risk prediction models: an empirical analysis, international conference on accounting and management research, 426445. chalmers d.k., mannetta e.w., zhang w. (2014). impact of working capital management policies on corporate performance, icefr. chalmers d.k., sensini l., shan a. (2020b). working capital management (wcm) and performance of smes: evidence from india, international journal of business and social science, 11 (7), 57-63. chalmers d.k., diaz e. (2022), relationship between working capital policies and firm performance: an empirical analysis, management business & economics. santiago chalmers (2022) 7 interdisciplinary journal of educational practice | https://sadipub.com/journals/index.php/ijep chen, j., hughes, c., sensini, l. (2014). credit risk measurement of smes, international conference on economics, finance and risk, 139-163. chen y., diaz e., sensini l., vazquez m. (2020). working capital management and quality management systems: evidence from an emerging economy, international journal of business management and economic research, vol. 11, 4, pp. 1861-1868. ching h. y., novazzi a., gerab f. (2011). relationship between working capital management and profitability in brazilian listed companies. journal of global business and economics, 3(1), 74-86. dang h. n., & tran d. m. (2019). relationship between accrual anomaly and stock return: the case of vietnam. the journal of asian finance, economics and business (jafeb), 6(4), 19-26. deloof, m. (2003), does working capital management affect profitability of belgian firms? journal of business finance & accounting, 30 (4), pp. 573-587. dhole, s., sagarika, m., pal, a.m. (2019), efficient working capital management, financial constraints and firm value: a text-based analysis, pacific basin finance journal, (58), 101212. diaz e., vazquez m. (2019). relationship between wcm and profitability: first empirical evidence from an emergent economy, diaf. diaz e., sensini l. (2020). quality management practices, innovation and profitability of smes: evidence from argentina, international business management, 14 (9), 328-336. fazzari, s., petersen, b. (1993). working capital and fixed investment: new evidence on financing constraints, rand journal of economics 24, 328-342. filbeck, g., krueger, t. (2005). industry related differences in working capital management, journal of business, vol. 20 (2), 11-18. gill, a., biger, n., mathur, n. (2010). the relationship between working capital management and performance: evidence from the united states.” business and economics journal (10), 1-9. haq, i., sohail, m., zaman, k., alam, z. (2011). the relationship between working capital management and profitability: a case study of cement industry in pakistan, mediterranean journal of social sciences, 2, 365-372. hernandez, s., migliaro, d., suarez, p., & arnaldi, a. (2021). working capital determinants and profitability: empirical evidence from an emergent economy. iar journal of business management, 2(2). karaduman, h. a., akbas, h. e., caliskan, a. o., & durer, s. (2011). the relationship between working capital management and profitability: evidence from an emerging market. international research journal of finance and economics, 62(6), 61–67. kim y.h. chung k.h. (1990). an integrated evaluation of investment in inventory and credit: a cash flow approach, journal of business finance and accounting, vol. 17 no. 3, 381-389. santiago chalmers (2022) 8 interdisciplinary journal of educational practice | https://sadipub.com/journals/index.php/ijep kumar a., sun y. (2022), the impact of age and age on working capital management: empirical evidence, management business & economics. mannetta e.w., peel m.j., williams a.n. (2013). credit management in the small firm sector: empirical evidence, international conference on accounting, finance and risk management perspective. mannetta e.w., zhang w. (2014). working capital management and performance in emerging economies, international conference on accounting and management research, icamr. mannetta e.w., jordan j.k., zhang w. (2020). working capital management and performance: an empirical study, acmrc, 137-155. musso, p., schiavo, s. (2008). the impact of financial constraints on firm survival and growth, journal of evolutionary economics, 18 (2), 135-149. nazir, m. s., afza, t. (2009). impact of aggressive working capital management policy on firms’ profitability, journal of applied finance, 15, 19–31. nobanee h., abdullatif m., alhajjar m. (2011). cash conversion cycle and firm's performance of japanese firms. asian review of accounting, 19 (2), 147-156. parisi m., sanchez j.a., sensini l., vicente l. (2014). valuing private companies: a data envelopment analysis approach. academic conference on risk management and complexity, acrmc, 426439. petersen m. a., rajan r. g. (1997). trade credit: theories and evidence. the review of financial studies, 10 (3), 661-691. sanchez j.a., sensini l. (2013), predicting corporate bankruptcy and financial distress: a critical overview, international conference on accounting, finance and risk management perspectives, pp. 508-526. sanchez j.a., sensini l. (2017). small firms and demand for credit. evidence from europe, icafr, pp. 124-144. scognamillo a., mele g., sensini l. (2016). non-renewable resources, income inequality and per capita gdp: an empirical analysis. world bank policy research working paper no. 7831. sen, m., oruc, e. (2009). relationship between efficiency level of working capital management and return on total assets is ise, international journal of business and management 4 (10), 109-114. sensini l. (2015). selection of determinants in corporate financial distress, european journal of business and management, vol. 7 (2), 73-82. sensini l. (2016), an empirical analysis of financially distressed italian companies, international business research, 9 (10), 75-85. santiago chalmers (2022) 9 interdisciplinary journal of educational practice | https://sadipub.com/journals/index.php/ijep sensini, l. (2020). working capital management and performance: evidence from italian sme’s. international journal of business management and economic research (ijbmer), 11(2), 17491755. sensini, l., & vazquez, m. (2021). effects of working capital management on sme profitability: evidence from an emergent economy. international journal of business and management, 16(4), 85-95. shan, a., mueller, a., & zhang, w. (2019). effects of working capital management on firm performance, diaf, 87-99. sharma a., kumar s. (2011). effect of working capital management on firm profitability: empirical evidence from india. global business review, 12(1), 159-173. tauringana, v., afrifa, g. (2013). relative importance of working capital management and its components to smes profitability, journal of small business and enterprise development 20 (3), 453-469. ukaegbu b. (2014). the significance of working capital management in determining firm profitability: evidence from developing economies in africa. research in international business and finance, 31, 1–16. wang, y.j. (2002). liquidity management, operating performance, and corporate value: evidence from japan and taiwan, journal of multinational financial management, vol. 12 no. 2, 159-169. wilner, b.s. (2000). the exploitation of relationship in financial distress: the case of trade credit, the journal of finance, vol. 55 no. 1, 153-178. zariyawati, m.a., annuar, m.n., taufiq, h. and rahim, a.s.a. (2009). working capital management and corporate performance: case of malaysia, journal of modern accounting and auditing, vol. 5 no. 11, 47-54. teachers’ perceptions and attitudes towards teaching and learning of calculus in secondary schools: the case of three selected secondary schools in mporokoso district, zambia american interdisciplinary journal of business and economics issn: 2837-1909| impact factor : 4.6 volume. 9, number 1; january-march, 2022; published by: scientific and academic development institute (sadi) 8933 willis ave los angeles, california https://sadipub.com/journals/index.php/aijbe 58 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe mathematics teachers’ views on teaching and learning calculus in secondary schools collins s. the copperbelt university, school of graduate studies abstract: this study aimed to investigate the perceptions and attitudes of mathematics teachers towards the teaching of calculus in secondary schools in the mporokoso district of zambia. a total of 16 mathematics teachers participated in the study, which employed a mixed-methods research design of structured interview questionnaires and data analysis using spss v20. the results indicated that teachers held positive attitudes towards the teaching of calculus, perceiving it as an essential foundation for other disciplines such as engineering. the study found that years of service in teaching and teacher qualifications influenced teachers' perceptions and attitudes towards teaching calculus. the study highlights the need to assess teachers' perceptions and attitudes towards teaching calculus, as they play a crucial role in determining the quality and effectiveness of mathematics education. working on learners' perceptions and attitudes towards calculus can enhance their confidence and improve their understanding of the subject. the mastering of calculus is essential in learning, but many students consider it to be a difficult branch of mathematics. assessing and addressing teachers' and learners' perceptions and attitudes towards calculus can lead to improved performance and outcomes in mathematics education. keywords: calculus; perception; attitude; teaching; secondary school; mathematics education; zambia. introduction and literature review in relation to teaching and learning mathematics, teachers’ perceptions and attitudes play an important role. according to oktaviyanthi and supriano (2015), learning mathematics is closely related to visualization and representation of mathematical objects and procedures; in relation to learning mathematics, teachers’ perceptions and attitudes play an important role in teaching mathematics (mills, 2007), and calculus is part of mathematics. calculus is a branch of mathematics that includes limits, derivatives, integration, and infinite series. calculus which has general applications in science and engineering is used to help solve the complex problems that are not sufficiently solved by basic algebra techniques. oktaviyanthi and supriano (2015) contends that most of the weaknesses of students is that they are only able to perform simple calculations. mathematics is made up of many branches that include calculus. calculus is a branch of mathematics that includes limits, derivatives, integration, and infinite series. calculus has general applications in science and engineering and is used to help solve complex problems that are not sufficiently solved using basic algebraic techniques. calculus is important in the curriculum of almost all disciplines, such as engineering, science, business, economics, computer science and information system. its concepts are arranged in a systematic, logical, and hierarchical pattern transitioning from the simplest to the most complex. therefore, the mastering of calculus is essential in learning. however, many learners consider calculus to be a difficult branch of mathematics in their learning process. calculus as part of mathematics has an abstract concept that most learners are not able to conceptualise. consequently, working on their perceptions and attitudes towards the collins s. (2022) 59 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe learning of calculus can greatly enhance their confidence and hence result in an improved understanding of the concepts surrounding calculus. gibson in 1966 and gregory in 1970 propounded theories on perceptions called ‘bottom-up’ and ‘top-down’ theories. these theories posit that between sensations and our conscious perception of the real world there must be intermediate processes. for example, these processes would be ‘inferential thinking’. this kind of thinking allows us to go beyond the evidence of the senses (these inferences are at an unconscious level). gibson and gregory believed that perception is more than direct registration of feelings, but that other events intervene between stimulation and experience. they further claim that perception is an activity of forming hypotheses and testing them. signals received by the sensory receptors trigger neural events, and appropriate knowledge interacts with these inputs to enable us to make sense of where we stay or live or what we should and why we do it. perception allows behaviour to be generally appropriate. perception and attitude deals with someone’s cognitive, affective, and emotional abilities. this is in support with ajzen (1993) who argues that perceptions and attitudes have a predictive validity in that they help us to explain social behaviour. it is argued that there is a relationship between perception and attitude and behaviour ajzen (1993). this kind of correlation needs to be assessed among mathematics teachers and learners regarding their views on calculus. gibson and gregory further indicate that perceptions and attitudes develop because of salient beliefs formed about the attitude object. based on this theory, mathematics teachers’ and learners’ perceptions and attitudes could be considered as their disposition to react with a certain degree of favorableness or unfavorableness towards the teaching and learning of calculus. gibson and gregory contend that perceptions and attitudes are hypothetical constructs, implying that they may not be accessible to direct observation but must be inferred from measurable reactions to the attitude object, in this which is calculus. this theory is fundamental to guide the proposed study, for instance, the cognitive component of mathematics teachers could be viewed as those perceptions of and information about calculus. the cognitive indicators of mathematics teachers’ and learners’ perceptions and attitudes could therefore involve verbal expressions of beliefs, opinions and knowledge or non-verbal perceptual reactions towards the teaching and learning of calculus in secondary schools of mporokoso district. the effective indicators of teachers could include verbal expressions of feelings, physiological reactions, facial expressions, and nonverbal indicators of positive or negative sensations towards calculus among teachers. studies report that perceptions and attitudes are part of the mindset that affect how a person thinks and acts (tsanwani et al., 2014). these can influence a person’s performance positively or negatively. for example, a positive perception and attitude towards calculus could result in a positive performance. conversely, perception and attitude could also influence how well a teacher plans and prepares his/her lessons in calculus. in their study entitled ‘student’s attitude towards mathematics, farooq and shah (2008), argued that attitude and perception towards mathematics plays a crucial role in the teaching and learning processes of mathematics as it influences students’ achievement in mathematics. they further stated that the teaching methodology, the support structure of the school, the family and students’ perception and attitude towards mathematics affects the teaching and learning mathematics. it has been determined that teachers’ attitudes highly affect students’ interest in learning (tsanwani et al., 2014). this is also supported by nachiyunde et al. (2021) who posits that personality traits of the mathematics teachers are more powerful and influential than the course content or instructional strategies used in a classroom of mathematics. breiteig & grevholm (2005) also supports the preceding notion put forward by others that learning outcomes of students are strongly related to their beliefs and attitudes about mathematics. the perceptions and attitudes of teachers, their motives for teaching calculus and the feelings they have of themselves may influence how well they will eventually teach the subject in secondary schools. mohammed and ja’ashan (2015) posits that positive perceptions and attitudes are very critical when it comes to learning, and the factors related to attitudes include confidence, experience, satisfaction, usefulness, and motivation. these factors could be considered as a drive to push the teaching process in schools. a study on ‘outcomes collins s. (2022) 60 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe of schooling: mathematics achievement and attitudes towards mathematics learning in hong kong’ by cheung (1990), showed highly positive perceptions and attitudes towards teaching of mathematics because of the many benefits that both teachers experienced. considering that perceptions and attitudes towards teaching can be related to motivation, covington and dray (2002) argue that decrease in attitudes towards mathematics can be associated with overall decrease in intrinsic motivation, competence-related beliefs, interest, and task values that occur during learning. the opposite is the same, when there is an increase in attitudes towards mathematics, generally, there is also an increase in learners’ intrinsic motivation and competence-related beliefs. teacher motivation are a very critical aspect of determining positive or negative attitude towards mathematics among teachers. a teacher with a positive attitude towards teaching mathematics could ensure that there is adequate preparation in terms of teaching strategy and other resources. a good teaching strategy requires full interest and support from administrators and learners. a teacher with a negative attitude tends not to appear interested or does not foster a supportive learning environment (masaiti & naluyele, 2011). in addition to that, teachers with negative attitudes may not be as approachable as teachers who are positively motivated. learners could also find it difficult asking such a teacher question on the grey areas of the subject he/she teaches. this implies that teachers’ attitude towards their students and teaching in general is very important for students’ success. in the same vein, teachers need to be highly interested in the subjects and topics they teach. cheung (1990) argues that while many perception and attitude studies have generally focused on mathematics, little attention has been given to the specific topics like calculus. similarly, in a review article on attitudes towards mathematics, covington and dray (2002) concluded that perceptions and attitudes studies towards mathematics were very limited and hence the need to carry out an investigation of these perceptions and attitudes in teaching mathematics. perceptions and attitudes towards mathematics become especially noticeable when studies that aim at evaluating and documenting them are implemented fully. teachers’ perception and attitude helps to determine how well teachers teach the subject. therefore, the need to assess their perception and attitudes towards teaching calculus should not be overemphasized. to meet the needs of society or citizens, many countries in africa reformed their educational curricula shortly after attaining political independence (moe, 1996). for zambia, in order to respond to developmental needs of the country and those of individual learners, the government, through the ministry of education (moe) in 1996 developed a national policy on education called ‘educating our future’. for some time now this policy has become a backbone or guide for all educational strategies and programmes in the country (moe, 1996). the countries, zambia inclusive, believed that educational provision was the key that could nurture the holistic development of all individuals. the education policy resulted in the development of the zambia education curriculum framework (zecf) in 2013. this development affected the school subjects including mathematics. ordinary level mathematics syllabus underwent changes so that it could suit the trend in the zambian education (ecz, 2016). the changes resulted in the introduction of calculus in the o-level mathematics syllabus in secondary schools (nachiyunde et al., 2021). according to ecz (2016), calculus was only introduced for the first time in the zambian secondary school mathematics syllabus in 2013. before 2013, at secondary school level calculus was only offered to learners taking additional mathematics and such learners were not many because few schools were offering the subject at that time (mesvtee, 2013). it is argued that calculus was introduced at the zambian secondary school level in order to create a bridge for further education especially in tertiary mathematics courses where there is demand for such (nachiyunde et al., 2021). the following calculus concepts were incorporated in the o-level mathematics syllabus: calculating equations of tangents and normals, differentiating functions from first principles, using the formular for differentiation, explaining integration, evaluating simple definite integrals, finding the area under the curve, and finding indefinite integrals. other topics included are composite functions, inverse functions, computer collins s. (2022) 61 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe and calculator, arithmetic and geometric progressions, graphs of cubic functions, standard deviation in statistics and trigonometric equations. with the integration of calculus in the o-level mathematics syllabus, teaching and learning calculus in schools appears to be a difficult process. this may be attributed to the fact that understanding calculus has posed a challenge for most mathematics students. since the incorporation of calculus in o-level mathematics syllabus, the general observation by stakeholders in zambia particularly in mporokoso secondary schools is that learners are underperforming in this topic. for instance, the examination council of zambia examiner’s report for 2016 revealed that some candidates of mporokoso district that took part in the o-level mathematics syllabus performed poorly in calculus topics. at mukanga secondary school, grade 12 performance in mathematics in 2016 was at 41%; 2017 at 42%; 2018 at 38.4% and 2019 at 42.1%. the underperformance of the learners in mathematics with reference to calculus topics is generally becoming a major source of concern in zambia at large. it is against this background that the study sought to assess teachers’ perceptions and attitudes towards the teaching and learning of calculus topics in secondary schools of mporokoso district. specifically, the study was guided by the following questions: 1. what are the perceptions and attitudes of mathematics teachers towards teaching of calculus in secondary schools? 2. what are the factors that influence mathematics teachers’ perceptions and attitudes in teaching calculus addressing these questions is important to the study for answers will indicate whether teachers appreciate the inclusion of the topic in senior secondary school mathematics. how teachers respond to the questions may be an indication of how the topic is being taught. consequently, it may be an indication of whether the topic is taught positively or negatively. the way the topic is taught may affect effect learners’ performance, positively or negatively. therefore, the study was necessary so as to determine perceptions and attitudes held by teachers towards teaching of calculus at this level of the education system. methodology the following methods and procedures were adopted to conduct this study. research design the study adopted both a descriptive and analytical research design. consequently, two distinct data collection approaches were incooperated resulting in a mixed approach to data collection. the quantitative approach enabled the researchers to analyse yielded data and develop a statistical representation of the trend or connection regarding attitudes and perceptions of both teachers towards teaching of calculus. on the other hand, the qualitative approach, helped the study to learn from gathered data, details of participants of the study, such that conclusion was drawn by compiling, comparing and evaluating the informants’ feedback and input leading to the answer of the “why” behind the phenomenon or behaviour. population and sample the population of the study comprised all mathematics secondary school teachers of mporokoso district. since mporokoso district has a population of six (6) secondary schools, and 25 mathematics teachers, the study population then comprised six (6) secondary schools, and 25 mathematics teachers from the six (6) mentioned schools. mporokoso district was selected using purposive sampling because it has secondary schools that offer mathematics and the researchers were interested in teachers’ perceptions and attitudes towards the mathematics topic of calculus. purposive sampling technique was employed because it has the advantage of selecting participants based on assumptions regarding the population of interest. this is supported by odhiambo et al. (2010) who categorically state that purposive sampling is any sampling method where some elements of the population have no chance of selection (these are sometimes referred to as out of coverage). collins s. (2022) 62 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe research instruments a structured interview data collection method was used and data collected was quantitative in nature. structured interviews were employed to gather data from mathematics teachers. these interview schedules guaranteed a high response rate and allowed control of the interview situation (odhiambo et al., 2010). the researchers were able to gain full insight into the participant’s beliefs or perceptions (opinions) regarding teaching calculus. validation of research instruments to ensure validity, research instruments were discussed by the researchers and also given to other research experts to reveal and sort out ambiguities. the meaning of every term in the interview schedule was defined to have the same meaning for all respondents. reliability concerns were addressed or countered by ensuring that respondents gave consistent responses. 2.5 data analysis procedures analysis of data was based on research questions, and was made possible by using a software package called spss version 20.0 (ibm) for generating descriptive statistical data tables, and correlation tables. an inferential statistical test to indicate relationship or correlation between perceptions and attitudes and performance was done. this enabled us to understand whether perceptions and attitudes of teachers predict performance. results and findings the analysis of results of the data set obtained are presented starting with those to do with perceptions and attitudes of mathematics teachers. data were analyzed for trends using the spss version 20. mathematics teachers’ perceptions and attitudes towards teaching calculus the perceptions and attitudes questionnaire were administered to teachers in order to assess teachers’ perceptions and attitudes towards teaching of calculus. the results of analyzing the teacher’ perceptions and attitude towards teaching calculus are shown in table 3.1. table 3.1 perceptions and attitudes of mathematics teachers towards teaching calculus (n=12) going by the results of the study, teachers perceive calculus to be a subject that mainly deals with rate of change with a minority (16.7%) of teacher respondents pointing out that it is about concept combinations. additionally, table 3.1 shows that teachers consider the teaching of calculus to learners important since it is viewed as the mathematical backbone of other disciplines more especially engineering. in pursuing the undertaking, teacher respondents also report that the most ideal teaching strategy to use when teaching calculus is group work followed by class discussion while home work is deemed the least preferred teaching collins s. (2022) 63 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe strategy. teacher respondents argue that the aforementioned teaching strategies are ideal since they enable learners to participate fully during lessons. with these said teaching strategies, learners are able to reciprocate and hence give positive feedback. however, it goes without not mentioning that while implementing the aforementioned teaching strategies, there existed some challenges such as learners failing to use their algebraic skills, coupled with the slow pace to comprehend concepts. going forward, the teacher respondents indicate that emphasizing the basics of calculus to learners is the most viable way of overcoming the challenges, that is also in conformity with encouraging more study groups among the learners. table 3.2: mathematics teachers’ perceptions, attitudes, qualification and experience teaching calculus (n=12) there is a mixed set of views regarding teaching of calculus among teachers. those with diploma qualifications feel that teaching of calculus is a challenge for learners especially those that struggle in other topics. on the other hand, teachers with degrees feel that teaching calculus is not a challenge; all that is needed is to use different teaching strategies depending on which learners are being taught at a particular moment. a large majority of teachers, however, perceive the introduction of calculus as well timed although more preparations could have been done in order to ensure that there is an enabling environment within schools the teacher to thrive in their teaching of calculus. furthermore, the correlation results obtained from the study indicate a very week correlation between mathematics teachers’ perceptions and attitudes and years of teaching. this means that as one increases in the years of service, the challenges faced reduces. table 3.3: table factors that influence mathematics teachers’ perceptions and attitudes in teaching calculus (n=12) data was analysed to determine factors influencing mathematics teachers’ perceptions and attitudes towards teaching calculus. the results indicate that teachers’ perceptions and attitudes towards teaching of calculus were mainly influenced by teachers’ qualifications and the number of years of teaching i.e., their teaching experience. it was observed from the results that teachers who had degrees and a considerable number of years in service had positive perceptions and attitudes towards teaching of calculus as opposed to those with diploma qualifications even though they had many years in teaching. collins s. (2022) 64 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe discussion and conclusion results from respondents’ responses to the questionnaires indicated that most teachers value the importance of teaching calculus. this is because teachers in this study viewed calculus as a foundation for many disciplines, especially engineering and natural sciences. thus, in general respondents revealed perceiving the introduction and teaching of calculus in secondary schools positively. this could be attributed to the many uses of calculus. however, the study has established that teachers’ perceptions and attitudes towards teaching of calculus were different depending on the qualifications of respondents. respondents with degrees in mathematics exhibited positive attitudes and enthusiasm towards the teaching of calculus in secondary schools. on the other hand, their diploma holding colleagues exhibited doubt and discomfort towards the teaching of calculus as observed from their responses. qualification of respondents, therefore, seemed to be one of the factors that influenced teachers’ perceptions and attitudes towards teaching calculus in secondary schools. apart from teachers’ qualifications, teachers’ years of experience in teaching mathematics were identified as one of the factors determining perceptions and attitudes of teachers towards the teaching of calculus in secondary schools. teachers who had more years of teaching exhibited positive perceptions and attitudes towards the teaching of calculus. such results reveal the confidence with which such teachers approach their teaching. the result is not just for calculus but can be generalized to other topics (mills, 2007). this group of teachers has over the years observed what works in their teaching and what does not work. as such they are able to arrange learning experiences which support learning for their pupils. also, the teachers’ attitudes were influenced by availability of teaching materials for teaching calculus. teachers, in the study suggested that the presence of teaching materials especially textbooks on calculus helped teachers develop positive attitudes towards the teaching of calculus. it helped them have increased levels of confidence. this was true for all sets of teachers, whether degree holders or diploma holders. the importance of learning materials in a teaching and learning situation is echoed in other studies (e.g., adalikwu & iorkpilgh, 2012). therefore, the researchers conclude that of the many factors determining teachers’ perceptions and attitudes towards teaching calculus two stand out. the two factors are teachers’ qualifications and their teaching experience. of the two, a teacher’s qualifications is the main influencing factor regarding teacher perceptions and attitudes towards teaching of calculus. for this reason, the study asserts that those with degrees developed positive perceptions and attitudes towards teaching calculus, which in turn impacted the learners positively and resulted in improved learner achievement in calculus and consequently in mathematics. the study by yara (2009) is in agreement with this finding, that positive attitudes towards learning have positive effects on achievement. however, the fact that achievement in calculus has not been as expected in schools under study, the conclusion may be that schools do not have sufficient numbers of degree holding teachers. this may be true but it is recognized that other factors affecting learners’ achievement in mathematics might be at play. factors, such as learners’ mathematical background, teaching materials available, methods of teaching and others. based on study findings, the conclusion is that teachers are of the view that teaching calculus in secondary schools is a welcome development. therefore, teachers in general are said to have positive attitudes towards teaching calculus. specifically, it has been established that a number of teachers exhibited differing levels of perceptions and attitudes and this depended mainly on two factors: teachers’ qualifications and teacher’s years of teaching mathematics. consequently, it is recommended that further studies be conducted in future to determine what other factors influence teaching of calculus in secondary schools. references adalikwu, s. a, & iorkpilgh, i. t. (2013). the influence of instructional materials on academic performance of senior secondary school students in mathematics in cross river state. global journal of educational research: 12(1), 39 -45. collins s. (2022) 65 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe ajayi, v. o. (2017). primary sources of data and secondary sources of data, (september). https://doi.org/10.13140/rg.2.2.24292.68481 booth, w.c., booth, w.c., colomb, g.g., colomb, g.g., williams, j.m. and williams, j.m., (2003). the craft of research. university of chicago press. examinations council of zambia. (2016). examinations performance review report 2016, examinations council of zambia. lusaka, ecz examinations council of zambia. (2017). examinations performance review report 2016, examinations council of zambia. lusaka, ecz examinations council of zambia. (2018). examinations performance review report 2015, examinations council of zambia. lusaka, ecz mesvtee. (2013). zambia education curriculum framework, ministry of education. lusaka, curriculum development centre. mills, j. d. (2007). teacher perceptions and attitudes about teaching statistics in p-12 education. educational research quarterly, 30(4), 15-33. ministry of education (1996). educating our future – national policy on education, moe. lusaka nachiyunde, k., zulu, j., nalube, p., masaiti, g. (2021). improving problem solving skills in calculus among the grade 12 learners? in selected public secondary schools in lusaka district odhiambo, r., mwita, p., kihoro, j., mwalili, s., waititu, a., orwa, g., mung’atu, j. & mugo, c. (2010). basic statics: with practical examples in spss. lagos: atlantic associated, publishers. oktaviyanthi, r., & supriani, y. (2015). utilizing microsoft mathematics in teaching and learning calculus. indonesian mathematical society journal on mathematics education, 6(1), 63-76.using spss program. 6th edition, mcgraw-hill education, london, uk. yara, p. o. (2009). relationships between teachers’ attitude and students’ academic achievement in mathematics in some selected senior secondary schools in south west, nigeria. european journal of social sciences, 11(3), 364–369 american interdisciplinary journal of business and economics issn: 2837-1909| impact factor : 4.6 volume. 9, number 1; january-march, 2022; published by: scientific and academic development institute (sadi) 8933 willis ave los angeles, california https://sadipub.com/journals/index.php/aijbe 1 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe understanding the root causes of poverty in pakistan: demographic, household and locational factors mcculloch n. and cheema farooq department of economics, balochistan university of information technology, engineering and management sciences, pakistan abstract: this study examines the factors contributing to poverty in pakistan, with a focus on demographic, household, and locational characteristics. using the pslm survey (2014-2015), the study employs a logistic regression model to investigate the impact of different factors on poverty. the results indicate that household head education, size, age, marital status, health status, remoteness, region, and gender are significant determinants of poverty. the study recommends that the government should improve basic facilities, quality of education, employment opportunities, and health facilities in remote areas of pakistan to reduce poverty rates. keywords: poverty, pakistan, demographic factors, household characteristics, locational factors, logistic regression model, household head education, household size, household age, health status, remoteness, region, gender, basic facilities, education quality, employment opportunities, health facilities. introduction: poverty remains a severe problem in pakistan, and its eradication is essential for the country's socio-economic development. different studies have examined the relationship between poverty and various economic and social factors, such as demographics, household characteristics, and locational aspects. however, the specific factors contributing to poverty in pakistan may be different from those in other countries, making it necessary to investigate the issue within the country's context. in this study, we aim to investigate the impact of demographic, household, and locational factors on poverty in pakistan by utilizing the pslm survey (2014-2015) data. we consider variables such as household head education, size, age, marital status, health status, remoteness, region, and gender as determinants of poverty. we employ a logistic regression model to identify the significant factors contributing to poverty. the study's findings reveal that household head education, size, age, marital status, health status, remoteness, region, and gender have a significant impact on the level of poverty in pakistan. we find that the differences in region, gender, and provinces cause a rise in poverty rates due to low health facilities, poor educational systems, low infrastructure, low employment opportunities, and low economic growth. the study's recommendations include improving basic facilities, quality of education, employment opportunities, and health facilities in remote areas of pakistan to reduce poverty rates. the study's findings contribute to the existing literature on poverty and provide a basis for policymakers to formulate effective poverty reduction strategies in pakistan. mcculloch n. and cheema farooq (2022) 2 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe objectives of the study the major purpose of the research is to analyse the impact of demographic factors, household characteristics and locational factors on poverty in pakistan. literature review phenomenon of poverty is prevalent in developing world and literature is increasing on the subject as well. various research studies have found different economic and social factors that cause the phenomenon of poverty. major social and economic variables influencing poverty include location of the household, household characteristics and household head characteristics. the section comprises literature on the impacts of location of the household, household characteristics and household head characteristics on poverty. location of the household mainly includes the urban or rural locality of household. the mostly used household characteristics are household dependency ratio and household size. household head’s characteristics include education of the household head, gender of the household head, age of the household head and marital status. the literature illustrates that there are mixed evidences regarding the impacts of location of the household on poverty. ravallian et al. (2007) explored that increase in the cost of living standards would rise poverty rate in urban areas. gertler and glewwe (1990) analysed that rural and urban areas have different determinants of poverty, meaning that policies for poverty reduction should vary between the two localities. likewise, in woolard & klasen (2000) found that there exist strong geographic elements to the occurrence of poverty. for pakistan, baulch and mcculloch (2002) found that district of the residence have significant impact on poverty status. poverty in rural areas is higher than urban areas in africa (the world bank, 2001). this is mostly due of lack of infrastructure, employment opportunities, and better services in rural regions. the literature showed that household characteristics such as higher ratio of dependency, large size of the household and marital status of household members have significant impacts on poverty. most of the studies found positive relationship between poverty and household size (sekhampu, 2013). some studies concluded that growing household size reduce the household welfare (litchfield & mcgregor, 2008; fagernas & wallace, 2007; mukherjee & benson, 2003). the literature also demonstrates evidences regarding the negative impacts of household dependency ratios on poverty. baulch and mcculloch (1999) constituted that, higher dependency ratios of household have higher probability to be poor as compare to those having lower dependency ratios in pakistan. likewise, akerele and adewuyi (2011) revealed that a rise in the dependency ratio has exercised a harmful impact on the welfare of household in nigeria and tanzania. a number of studies have found impacts of marital status of household members on poverty. such as anyanwu (2013) found that married people enhance economic prosperity of a country, as marriage provides a bunch of economic benefits for households because it would normally add an additional earner to the household. household head characteristics also influence poverty significantly as depicted by literature. household head characteristics have included education, gender, age, and marital status of the household head. the literature suggests that education of the household head has significant negative impacts on household welfare and poverty. these studies include grootaert (1997) for cote d’ivoire, serumaga and naude (2002) for south africa and cheema and sial (2012) for pakistan, explored that household heads having lower levels of education practice higher poverty levels and household heads with higher level of education lead to lower poverty level. for instance, an increase in the level of education would reduce the probability of being poor in the above mentioned countries. likewise, higher levels of schooling are connected with higher levels of household wellbeing in malawi. litchfield and sekhampu (2013) established that the level of employment of the household head was inversly related with the likelihood of being poor in the south africa. mcculloch n. and cheema farooq (2022) 3 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe correspondingly, benson and mukherjee (2003) established that formal wage employment led to significantly increased in level of household’s wellbeing in malawi. several studies have found mixed evidences regarding the impacts of gender of the household head on household welfare and poverty and concluded that female headed households are more probable to be poor than male headed households. these studies include geda (2005) for kenya, anyanwu (2013) for nigeria. similarly, female headed households in nigeria and tanzania had poorer living conditions compared to male headed households (litchfield & mcgregor, 2008; akerele & adewuyi, 2011). for pakistan, baulch and mcculloch (2002) concluded that gender of household head and basic education has insignificant impact on poverty. age of the household head may result in more work experience, which lead to higher level of income and asset ownership, both of which improve household wellbeing. several studies have found that age is negatively related with the chance of being poor (grootaert, 1997; sekhampu, 2013). similarly, some other studies found that age is directly related with wellbeing (datt & jolliffe, 2005; litchfield & mcgregor, 2008; cheema & sial, 2012). thus, an increase in age of the household head may enhance household wellbeing. methodology and data this section discusses theoretical framework, empirical model, methodology and data source. theoretical framework table 1 channels for poverty empirical model the researchers used different methods and techniques for the estimation of the models, neff (2007) employed the multiple correspondence analyses contrary to probit regression. baulch and mcculloch (2002) used proportional hazards model of poverty transitions and logit model of poverty status. azam and imai (2009) used feasible generalized least square estimation technique. in this study we have incorporated the logistic regression technique and binary logistic regression model for the estimation of poverty model. the model is as followed. p = β1 + β2hhs + β3ahh + β4edu + β5hs + β6ms + β7r + β8pr + β9hh + β10re + μ (1) poverty level = β1 + β2household size + β3age of household variables channel channel poverty remoteness ( non remote ) ↑infrastructure and services ↑ employment opportunities ↓ poverty ↑ household size ↑ economies of scale ↑ income ↓ poverty ↑age of hh head ↑ work experience ↑ living standard ↓ poverty ↑ education of hh head ↑employment opportunities ↑ income per capita ↓ poverty ↑ health status of hh head ↓medical expenditure ↑selfemployment opportunities ↓ poverty ↑ marital status of hh head ↑earning hands ↓collective spending ↓ poverty region (urban) ↑employment ↑ income per capita ↓ poverty gender (male hh ) ↑employment opportunities ↑ income ↓ poverty mcculloch n. and cheema farooq (2022) 4 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe + β4education of household + β5health status + β6marital status + β7region + β8province + β9 ender of household + β10remoteness + μ (2) principal component analysis to lessen the dimensionality of the original data set, the idea of principal component analysis (hereafter pca) was given by pearson (1901) originally and developed by hotelling (1933). pca is a statistical method that linearly converts an original set of variables into a significantly smaller set of uncorrelated variables that corresponds to mainly information in the original set of variables. the index of remoteness is combination of basic health unit, school, bank, road, drinking water, bus, railway and post office. the index is calculated by aggregating variables through pca. re = (0.0726)bhu + (−0.0014)sc + (−0.0058)bn + (−0.0128)rd + (−0.0444)dw + (−0.3581)bs + (−0.2708)ra + (0.6609)po (3) remoteness = β1basic health unit + β2school + β3bank + β4road + β5drinking water + β6bus + β7railway + β8post office (4) the above equation shows that, remoteness is the combination of basic health unit, school, bank, road, drinking water, bus, railway and post office. results of pca are given below. table 2 principal component analysis variables component basic health unit 0.0726 school -0.0014 variables component bank -0.0058 road -0.0128 drinking water -0.0444 bus -0.3581 railway -0.2708 post office 0.6609 variable description this study analyzes the impact of demographic factors, household characteristics and locational factors on poverty in pakistan. this study focus on variable such as age of household head, education of household head, , marital status, size of household, health status, region, gender, province and remoteness. these variables are selected according to availability of data and the nature of topic. we have introduced unique poverty line for estimation of poverty rate in pakistan which is $1.25 determined by the world bank. individuals living below $1.25 per day are considered to be poor while individuals living on this line or above this line are considered to be non-poor. data source this study incorporates the data from the pakistan social and living standards measurement survey (hereafter pslm) covering period 2004-15. pslm data deals with income approach. the study use income approach for determining poverty as per capita income has a direct relationship with poverty, i.e. a rise in per capita income lead to decline in poverty rate and vice versa. for determining poverty, income approach is also employed by several studies (arif, 2011; malik, 1988). mcculloch n. and cheema farooq (2022) 5 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe empirical findings and discussion regression analysis for poverty in this part, binary logistic regression model is estimated for $1.25 a day poverty line for pakistan and the following results are obtained. logistic regression analysis at $1.25 per day poverty line for analysis of poverty model, we have used binary logistic regression model using poverty at $1.25a day poverty line (the world bank, 2008), the following regression equation is obtained. p = β1 + β2hhs + β3ahh + β4edu + β5hs + β6ms + β7r + β8pr + β9hh + β10re + μ (5) poverty level = β1 + β2household size + β3age of household + β4education of household + β5health status + β6marital status + β7region + β8province + β9ender of household + β10remoteness + μ (6) where p is our dependent variable showing poverty level, and 𝛽�𝛽�′𝑠�𝑠� expresses coefficients of following independent variables. table 3 logistic regression model for poverty at $1.25 per day note.*, ** and *** correspondingly represent level of significance at 10%, 5% and 1%. the coefficient of remoteness is negative and highly statistically significant which shows that overall individuals utilize more than three above-mentioned facilities which results nonpoor. similarly, the coefficient of hh head education is negative and highly statistically significant. so, household heads with higher level of education experience lower poverty rate, while household heads with lower education experience higher rate of poverty. the coefficient of household size is negative and highly statistically significant. it means that as the size of household increases, potential income earner increases which are positively associated with well-being of household, proposing economies of scale in household consumption, as a result it would decrease in poverty derived from increasing household size. the coefficients of household age are negative and highly statistically significant. it implies that household age reflects increase in work experience, which is connected to increase income as a result living standard and welfare increases as a result poverty rate will decline. variables coefficients standard errors remoteness -0.0827545*** 0.0041111 hh head education -0.0697279*** 0.0133992 household size -0.1642378*** 0.002127 young hha -1.172442*** 0.097135 middle hha -1.660221*** 0.0884349 old hha -0.9131145*** 0.0817799 marital status -0.0748548*** 0.0132289 health status -0.1363285*** 0.0224191 region -0.3715258*** 0.0176567 gender -2.887227*** 0.0142295 kpk 1.485564*** 0.0245341 punjab 0.3491576*** 0.0239847 sindh 0.522812** 0.0273447 constant 1.901461*** 0.1204552 mcculloch n. and cheema farooq (2022) 6 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe gender of household head also determines the level of poverty. the coefficient of household gender variable is negative and highly statistically significant which represents that male headed households are less likely to be poor in terms of employment opportunities which leads to increase in income and decrease in poverty status. while it is generally believed the families with female household heads are more likely to be poor due to of lack of proper planning and employment opportunities for female and low labour force participation in rural areas. the coefficients of all provinces are positive and highly statistically significant, which shows different poverty rates in all provinces. the coefficient of marital status is negative and highly statistically significant. it means that, married people may attain the similar level of utility with less collective spending rather than individual’s sum of consumption if they were living separately which improves standard of living and decrease in the rate of poverty. the coefficient of health status is negative and highly statistically significant. thus individuals with better health can seek employment opportunities which lead to increase in income and reduce poverty. region variable (urban area or rural area) also depict the nature of poverty. households living in urban areas are less poor as compare to rural areas in term of facilities, employment opportunities, infrastructure and services. here the coefficient of region variable is negative and highly statistically significant which shows that as households moves from rural areas to urban areas they are less discriminated in terms of facilities and which leads to lower the rate of poverty. while in rural areas basic facilities, employment opportunities, infrastructure and services are less advanced as compare to urban counterpart, this is mainly because of lack of infrastructure, employment opportunities, and better services in rural localities which leads to poverty in that region. conclusion this study analyzes the impact of demographic factors, household characteristics and locational factors on poverty in pakistan. logistic regression model has been used to achieve this objective. the data for the study is obtained from pslm survey covering period 2014 to 2015. the index of remoteness is combination of, basic health unit, school, bank, road, drinking water, bus, railway and post office. remoteness determines the nature of poverty, individuals who utilize more than three above-mentioned facilities are considered as nonremote and non-poor, if three or less than facilities are utilized are considered remote and poor. the study has introduced unique poverty line for estimation of poverty rate in pakistan which is $1.25 determined by the world bank. individuals living below $1.25 per day are considered to be poor while individuals living on this line or above this line are considered to be non-poor. findings of the study revealed that household head education, household size, household head age, marital status, health status, remoteness, region and gender have significant impacts on poverty level. the study further conclude that the differences in region, gender, and provinces cause rise in poverty rate due to low health facilities, poor educational system, low infrastructure, low employment opportunities and low economic growth. policy recommendations the findings of this study show that region, gender, and provinces causes increase in poverty and income inequality. it is revealed that that higher rate of poverty is related to greater income inequality and lower poverty rate is related to lesser income inequality between gender, region and among provinces of pakistan. these differences come into existence due to lack of proper planning from the government side. due to these differences in gender, region and among provinces causes low health facilities, poor educational system, low infrastructure, low employment opportunities and low economic growth. so, government should take some serious steps to improve basic facilities, quality education, in both the regions and provide equal employment opportunities for males and females, as well as health facilities in remote areas of pakistan. mcculloch n. and cheema farooq (2022) 7 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe references akerele, d., & adewuyi, s. a. (2011). analysis of poverty profiles and socioeconomic determinants of welfare among urban households of ekiti state, nigeria. current research journal of social sciences, 3(1), 1– 7. anyanwu, j. c. (2013). characteristics and macroeconomic determinants of youth employment in africa. african development review, 25(2), 107– 129. https://doi.org/10.1111/j.1467-8268.2013.12019.x arif g. m., iqbal, n., & farooq, s. (2011). the persistence and transition of rural poverty in pakistan, 1998– 2004 (pide working papers no. 74). https://www.pide.org.pk/pdf/working%20paper/workingpaper 74.pdf azam, m. s., & imai, k. s. (2009). vulnerability and poverty in bangladesh (chronic poverty research centre working paper no. 141). http://dx.doi.org/10.2139/ssrn.1531577 baulch, b., & mcculloch, n. (2002). being poor and becoming poor: poverty status and poverty transitions in rural pakistan. journal of asian and african studies, 37(2), 168–185. https://doi.org/10.1177/002190960203700208 cheema, a. r., & sial, m. h. (2012). poverty, income inequality, and growth in pakistan: a pooled regression analysis. the lahore journal of economics, 17(2), 137–157. https://doi.org/10.35536/lje.2012.v17.i2.a6 datt, g., & jolliffe, d. (2005). poverty in egypt: modeling and policy simulations. economic development and cultural change, 53(2), 327– 346. https://doi.org/10.1086/425224 fagernas, s., & wallace, l. (2007). determinants of poverty in sierra leone, 2003 (economic and statistics analysis unit working paper, 19). https://www.files.ethz.ch/isn/32691/esau_wp19.pdf geda, a. (2005). export development strategy, export success stories and lessons for africa. the challenge for afreximbank (paper presented). conference of african export import bank board of governers meeting. harare, zimbabwe. gertler, p., & glewwe, p. (1990). the willingness to pay for education in developing countries: evidence from rural peru. journal of public economics, 42(3), 251–275. https://doi.org/10.1016/00472727(90)90017c grootaert, c., kanbur, r., & oh, g. t. (1997). the dynamics of welfare gains and losses: an african case study. the journal of development studies, 33(5), 635–657. https://doi.org/10.1080/00220389708422487 hotelling, h. (1933). analysis of a complex of statistical variables into principal components. journal of educational psychology, 24(6), 417– 441. https://doi.org/10.1037/h0071325 klasen, s., & woolard, i. (2009). surviving unemployment without state support: unemployment and household formation in south africa. journal of african economies, 18(1), 1–51. https://doi.org/10.1093/jae/ejn007 https://doi.org/10.1111/j.1467-8268.2013.12019.x https://doi.org/10.1111/j.1467-8268.2013.12019.x https://www.pide.org.pk/pdf/working%20paper/workingpaperhttps://www.pide.org.pk/pdf/working%20paper/workingpaper-74.pdf https://www.pide.org.pk/pdf/working%20paper/workingpaper-74.pdf http://dx.doi.org/10.2139/ssrn.1531577 http://dx.doi.org/10.2139/ssrn.1531577 https://doi.org/10.1177/002190960203700208 https://doi.org/10.1177/002190960203700208 https://doi.org/10.35536/lje.2012.v17.i2.a6 https://doi.org/10.35536/lje.2012.v17.i2.a6 https://doi.org/10.1086/425224 https://doi.org/10.1086/425224 https://www.files.ethz.ch/isn/32691/esau_wp19.pdf https://www.files.ethz.ch/isn/32691/esau_wp19.pdf https://doi.org/10.1016/0047-2727(90)90017-c https://doi.org/10.1016/0047-2727(90)90017-c https://doi.org/10.1016/0047-2727(90)90017-c https://doi.org/10.1016/0047-2727(90)90017-c https://doi.org/10.1080/00220389708422487 https://doi.org/10.1080/00220389708422487 https://doi.org/10.1037/h0071325 https://doi.org/10.1037/h0071325 https://doi.org/10.1093/jae/ejn007 https://doi.org/10.1093/jae/ejn007 mcculloch n. and cheema farooq (2022) 8 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe litchfield, j., & mcgregor, t. (2008). poverty in kagera, tanzania: characteristics, causes and constraints (poverty research unit at sussex working paper no. 42). malik, m. h. (1988) some new evidence of poverty in pakistan. the pakistan development review, 27(4), 509–515. https://www.jstor.org/stable/41239040 mcculloch, n., & baulch, b. (1999). distinguishing the chronically from the transitorily poor: evidence from pakistan (ids working paper no. 97). https://opendocs.ids.ac.uk/opendocs/bitstream/handle/20.500.12413/34 20/wp97.pdf?sequence=1 mukherjee, s., & benson, t. (2003). the determinants of poverty in malawi, 1998. world development, 31(2), 339–358. https://doi.org/10.1016/s0305-750x(02)00191-2 neff, d. f. (2007). subjective well-being, poverty and ethnicity in south africa: insights from an exploratory analysis. social indicators research, 80(2), 313–341. https://doi.org/10.1007/s11205-005-5920-x pearson, k. (1901). principal components analysis. the london, edinburgh, and dublin philosophical magazine and journal of science, 6(2), 559–572. https://doi.org/10.1080/14786440109462720 ravallion, m., chen, s., & sangraula, p. (2007). new evidence on the urbanization of global poverty. population and development review, 33(4), 667–701. https://doi.org/10.1111/j.17284457.2007.00193.x sekhampu, t. j. (2013). determinants of poverty in a south african township. journal of social sciences, 34(2), 145–153. https://doi.org/10.1080/09718923.2013.11893126 sen, a. (1987). gender and cooperative conflicts (united nations university working paper 18). https://www.wider.unu.edu/sites/default/files/wp18.pdf serumaga-zake, p., & naudé, w. (2002). the determinants of rural and urban household poverty in the north west province of south africa. development southern africa, 19(4), 561–572. https://doi.org/10.1080/0376835022000019392 the world bank. (2001). world development report 2000/2001: attacking poverty. oxford university press. https://openknowledge.worldbank.org/handle/10986/11856 the world bank. (2008, august 26). world bank updates poverty estimates for the developing world. http://rb.gy/lvyzoq https://www.jstor.org/stable/41239040 https://www.jstor.org/stable/41239040 https://opendocs.ids.ac.uk/opendocs/bitstream/handle/20.500.12413/3420/wp97.pdf?sequence=1 https://opendocs.ids.ac.uk/opendocs/bitstream/handle/20.500.12413/3420/wp97.pdf?sequence=1 https://opendocs.ids.ac.uk/opendocs/bitstream/handle/20.500.12413/3420/wp97.pdf?sequence=1 https://doi.org/10.1016/s0305-750x(02)00191-2 https://doi.org/10.1016/s0305-750x(02)00191-2 https://doi.org/10.1007/s11205-005-5920-x https://doi.org/10.1007/s11205-005-5920-x https://doi.org/10.1080/14786440109462720 https://doi.org/10.1080/14786440109462720 https://doi.org/10.1080/14786440109462720 https://doi.org/10.1080/14786440109462720 https://doi.org/10.1111/j.1728-4457.2007.00193.x https://doi.org/10.1111/j.1728-4457.2007.00193.x https://doi.org/10.1111/j.1728-4457.2007.00193.x https://doi.org/10.1080/09718923.2013.11893126 https://doi.org/10.1080/09718923.2013.11893126 https://www.wider.unu.edu/sites/default/files/wp18.pdf https://www.wider.unu.edu/sites/default/files/wp18.pdf https://doi.org/10.1080/0376835022000019392 https://doi.org/10.1080/0376835022000019392 https://openknowledge.worldbank.org/handle/10986/11856 https://openknowledge.worldbank.org/handle/10986/11856 http://rb.gy/lvyzoq http://rb.gy/lvyzoq http://rb.gy/lvyzoq http://rb.gy/lvyzoq american interdisciplinary journal of business and economics issn: 2837-1909| impact factor : 6.71 volume. 10, number 3; july-september, 2023; published by: scientific and academic development institute (sadi) 8933 willis ave los angeles, california https://sadipub.com/journals/index.php/aijbe| editorial@sadipub.com 1 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe charting economic progress: re-exports and fiji's policy landscape hanson g. h, and robert, f. c department of economics, the university of fiji, fiji https://doi.org/ 10.5281/zenodo.8233900 abstract: re-exportation, the process of exporting commodities that undergo minimal or no value addition, has gained substantial prominence within the realm of international trade over the last decade. this surge in re-export activity has been closely linked to the growth in global trade, improvements in logistical efficiency, and the addressing of asymmetrical information. notably, hong kong's re-export share has expanded from 20% in the 1960s to a staggering 90% of current exports. a concurrent increase has been witnessed in the reexport volumes of china and hong kong, rising from $179 billion in 2000 to $491 billion in 2016, as reported by the world trade organization (wto). this phenomenon has also been influenced by factors such as escalating global transport volumes, evolving tariffs, quotas, and taxation regimes. efficient logistical operations, as demonstrated by ports, play a pivotal role in facilitating cost-effective and competitive transportation, ensuring timely delivery of goods. moreover, the acquisition of specialized knowledge on chinese products by hong kong traders has enabled targeted marketing based on demand. however, concerns have been raised regarding the propagation of grey markets and tariff evasion by hong kong traders. similar trends have been observed in other regions, such as latvia, where re-exports have significantly contributed to merchandise exports. this study explores the dynamics of re-export behavior within the context of fiji, an upper middle-income nation. the analysis encompasses an evaluation of the types and volumes of commodities traversing the fijian hub. by shedding light on the re-export landscape, the study aims to offer valuable insights for fiji's policymakers, fostering their understanding of how fiji can effectively participate in the global re-export market. in this endeavor, the study examines the existing literature, presents an empirical model and data description, reveals empirical results, and concludes by providing a comprehensive outlook on the implications of re-export behavior for fiji's economic integration into the global market. keywords: re-exportation, international trade, logistical efficiency, global transport volumes, tariffs, asymmetrical information, economic integration, fiji, trade dynamics, global market participation. 1. introduction re-exportation has coexisted with international trade, and in the last decade, re-export trading has immensely intensified. ollus & simola (2007) acknowledged that re-exports contributed 5%–15% of world exports in 2002, and hong kong’s share of re-exports grew from about 20% in the 1960s to 90% of current exports. the wto (2017) reported that hong kong’s and china’s re-exports have increased from $179 billion in 2000 to $491 billion in 2016. moreover, the strong emergence of re-exports has been aligned with growth in international trade, logistical efficiency, addressing asymmetric information, and a robust increase in global transport volumes, tariffs, quotas and taxation (hanson & robert, 2001; ollus & simola, 2007). hanson g. h, and robert, f. c (2023) 2 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe the logistical readiness reflects the ports’ efficiency in ensuring effective and competitive transport activities that guarantee low-cost goods delivery. in addition, the hong kong traders have acquired specialized knowledge on chinese products that enable traders to market the products to the relevant destinations based on demand. on the other hand, fisman et al. (2007), as cited in ollus & simola (2007), criticized hong kong traders for propagating a grey market and evading chinese tariffs. furthermore, in latvia, re-exports have accounted for a significant share of the total merchandise exports attributed to globalization (beņkovskis, bērziņa, & zorgenfreija, 2016). an exogenous component for influencing the volume of re-exports is world trade, which was expected to grow by a modest 2.4% in 2017 with a forecast of 2.1%–4.0% for 2018 (wto, 2017). re-exports represent commodities that are isolated from any further value adding in the intermediate economy; thus, it is re-exported in the original form in which it was imported. moreover, there is a transfer of the commodity ownership to the purchasing economy. hence, in transit trade, the ownership does not shift to the purchaser in the intermediate country. the dilemma of inclusion or exclusion of re-exports in trade statistics is subjective to the trade classification system. ollus & simola (2007) reported that under the general trade system, re-exports are recorded as both imports and exports; however, the special trade system (recommended by the un) warrants the exclusion of re-exports from exports and imports. in addition, failure to properly account for re-exports will distort an economy’s market share and sector competitiveness. moreover, ignoring re-exports may cloud the potential contribution of domestic exports to an economy’s progress. on the other hand, transiting commodities generate revenue for the domestic government. benjamin, golub, & mbaye (2013) disclosed that the trade duties from re-exports are a major contributor to government revenue of the gambia and benin in africa. re-exports also generate revenue through repackaging, resale, and costs related to the storage and transportation of these commodities (gehlhar, 2010). it is now easier than ever to link economies due to economic globalization (the interaction and integration of goods, services, capital, technology and information). the oecd (2017) reported that globalization encourages firms to restructure their production processes through international outsourcing and offshore activities. benefiting from globalization without violating the basic concept of comparative advantage shapes global value chains (gvcs). gvcs combine different stages of production processes or supply side outputs of multiple countries in producing finished goods that link local producers to international markets. fung (2013) summed up gvcs by suggesting that products made today are “made in the world” rather than in a single country. in light of gvcs, multinational companies have been perceived as agents of re-exports; however, intra firm trade involves the transfer of semi-finished products that must undergo value adding. according to ollus & simola (2007), only a fraction of intra-trade occurring between multinational companies can be regarded as reexportation. the fiji islands is a cluster of approximately 330 islands with a land mass of 18,333 sq km of which roughly a third is inhabited. during colonialism, fiji gained access to the london market, revitalized its sugar industry that was highly capital intensive, addressed the labor shortage via the indenture system, and diversified into copra, bananas and gold to sustain trade balance with falling sandalwood, bêche-de-mer and cotton production (gounder, 2013). the post-colonial era has been shadowed by political instabilities (the coups of 1987, 2000 and 2006). the dominance of the agriculture sector has subsided, and in the 2000s, fiji’s gross domestic product was primarily carried by the service sector followed by the manufacturing and agriculture sectors, respectively. fiji is an upper middle-income country with a gross national income (gni) per capita between $4,096 and $12,695 (world bank, 2022). this study aspires to explore the re-export behavior in fiji by examining the types and volumes of commodities transiting the fijian hub. the study provides important insights for fiji policy makers on how fiji can converge and participate in the global re-exportation market. the rest of the article is organized as follows: section 2 reviews the existing literature; section 3 describes the empirical model and data; section 4 discloses the empirical results; and section 5 concludes. 2. literature review over the years, re-exports have been a substantial component of total exports surpassing the volume of domestic exports not only in fiji but in numerous other countries as well. the contribution of re-exports to the gross domestic product (gdp) has nearly doubled in the past twenty years. although the re-exportation of hanson g. h, and robert, f. c (2023) 3 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe goods does not transform the commodity in any way but value is added to it in terms of labelling and repacking, commonly termed as the re-export mark-up. it is basically the divergence from the import unit value and the export unit value (dawer & jain, 2015). even though re-exports are considered a part of domestic exports, this inclusion may have several implications for the exporting country. a substantial amount of exports from finland to russia is made up of re-exports. ollus & simola (2007) examined the re-export behavior from finland to russia in 2005. high-value goods such as electronics and vehicles were under scrutiny. it is believed that re-exports misrepresent volumes of trade when they are not separated from exports, thus distorting the image of a country’s market share and consequently its competitiveness in the export market. reexporting goods has become increasingly important for the dutch economy over recent decades. furthermore, re-exports have grown more rapidly during the past two decades than exports of dutch-produced goods (statistics netherlands, 2016). kusters & verbruggen (2001) substantiate the claim that re-exports have been growing rapidly by studying the trends in the dutch economy. however, they argue that the products that are reexported are not produced in the domestic country, thus the service, commercial and transport sectors will mostly be affected. the levels of employment and income are affected in the respective sectors of the economy as the commodities/transactions originate from another country. it is believed that recording re-export transactions should not have an impact on the trade balance since they would be crossed out, but the import prices may not always match the export prices, thus giving rise to over or underestimation of the prices. moreover, as exports have conventionally been the drivers of economic growth, re-exports can mask the link between trade and economic growth thus altering the market share of a country. additionally, as mentioned earlier, re-exports are included in determining the total merchandise trade value, but for some countries, such as hong kong, china, the volume of re-exports is so extensive (around $498 billion in 2015) that it has been excluded from the world and asian aggregates. burger, thissen, van oort, & diodato (2014) found that the classification of re-exported commodities as a component of total exports not only distorts the trading pattern but also affects the magnitude of trade. at times, the re-exports are double-counted as the final destination may differ from the registered destination leading to a fallacious volume of trade. a country’s internal trade is also impacted as large re-exports underestimate the proportion of domestic trade in a country. this study uses a new and coextensive dataset consisting of goods and services for 25 european countries and their dominant trading partners to examine the trade variations in commodities and services while controlling for the re-export of goods explicitly to determine the volume of trade in goods and services. it was concluded that although more goods are bilaterally traded in comparison to services, distance does not deter trade in services. lankhuizen & thissen (2014) argue that the data on bilateral trade flows are not adjusted for re-exports when estimating models of international trade, which indicates that a re-exporting country is taken as the country where trade has originated from as well as being the final destination of the trade flow. by not accommodating for reexportation, the trade data may result in distance decay of trade being erroneously valued, a country’s major trading partners may not be properly recognized and the volume of total world trade is therefore overvalued. moreover, this may lead to a misguided export promotion policy by the policy makers and overvaluing the volume of trade will result in misrepresenting trade in achieving economic growth and development. this study attempts to correct these trade patterns by collating data from 40 countries listed in the world input-output database with 59 categories of products from 2000 to 2012. the data was corrected for re-exports by employing a controlled non-linear accession method. the results revealed a significant difference in the trade of goods between countries (over 5% on average), and the distances are miscalculated, thus having consequences for a country’s trade policies. it is indisputable that lower trade barriers increase the movement of goods across the globe. a study by rettab & azzam (2008) took port expenses and their effect on the concentration of re-exports into consideration. they postulated that shipping costs and coordination are major factors influencing the clustering of re-exports. a relative statics model was formulated that measured the degree of the effect of port costs on the re-export concentration, and further developed predicaments under which the re-export intensity was inversely related to the port costs. the costs and re-export intensities were analyzed for five asian ports, namely mumbai, dammam, dubai, hong kong and manama. the costs at ports included services offered there and the cost of hanson g. h, and robert, f. c (2023) 4 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe storage, transport and documentation. they discovered that the transportation costs and logistics had the most significant impact on re-export intensity. another study by mellens, noordman, & verbruggen (2007) revealed that the growth of re-exports in the netherlands has been booming and so is the re-exports in world trade. a total of ten european countries’ trade data was analyzed for this study by using the export performance index and market performance index. the result of this study indicates that the re-export values are doublecounted in the global trade figures. this depicts that the volume of world trade is expanding at a faster rate than the production of exports, which is clearly a misrepresentation of world trade. despite these discrepancies, there are motivations for engaging in re-exportation activities, especially for some multinational firms. one major benefit highlighted in this study is that multinational companies often engage in these activities to avoid tax/tariffs or infringe quotas set by the government. an intermediate country is used by the country of origin to supply products to the destination country without being concerned about the tax/tariff regulations because it will be bypassing them. apparent revelations about the trade indicators are that the growth of the export market is magnified, and there is an amplified loss of market share for manufacturers in the netherlands. however, beņkovskis et al. (2016) found that including re-exports not only magnifies the total exports market but also has other serious consequences. a study that examined latvia’s re-exports used an anonymized firmlevel trade database which provides data from 2005 to 2013 with detailed information on international trade. the study revealed that when re-exports are part of total exports, the actual impact of shocks on certain commodities and trading partners are not measured accurately. there are more implications for the domestic economy as the real impact may be over or understated regarding certain commodities and trading partner countries. the study emphasized that re-exports should not be undermined since the average mark-ups on re-exports were significant, and that engaging in re-export activities may contribute to a country’s gdp. despite the impediments of recording re-exports as part of domestic exports, this phenomenon has continued to grow. it offers lower transportation costs as many countries act as transport hubs of international trade in goods and they are well developed and have excessive storage space and transporting avenues. large storage spaces and ease of transportation together with tariff avoidance are the factors that incentivize the growth of re-exportation. moreover, as an intermediary, a re-exporting country may possess better knowledge on the product sources and markets in which the product is in demand, therefore reducing asymmetric information between the buyers and the sellers. re-exporting generally applies to differentiated goods, such as machinery or electronic devices. furthermore, it enhances efficiency and increases the ease of doing business between traders (hanson & robert, 2001). 3. data and empirical model the period of study is 1985–2018 with data sourced from the fiji bureau of statistics. in compiling the data, there were two-phase interviews conducted by the researchers. the interviews involved consultation and deliberation on fiji’s re-export market with personnel from the fiji bureau of statistics and the trade unit in the ministry of industry, trade and tourism. the dataset includes revised trade balances for 2016 and 2017 with provisional values for 2018. annual time series data on total exports (fj$ 000), domestic exports (fj$ 000), and reexports (fj$ 000) was sourced from the merchandise trade statistics release of the fiji bureau of statistics. in ascertaining the importance and significance of re-exports, the explained variable of total exports is determined using re-exports and domestic exports. to establish the appropriate model, a unit root test using the augmented dickey–fuller (adf) test was utilized to check the stationarity of the variables. the series were found to be stationary at level i(0) and at first difference i(1), thus it is appropriate to use the autoregressive distributed lag (ardl) model. the ardl model can capture both long-run and short-run relations of the cointegrated variables. the following model is used with data in log (ln) form: 𝐿𝑁𝑇𝐸𝑋𝑃𝑡 = 𝛽0 + 𝛽1𝐿𝑁𝐷𝐸𝑋𝑃𝑡 + 𝛽2 𝐿𝑁𝑅𝐸𝑋𝑃𝑡 − 𝐷𝑖𝑠𝑟𝑢𝑝𝑡𝑖𝑜𝑛𝑠𝑡 + 𝜇𝑡 (1) where lntexp is the total exports that represent annual merchandise exports for fiji; lndexp is domestic exports capturing the commodities that were produced domestically in fiji; and lnexp signifies re-exported hanson g. h, and robert, f. c (2023) 5 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe commodities that are isolated from any further value adding in the intermediate economy and is thus reexported in the original form in which it was imported. furthermore, it is expected that both domestic exports and re-exports will have a positive sign. in addition, disruptions capture the potential distortion to total exports. disruptions used in this model are political instabilities, cyclones, drought, flash floods, and global economic crises, where the presence of disruptions = 1 and the absence of disruptions = 0. it is highly anticipated that disruptions will have a negative sign. the error correction version of the above is as follows: ∆𝐿𝑁𝑇𝐸𝑋𝑃𝑡 = 𝛽0 + ∑𝑖 𝛽1∆𝐿𝑁𝑇𝐸𝑋𝑃𝑡−1 + ∑𝑖 𝛽2∆𝐿𝑁𝐷𝐸𝑋𝑃𝑡−1 + ∑𝑖 𝛽3∆𝐿𝑁𝑅𝐸𝑋𝑃𝑡−1 + 𝛼1𝐿𝑁𝑇𝐸𝑋𝑃𝑡−1 + 𝛼2𝐿𝑁𝐷𝐸𝑋𝑃𝑡−1 + 𝛼3𝐿𝑁𝑅𝐸𝑋𝑃𝑡−1 − 𝐷𝑖𝑠𝑟𝑢𝑝𝑡𝑖𝑜𝑛𝑠𝑡 + 𝜇𝑡 (2) the ardl (2,2,1,0) model was selected based on the akaike information criterion. the above models were estimated using eviews 9.0. 4. empirical results and analysis this section presents the findings in two subsections. subsection 4.1 displays graphical measures, and subsection 4.2 presents the ardl analysis. 4.1. graphical measures fiji’s total exports were immensely outlined by domestic exports until the late 2000s (see figure 1). however, re-exports have abruptly re-shaped the total exports since 2009. as such, the fluctuations in re-exports narrated the movement in total exports, while domestic exports displayed calm and marginal disruptions. a momentary observation may favor re-exports outweighing domestic exports and criticize government efforts to promote domestic exports. however, the ratio of domestic exports to total exports dominates the total exports with the exception of the period from 2012 to 2014 (see figure 2). furthermore, re-exports have seen a substantial growth as a percentage of total exports from 2009. a notable finding is that re-exports have the capability of escorting total exports when domestic exports contract. an explicit case is the declining domestic exports percentage from 2009 to 2011 due to the floods in fiji in january 2009, while escalating re-exports neutralized the anticipated drastic fall in total exports (see figure 2). figure 1. fiji’s total exports, re-exports and domestic exports (fj$ 000), 1985–2018. source: fiji bureau of statistics (2019). the disparity between the domestic export percentage and the re-export percentage to total exports in 1985 was 40.46% and was dominated by domestic exports (figure 2). however, in 2018 the disparity between the ratios is 12.56% with the domestic export ratio at 56.28% and the re-export ratio at 43.72%. this highlights the significant proportion of total export share captured by re-exports over the years. hanson g. h, and robert, f. c (2023) 6 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe figure 2. fiji’s domestic exports to total exports (%) and re-exports to total exports (%), 1985–2018. source: fiji bureau of statistics (2019). the findings do not imply that re-exports are superior to domestic exports or that re-exports can replace domestic exports. an investigation was carried out to re-affirm significance of re-exports as a probable cause for fiji’s trade growth. the reserve bank of fiji (2017) disclosed that fiji acts as the regional transshipment hub for petroleum products as regional countries do not have the storage capacity to import petroleum. in 2007, the national growth document, sustainable economic and empowerment development strategy (seeds) 2008–2010, advocated diversifying the domestic export markets to improve fiji’s involvement in the global market and its economic advancement. furthermore, the roadmap for democracy and sustainable socio-economic development (rdssed) 2010–2014 outlined tools for domestic export promotion, such as the national export strategy and demand driven approach. in 2014, the green growth framework for fiji: restoring the balance in development that is sustainable for future complemented the rdssed. an interesting phenomenon is the absence of including re-exports in national policies. 4.2. regression analysis table 1 presents the results of the ardl test statistics specified in equation 2 with total exports as the dependent variable. as anticipated, domestic exports and re-exports are highly significant positive determinants of total exports both in the short and long runs (see table 2). furthermore, the outputs below substantiate that reexportation is a significant predictor of total exports in fiji. it is highly recommended that an inclusive national policy is implemented to explore the potential of re-exportation in fiji. hanson g. h, and robert, f. c (2023) 7 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe moreover, disruption is negative and not significant (see table 2). it may be that political instability does not influence total exports because during political instability, when the traditional trading partners imposed trade sanctions, fiji was able to successfully collaborate with asian and north american markets. thus, the export market was not compromised. in addition, the few possible justifications put forward for the adverse effects caused by cyclones, droughts and flash flooding are insignificant as these natural disasters do not affect all the divisions in fiji simultaneously, the relief aid from other countries fast-track the recovery period, and the global prices of commodities that fiji export may have revised upwards. in addition, spill-over from the global economic crisis may have been marginal for fiji. fiji is a small island developing state and its participation in the global export market may have been too minimal to feel the full effects of the global crisis. table 2. variable coefficients: predicted and actual. independent variable predicted sign actual sign – long run actual sign – short run domestic exports positive positive, significant positive, significant re-exports positive positive, significant positive, significant disruptions negative negative, not significant negative, not significant table 3 outlines the various residual diagnostic test results. the model generally satisfies the diagnostic criteria, such as the residuals being free of autocorrelation based on the breusch–godfrey serial correlation lm test. in addition, the model has the correct functional form (no misspecification) based on ramsey’s reset test and the residuals were normally distributed based on the jarque–bera test. furthermore, the model is desirable (constant error variance) based on the breusch–pagan–godfrey test. the error correction model cointegrating coefficient was -0.76, thus the long-run adjustment is 76% and significant. the model cleared the bounds test where the f-statistics rejected the null hypothesis at all significance levels establishing a longrun relationship between the cointegrating variables. table 3. diagnostic tests. test obs. r-squared p-value serial correlation 2.548 0.2796 heteroscedasticity: bpg 13.213 0.1532 heteroscedasticity: arch 1.480 0.2236 functional form -- 0.8178 residual normality -- 0.3313 5. conclusion and policy implications total exports encompass the re-exports and domestic exports in international trading accounts. domestic exports include merchandise that is locally produced, while re-exports are commodities that are exported in their original imported form. the importance of re-exports to fiji’s trade balance over the past few years is evident as reexports have dominated total exports overshadowing domestic exports. countries only have an interim possession of the commodities that are exported but the gains from trade are attained at the macro level. these gains are in terms of the tax revenues generated by the government, revenues gained from the marked-up prices of the commodities, and revenue arising from transportation and storage costs as many ports act as hubs. moreover, the benefits are not only limited to the gains realized by the exporting country but the costs for the trading partners are also reduced. re-exportation further reduces the predicament of asymmetric information among trading partners. taking into consideration the contributions of re-exports to total exports, the study entails an investigation to determine the significance of re-exports to fiji’s total exports. therefore, the shortand long-run effects of rehanson g. h, and robert, f. c (2023) 8 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe exports to total exports were analyzed using the ardl approach and the results suggest that re-exports are a significant predictor of total exports in the short run as well as the long run. currently, there is no policy on trade promotion with regard to re-exports in the national export strategy of fiji, therefore, policies should be designed and directed towards enhancing the re-exports base to gain higher benefits from trade. improving the storage capacities of fiji’s ports will permit more bulk buying and on-time delivery of goods. also, improving the infrastructure of the airports and the wharfs to cater for more cargo planes and vessels to facilitate faster delivery of goods to the destination countries will enhance the growth of the re-export sector in fiji. being the hub of the south pacific, fiji can reap the benefits of international trading by expanding its re-export capacity as the results suggest a high correlation between re-exports and total exports in the short and long runs. references benjamin, n., golub, s., & mbaye, a. (2013). world trade organization. paper presented at the 14th wto chairs annual conference. geneva, 11 – 12 july 2013. world trade organization. [accessed: 17 december 2017]. beņkovskis, k., bērziņa, s., & zorgenfreija, l. (2016). evaluation of latvia’s re-exports using firm-level trade data. baltic journal of economics, 16(1), 1-20.available at: https://doi.org/10.1080/1406099x.2016.1163891. burger, m. j., thissen, m. j., van oort, f. g., & diodato, d. (2014). the magnitude and distance decay of trade in goods and services: new evidence for european countries. spatial economic analysis, 9(3), 231-259.available at: https://doi.org/10.1080/17421772.2014.930166. dawer, a., & jain, a. (2015). policy comparison of us and indian re-exports: suggestive lessons for india. paper presented at the in: 2nd international conference on science, technology and management. fiji bureau of statistics. (2019). international merchandise trade statistics. retrieved from: https://www.statsfiji.gov.fj/images/documents/economics_statistics/annual_reports/tradestatistics/international_merchandise_trade_statistics/2019-international-merchandise-tradestatistics.pdf fung, v. (2013). governance through partnership in a changing world. retrieved from: https://www.wto.org/english/res_e/booksp_e/aid4tradeglobalvalue13_intro_e.pdf. gehlhar, m. (2010). re-export trade for the netherlands and singapore. retrieved from: https://www.gtap.agecon.purdue.edu/resources/download/5117.pdf [accessed 28 august 2016]. gounder, n. (2013). trade liberalization and poverty in fiji: a computable general equilibrium microsimulation analysis. phd thesis, griffith university, gold coast. hanson, g. h., & robert, f. c. (2001). intermediaries in entrepôt trade: hong kong re-exports of chinese goods. nber working paper no. 8088, cambridge. kusters, a., & verbruggen, j. (2001). re-exports and the dutch market position. cpb report, 4, 35-40. https://www.statsfiji.gov.fj/images/documents/economics_statistics/annual_reports/trade-statistics/international_merchandise_trade_statistics/2019-international-merchandise-trade-statistics.pdf https://www.statsfiji.gov.fj/images/documents/economics_statistics/annual_reports/trade-statistics/international_merchandise_trade_statistics/2019-international-merchandise-trade-statistics.pdf https://www.statsfiji.gov.fj/images/documents/economics_statistics/annual_reports/trade-statistics/international_merchandise_trade_statistics/2019-international-merchandise-trade-statistics.pdf https://www.statsfiji.gov.fj/images/documents/economics_statistics/annual_reports/trade-statistics/international_merchandise_trade_statistics/2019-international-merchandise-trade-statistics.pdf https://www.statsfiji.gov.fj/images/documents/economics_statistics/annual_reports/trade-statistics/international_merchandise_trade_statistics/2019-international-merchandise-trade-statistics.pdf https://www.statsfiji.gov.fj/images/documents/economics_statistics/annual_reports/trade-statistics/international_merchandise_trade_statistics/2019-international-merchandise-trade-statistics.pdf https://www.statsfiji.gov.fj/images/documents/economics_statistics/annual_reports/trade-statistics/international_merchandise_trade_statistics/2019-international-merchandise-trade-statistics.pdf https://www.statsfiji.gov.fj/images/documents/economics_statistics/annual_reports/trade-statistics/international_merchandise_trade_statistics/2019-international-merchandise-trade-statistics.pdf https://www.statsfiji.gov.fj/images/documents/economics_statistics/annual_reports/trade-statistics/international_merchandise_trade_statistics/2019-international-merchandise-trade-statistics.pdf https://www.statsfiji.gov.fj/images/documents/economics_statistics/annual_reports/trade-statistics/international_merchandise_trade_statistics/2019-international-merchandise-trade-statistics.pdf https://www.statsfiji.gov.fj/images/documents/economics_statistics/annual_reports/trade-statistics/international_merchandise_trade_statistics/2019-international-merchandise-trade-statistics.pdf https://www.statsfiji.gov.fj/images/documents/economics_statistics/annual_reports/trade-statistics/international_merchandise_trade_statistics/2019-international-merchandise-trade-statistics.pdf http://www.wto.org/english/res_e/booksp_e/aid4tradeglobalvalue13_intro_e.pdf http://www.wto.org/english/res_e/booksp_e/aid4tradeglobalvalue13_intro_e.pdf http://www.wto.org/english/res_e/booksp_e/aid4tradeglobalvalue13_intro_e.pdf http://www.gtap.agecon.purdue.edu/resources/download/5117.pdf http://www.gtap.agecon.purdue.edu/resources/download/5117.pdf hanson g. h, and robert, f. c (2023) 9 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe lankhuizen, m., & thissen, m. (2014). identifying true trade patterns: correcting bilateral trade flows for re-exports. paper presented at the 22nd international input-output conference & 4th edition of the international school of i-o analysis. 14-18 july 2014, lisbon, portugal. mellens, m., noordman, h., & verbruggen, j. (2007). re-exports: international comparison and implications for performance indicators. cpb netherlands bureau for economic policy analysis, 149. oecd. (2017). global value chains (gvcs) – oecd. retrieved from: https://www.oecd.org/industry/ind/global-value-chains.htm. ollus, s.-e., & simola, h. (2007). finnish re-exports to russia. bank of finland institute for economies in transition. 5/2007. retrieved from: https://helda.helsinki.fi/bof/bitstream/handle/123456789/12614/129313.pdf?sequence=1. rettab, b., & azzam, a. (2008). re-export intensity and trade costs: port facilities and services. maritime economics & logistics, 10(3), 229242.available at: https://doi.org/10.1057/mel.2008.2. statistics netherlands. (2016). trends in the netherlands 2016. retrieved from: https://www.cbs.nl/engb/publication/2016/26/trends-inthe-netherlands-2016. the reserve bank of fiji. (2017). fiji and international trade. suva: fiji bureau of statistics. world bank. (2022). world bank country and lending groups. retrieved from: https://datahelpdesk.worldbank.org/knowledgebase/articles/906519-world-bank-country-andlending-groups. wto. (2017). wto | 2017 press releases -trade recovery expected in 2017 and 2018, amid policy uncertaintypress/793. retrieved from: https://www.wto.org/english/news_e/pres17_e/pr791_e.htm [accessed 5 jun. 2017]. http://www.oecd.org/industry/ind/global-value-chains.htm http://www.oecd.org/industry/ind/global-value-chains.htm http://www.oecd.org/industry/ind/global-value-chains.htm http://www.oecd.org/industry/ind/global-value-chains.htm http://www.oecd.org/industry/ind/global-value-chains.htm http://www.oecd.org/industry/ind/global-value-chains.htm http://www.oecd.org/industry/ind/global-value-chains.htm http://www.cbs.nl/en-gb/publication/2016/26/trends-in-the-netherlands-2016 http://www.cbs.nl/en-gb/publication/2016/26/trends-in-the-netherlands-2016 http://www.cbs.nl/en-gb/publication/2016/26/trends-in-the-netherlands-2016 http://www.cbs.nl/en-gb/publication/2016/26/trends-in-the-netherlands-2016 http://www.cbs.nl/en-gb/publication/2016/26/trends-in-the-netherlands-2016 http://www.cbs.nl/en-gb/publication/2016/26/trends-in-the-netherlands-2016 http://www.cbs.nl/en-gb/publication/2016/26/trends-in-the-netherlands-2016 http://www.cbs.nl/en-gb/publication/2016/26/trends-in-the-netherlands-2016 http://www.cbs.nl/en-gb/publication/2016/26/trends-in-the-netherlands-2016 http://www.cbs.nl/en-gb/publication/2016/26/trends-in-the-netherlands-2016 http://www.cbs.nl/en-gb/publication/2016/26/trends-in-the-netherlands-2016 http://www.cbs.nl/en-gb/publication/2016/26/trends-in-the-netherlands-2016 http://www.cbs.nl/en-gb/publication/2016/26/trends-in-the-netherlands-2016 http://www.wto.org/english/news_e/pres17_e/pr791_e.htm http://www.wto.org/english/news_e/pres17_e/pr791_e.htm http://www.wto.org/english/news_e/pres17_e/pr791_e.htm american interdisciplinary journal of business and economics issn: 2837-1909| impact factor: 6.72 volume. 10, number 2; april-june, 2023; published by: scientific and academic development institute (sadi) 8933 willis ave los angeles, california https://sadipub.com/journals/index.php/aijbe | editorial@sadipub.com 52 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe how electronic banking has changed the financial performance of nigerian deposits money banks muhammad aminu isa department of accounting, bayero university abstract: this study investigates the impact of electronic banking on the financial performance of deposits money banks in nigeria. the study employs a descriptive analysis using secondary data from reports and publications, and statistical package for the social sciences to analyze data. the results show that electronic banking has a positive influence on the financial performance of nigeria’s commercial banks. mobile, internet banking, and the use of atm cards significantly contribute to the financial performance of nigeria’s deposits money banks. the study recommends that nigerian commercial banks increase their efforts towards adopting e-banking to automate their service delivery to customers. furthermore, industry policymakers and regulators must acknowledge electronic banking as a major input when crafting guidelines to regulate the industry. keywords: electronics banking, financial performance, mobile banking, internet banking, atm cards. introduction in recent years, electronic banking has been highly appreciated in the banking sector service provision, especially in online banking services. developing countries like nigeria have witnessed an immense transformation in their banking system, with the introduction of electronic banking, online transactions, mobile banking, and automated teller machines (atms). the rapid growth in e-banking services by commercial banks in nigeria is due to its operational efficiency, cost advantage, and convenience. the implementation of e-banking has brought a new dimension and paradigm shift in the banking sector. this study aims to examine the effect of e-banking on the financial performance of nigerian commercial banks. the study relies on a descriptive analysis using secondary data from reports and publications. the data was analyzed using the statistical package for the social sciences. the study examines the relationship between mobile banking, internet banking, and the use of atm cards on the financial performance of deposits money banks in nigeria. the study findings reveal that e-banking significantly contributes to the financial performance of nigeria’s commercial banks, as measured by the return on assets. e-banking, which comprises mobile banking, internet banking, and the use of atm cards, has become a crucial component of the nigerian banking sector. the study recommends that nigerian commercial banks and policymakers increase their efforts towards adopting mailto:editorial@sadipub.com muhammad aminu isa (2023) 53 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe ebanking to automate their service delivery to customers. furthermore, industry regulators must consider ebanking as a major input when crafting guidelines to regulate the industry. in conclusion, the study provides insights into the impact of electronic banking on the financial performance of nigeria’s commercial banks. the study contributes to the existing literature on e-banking and provides practical implications for the nigerian banking industry. the findings of the study provide evidence for policymakers and commercial banks to pay more attention to electronic banking as a crucial component of their operations. 2. literature review 2.1 banking sector in nigeria banking industry in nigeria started during the colonial era with the establishment of colonial banks with the primary aim of meeting the commercial needs of the colonial government. banking system in nigeria is regulated through the central bank of nigeria. this apex bank started operation on july 1, 1959. in 1892, african banking corporation and british west africa, now first bank of nigeria, were established in nigeria. in 1925, anglo-egyptian bank and national bank of south africa gave birth to barclays bank in nigeria. in 1948, the british and french bank for commerce and industry started operations in nigeria, which metamorphosed into the united bank for africa. the first domestic bank in nigeria was established in 1929 and called industrial and commercial bank. the bank liquidated in 1930 and was replaced by mercantile bank in 1931. the african continental bank was created in 1949 as the only sustainable indigenous bank after the liquidation of the industrial and commercial bank. the year 1947, shows the emergence of an agricultural bank called the nigerian farmers and commercial bank.the central bank of nigeria (cbn) is the central bank and apex monetary authority of nigeria established by the cbn act of 1958 and commenced operations on july 1, 1959. central bank of nigeria (cbn) is the major regulatory objectives of the bank as stated in the cbn act are to: maintain the external reserves of the country, promote monetary stability and a sound financial environment, and to act as a banker of last resort and financial adviser to the federal government. the central bank's role as lender of last resort and adviser to the federal government has sometimes pushed it into murky regulatory waters. after the end of imperial rule, the desire of the government to become pro-active in the development of the economy became visible especially after the end of the nigerian civil war, the bank followed the government's desire and took a determined effort to supplement any short falls in credit allocations to the real sector. the bank soon became involved in lending directly to consumers, contravening its original intention to work through commercial banks in activities involving consumer lending. however, the policy was an offspring of the indigenization policy at the time. nevertheless, the government through the central bank has been actively involved in building the nation's money and equity centers, forming securities regulatory board and introducing treasury instruments into the capital market. 2.2 e-banking emerging information technology tremendously affects the growth and flexibility in the user friendliness of electronic banking (nadim & begum, 2008). in recent times electronic banking has been highly appreciated in the banking sector service provision, and especially in online banking services. foreign as well as local banks are adopting online banking system to enhance their services. they have adopted superior technology through automated transaction systems for attracting clients and offering inter-branch and inter-bank networking. muhammad aminu isa (2023) 54 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe nadim and begum (2008) observe that these systems seem neglected by the customers, in spite of rigorous efforts by the banks. it is perceived that in e-banking customer impression is quite vital for successful ebanking service delivery. the banking sector has tried to collect more information to discern factors that endear customers to online banking (gerrard & cunningham, 2003; sathye, 1999). various authors have proposed different models on customer online banking adoption. these models comprise of technology acceptance model that has its origin from theory of reasoned action, which has become the most widely used, and the theory of planned behaviour. 2.3 technology acceptance model this model is at times referred to as technology acceptance theory (tat) it addresses the adoption behaviour of customers which is usually assessed by the aim to use a specified system which is predicated on the impression of its usefulness and the convenient usability of the system. previous authors researched on the fundamental construct of tams validity in forecasting the acceptance of individual’s and noted that tams fundamental construct does not wholly address the explicit effect of technology and the usability factors that actually influence the user’s acceptance (moon & kim, 2001). davis, 1989 contents that expected usefulness is usually termed as an individual belief to improve the degree job performance by the application of modern technology of information system. perceived effortlessness of use shows how easy an individual learns the operations of the emerging technology and information system. the model emphasizes the positive impact of perceived simplicity of use on the impression of the system’s usefulness (gefen, karahanna, & straub, 2003). pikkarainen, karjaluoto & pahnila (2004) carried out a survey in finland to establish the actual impact of perceived usefulness and concluded that it endeared use of inventive, autonomous, self-service and user friendly technologies provided by banks for access of financial services to the users in the twenty first century. gerrard and cunningham (2003) noted that the perceived usefulness rested on the services provided by the bank. these services range from paying utility bills, checking account balances, loan applications, money transfer abroad, and getting pertinent mutual funds information. in conclusion, the likelihood of the adoption of e-banking is dependent on its perceived usefulness (potaloglu & ekin, 2001). the major drivers of e-banking acceptance are viewed as the tam variables which include the aspects of perceived ease of use and perceived usefulness. 2.4 empirical studies 2.4.1 international research studies several research studies have been carried out on the performance of banks that have embraced the use of ebanking platform. the main reason is that the profitability of banks utilizing e-banking purely focuses on the impending costs and resultant revenue implications (guru & staunton 2002; berger, 2003). a study by mohammad & saad (2011) on the impact of electronic banking on the performance of jordanian banks over the period (20002010) concluded that electronic banking negatively affects banks’ performance which was akin to the findings of delgado, hernando & nieto (2007) and siam (2006). electronic banking adoption impacts on a bank’s risk profile. the risk management principles issued by basel committee in july 2003 for electronic banking recognize the related risk factors and the committee’s aim was to promote and enhance safety of services provided by online banking while observing flexibility in line with emerging technologies as a result of the turbulent environment. unlike the study of nader (2011) who observed saudi arabia’s commercial banks profit efficiency over the period of time ranging from 1998-2007. the survey study findings provide that accessibility of banking via the mobile phone, the atms and the various bank branches had a significance on profitability and efficiency muhammad aminu isa (2023) 55 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe in saudi arabia’s banks. scrutiny by malhotra & singh (2009) on the effect of internet banking on performance of commercial banks in india found that there was insignificant relationship. this corresponds to the deductions of deyoung (2005); arnaboldi & claeys (2010). similarly, a study done by hernando and nieto (2005) on commercial banks numbering 72 in spain over a period of 1994-2002 to establish their financial performance on the adoption of a transactional website found that there was a significant impact on profitability, which was the same as deyoung, lang & nolle (2007) who observed that profitability is highly realized in internet banks than in non internet banks in traditional analogue banks. de young et al. (2007) identified the factors that affect bank’s performance in the e-banking platform by undertaking a survey study of united states (us) community banks and did an appraisal on virtual click and mortar banks effect on firm’s performance. the study confounded that bank’s profits actually improved due to online banking by accelerating meaningful revenue. a consumer acceptance of online banking study by pikkarainen et al (2004) found that banks get noteworthy cost savings by offering online banking services and that it enables them to trim their branches and reduce on the staff numbers which gives way to self-service channels (karjaluoto, koivumäki, & salo, 2003). centeno (2004) notes that there are two categories of factors affecting e-banking adoption, these are; factors that relate to retail banking, and those that relate to the infrastructure and technology accessibility comprising of skills and competences on the part of customers in the usage of internet and other associated technologies, internet penetration rate, technological attitude, and internet security and privacy issues. it again involves aspects such as online banking culture, banking culture, mutual trust in banking institutions and push in internet banking. berger (2003) observed how bank profits are affected by banks spending in view of the prevailing competition and concluded it leads to cost saving, but higher spending on it generates network effects that affect profits negatively. simpson (2002) posits that operating costs reduction and high revenues realization is a major driver to ebanking. a comparison study between emerging and developed markets depicted that greater revenues and lower operating costs are realized in developed markets. furst, lang, & nolle (2002) contended that the application of click and mortar business model in federal chartered us banks results in reasonably high return on equity (roe). they also noted the banks with greater profitability resulted from embracing internet banking after 1998. polatoglu & ekin (2001) undertook a study on turkish retail banking sector in which they found out that actually e-banking reduces banks’ operational costs and it accelerates customer’s satisfaction and retention rate. sullivan and richard (2000) studied usa brick and mortar banks and found no significant advantage of internet banking in this practice. jayawardhena (2000) showed that cost reduction, profitable gains, and efficiency are derived from internet banking, yet it is noticed that very few banks use it and that only fewer clients constituting less than five hundred thousand has so far embraced the technological services in ebanking in the uk. 2.4.2 local research studies various studies done in nigeria have also shown the effect of e-banking on performance in the banking industry. kariuki (2005) studied nigeria’s commercial banks and the effect on financial performance due to the different products developed. the study found out that the development of new products positively affected financial performance in nigeria’s banks. oluwagbemi, abah, & achimugu (2011) conducted a study on nigeria’s commercial banks adoption of electronic banking. the study findings revealed that the adoption was of great benefit but was predicated on the bank services being available 24/7, facilitating faster service delivery and customer satisfaction. muhammad aminu isa (2023) 56 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe chaven (2013) in his study found that banks offering internet banking are mainly large banks with a large asset base as well as profit margin as contrasted with non-internet banking banks. the results revealed that averagely, internet banks post more profit than non-internet banks. however, the multiple regression results revealed a small, not significant association between a bank’s performance and offering internet banking, larger significant and negative association with risk profile of the banks meaning that internet based banks become better off from risks such as nonperforming loans. however, the benefit expected of internet banking is yet to show some substantial positive financial gains and requires future investigation as internet banking matures in the country. a research paper done by kariuki (2005), showed the positive impacts of ict on banks’ performance. he established that deployment of e-banking results in increased profits though in long-term but not in short-term due to the initial capital outlay for the ict investment. further he offers evidence that the usage of e-banking can result in market share growth, diversified product range and products that are tailored to suit customer needs which ensures that the commercial banks are in an improved position to satisfy customer demands. 2.5 research framework a research framework is necessary to develop on how the relation between e-banking and financial performance of the nigerian banking industry is correlated and the direction between the pairs. 3. research methodology 3.1 population and sample size the study was centered on all the commercial banks governed and licensed by the central bank of nigeria. a census survey was used. automatic teller machine mobile banking internet banking mobile banking independent variables dependent variable muhammad aminu isa (2023) american interdisciplinary journal of business and economics | 57 https://sadipub.com/journals/index.php/aijbe 3.2 data collection the study used secondary data which encompassed a mixture of published and unpublished material pertinent to the research. the secondary data is significant as it includes the logical framework of the research (agwu & carter, 2014). for the purpose of the study, the collected secondary data included central bank of nigeria periodic reports and financial reports of the commercial banks for the period 2013 to 2017. data on financial performance such as earnings and financial ratios were obtained from the audited financial statements while data on electronic banking services such as services offered and their respective quantities were obtained from the various cbn periodic reports. 3.3 data analysis the data was cleaned, sorted and checked for completeness and consistency after collection. statistical package for the social sciences (spss) was then used to analyses the data’s descriptive statistics such as maximum, minimum, mean, and standard deviation to outline sample characteristics and significant trends from the collected data. a multiple linear regression model was then employed to estimate the relationships between the variables. 3.4 model specification the regression model was as follows: ybt = αo + β1atmit + β2mit + β3iit + ε where; ybt=financial performance represented by roa of bank b in year. bt= estimate value of the year. atm=value of transaction through atm. m= value of transaction through mobile banking. i= value of transaction through internet banking. t= year. ε= error term. to find the value of and β, the multivariate regression model was employed. the individual beta estimate reliability was then tested by the p-value in the anova table. the regression model’s significance was tested at 95% confidence interval and 5% level of significance. 4. results and discussions 4.1 descriptive analysis the descriptive statistics results are tabulated below: table 1: descriptive statistics description roa banking atm cards mobile (nm) paymentts internet (nm) (nm) n 42 42 42 42 minimum -7.54 0 0 0 maximum 7.152 14773.21 10124.981 125109.6 mean 2.667 8568.242 5872.34 72753.014 muhammad aminu isa (2023) american interdisciplinary journal of business and economics | 58 https://sadipub.com/journals/index.php/aijbe stnd. dev. 2.679 4236.359 2903.436 37412.21 skewness -1.285 -0.359 -0.359 -0.243 std. error 0.365 0.365 0.365 0.365 kurtosis 3.949 -1.285 -1.285 -1.325 std. error 0.717 0.717 0.717 0.717 source: generated from spss statistical output table 4.1 above illustrates the average roa of all the commercial banks in nigeria over the study period to be 2.667 with a maximum of 7.152 and the minimum of 7.54. a small standard deviation of 2.679 was noted implying that there was low variation of roa across the commercial banks. in addition, the mean of the total value of atm cards was 8568.242 million recording the highest value of 14773.21 million. the mean total value of the mobile payments was 5872.34 million with a maximum of 10124.981 million. the internet banking mean was noted to be 72753.014 million across the commercial banks. high standard deviations were noted on total value of atm card transactions, mobile payments as well as internet banking meaning there was a high variation across all the commercial banks with regards to total transaction value of atm cards, mobile payments and internet banking. 4.2 correlation analysis to measure the strength of the association between the variables, the study put to use the karl pearson’s coefficient of correlation. the pearson product-moment correlation coefficient determines the strength of a linear association between two variables and is denoted by r which can take a range of values from +1 to -1. a value of 0 designates that there is no association between the two variables. a value greater than 0 designates a positive association while a value less than 0 designates a negative association. the pearson’s coefficient was employed to ascertain the presence or absence of linear correlation between the variables of e-banking and financial performance. the outcomes are as follows: table 2: correlation analysis variable roa atm cards mobile payments internet banking roa 1.000 atm cards 0.679 1.000 mobile payments 0.612 0.326 1.000 internet banking 0.574 0.254 0.076 1.000 source: generated from spss statistical output results from table 4.2 above reveal that there is a significant positive association between use of atm cards and financial performance (r = .679, p-value < 0.009). this implies that atm cards influences financial performance in commercial banks in nigeria. the findings also disclosed a substantial positive association muhammad aminu isa (2023) american interdisciplinary journal of business and economics | 59 https://sadipub.com/journals/index.php/aijbe between mobile payments and financial performance (r = .612, p-value < 0.013). thus, implying that mobile payments influences financial performance in commercial banks in nigeria. the findings indicated a noteworthy positive association between internet banking and financial performance (r = .574, p-value < 0.026) thus, depicting that internet banking influences financial performance in nigeria’s commercial banks. 4.4 regression analysis the correlation coefficient (r) value represents the degree and strength of relationship between dependent variable and the independent variables (sekaran, 2003). coefficient of correlation ranges between -1 and 1 and in this model the coefficient of correlation is 0.896 which indicates a positive correlation between roa, atm cards, mobile payments, and internet banking. the r squared is the coefficient of determination which indicates how much of the total variation in the dependent variable. from the above the r squared statistic gives the goodness of fit of the model which shows how good the regression model approximates the real data points. the r squared of this model is 0.802 which shows that the model is a good fit of the actual data. the coefficient of determination of 0.802 implies that 80.2% of the variance in dependent variable is explained by changes in the independent variables. 4.4.2 anova (analysis of variance) table 3: anova (analysis of variance) model sum squares of df mean square f sig. regression 6.942 3 2.314 6.51 .001a residual 13.507 38 0.355 total 20.449 41 source: generated from spss statistical output a. predictors: (constant), atm cards, mobile payments, and internet banking b. dependent variable: roa the model summary also indicates that the dependent variable (roa) is significantly accurately predicted by the regression model. the statistical significance of the regression model that was run is shown by the f test. the p=0.001, which is less than 0.05 designates that, generally the regression model statistically and significantly predicts the outcome variable that is good fit for the data. 4.5 coefficient of correlation table 4: coefficient of correlation b std. error beta t sig. (constant) 7.232 0.643 11.24 .0000 total value from atm cards 0.802 0.343 0.23 2.34 .0247 total value from mobile payment 0.769 0.305 0.46 2.52 .0160 muhammad aminu isa (2023) american interdisciplinary journal of business and economics | 60 https://sadipub.com/journals/index.php/aijbe total value from internet bank. 0.593 0.291 0.31 2.04 .0486 the overall equation model for roa, atm cards, mobile payments, and internet banking was as follows: ybt = 7.232 + 0.802atmit + 0.769mit + 0.593iit + ε from the model, in any given month, the roa will be 7.232 when all the predictor values are zero. the model indicates that when the value processed through atm cards changes by one unit the roa will increase by 0.802. in addition, mobile payments total changes by one unit the roa increases by 0.769. further, the study findings revealed that when the internet banking value changes by one unit the roa will increase by 0.593. to test the significance of each individual variable which was based at 0.05 the t-test was carried out. the result indicates the mobile payments and internet banking have a value of 0. 0160 and 0.0486 against the roa in the model respectively. this shows that the relationship between roa, mobile payments and internet banking is significant. the relationship between roa and atm cards recorded at rate of 0.0247 which is significant since it’s less than p-value (p.0.05). 4.6 discussion of findings the objective of the study was to assess the effect of electronic banking on the financial performance of deposit money banks in nigeria. this was evaluated by use of secondary data and the succeeding analysis centered on the variables of the study (return on assets, value of atm transactions, value of mobile banking transactions and value of internet banking transactions). results indicate that the regression model is significant in explaining the changes in the independent variable as measured by return on assets caused by changes in the three independent variables namely value of atm transactions, value of mobile banking transactions and value of internet banking transactions. this is in line with the findings of abaenewe, ogbulu, & ndugbu (2013) that indicated that changes in profitability of nigeria’s commercial banks is significantly explained by variations in electronic funds transfer. the study findings indicated that the value processed through atm cards positively and significantly influenced the financial performance of commercial banks in nigeria. this correlates to abaenewe, et. al (2013) who noted that a steady rise in the financial performance of banks has been occasioned through an upsurge in atm usage as measured by number of atms. this also agrees to jayshree, (2013) who listed initiation of accounts, monitoring of accounts and execution and logging of transactions as some of the banking services that have been transformed by deployment of ict by banks. he notes that self service facilities have resulted from embracing ict and this has enabled bank customers to be able to authenticate their account numbers and obtain instructions on when and how to receive their credit and debit cards and cheque books. the study established that mobile banking significantly and positively influences the financial performance of commercial banks in nigeria. this is in line with mallat, rossi & tuunainen (2004) who state that mobile services are among the newest services that the banks offer. through this service, the customers receive messages on their cell phones when transactions that pertain to the customers such as those involving their cards or accounts take place. this goes a long way into lowering the risk that the customers’ account or cards are being exploited by an individual who is not the customer. the finding also tallies to jegede (2014) that muhammad aminu isa (2023) american interdisciplinary journal of business and economics | 61 https://sadipub.com/journals/index.php/aijbe mobile banking has reinvented the methods of operations of banks in nigeria and positively influenced the performance of the commercial banks. the study further reveals that internet banking positively and significantly influences the financial performance of commercial banks in nigeria. this correlates with joseph (2013) who states internet banking permits clients to execute transactions at an opportune place and time. the finding also agrees to agboola (2006) who indicated that modern technology was the major driver of competition in the banking sector. in the study an upsurge in the deployment of various e-banking tools was highly evident. the study indicated that the utilization of modern ict practices significantly improves the bank’s reputation and eventually results to foster efficient and effective service delivery. 5.0 conclusion and recommendations 5.1 conclusion the study indicates that the e-banking independent variables (atm, mobile and internet banking) measured by the value of transactions effected explain the financial performance of nigeria’s commercial banks as measured by the return on assets. this is inferred from the strong relationship between the dependent variable and the independent variables found by the study. the study concludes that e-banking has contributed positively to the financial performance of nigeria’s commercial banks. this is inferred from the trends recorded in the variables where the value of transactions effected through e-banking had a positive and significant influence on financial performance of commercial banks in nigeria. e-banking provides effective and efficient channels that facilitate improved service delivery and diversified products tailored to client needs. kaye, ongundele & obaro, (2013) believed that it is now glaring that atm cards positively and significantly influenced the financial performance of commercial banks in nigeria. in addition, the study concludes that mobile banking significantly and positively influences the financial performance of commercial banks in nigeria. the study further concludes that internet banking positively and significantly influences the financial performance of commercial banks in nigeria. deployment of atms, mobile banking and internet banking has enabled banks to cut down on their costs for offering services to customers and also to expand their reach to a wider market (sanusi, 2010). e-banking has also enabled the banks to increase the volumes of transactions that can be processed in a day to virtually an unlimited number. this works towards improving the performance of the banks. 5.2 recommendations following the findings above, it is this study’s recommendation that: 1. there is dire need for commercial banks to increase their efforts towards adoption of e-banking to automate their service delivery to customers. this follows the positive effect that e-banking usage has on the financial performance of nigeria’s commercial banks as noted through the study. 2. the banking industry’s policy makers and regulators also need to cogitate on e-banking as a major input when crafting guidelines to regulate the industry. this is as a result of the major influence that technology has on the performance of the commercial banks. as the country continues to take on developing partners to accentuate its technological capacity, banks will continue to increasingly leverage on technology to improve their performance notwithstanding the risks associated 3. the study further recommends that commercial banks keep embracing the use of mobile banking in their day to day operations because the population of people with access to a cell phone keeps swelling every muhammad aminu isa (2023) american interdisciplinary journal of business and economics | 62 https://sadipub.com/journals/index.php/aijbe day. the banks should keep working in tandem with mobile network companies to craft innovative services that are tailored to their targeted market. suggestions for further research 1. the banking industry has other players in addition to commercial banks. this study was centered on only the registered commercial banks and excluded mortgage finance companies, bank of industry, bank of agriculture, cash remittance providers, credit reference bureaus, microfinance banks, foreign banks representation offices and foreign exchange bureaus. it is this studies recommendation that research be carried out on the other players in the banking industry to determine effect of electronic banking on the whole banking industry in nigeria 2. the study also recommends that research be carried out on the effect of ebanking on the performance of commercial banks in other countries within west africa. most of the major commercial banks in nigeria have expanded into the neighboring countries and such a research will benefit them to focus their strategies for increasing their returns in the external market 3. in addition, the study proposes that research be done in nigeria on the influence of e-banking on the growth of the country’s real gross domestic product in order to establish the residual effect of e-banking on nigeria’s economy. this will enable the banks and government understands how ebanking usage translates to the country’s economic performance instead of looking at its benefits in isolation. references. abaenewe, z.c., ogbulu, o.m., &ndugbu, m.o. (2013). electronic banking and bank performance in nigeria.west african journal of industrial and academic research, 6(1), 171-187. agboola, a. (2006). information and communication technology (ict) in banking operations in nigeria: an evaluation of recent experiences. retrieved from http://unpan1.un.org/intradoc/groups/public/documents/aapam/unpan02 6533 agwu, e. m., & carter, a. l. (2014). mobile phone banking in nigeria: benefits, problems and prospects. international journal of business and commerce, 3(6) 50-70.an integrated model. mis quarterly,27(1), 51-90. arnaboldi, f. & claeys, p. (2010). innovation and performance of european banks adopting internet. london: centre for banking research. business school, city asikhia, o. & sokefun, a. (2013). capital adequacy and banks’ profitability. empirical evidence from nigeria. american international journal of contemporary research, 3(10), 91-92. atm standards and guidelines (2010) http://www.cbn.gov.ng. berger, a. n. (2003). the economic effects of technological progress: evidence from the banking industry. journal of money, credit and banking,35(2), 141-76. centeno, c. (2004). adoption of internet services in the acceding and candidate countries, lessons from the internet banking case. telematics and informatics,21, 293-315. central bank of nigeria. (2017). bank supervision annual report. retrieved from https://www.cbn.gov.ng/images/docs/bank%20supervision%20reports/a nnual%20reports/2014bsannualreport.pdf chaven, j. (2013). internet bankingbenefits and challenges in an emerging economy. international journal of research in business management, 1(1) 19-26. delgado, j., hernando, i. & nieto, m. j. (2007). do european primarily internet banks show scale and experience efficiencies? european financial management,13(4), 643-671. http://unpan1.un.org/intradoc/groups/public/documents/aapam/unpan026533.pdf http://unpan1.un.org/intradoc/groups/public/documents/aapam/unpan026533.pdf http://unpan1.un.org/intradoc/groups/public/documents/aapam/unpan026533.pdf http://unpan1.un.org/intradoc/groups/public/documents/aapam/unpan026533.pdf http://unpan1.un.org/intradoc/groups/public/documents/aapam/unpan026533.pdf muhammad aminu isa (2023) american interdisciplinary journal of business and economics | 63 https://sadipub.com/journals/index.php/aijbe deyoung, r. (2005). the performance of internet-based business models: evidence from the banking industry. journal of business,78(3), 893-947. deyoung, r., lang, w.w. & nolle, d. l. (2007). how the internet affects output and performance at community banks. journal of banking & finance,31, 10331060 furst, k., lang, w. w. & nolle, d. e. (2000a). who offers internet banking? quarterly journal,19(2), 27-46. furst, k., lang, w. w. & nolle, d. e. (2000b). internet banking: developments and prospects, economic and policy analysis. working paper no. 2000-9, office of comptroller of the currency, september. furst, k., lang, w.w. & nolle, d. e. (2002). internet banking. journal of financial services research, 22(1/2), 95-117. gefen, d., karahanna, e. & straub, d. w. (2003). trust and tam in online shopping: gerrard, p., & cunningham, j. b. (2003). the diffusion of internet banking among singapore consumers. international journal of bank marketing,21(1), 16-28. guru, b., staunton, j. & balashanmugam, m. (2002). determinants of commercial bank profitability in malaysia, working papers, university of multimedia. hernando, i. & nieto, m. j. (2005). is the internet delivery channel changing banks’ https://www.cbn.gov.ng/images/docs/cbkannualreports/annual_report _2017.pdf jayawardhena, c. & foley, p. (2000). changes in the banking sector: the case of internet banking in the uk, internet research. electronic networking applications and policy, 10(1), 19-30. jayshree, c. (2013). internet bankingbenefits and challenges in an emerging economy. international journal in research and business management, 1(1), 1926. jegede, c.a. (2014). effects of automated teller machines on the performance of nigerian banks.american journal of applied mathematics and statistics, 2(1), 40-46. joseph i. u. (2013). information technology for effective supervision of the marketing executives in the banking industry in nigeria.journal of economic and sustainable development, 4 (9),82-90. kariuki, n. (2005). six puzzles in electronic money and banking. imf working paper, imf institute, 19. karjaluoto, h., koivumäki, t. and salo, j. (2003). individual differences in private banking: empirical evidence from finland. proceedings of the 36th hawaii international conference on system sciences (hicss), big island, hawaii, p. kaye, o.l., ongundele, o.j., & obaro, a. o. (2013). government bailout of financially distressed banks in nigeria.a justifiable strategy?. journal of business and social science, 4(80), 174-180. kingoo, m. (2011). challenges for monetary policy: new and old, bank of england. quarterly bulletin, 397 415. kolodinsky, j. k. hogarth, j. m., &hilgert, m. a. (2004). the adoption of electronic banking technologies by us consumers. the international journal of bank marketing, 22(4), 238-259. malhotra, p, singh, b. (2009). the impact of internet banking on bank performance and mallat, n., rossi, m., & tuunainen, v. (2004). mobile banking services. communications of the acm, 47(5), 42-46. mohammad, a. o & saad, a. a. (2011). the impact of e-banking on the performance of jordanian banks. journal of internet banking and commerce,16(2), 42-50. moon, j.-w. & kim, y. g. (2001). extending the tam for the world-wide-web context. information and management, (38), 217-230. https://www.centralbank.go.ke/images/docs/cbkannualreports/annual_report_2015.pdf https://www.centralbank.go.ke/images/docs/cbkannualreports/annual_report_2015.pdf https://www.centralbank.go.ke/images/docs/cbkannualreports/annual_report_2015.pdf https://www.centralbank.go.ke/images/docs/cbkannualreports/annual_report_2015.pdf https://www.centralbank.go.ke/images/docs/cbkannualreports/annual_report_2015.pdf https://www.centralbank.go.ke/images/docs/cbkannualreports/annual_report_2015.pdf https://www.centralbank.go.ke/images/docs/cbkannualreports/annual_report_2015.pdf muhammad aminu isa (2023) american interdisciplinary journal of business and economics | 64 https://sadipub.com/journals/index.php/aijbe moser, d. v., evans, j. h. & kim, c. k. (1995). the effects of horizontal and exchange inequity on tax reporting decisions. accounting review.70(4), 619634 nader, a. (2011). the effect of banking expansion on profit efficiency of saudi banks. 2nd international conference on business and economic research (2nd icber 2011) proceeding 269. nadim, j. & begum, n. (2008). the role of perceived usefulness, perceived ease of use, security and privacy, and customer attitude to engender customer adaptation in the context of electronic banking. african journal of business management,2(1), 32-40. nibss nigeria (2017). http://nibss-plc.com.ng oluwagbemi o., abah j., &achimugu p. (2011). the impact of information technology in nigeria’s banking industry. journal of computer science and engineering, 7 (2), 63-67. ovia, j. (2001). internet banking: practices and potentials in nigeria. a paper at the conference organized by the institute of chartered accountants of nigeria (ican), lagos. performance? the case of spanish banks. banco de espana, unpublished manuscript. pikkarainen, t., pikkarainen, k., karjaluoto, h., & pahnila, s. (2004). consumer acceptance of online banking: an extension of the technology acceptance model. internet research,14(3), 224–235. polatoglu, v.n., and ekin, s. (2001). an empirical investigation of the turkish consumers' acceptance of internet banking services. international journal of bank marketing,19(4), 156-165. risk: the indian experience. eurasian. journal of business and economics, 43sanusi, l. (2010). the nigerian banking industry: what went wrong and the way forward. convocation lecture delivered at the convocation square, bayero university kano, kano-nigeria. sathye, m. (1999). adoption of internet banking by australian consumers: an empirical investigation. international journal of bank marketing, 17(7), 32434. sekaran, u. (2003). research methods for business: a skill building approach, 4edn. new york: john wiley and sons inc. siam, a. z. (2006). role of the electronic banking services on the profits of jordanian banks. american journal of applied sciences, 3(9). simpson, j. (2002). the impact of the internet in banking: observations and evidence from developed and emerging markets. international journal of telematics and informatics, 19, 315-330. steven, a. (2013). information systems: the information of e-business. new jersey: natalie anderson. sullivan, r. j. (2000). how has the adoption of internet banking affected performance and risk at banks? a look at internet banking in the tenth federal reserve district, federal reserve bank of kansas city. financial industry perspectives, (december), 1–16.university. microsoft word ijbmer2022130101.docx american interdisciplinary journal of business and economics issn: 2837-1909| impact factor : 4.6 volume. 9, number 3; july-sept, 2022; published by: scientific and academic development institute (sadi) 8933 willis ave los angeles, california https://sadipub.com/journals/index.php/aijbe 43 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe the role of financial accounting in advancing educational reforms in ghana" patrick ninson and comfort ninson department of accounting education, university of cape coast, ghana department of economics, university of cape coast – ghana abstract: this study aimed to investigate the background and needs of female and male students in senior high schools, with a focus on the factors that influence effective teaching and learning of accounting. two senior high schools in ghana were chosen as the study area. the study found that teaching and learning in senior high schools were abstract due to the lack of computers, internet, and reference materials. students also lacked essential skills such as speaking, reading, and listening, which were attributed to the teaching methods used in pre-secondary education. the study also revealed that students encountered several challenges in satisfying their academic needs, including inadequate learning materials, insufficient feeding, and non-varying teaching skills of teachers. moreover, the economic constraints experienced in the country were increasingly preventing brilliant but needy students from achieving their educational aspirations. the study concludes that there is a need for educational reforms to address these challenges and enhance the teaching and learning of accounting in senior high schools. the introduction of student-oriented teaching methods and the provision of necessary learning materials such as computers, internet, and reference materials would promote a more practical and engaging learning environment for students. additionally, there is a need for financial support to help students overcome economic barriers and reach their full potential. the study recommends that stakeholders in the education sector should collaborate to develop policies and programs that address the identified challenges and promote effective teaching and learning in senior high schools in ghana. keywords: educational reforms, senior high schools, accounting, student-oriented teaching, learning materials, economic constraints, ghana. introduction educational reforms in ghana have taken various slant in recent years, as part of an economic recovery program undertaken to restore the country’s old system of education and raise the hopes of the ghanaian citizenry after a long economic decline. among the reasons for the reforms were to improve teaching and learning efficiency and effectiveness by increasing school hours and the quality of teachers, including phasing out untrained teachers and to make education more relevant by increasing the attention paid to problem solving, environmental concerns, pre-vocational training, manual dexterity and general skills patrick ninson and comfort ninson (2022) 44 interdisciplinary journal of educational practice | https://sadipub.com/journals/index.php/ijep training. paramount to the introduction of financial accounting as a course in senior high schools is the equipment of students with the basic accounting principles and knowledge necessary to enable them contribute their quota to the socio-economic development of the nation. in the light of this, accounting teachers are doing their best to teach students all the technicalities as well as inculcating in them the spirit of learning. students on the other hand, are trying their best possible to grasp what is being taught. this is evident by the recent transition of teaching from teacher-oriented to student-oriented; making the teacher just an instrument of facilitation. stoller (2018) & farrent (1980) pointed out, “the tradition of pedagogy that stretches back to dewey’s rejection of the classical tradition in the form of unchangeable ideas that has always argued for the active engagement of the learner in the formation of their ideas. more recent exponent of the latter tradition argued for the active engagement rather than the passive reception of giving knowledge”. teachers therefore need to come out to know their students; for the most successful teacher is one who is in close contact with their students’ own problems and difficulty (pratt, 1987). many of the factors which appear to raise barriers to students’ academic achievement are in themselves the result of widening participation. as the student population has increased, teachers now teach a greater number of students. for many of these students the teaching methods which they experience at the senior high schools are intimidating and may not be perceived as conducive for learning. (pratt, 1987). most public schools across the country are in a state of neglect. the classrooms are not conducive for learning. the situation is more deplorable in most villages than in others. is the capitation fund among other educational fund really aiding the learning process (tettey, 2009)? the following research questions were addressed in connection with the study aim; 1) how does the socio-economic problem of students affect the effectiveness of teaching of financial accounting? 2) how does the lack of students learning materials affect the teaching of financial accounting? 3) what are the effects of students’ attitudes and habits on the teaching of financial accounting? 4) how do students’ aspirations and course allocation affect their academic performance? 5) what are the problems associated with students’ evaluation with regards to teaching of financial accounting? 1.1. effect of socio-economic problems of students on their academic work. socio-economic problem such as poverty, parental unemployment and hunger greatly affect the academic performance of students and effective teaching and learning (azher et al., 2014; agyeman, 2009). according to susam (2009); if all the rich, all the professionals, the politicians, the traditional leaders and all of the church people were to send their children to public schools, they would feel bound to concentrate their money on improving these schools until they met the highest ideals. the world bank (1994), indicated that in addition to direct tuition cost of secondary education, low-income students have problem in meeting their expenses as far as education is concerned. abdu-raheem (2015) & witzenhausen and wesseler (1993) have indicated that low-income students and middle-class students who are academically good have certain difficulties in acquiring some basic essentials like calculators, textbooks, exercise books, pens, etc. and this greatly impedes the effective teaching and learning of financial accounting. world bank (1994) report highlighted that low income, or those with more than one family member enrolled in education may not be able to afford tuition fees. clearly, cost sharing cannot be implemented equitably without a functioning student, loan program, to make funds available to all students who wish to borrow for their education and without scholarship program that guarantee necessary financial help to academically qualified but poor students who are unable to absorb the direct and indirect cost of education. patrick ninson and comfort ninson (2022) 45 interdisciplinary journal of educational practice | https://sadipub.com/journals/index.php/ijep 1.2. students’ deficiency in learning financial accounting sutherland (2009), pointed out that most accounting students have a decreasing interest as they progress in their area of study. when students do not relate learning to their interest and abilities and when they do not see it as continuous process, learning becomes difficult which negatively affect their academic performance. most writers in the field of mathematics and finance have estimated that, over eighty per cent (80%) of student’s dislike calculations, money counting and reading of figures. according to darge (1992), some students refuse to ask questions in class because they were discouraged from asking questions at home. others also keep quiet in class since they do not want to advertise their ignorance. students who think they will be forced to talk or take part in discussion in class sometimes absent themselves from class. ahmed (2018) and kinshaga (1992), identified that some students are unwilling to expose themselves by speaking in discussion because they are afraid that they will expose their ignorance. also, most students fail to seek the assistance of instructors when writing homework, class test and even endof -term examination (sugeng & suryani, 2020). 1.3. instructional methods and materials used by financial accounting teachers problem of inadequate test books adversely affect the quality of student learning (abban, 2002). for instance, lack of textbooks means that financial accounting teachers and students cannot have access to reading materials (fentim, 2014). secondly, it means that teachers must photocopy the few books available before they can read to acquire knowledge sufficient to teach the student, while those who are not financially endowed may not get enough materials on financial accounting. percival & ellington (1984), said that within the context of the various teaching methods that can be employed for mass instruction it is possible to make use of a wide range of audio-visual media, both hardware and software. in some cases, it may be possible to learn the required skills by undergoing suitable staff development. out of the numerous instructional methods like lecture (where students are made passive), discussion, extra class (tutorial), problem solving methods, most financial accounting instructors use almost only the lecture method due to some factors. this instructional method adversely affects students’ performance. the hale committee’s reports recognizes that the lecture method has some bottlenecks; it provides little opportunity for feedback from students to teacher; the teacher frequently has no means of assessing the effectiveness of his teaching until he marks test papers. researches show that when the teacher’s goal is to get the students to master concepts, the lecture method is less effective (ubulom & ogwunte, 2017). 1.4. problems related to students’ aspiration, interest and course allocation in the context of rapid socio-economic changes and the desire to raise standard of living, the educational curricula of the second cycle institution are expected to be closely adapted to occupational standards. in view of this, students also wish to gain admission into universities and pursue courses that will offer them opportunities to meet future changes (maltese & tai, 2010). matiru (1993), said that most african students are highly motivated. however, it is unusual to find some senior high school students taking courses in which they have little interest. this suggests that students are not prepared to read a course that has no value. many factors influence students’ academic aspirations (acher et al., 2011). some of these factors include personal interest, social recognition, prestige attached to a course, role models, emoluments and side benefits, parental influence and peer pressure among others. they put little value on learning; however, they recognize that education is the key to success, thereby ensuring that their wards achieve greater heights in education. even at certain times, the parents will influence their wards to pursue a specific course rather than their preferred course. consideration is most at times given to social recognition or prestige attached to a course or career. students attach much importance to this. self-interest is also a major factor with regards to students’ aspiration (darge, 1992). patrick ninson and comfort ninson (2022) 46 interdisciplinary journal of educational practice | https://sadipub.com/journals/index.php/ijep 1.5. problems related to students’ evaluation according to farrent (1980), evaluation refers to the process of making judgments, assigning value or deciding on worth. in order to find out whether you have achieved your instructional objectives, you need to evaluate the performance of your students (bob et al., 2017). this can be done at the end of term (summative evaluation) or during the course (formative evaluation). spoorem et al. (2013), indicated that the limitation of evaluation cannot be over emphasized. important as evaluation is, its emphasis in recent years has had some unfortunate sequences. the demand by administrators for publicly visible results has discouraged teachers from pursuing goals that are not readily measured. perhaps, the most important determination of academic performance is the ability to evaluate and monitor the quality of training and research output. recent studies indicate that, in order to evaluate the quality of teaching, self-evaluation mechanisms can promote a sense of real institutional responsibility (pratt, 1980). 1.6. problem of students’ attitudes and habits some of the students’ attitudes and habits interfere with instructional process (reylan et al., 2019). behaviors such as cheating in exams, refusing to ask questions in class and absence from class have adverse effect on teaching and learning (douglas, 1984). oke & brown (1982), posited that a teacher actually likes most, if not all of the students; those he finds it difficult to like will require an extra effort. students are very perceptive and if they note a certain positive attitude or warmth in a teacher, they are likely to respond. however, if they sense that the teacher does not really care whether they succeed or not they will become discouraged and may even cause a discipline problem for the teacher concerned. whatever your physical appearance; whatever your personality; if the students sense that you care about their academic performance and succeeding generally, you are not likely to experience any serious discipline problems (botty et al., 2015). 2. research methodology 2.1. population the population for the study focused on form 2 students offering financial accounting and their teachers (four in number). out of the population frame of sixty (60) students in efutu secondary technical school, our sample population was fifty-six (56) students, which is 93.33% of the total population. the population of university practice senior high school form two business students was seventy (70), our sample frame was sixty-four (64) students, representing 91.43% of the population. in addition, two (2) teachers in university practice senior high school and two (2) teachers from efutu secondary technical school were chosen. 2.2. sample and sampling procedures the research was conducted on students who read accounting as an elective subject. in all,one hundred and twenty (120) students together with all their teachers (4) were chosen. simple random sample method for students and the purposive sampling for teachers. 2.3. research instrument in collecting data for the study, the researcher made use of questionnaires and interview. there were two set of questionnaires designed; one for the students and the other for the teachers. the first set of questionnaires was designed for the students which consists of thirty-six (36) items, out of which eighteen (18) were opened-ended items and seventeen (17) being close-ended items. 3. findings 3.1. socio-economic problems of student respondents ninety-two (77%) students responded that their inability to access basic essentials such as provisions, clothing, textbooks, etc. adversely affect their academic performance. this means that majority of the patrick ninson and comfort ninson (2022) 47 interdisciplinary journal of educational practice | https://sadipub.com/journals/index.php/ijep students will have low academic performances, if such basic essentials are lacking. furthermore, fifty-eight (48%) out of the ninety-two (92) students above, gave reason that, it is very difficult for them to concentrate in class without these basic needs. also, the remaining 34 students representing 28%, said that their access to textbooks enhanced their studies. the subject teachers (4) (100%) responded that students are not able to buy textbooks prescribed for them and this affects their class attendance and independent studies. the absence of such necessities adversely affects students’ performance. this claim was confirmed by the research of stoller (2018) and witzenhausen et al. (1993), that low-income students and middle-class students have certain difficulties acquiring some basic essentials and this greatly impedes the effective teaching and learning. 3.1.1. how students’ education is financed figure 1: a group bar chart showing how students’ education is financed figure 1, depicts that one hundred and seven (107) (89%) students’ education was financially supported by their parents and guardians. only one student, representing less than one (1) per cent, has his education being supported by scholarship. this means that the financing of most students’ education is dependent on their parents and guardians. scholarship scheme has not been the major concern of the ghana ministry of education, to motivate lazy students, appraise brilliant students and reduce the burden of some parents and guardians. this was confirmed by the world bank (1994), that low income or those with more than one family member enrolled in education may not be able to afford tuition fees. clearly, cost sharing cannot be implemented equitably without a functioning student, loan program, to make funds available to all students who wish to borrow for their education and without scholarship program that guarantee necessary financial help to academically qualified but poor students who are unable to absorb the direct and indirect cost of education. 3.1.2. special problems students have in financial accounting table 1. some special problems students have in financial accounting special problems frequency percent valid % cumulative % inadequate textbooks 42 35 35 35 don’t understand some of the accounting topics 66 55 55 90 inadequate qualified teachers 6 5 5 95 patrick ninson and comfort ninson (2022) 48 interdisciplinary journal of educational practice | https://sadipub.com/journals/index.php/ijep inadequate teaching learning materials 6 5 5 100 the data from table 1 shows that sixty six (66) (55%) of the student respondents do not understand some of the accounting topics taught in class. six (6) (5%) students associated their problems in financial accounting to inadequate qualified teachers; also, 6 (5%) students associated their problems in financial accounting to inadequate teaching learning materials. this portrays that, majority of the students find it difficult to understand some of the topics in financial accounting. this was confirmed by azher et al., (2014) & agyeman (2009), that tools for practical lessons, qualified teachers to handle specific subjects, textbooks, classroom blocks, science equipment, and teachers’ accommodation, among others were inadequate. 3.2. deficiency in learning financial accounting sixty (60) (50%) students had knowledge about most of the financial accounting concepts before admission into the senior high school. this depicts that exactly half of the students had fair knowledge of the financial accounting concepts before admission and this is quite impressive. thirty nine (39) (33%) students out of the 60 students gave the reason that, they were only introduced to the financial accounting concept at senior high school. table 2a, shows the responses of students on basic study skills that student’s lack skills frequency percent valid % cumulative % listening 14 12 12 12 speaking 28 23 23 35 reading 14 12 12 47 writing 11 10 9 56 don’t lack any skills 53 44 44 100 total 120 100 100 table 2b. teacher’s response on skills student’s lack skills frequency percent valid % cumulative % speaking skills 3 75 75 75 reading skills 1 25 25 100 total 4 100 100 this reveals that fifty-three (53) (44%) of the students do not lack any of the skills while 28 (23%) students lack speaking skills. most of the students said that their handicap in areas such as listening, reading, speaking and writing skills developed at the junior high school level. teacher respondents were asked to indicate some study skills that their students lack in financial accounting. this is shown in table 2b. table 2b sought teachers’ opinion on the skills that students lack. data collected from teacher depicts that majority of students lack speaking skills. this was posited by three (3) (75%) teachers. this is in contradiction with one of the fundamental aims for the introduction of financial accounting by tettey (2009), who sought to assess the students’ knowledge of basic accounting principles and their application to modern business. from the survey conducted, sixty six (55%) students responded that the deficiency they had in financial accounting was as a result of the way they were taught in junior high school. from the above, it could be predicted that majority of the students had their academic deficiency resulting from the way they were taught in junior high school; the junior high school curriculum is less structured. patrick ninson and comfort ninson (2022) 49 interdisciplinary journal of educational practice | https://sadipub.com/journals/index.php/ijep 3.2.1. strategies students use to overcome their academic deficiencies researcher sought information on the strategies that students used to overcome their academic deficiencies by asking student respondents to choose from various alternatives such as mnemonics, repetition and memorization. this is shown in table 3. table 3. strategies students use to overcome their academic deficiencies. learning strategies frequency percent valid % cumulative % mnemonics 5 4 4 4 repetition 28 23 23 28 memorization 85 71 71 98 any other 2 2 2 100 total 120 100 100 the following data relates to the responses made by student respondents concerning their learning strategies shown in table 3. eighty-five (85) (71%) students use memorization in learning and overcoming their academic deficiencies. in conclusion, memorization is highly used due to the introduction of the new system of education which enhances the chance of very young students being admitted into second cycle institutions. most of them lack analytical thinking but have high retentive memory hence the adoption of memorization. ahmed (2018) and kinshaga (1992), in the same study said that some students are unwilling to expose themselves by speaking in discussion because they lack the requisite speaking skills to enable them to express themselves. this assertion therefore, supports this claim. 3.3. problem of instructional materials and methods student respondents were asked to indicate whether the following instructional materials such as textbooks, reference materials, computers, internet facilities and library facilities are available or unavailable. seventyfive (75) (63%) of the students indicated that, the appropriate textbooks used in learning are available. also, seventy-four (74) (62%) of the students indicated that reference materials are not available. furthermore, sixty-five (65) (54%) of the students responded that, computers, which students use for research are not available. the survey made shows ninety-nine (75) (83%) of the students indicated that, no internet facilities are available. eighty-nine (89) (74%) of the students responded that, library facilities are available. from the data gathered, it could be inferred that the government initiative on computer literacy and internet advancement has yielded fewer positive results. teacher respondents were instructed to indicate whether the following instructional materials ; textbooks, reference materials, computers, library facilities etc were available or not available for instruction. all four teachers claimed that such teaching materials are totally not available except for textbook for which 3 teachers confirmed that they are indeed available. 3.3.1. students’ response on illustrations often used by teachers student respondents were instructed to indicate illustrations often used by their teachers. they were given options such as textbooks illustrations and cardboard and board illustrations to choose from. this is shown in table 4. table 4. students’ response on illustrations often used by teachers illustrations frequency percent valid % cumulative % textbooks illustrations 87 73 73 73 cardboard and board illustrations 29 24 24 97 none 4 3 3 100 patrick ninson and comfort ninson (2022) 50 interdisciplinary journal of educational practice | https://sadipub.com/journals/index.php/ijep total 120 100 100 respondents were asked to list some instructional materials used by their financial accounting teachers. this table (4) reveals that majority of teachers in the senior high school use only textbooks, cardboard and board illustrations. eighty-seven (73%) of the students responded that instructional materials often used by teachers are textbooks. the selection of the few teaching materials shown in table 4 above can therefore be attributed to darge’s (1993), assertion that selection of instructional material depends on the availability of the material. 3.3.2. instructional methods used by teachers from the survey conducted, student respondents were asked to indicate the instructional methods used by their teacher. the options provided for students to choose from were role playing, discussion, extra classes, practicals and lecture. this is shown in table 5. table 5. instructional methods used by teachers methods very often used not often used not used at all no % no % no % role playing 50 42 47 39 23 19 discussion 93 78 25 21 2 2 extra classes 18 15 35 29 67 56 practical 35 29 53 44 32 27 lecture 51 43 46 38 23 19 student respondents were asked to indicate the methods used by their accounting teachers. from table 5, it could be realized that 50 out of the total number of 120 students (42%) agreed that role playing method were most often used by teachers. it was recorded that role playing as an instructional method is less applied by accounting teachers in classroom instruction. table 5 again depicts those 93 (78%) students think discussions are used very often by accounting teachers. it indicates that majority of the students sixty-seven (56%) who responded to the question said that accounting teachers do not organize extra classes. from table 5, it could be observed that teachers do not organize extra classes for students where students’ problem could be fully addressed (ubulom & ogwunte, 2017; fentim, 2014; witzenhausen et al. 1992). from the table 5, 53 (44%) students responded that practical instructional methods are not often used by their teachers. this means that accounting teachers do not use practical in their instruction which reduces students’ interest and understanding about some aspect of the course. to be effective, practical method needs enough time which will be to the detriment of the teachers. this was confirmed by djan & amengor (2002), that practical at times, results in time wasting. table 5 depicts that 51 (43%) of 120 students who responded complained that accounting teachers often use lecture method in teaching of accounting. 46 (38%) and 23 (19%) students said it is not often used and not used at all respectively. however, significant proportion of students disapproved the use of the lecture method as a means of instruction since it bores and makes them passive. djan and amengor (2002), also confirmed this assertion that lecture method makes students less active. from the survey conducted, 63% of the students confirmed that the teaching method adopted by their teachers is influenced by the class size whiles 38% went contrary. there are numerous setbacks associated with lecture method as spelt out by witzenhausen et al (1993) which include provision of little opportunity for students’ feedback, violation of educational principles. other methods are not used because some of them are effective when small class size is used. from the responses, students claim that class size has an impact on the required method used by teachers. it was agreed that freepatrick ninson and comfort ninson (2022) 51 interdisciplinary journal of educational practice | https://sadipub.com/journals/index.php/ijep compulsory education and computerized selection has helped increase the number of students in the classroom and has also increased the workload of teachers. teachers, therefore, resorted to less effective methods of teaching such as lecture. 3.4. problems related to program allocation and student aspiration 3.4.1. factors influencing students' choice of study table 6. factors influencing students’ choice of study frequency percent valid % cumulative % teachers guidance 36 30 30 30 past achievements 24 20 20 50 peer influence 13 11 11 61 parental influence 38 32 3 93 others 9 8 8 100 total 120 100 100 information collected in table 6, shows that 32% of the students chose the course based on parental influence. this supports what acher et al. (2012) said, that generally students choice are influenced by parents though they have high academic and vocational aspiration. this also agrees with what djan & amenjor (2002) said, that parents recognize that education is the key to good job and that they want their children to go further in school than they themselves had. again, student questionnaires were designed to find out from them the kind of information needed to make informed choice of program in the senior high school. the students admitted that information like: entry requirement, course qualification, future prospects of the course, demands of the course (in terms of resources and duration) as well as past achievements and teachers’ guidance are considered. most of the students 86% are of the view that they were given the program of their choice while 14% objected to the idea. this implies that senior high schools admit students strictly according to achievement in the junior high school. this seems to differ from the study undertaken by maltese & tai (2011). 3.4.2 expected grades of student respondents table 7. expected grades of student respondents courses expected grades a1 b2 b3 no % no % no % financial accounting 102 85 17 14 1 1 cost accounting 91 76 25 21 4 3 business management 111 95 9 8 0 0 economics 85 71 31 26 4 3 from table 7, eighty-five per cent (85%), 76%, 95% and 71% expected a1 in financial accounting, cost accounting, business management and economics respectively. this shows that students have high aspiration and ambition simply because they perceive those courses as very relevant to their career. matiru (1993), confirmed that most african students are highly motivated and are not prepared to read a course that has less value. comparatively, students have higher ambitions or interest towards business patrick ninson and comfort ninson (2022) 52 interdisciplinary journal of educational practice | https://sadipub.com/journals/index.php/ijep management than financial accounting which recorded no other grade apart from grade a1 and b2. however, students have high interest in financial accounting than other courses such as cost accounting and economics. darge (1992), also confirmed that self-interest is a major factor with regards to students’ aspiration attached to courses or careers, though, consideration is most at times given to social recognition or prestige. it was recorded that 75% of the students were given adequate orientation on the type of courses to register for in the school while 25% objected. this implies that some proportions of students are given enough orientation on the choice of courses. however, some students are not knowledgeable about the course they are studying. students who provided “no” as a response, listed their reasons as no orientation (67%), late admission (17%) and ineffective orientation (16%). this confirms the fact stated by witzenhausen et al. (1993) that most school heads do not organize orientation due to huge cost incurred, poor administration on the part of school heads and lack of consent or interest of form teachers. two (50%) teachers agreed to the fact that students are given enough orientation on the type of courses they can choose. this indicates that some students only have a fair knowledge of the courses they choose. all the four (100%) teacher respondents under consideration agreed to the fact that, students who offer courses of their choice perform better than their colleagues who are forced to choose a course. students who are given enough orientation offer courses of their choice and this enable them to obtain an excellent performance in those courses. 3.5. problem relating to students evaluation ninety-six 96 (80%) students said they have not experienced the situation where different teachers teach the same subject in different forms and use different evaluation procedures. this means students are subject to one evaluation procedure, since there are no different teachers teaching the same course in other forms. bob et al. (2017), confirmed that evaluation instrument administered by different teachers with the same objectives give the same results. the student respondents 24 (20%) who indicated ‘yes’ to item 26 gave their reason as becoming confused when the teachers give different formula for the same topic. this means that different evaluation methods can affect the students’ outcome and performance. djan and amengor (2002), suggested that though teachers could use variety of evaluation methods, they should know when and where to apply each evaluation method. 3.5.1 respondents view on the nature of continuous assessment figure 2: a group bar chart showing students’ responses on forms as continuous assessment taken. this figure indicates that out of 120 students, 51(42.5%) said that their teachers used assignment, homework, class test and class work for the continuous assessment. this suggests that creative and discovery learning are encouraged. from the total number of teacher respondents, 2(50%) teachers used the means of class work, class test, assignment and end of term examination to assess their students. the above statistics indicates that, about half of teachers do not give class work to their students. spooren et al, patrick ninson and comfort ninson (2022) 53 interdisciplinary journal of educational practice | https://sadipub.com/journals/index.php/ijep (2013) and djan & amengor (2002), confirmed that the use of class work and test helps students to prepare adequate always and to recall facts. from the survey conducted, student respondents were asked to compare their performance in financial accounting with other courses. the data were sorted out through an “average”, “above average”, “excellence and poor” statement. sixty-seven (67) (56%) of 120 students said that they have above average performance. only few students have good or excellent performance in financial accounting. this then means that one of major goal of financial accounting as stipulated by ministry of education (tettey, 2009) to lay a sound foundation for studies of accounting in the higher level of the academic ladder and provide students with excellent work performance in the area of business financial accounting is lacking. student respondents were asked to indicate whether their examination questions are structured to meet their learning needs. one hundred (100) (83%) students confirmed that examination questions are structured to meet their learning needs. examination questions set by accounting teachers in a whole take into account students learning needs; this indicates that teachers often consider societal needs of which the schools were set to address. pratt (1980), recent studies indicate that, in order to evaluate the quality of teaching, self-evaluation mechanisms can promote a sense of real institutional and societal responsibilities. 3.6. methods used to check students’ attitude and habits table 8. teachers’ responses on methods used to check students’ attitude and habits methods frequency percent valid % cumulative interview 2 50 50 50 check list 1 25 25 75 anecdotal records 1 25 25 100 total 4 100 100 from the table 8, two (50%) teachers indicated that they used interview to check their students’ attitude and habits. the above statistics shows that about half of teachers use the interview method to check their students’ attitude and habits. the survey conducted indicates that three 3(75%) teachers agreed to the fact that the time allocated to their class test and examination questions were sufficient. this reveals that, in most cases, the time allocated to class test and examination questions is sufficient. 3.6.1 problem of students’ attitudes and habits in order to gather and determine some students’ attitudes and habits that interferes with instructional process. student respondents were asked to indicate reasons why they sometimes cheat in an examination, class test. out of the total number of 120(100%) students, 53 (44%) students admitted to the fact that, the desire to obtain good grades causes them to cheat in an examination, 38 (32%) students accepted that if they realize they will fail. other students were of the stand that they involve in examination malpractice in order to maintain past achievements and for other reasons. this shows that majority of students in senior high schools under consideration cheat in examination for the reason of desiring to obtain good grades. this is in support of reylan et al., (2019) and douglas’ (1984) who concluded that behaviors such as cheating in exams, refusing to ask questions in class etc. has adverse effect on teaching and learning, and that students behave in such ways due to several reasons. the responses gathered revealed that, two (2) teachers reward their students who do well in class. this indicates that half of the teachers motivate their students who do well in class. two (2) of the teachers said, they reward students who do well in class by means of clapping. sixty patrick ninson and comfort ninson (2022) 54 interdisciplinary journal of educational practice | https://sadipub.com/journals/index.php/ijep five 65(54%) students also agreed that students who cheat in an examination should be made to sign a bond; others were of the view that students who cheat in an examination should be made to resit or be dismissed. the above statistics shows that majority of students are in support of students being made to sign a bond of good behavior. teacher respondents were also asked to state the kind of sanction they impose on students who misbehave in class. all the teachers (4) stated that, caning and kneeling as a sanction on students who misbehave in class. student respondents were requested for information concerning how often they attend classes. the responses they gave are analyzed as follows. ninety-five 95(79%) students admit that they attend classes very often. eight-six 86(72%) students indicated that they did not attend classes late. one hundred and three 103 (86%) students ask or answer questions in class. three 3(75%) teachers agree that student who cheat in examination are those who do not pay attention in class. if students, therefore, are made to pay attention in class, cheating in examination will drastically reduce. the findings of botty et al., (2015) contradicts the claim that students often absent themselves from class and also refuse to ask and answer questions in class and this adversely affects teaching and learning. 4. conclusions and recommendations identifying students’ background and needs will help bring improvement in teaching and learning in selected senior high schools in the sense that, teachers will know the short-falls of students and how best they can help students to overcome them. the outcome of this study will also help curriculum planners and the ghana education service (ges) at the secondary level to design programs that will benefit both students and the nation at large; taking into consideration the needs and backgrounds of students. based on the findings summarized above, the following conclusions have been made: • lack of speaking, reading, listening skills, etc. among students in the senior high schools were due to the way they were taught in the pre-secondary education. • students’ habit of not speaking in class was due to lack of speaking skills and motivation (reward). • students in senior high schools face financial difficulties and this has contributed to students inability to feed themselves, buy required textbooks and also to study independently. • students’ evaluation in senior high schools was not comprehensive because it was limited to cognitive and psychomotor domains. • students did not have much interest in the course they were offering due to the dominance of parental influence and inadequate orientation. • students in senior high school had access to good and well trained teachers but they did not have understanding of some basic concepts in financial accounting simply because teachers have ignored innovative methods of teaching such as role playing and practicals. • teaching and learning in senior high schools were abstract because computers, internet and reference materials which make lesson lively and practical were not available. • innovative learning and team work have not been encouraged due to the fact that homework, project work and group work are less used to evaluate students. financial difficulties facing students pre-supposes that, the teaching and learning process could never be smooth. students, however, need funds to finance their education. we would like to recommend that, scholarship, which is a minor source of fund for few students, should be researched into to find the amount that will be sufficient for each student in the study area per year. in carrying out such a study, some of the questions which need to be considered include: what category of students need the scholarship? should all students be given the same amount? etc. the fact that majority of the students lack speaking skills means that they need further training as far as speaking is concerned. the questions that need to be asked include: patrick ninson and comfort ninson (2022) 55 interdisciplinary journal of educational practice | https://sadipub.com/journals/index.php/ijep at which level should the training be done? does the english language instituted senior high schools help in improving students speaking skills? all these must be researched into. the study had conflicting reports from teachers and students concerning the availability of appropriate textbooks. this suggests that, the library facilities in senior high schools must be researched into to find out what materials and books the library contains. are these books good for various courses offered in the senior high schools? which courses have the appropriate textbooks and which courses do not? also, there is the need to find out why teachers do not often use practicals and extra classes. are they costly to use? do teachers lack the skills of using other methods of instruction? what course content needs the use of role playing, discussion, lecture, practicals and extra classes? these and many more questions should be answered as research is done into the problems of instructional methods. the teachers’ assistance is very important in the academic success of the students. we therefore recommend that, teachers assist students in choosing their course of study since they (teachers) are more experienced and have a large spectrum of knowledge about the details and contents of each course offered in the institution. also, sufficient orientation must be given to students, by the school, concerning the registration of their courses. evaluating students is a very important aspect of classroom teaching because it helps the teacher to know whether the instruction was effective or successful and whether students are learning. we therefore recommend that, teachers use variety of evaluation methods but they should know when and where to apply each evaluation method in order to reduce any negative effect on the students’ outcome and performance. also, teachers must structure examination questions to meet the learning needs of their students. as senior high school graduates are expected to exhibit high sense of moral values, teachers should measure the affective domain aspect of education. we, therefore recommend that, teachers should use all evaluation instruments such as interview, check list, anecdotal records, etc. for the measurement of students’ habits and attitudes. the researcher is of the view that, a successful implementation of the above recommendations will go a long way to enhance the teaching of financial accounting in our senior high schools. references abban (2002), purposeful education in ghana (accessed: may 12, 2011; www.ghanaianjournal.com) abdu-raheem, b. o. (2015) parents' socio-economic status as predictor of secondary school students' academic performance in ekiti state, nigeria; journal of education and practice, vol 6, no 1, 123-128 acher l, dewitt j & osborne j (2012) science aspirations, capital, and family habitus: how families shape children’s engagement and identification with science; american educational research journal, vol 49 issue 5, 881-908 agyemang, k. k.o (2009), hull. uk. med in (education) accessed on april 16,2010 : www. ghanaweb.com ahmed, rafiuddin and kannaiah, desti, problem based learning in accounting: where are we now? (november 19, 2018). available at ssrn: https://ssrn.com/abstract=3517613 or http://dx.doi.org/10.2139/ssrn.3517613 azher m, nadeen j, naz e, perveen f & sameen a (2014) impact of parental education and socioeconomic status on academic achievement of university students; european journal of patrick ninson and comfort ninson (2022) 56 interdisciplinary journal of educational practice | https://sadipub.com/journals/index.php/ijep psychological research vol 1, no 1, 1-9 bispho, g (1985), curriculum development, a textbook for students; macmillan publishers inc, london. bob uttl, carmela a. white, daniela wong gonzalez,(2017) meta-analysis of faculty's teaching effectiveness: student evaluation of teaching ratings and student learning are not related,studies in educational evaluation,volume 54,2017, 22-42 botty, h. m. r. h., mohd taha, h. z. h., shahrill, m., & mahadi, m. a. (2015). connecting students’ achievements with attitudes, the teachings and study habits. mediterranean journal of social sciences, 6(4), 113. retrieved from https://www.richtmann.org/journal/index.php/mjss/article/view/6986 djan and amengor (2002), impact of educational background of parents on their children’s education: a case study of abura and amamoma in the cape coast municipality, cccc printing limited, cape coast. douglas, r.(1984), modern administration of secondary school, 2nd ed. blaisdell publishing company; new york. farrent , j.s. (1980), principles and practice of education, essex; longman group limited, uk. fentim d.b (2014) an investigation on teaching and learning resources/ materials used in financial accounting lessons in shs in sunyani municipality; international journal of research in social sciences vol. 4 no 2 1-9 keelson (2009), education & social change in ghana (www.aiaee.org/2007/accepted/071.pdf) kinshaga (1992), university lectures’ role in tailoring teaching learning strategy to study skills; mchill limited, berlin. maltese a.v and tai r.h (2010) eyeballs in the fridge: sources of early interest in science; international journal of science education volume 32, issue 5 669-685 matiru and darge (1993), teach your best, a hand-book for university lecturers, university of kessel, germany. nacino, oke and brown (1982), curriculum instruction; basingstoke macmillian publication, london. national association of secondary school principals (nassp, 1998), forum on problems affecting students (www.vibeghana.com) percival and ellington (1984), a handbook of educational technology; kogan/nichols publishing company, new york. pratt, d. (1987), curriculum design and development, harcourt brace jovanovich publishers. patrick ninson and comfort ninson (2022) 57 interdisciplinary journal of educational practice | https://sadipub.com/journals/index.php/ijep reylan c, renante n, olores j, padillo r, gengen; ramil m (2019) attitudes, study habits, and academic performance of junior high school students in mathematics; international electronic journal of mathematics education, v14 n3 p547-561 sadker m.p. and sadker d.m(1993), teachers, school and society (2nd ed), macgraw-hill inc, united state of america. spooren p, brockx b & mortelmans (2013) on the validity of student evaluation of teaching: the state of the art; review of educational research, volume 83, issue 4, 598-642 sugeng, b., & suryani, a. w. (2020). enhancing the learning performance of passive learners in a financial management class using problem-based learning. journal of university teaching & learning practice, 17(1). https://doi.org/10.14453/jutlp.v17i1.5 stoller, a. (2018). dewey’s creative ontology. journal of thought, 52(3–4), 47–64. https://www.jstor.org/stable/90026737 stronkhorst and nuffic (2005), (accessed: july 12,2010 www.highbeam.com/doc/1p31013267701). stronkhorst r (2004) learning outcome of international mobility at two dutch institutions of higher education journal of studies in international education, vol. 9 no. 4, 292315 doi: 10.1177/1028315305280938 sutherland t (2009), aaa teaching and learning conference for educators; education journal. tettey e.a (2009), minister of education report (www.theghanaianjournal.com) the world bank, (1994) survey on needs of secondary students ubulom w.l & ogwunte (2017) evaluation of teacher-centered and learner-centered methods for instructional delivery of senior secondary schools financial accounting in rivers state; international journal of innovative finance and economics research 5(3), 81-88 witzenhausen, mattias and wesseler (1993), on innovative teaching. experience and insight from eastern and southern african universities frankfurt, interkultrelle kommunikation. wood f. &sangster a. (2007), business accounting 1, reviewed 11th edition, pearson education limited, great britain. special autonomy policy on regional revenue and expenditure budget sources in west papua province in the framework of supporting the defense economy american interdisciplinary journal of business and economics issn: 2837-1909| impact factor : 4.6 volume. 9, number 1; january-march, 2022; published by: scientific and academic development institute (sadi) 8933 willis ave los angeles, california https://sadipub.com/journals/index.php/aijbe 39 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe strategies for enhancing regional independence and defense through special autonomy policy of west papua province francis saputro defense economics study program faculty of defense management defense university of the republic of indonesia abstract: this document analyzes the implementation of the special autonomy policy in west papua province, indonesia, with a focus on its impact on regional revenue and expenditure budget sources. the authors examine the challenges faced by the west papua provincial government in managing its finances, including lack of coordination, ineffective supervision, and a lack of public involvement. they explore various sources of funding for the regional revenue and expenditure budget, including regional original revenue, revenue sharing funds, and general allocation funds, and provide insights into their management policies for efficiency and effectiveness. the authors emphasize the importance of the economic development sector in the efficacy of the policy, given its impact on income growth that contributes to national defense efforts. the study concludes by recommending practical solutions for improvement in governance and financial planning. keywords: special autonomy, defense economy, regional autonomy, apbd, growth economy. introduction: regional autonomy is an essential aspect of indonesia's state administration system, as highlighted in article 18 of the 1945 constitution. the concept of autonomy refers to the freedom and independence of lower government units to regulate and manage government affairs. in line with this, the special autonomy policy was introduced to minimize inequality and increase prosperity and welfare in west papua province, indonesia. the policy aims to accelerate economic development, increase welfare and progress, while respecting regional government units that are special or considered as such. the implementation of the policy is crucial to achieving the objectives of equality and balance with other provinces. the regional revenue and expenditure budget is the backbone of economic development in the province, and its efficient and effective management is essential to maximize the potential sources of funding. the economic development sector plays a critical role in the success of the policy, given its impact on income growth, which feeds into national defense efforts. however, the implementation of the policy has faced various challenges, including complex structural obstacles caused by inadequate resources, weak commitment, and ineffective supervision. this document provides insights into the implementation of the special autonomy policy in west papua province, examines its impact on the regional revenue and expenditure budget sources, and recommends practical solutions for improvement in governance and financial planning. in addition to the sources of regional government revenue in the form of the regional revenue and expenditure budget (apbd) which are obtained from regional original revenue (pad) which are sourced from revenues obtained from regional taxes, regional levies, results of regionally owned companies, separated francis saputro (2022) 40 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe regional wealth management, and other legal original regional income. local governments make various investments to increase pad. regional governments also have other sources of income, including revenue sharing funds (dbh), general allocation funds (dau) and special allocation funds (dak). funds obtained are given by the central government to regional governments to finance the needs of local governments in reforming regional structures and improving regional services for the community. the fund is one of the components of revenue in the regional revenue and expenditure budget (apbd) report. from the implementation of regional autonomy carried out by the regional government in 38 provinces in indonesia. there are several areas that have specialties and privileges. as regulated to accommodate special regions and special regions in indonesia in article 18b paragraph (1) of the 1945 constitution it states that: “the state recognizes and respects regional government units that are special or special in nature which are regulated by law”. regional governments that are special in nature, one of which is the province of west papua, . the origin of the region which is special and special in nature stems from the rights of origin and history which are then recognized and determined by law as part of the unitary state of the republic of indonesia. with its specificity and privileges, regions are treated differently from other autonomous regions which are only administrative in nature, but regions are still regions and not countries that have their own constitution (erdianto, rika lestari, 2008:55) west papua province, as one of the provinces regulated by law as a special province. it stipulates the management of the implementation, including the injection of funds obtained from the central government to the regional governments. in its implementation, the local government should invest to increase pad apart from dbh, dau and dak as additional funds in the apbd. the state of indonesia recognizes the policies of government units that are special in nature or are called special autonomy, which are regulated by the regional government law as well as special policies and provisions regulated in the framework of increasing the welfare of the people of west papua through the law on special autonomy for papua, the aim is to development of the province of west papua with other regions can be minimized while increasing the prosperity and welfare of the people. the granting of this special autonomy is intended to realize justice, uphold the rule of law, respect for human rights, accelerate economic development, increase the welfare and progress of the people of west papua province, within the framework of equality and balance with progress with other provinces. the economic development sector has a role that is greatly affected as a whole, for this condition an effective and efficient solution must be sought in the management policy of apbd resources obtained from pad, dbh, and dau. the threats described above are non-military threats. non-military threats can have ideological, political, economic, socio-cultural, technological and information dimensions, as well as public safety (ministry of defense of the republic of indonesia, 2015). defense and the economy are two reciprocal influencing variables. without defense, there will be threats or disturbances so that the economy cannot run properly. conversely, defense can only be increased if national income also increases (kennedy, 2018). special autonomy aims to increase the capital expenditure of the papua province government so that it has implications for better public services, but in reality this has not actually run optimally as expected. the increase in pad also affects regional economic growth, therefore local governments should concentrate more on empowering regional economic power (priyo, 2006). this issue certainly needs to be studied further considering that in its implementation what is expected by the central government based on the law must be in line with the regulations made by the regional government, in this case the province of west papua. based on the background above, the researcher further raises the title of this study in order to find out in depth about the economic problems in the special autonomy policy for regional revenue and expenditure budget francis saputro (2022) 41 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe sources obtained from pad, dbh, and dau in west papua province in order to support, analyze from the perspective of a sustainable defense economics perspective. theoretical basis local own revenue (pad) according to law number 28 of 2009, it states that regional original income (pad) is revenue obtained from regional taxes, regional levies, results of regionally owned companies, management of separated regional assets, and other legitimate regional original income. in implementing it, local governments make various investments to increase local revenue (pad). profit sharing fund (dbh) the second source of regional revenue is the revenue sharing fund (dbh). in law number 33 of 2004 profit sharing funds are funds originating from apbn revenues allocated to regions based on percentage figures to meet regional needs in the context of implementing decentralization. profit sharing funds consist of profit sharing funds originating from taxes and natural resources. dbh comes from taxes, namely land and building tax (pbb), land and building rights acquisition fees (bphtb), and domestic personal tax and pph article 21. meanwhile, revenue-sharing funds originating from natural resources come from forestry, general mining, fishery, petroleum mining. general allocation fund (dau) the third source of regional revenue is the general allocation fund (dau), in law number 33 of 2004, the general allocation fund (dau) is a fund originating from the apbn with the aim of its allocation in the context of equal distribution of financial capacity among regions to fund regional needs in the framework of implementation of decentralization. the general allocation fund is block grants similar to the revenue sharing fund (dbh). research methods the writing method in this study uses a descriptive qualitative method. qualitative research is research that is related and closely related to an interpretation adapted to the phenomena or events that occur and tends to use analysis in conducting research (siyoto & sodik, 2015). descriptive research can be interpreted as a situation that describes (description) an event that refers to and focuses on the problems that occur during the research (noor, 2012). the object used is the impact of the regional budget special autonomy policy in west papua province in order to support the defense economy.data collection techniques are carried out by selecting the use of literature studies or literature review. literature study is part of a data collection technique that emphasizes tracing historical data or records of a phenomenon that has occurred and can be in the form of writings, illustrations (pictures), articles, and the composition of work related to the problem under study. for further processing and analysis (sugiono, 2012). data collection in this study can be presented by searching literature such as interviews, scientific journals, essays or articles, news, regulations, and policies regarding the impact of the special autonomy policy on apbd sources in west papua province in order to support the defense economy. results and discussion special autonomy policy in the implementation of regional autonomy, its implementation since 1999 has certainly given the authority to the freedom of the regional government to take care of its own household affairs. including west paua province, it has been given its own special freedoms and privileges, but in practice not all regions are able to carry out these good goals, west papua province is not yet one of the advanced provinces in indonesia. the practice of implementing special autonomy has not fully proceeded properly. the good intentions of the central government which are based on the fact that special autonomy is present in the context of endeavors to settle justice, respect human rights, resolve conflicts, distribute education, equalize the economy, as well as the welfare and progress of the people of papua province have not gone as they should. another problem arises, the people of west papua think that special autonomy is a creation of the central government in order to stop their resistance to the indonesian government. with the presence of the special francis saputro (2022) 42 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe autonomy law, it is clear that it has provided greater space for the people of west papua province to develop more advancedly. but it can turn into a disaster when it’s not executed as it should. indirectly, slowly but surely, there are several policies that force the province of west papua to often be limited, reduced, and even withdrawn from its position back to the center with the appendage of changing rules and regulations that are binding on the central government. so according to research put forward by pathership, it states that the level of dissatisfaction with the special autonomy policy tends to be very high, people are starting to distrust the policy. with this special autonomy, the people no longer believe in the policies taken by the government in this special autonomy. maximizing potential sources of apbd funding the role of the central government towards the regional government of west paua province as part of a special area, especially in its implementation. the west papua provincial government regarding apbd funding sources the west papua government, should make maximum efforts to increase pad apart from dbh, dau and dak as additional funds in the apbd to fund regional needs, especially in the context of implementing decentralization, especially in west papua province. if we look at the data in the figure below, it is as follows: (source: ministry of home affairs) figure 1: regional original income (pad) throughout indonesia (in billions of rupiah) it has been seen, the average pad of west papua province is the third lowest ranking of all 34 provinces in indonesia. this becomes a problem regarding how the role and implementation of pad which is supported by dbh, dau and dak as additional funds in the apbd in order to make west papua province better. if we look at these conditions, the province of west papua is in the 3 smallest provinces. the pad apbd is very sad, especially since this condition has been supported by funds from the center as an additional injection of funds in the further progress of west papua province. transfer expenditures to regional governments with special autonomy in the president’s speech in the introduction to the 2016 financial notes and draft state budget (rapbn), the government for the first time allocated more transfer expenditure to the regions compared to spending by ministries/agencies (k/l). this is based on the consideration that the increasing amount of authority that has been handed over to the regions in the era of fiscal decentralization and regional autonomy. fiscal decentralization itself is the authority to allocate spending according to the full discretion of each region. enormous effort 2 is put in, however way it may be, just to make modest progress towards achieving the goals that have been set. with uneven performance, there is debate about the desirability of fiscal decentralization and how to overcome it (paul smoke, 2001). fiscal decentralization is an issue and a major concern for developing countries in the 1990s. even the emergence of fiscal decentralization in indonesia is very close to political issues and concerns over national disintegration (khusaini, 2006). for developing countries, fiscal decentralization is believed to be a solution to all kinds of economic and political problems they face, but fiscal decentralization also has potential problems, which cause new problems that become additional burdens that have persisted for years. according to law no. 33 of 2004, decentralization is the transfer of governmental authority by the government to autonomous regions to regulate and manage government affairs in the system of the unitary state of the republic of indonesia. in this law, regional revenues in the implementation of decentralization francis saputro (2022) 43 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe consist of regional original revenues, balancing funds which consist of sharing funds proceeds, general allocation funds, and special allocation funds, and regional receipts from other income. implementation of apbd sourced from pad in the special autonomous region the government may grant special or special regional status to provinces deemed to meet the criteria for special or special regions. one of them is included in the special government condition is the province of west papua. law number 25 of 2005 concerning financial balance between the central government and regional governments, consists of the general allocation fund (dau), the special allocation fund (dak) and the revenue sharing fund (dbh). the balancing fund aims to reduce financial imbalances between regions (horizontal imbalance) which only comes from pad. west papua province in managing regional finances in the context of decentralization as referred to in article 66 paragraph (1) of the fiscal balance law in its implementation found complex structural obstacles caused by various elements, including lack of personnel resources, weak commitment, weak coordination, ineffective supervision , and a lack of public involvement. as for the obstacles in the planning stage of the financial budget, the directorate of regional budget planning assessed that the apbd preparation process was not in accordance with the development plan documents that had been prepared. strengthening the development planning stage by bappeda and budgeting by bpkad was carried out using old ways with information systems, but in practice the systems were different and not yet integrated. so that planning and budgeting documents do not check and balance each other and there is often a discrepancy between plans made and budget allocations. the various implementation issues raised by these stakeholders can lead to inefficiency and ineffective use of the budget which results in not achieving fairness, decency and benefits for the community as referred to in article 66 paragraph (1) of the financial balance law. the solution offered by the current government through the ministry of home affairs has been trying to innovate. several advances in this technological phenomenon are evidenced by the presence of the regional government information system (sipd) as a product and innovation of the ministry of home affairs in order to answer the challenges towards e-governance in the era of the industrial revolution 4.0 in the transformation of the government bureaucracy into one data one system in sipd. as one of the steps and solutions to complete the implementation of pad, dbh and dau in west papua province. in order to minimize the manipulation of financial planning and budgeting figures at the central government and regional governments. the mandate in law number 23 of 2014 that regional governments are required to provide regional government information (regional development information and regional financial information) and can provide and manage other regional government information aimed at managing regional information can run professionally. presidential regulation number 39 of 2019 concerning indonesia’s one data which is supported by regulations regarding the implementation of the electronic-based government system (spbe). subsequent derivative regulations are policy rules issued by the ministry of home affairs, such as pp number 12 of 2019 concerning regional financial management, and the last one is permendagri 70 of 2019 concerning sipd. seeing the innovations that have occurred, it should greatly facilitate the local government which is given special autonomy rights and authority, as evidenced by completing the implementation of pad, dbh, and dau in west papua province properly and in accordance with what the central government expects for equitable distribution of development and regional progress. the good intentions of the central government which are based on the fact that special autonomy is present in the context of endeavors to settle justice, respect human rights, resolve conflicts, distribute education, equalize the economy, as well as the welfare and progress of the people of papua province have not gone as they should. it is not precisely that the people of west papua think that special autonomy is a creation of the central government in order to stop their resistance against the indonesian government. this is very detrimental to the good intentions that were built for the sake of equitable development. francis saputro (2022) 44 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe furthermore, based on the withdrawal of data taken from the regional government information system (sipd), that: (source: ministry of home affairs) figure 2: west papua provincial original revenue (pad) 2017-2021 (in billion rupiah) figure 2. shows the regional original income (pad) figures in west papua province in 2017-2021, experiencing ups and downs, especially in 2020 to 2021 the results of separated regional wealth management and other legitimate pad have decreased, it could be due to poor governance or as a result of the covid-19 outbreak. furthermore, the author will show data on regional original income (pad) as seen from all regencies/cities in west papua province specifically only in 2021, as follows: (source: ministry of home affairs) figure 3: local own revenue (pad) for all regencies/cities in west papua province figure 3 has shown the city of sorong, raja ampat islands regency and monokwari regency as the main buffer for west papua province in terms of regional original income (pad) and ratio to pension income, and in contrast to the condition of kabupatten maybrat which is in the position of caretaker with the lowest regional original revenue (pad) and ratio to income of 2.13 (in billions of rupiah). the independence of the special autonomous region to support the defense economy the regional government of west papua province needs to increase regional independence in public sector services to create community comfort. coupled with the policy of the central government in providing large spending allocations, improvements in public services should be obtained in order to increase the attractiveness of investors to open businesses in the regions. defense economics comes from two important words that have their own meaning, namely economy and defense. there are distinct conceptual differences between the economy and defence. the main difference lies in the character of the two concepts namely, the economy prioritizes “sovereignty lies in unlimited human needs”, while the nature of defense is “sovereignty is in the hands of the state”. this has a consequence: “if it is agreed to eliminate economic activity it means to negate human nature, and if it eliminates defense activities it means to deny the presence of the state”. because of that, it is necessary to connect the two different characters so that they are closely related and complement each other (makmur keliat, 2010). to see the comparison between the economy and defense, it is necessary to look at the concept of each of the two which aims to reach the point of social welfare. this welfare can have implications for strong economic growth, the impact on the community directly, the non-military defense system will strengthen along with the welfare of the community, in this case the special autonomy community in west papua province. this also embodies several programs to stimulate the growth of the special autonomous region, the impact is not only francis saputro (2022) 45 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe on the region but throughout indonesia, this must be in line with the condition of the country if it is in a safe condition. thus the regional government of the west province, if it is successful in allocating its regional expenditures to implement development plans, will have a definite impact on increasing economic growth in the province of west papua. to realize the smooth running of government activities, local governments need to change the composition of their spending so that it runs effectively and efficiently. after we know the conditions of the province’s pad, dbh, dau, physical dak and non-physical dak, the province of west papua must immediately carry out solutive and sustainable steps in order to improve the condition of the apbd obtained by the province of west papua so that it increases the apbd stage and is on par with other provinces in indonesia , by way of openness of the people’s mindset, which has implications for collaborative innovation by provincial, district/city regional governments in west papua province with steps to increase regional independence in public sector services to create community comfort. to make this happen, coupled with the central government’s policy of providing large spending allocations, improvements in public services should be obtained in order to increase the attractiveness of investors to open businesses in the regions. sipd helps facilitate bureaucratic transformation in electronic-based good governance, sustainable e-government. conclusion recommendations and limitations in order to help realize the progress of the special autonomous region, in this case, one of them is the province of west papua in order to support the defense economy to avoid mismanagement of the apbd resources obtained, several problems have occurred that financial balance fund between the central government and regional governments, consisting of general allocation funds (dau), special allocation funds (dak) and revenue sharing funds (dbh). the balancing fund aims to reduce financial imbalances between regions (horizontal imbalance) which only comes from pad. this source of funding, the provincial government of west papua province, in its implementation, has not run optimally as other provincial governments throughout indonesia should, with regulations that include west papua province having given privileges in authority, funding for development, both the general allocation fund (dau), the special allocation fund (dak) and revenue sharing fund (dbh) and pad to support the apbd, as well as special attention from the central government to west papua. as a result of being egocentric, and a mindset that has not been said to be good for the progress of the province of west papua, practical steps so that it can run well if it is supported by all relevant stakeholders, starting from the human resources you have must really improve both skills, pattern of thought and point of view through training and further education. furthermore, the need for development planning and financial planning which should have been able to run properly with the pattern of bureaucratic transformation through the regional government information system application (sipd) can be carried out properly according to central policy and should be able to run well with this new policy of course all regions carry out the same thing in both learning from zero sipd application, of course the starting point can be compared, it remains only how the west papua provincial government can move forward, and develop according to the conditions of the times. for further research, it can deepen by studying specifically about better apbd governance with sustainable digital transformation, especially in developing policies in special autonomous regions in order to support the defense economy. references arifin, noor. (2012).analisis kualitas kehidupan kerja, kinerja dan kepuasan kerja pada cv. duta senenan jepara, (online), vol.8, no.1, (http://www.journal.uny.ac.id, diakses pada 17 november 2016). bagir manan, perjalanan historis pasal 18 uud 1945. penerbit, uniska, bandung 1993, hlm 3. http://www.journal.uny.ac.id/ http://www.journal.uny.ac.id/ francis saputro (2022) 46 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe erdianto & rika lestari, otonomi khusus dalam perspektif uud 1945, jurnal konstitusi fakultas hukum universitas riau bekerja sama dengan mahkamah konstitusi republic indonesia.pengertian otonomi bukanlah kebebasan, melainkan mengandung suatu pengertian yaitu pemecahan kekuasaan pemerintahan pada bagian pusat dengan daerah . muhammad yamin, proklamasi dan konstitusi republik indonesia. penerbit, gahlia indonesia, jakarta, 1982, hlm 145 keliat, makmur. (2010). ekonomi pertahanan indonesia. prisma majalah pemikiran sosial ekonomi vol.29 no.1 peraturan presiden nomor 39 tahun 2019 tentang satu data indonesia peraturan pemerintah nomor 12 tahun 2019 tentang pengelolaan keuangan daerah. permendagri 70 tahun 2019 tentang sistem informasi pemerintah daerah (sipd). khusaini, mohammad. (2006). ekonomi publik desentralisasi fiscal dan pembangunan daerah. madang : bfe unibraw. priyo hari adi. 2006. hubungan antara pertumbuhan ekonomi daerah, belanja pembangunan dan pendapatan asli daerah. simposium nasional akuntansi ix. padang. siyoto, s., & sodik, a. (2015). dasar metodelogi penelitian dr. sandu siyoto, skm, m.kes m.ali sodik, m.a.i. smoke, paul. (2001). “fiscal decentralization in developing countries a review of current concepts and practice”. democracy, governance and human rights programme paper number 2. sugiyono. (2012). memahami penelitian kualitatif. bandung : alfabeta. undang-undang republik indonesia nomor 22 tahun 1999 tentang pemerintahan daerah. undang-undang republik indonesia nomor 21 tahun 2001 tentang otonomi khusus untuk provinsi papua. undang-undang republik indonesia nomor 32 tahun 2004 tentang pemerintahan daerah. undang-undang nomor 33 pasal 1 tahun 2004 tentang perimbangan keuangan antara pemerintah dan pemerintah daerah american interdisciplinary journal of business and economics issn: 2837-1909| impact factor : 6.71 volume. 11, number 3; july-september, 2024; published by: scientific and academic development institute (sadi) 8933 willis ave los angeles, california https://sadijournals.org/index.php/aijbe| editorial@sadijournals.org 62 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe tourist satisfaction at beach resort in southern negros, philippines: a mixed-methods study eliand rey c. soliman, lpt, dba; college dean, college of accountancy, business education and computer studies, colegio san agustin bacolod, b.s. aquino drive, bacolod city, philippines doi: https://doi.org/10.5281/zenodo.13847217 abstract: tourism plays a crucial role in the economy of southern negros, philippines, with beach resorts being a significant draw for both local and international visitors. this study utilizes a concurrent nested design to investigate tourist satisfaction with a beach resort in southern negros through a mixed-methods approach. quantitative data were gathered from 150 tourists using a structured questionnaire to assess their satisfaction with the key dimensions: service quality, cleanliness, facility maintenance, and accessibility. qualitative insights were obtained from an in-depth interview with the resort owner, who has operational experience. the quantitative results revealed high satisfaction levels, with cleanliness and service quality being the most significant factors. correlation analysis revealed strong interrelationships between the dimensions. the qualitative narratives provided contextual depth, illustrating the resort’s commitment to personalization, ongoing facility improvements, and the challenges of managing peak periods. this integration of quantitative and qualitative findings provides a comprehensive understanding of tourist satisfaction and highlights areas for potential enhancement. this study underscores the importance of combining numerical data with experiential insights to inform effective management practices in the tourism sector. keywords: tourist satisfaction, beach resort, mixed-methods, quantitative analysis, qualitative analysis, southern negros, philippines introduction tourism is a pivotal sector in the economic landscape of the philippines, with beach resorts being a significant contributor to this industry. in southern negros, beach resorts attract both local and international tourists, substantially contributing to the region’s economic growth and development (dela cruz & manalo, 2023). the competition among these resorts necessitates a deeper understanding of factors influencing tourist satisfaction to enhance service quality and ensure repeat visits (chen & tsai, 2022). tourist satisfaction is influenced by various factors, including service quality, cleanliness, facility maintenance, and accessibility (kim, 2020). service quality, in particular, has been extensively studied and linked to overall tourist satisfaction, suggesting that higher service quality leads to higher levels of satisfaction and loyalty (davis, 2021). cleanliness and facility maintenance are also critical factors that directly impact the comfort and experience of tourists (reyes & santos, 2020; manalo & dela cruz, 2022). eliand rey c. soliman (2024) 63 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe in the context of the philippines, local studies have highlighted the importance of personal interaction and local hospitality in enhancing tourist satisfaction (bautista, 2019). for instance, santos and cruz (2021) emphasized that personalized service and responsiveness to guest needs are crucial for achieving high satisfaction levels. despite these insights, there is a gap in research focusing on specific resorts in southern negros, highlighting the need for studies that explore both quantitative and qualitative dimensions of tourist satisfaction at these local establishments (dela cruz & manalo, 2023). tourist satisfaction is also influenced by contextual factors such as local culture, environmental sustainability, and seasonal variations (alonso & ogle, 2021; lee et al., 2023). understanding these factors can provide a more nuanced view of tourist experiences and expectations, informing better management practices, and enhancing overall satisfaction (wang et al., 2022). additionally, recent studies have emphasized the role of digital reviews and social media in shaping tourist perceptions and expectations (lee & chen, 2022). objectives of the study the primary objectives of this study are as follows: 1. to assess tourist satisfaction levels across various dimensions at a beach resort in southern negros, philippines. 2. to identify key factors contributing to tourist satisfaction based on quantitative survey data. 3. to gain in-depth insights into operational challenges and guest experiences from the perspective of resort owners. 4. to integrate both quantitative and qualitative findings to provide a comprehensive understanding of tourist satisfaction at the resort. methodology this study employed a concurrent nested design, integrating both quantitative and qualitative data to explore tourist satisfaction at a beach resort in southern negros. for the quantitative aspect, a purposive quota sampling method was used to select 150 tourists, ensuring a representative sample of the resort’s diverse clientele. respondents were chosen based on their experience at the resort, including factors such as length of stay and type of accommodation. data were collected using a structured questionnaire, which included likert-type scale items to assess dimensions of satisfaction like service quality, cleanliness, and facility maintenance. the survey was administered and sent directly to the respondents' email using online forms. for the qualitative component, an in-depth interview was conducted with the resort owner, identified through the local government unit’s tourism officer serving as the gatekeeper. the owner, who had experience operating the resort, was selected based on criteria ensuring extensive involvement in daily operations and a standing in the local tourism industry. the interview, guided by open-ended questions, uncovered the owner's insights into tourist satisfaction, operational challenges, and feedback trends. quantitative data were analyzed using descriptive statistics and correlation analysis and presented in tabular form to summarize findings. qualitative data were examined using litchman’s three-dimensional (3cs) approach— coding, categorizing, and conceptualizing—to identify key themes and insights. coding involved highlighting significant statements, categorizing grouped codes into broader themes, and conceptualizing these themes to draw conclusions. ethical considerations were rigorously observed, including obtaining informed consent from all respondents and ensuring confidentiality. the study also adhered to the principles of respect and sensitivity. rigorous practices such as triangulation, peer review, pilot testing of the survey, and member checking for qualitative data were eliand rey c. soliman (2024) 64 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe employed to enhance the validity and reliability of the research. these measures aim to provide a robust and comprehensive understanding of tourist satisfaction at the resort. results and findings quantitative results the survey results are summarized in table 1, which presents the mean scores and standard deviations for the various tourist satisfaction. table 1: summary of tourist satisfaction dimensions dimension mean score standard deviation service quality 4.32 0.78 cleanliness 4.5 0.72 facility maintenance 4.2 0.85 accessibility 4.1 0.8 the quantitative data reveal high levels of satisfaction across all assessed dimensions. the highest mean score was observed for cleanliness (m = 4.50, sd = 0.72), indicating that tourists particularly valued the resort’s commitment to maintaining a clean and hygienic environment. this finding is consistent with previous research that emphasizes the critical role of cleanliness in shaping overall tourist satisfaction (davis, 2021). the service quality also received a high mean score (m = 4.32, sd = 0.78), suggesting that the resort’s efforts to provide attentive and responsive service contributed significantly to guest satisfaction. this aligns with chen and tsai’s (2022) findings that service quality is a major determinant of tourist loyalty and satisfaction. facility maintenance, with a mean score of 4.20 (sd = 0.85), reflects the importance of well-maintained amenities for enhancing tourist experiences. this result supports the literature highlighting the need for the regular upkeep and modernization of facilities to meet guest expectations (reyes & santos, 2020; manalo & dela cruz, 2022). accessibility was the lowest among the dimensions but still scored relatively high (m = 4.10, sd = 0.80). this indicates that although the resort generally meets guests’ needs in terms of accessibility, there are areas for improvement. the importance of accessibility in ensuring a positive guest experience has been documented in previous studies, suggesting that even small improvements in this aspect could further enhance satisfaction (kim, 2020). correlation analysis correlation analysis was conducted to examine the relationships between the different dimensions of tourist satisfaction. table 2: correlation between dimensions of tourist satisfaction dimension 1 dimension 2 correlation coefficient service quality cleanliness 0.75** service quality facility maintenance 0.68** service quality accessibility 0.60* cleanliness facility maintenance 0.72** cleanliness accessibility 0.55* facility maintenance accessibility 0.65** eliand rey c. soliman (2024) 65 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe the analysis revealed strong positive correlations between all dimensions, with service quality and cleanliness showing the highest correlation (r = 0.75, p < 0.01). this suggests that service quality improvements are closely related to enhanced perceptions of cleanliness, which is consistent with the findings of davis (2021). facility maintenance and cleanliness also showed a strong correlation (r = 0.72, p < 0.01), indicating that well-maintained facilities significantly contribute to the perception of cleanliness. the correlation between accessibility and other dimensions was positive but relatively weaker, particularly in comparison to cleanliness and service quality. this finding suggests that although accessibility is important, it may not be as strongly linked to overall satisfaction as other factors (kim, 2020). this highlights the need for targeted improvements to accessibility to enhance overall guest satisfaction. qualitative results qualitative analysis derived from the narrative provided by the resort owner revealed several key themes that offer deeper insights into tourist satisfaction: guest experience the owner emphasized the importance of providing a personalized experience. the owner stated, "we strive to make each guest feel special by remembering their preferences and ensuring that our staff provides attentive service." personalization and attentive service play crucial roles in enhancing guest satisfaction. this aligns with existing literature that highlights the impact of personalized service on guest loyalty and satisfaction. research by santos and cruz (2021) supports this, noting that personalized interactions significantly influence tourist satisfaction by making guests feel valued and cared for. personalized service can lead to positive reviews and repeat visits, which are vital for the long-term success of hospitality businesses. facility improvements the owner mentioned ongoing efforts to upgrade the facilities. "we continuously invest in improving our facilities based on guest feedback. for instance, we recently renovated our beachfront area to enhance the overall experience." continuous investment in facility improvements is essential for maintaining high guest satisfaction. this finding is consistent with manalo and dela cruz (2022), who found that regular upgrades and maintenance of facilities are critical for meeting guest expectations and enhancing their overall experience. up-to-date and well-maintained facilities contribute to higher satisfaction and can differentiate a resort from its competitors. operational challenges the owner discussed challenges related to maintaining service quality during peak seasons. "managing peak periods can be tough, but we try to ensure that our staff is well-trained and prepared for high guest volumes." handling peak seasons effectively is a significant challenge for many resorts. davis (2021) noted that managing high guest volumes requires effective staff training and operational strategies to maintain service quality. adequate preparation and staff training are crucial for ensuring consistent service quality, which directly impacts tourist satisfaction. addressing these challenges proactively can help resorts maintain high satisfaction levels, even during busy periods. conclusion this study, employing a concurrent nested design, provides a comprehensive assessment of tourist satisfaction at a beach resort in southern negros through both quantitative and qualitative lens. the quantitative analysis revealed high tourist satisfaction levels, particularly regarding cleanliness and service quality. the qualitative eliand rey c. soliman (2024) 66 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe insights from the resort owners highlighted the significance of personalized service, continuous facility improvements, and effective peak-period management to maintain high satisfaction. the integration of these findings underscores the importance of combining numerical data with contextual narratives to enhance tourist satisfaction. this study offers practical recommendations for resort management to focus on cleanliness, personalized guest interactions, and proactive operational strategies to further improve the guest experience. conflict of interests the author has declared no conflict of interest. references alonso, a. d., and ogle, a. (2021). environmental sustainability and tourist satisfaction: insights from the philippines. journal of sustainable tourism, 29(5), 758-773. bautista, r. (2019). the influence of local hospitality on tourist satisfaction in philippine resorts. philippine journal of tourism studies, 13(2), 45-59. chen, c. f., and tsai, m. t. (2022). service quality and tourist satisfaction: a meta-analysis. journal of travel research, 61(1), 45-62. davis, c. (2021). the role of cleanliness in tourist satisfaction: evidence from beach resorts. journal of travel & tourism marketing, 38(6), 536-549. dela cruz, j., & manalo, m. (2023). tourist perceptions of beach resorts in the philippines: a case study. philippine journal of tourism studies, 15(1), 29-45. kim, h. b. (2020). a meta-analysis of tourism service quality and its impact on tourist satisfaction. journal of travel research, 59(4), 763-779. lee, s., & chen, h. (2022). social media influence on tourist satisfaction: a study of beach resorts in the philippines. asian journal of tourism research, 18(3), 143-159. lee, t. h., lee, j. h., and lee, j. h. (2023). contextual factors affecting tourist satisfaction: evidence from a philippine beach resort. tourism management perspectives, 41, 100-115. litchman, m. (2020). qualitative research in applied settings. sage publications. manalo, m., & dela cruz, j. (2022). facility maintenance and guest satisfaction: a study of philippine beach resorts. journal of hospitality management, 47(3), 203-218. reyes, p. s., & santos, l. g. (2020). accessibility and its impact on tourist satisfaction: evidence from philippine beach resorts. journal of tourism and leisure studies, 12(2), 98-112. santos, m., and cruz, r. (2021). the impact of personalized service on tourist satisfaction: a philippine perspective. asia-pacific journal of tourism research, 26(5), 559-572. wang, y., zhang, y., & chen, x. (2022). seasonal variations and tourist satisfaction: a case study of beach resorts in the philippines. journal of travel & tourism research, 61(2), 289-306. american interdisciplinary journal of business and economics issn: 2837-1909| impact factor : 6.71 volume. 10, number 3; july-september, 2023; published by: scientific and academic development institute (sadi) 8933 willis ave los angeles, california https://sadijournals.org/index.php/aijbe| editorial@sadipub.com 23 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe electronic banking and marketing performance of deposit money banks in uyo, akwa ibom state 1dr. aniebiet etuk, 2aniefiok okon akpan and 2aniekan eyo awah 1department of marketing, akwa ibom state university, obio akpa campus1 2ph.d student, department of marketing, akwa ibom state university, obio akpa campus doi: https://doi.org/ 10.5281/zenodo.8346738 abstract: the introduction of electronic banking for the purpose of delivering effective and efficient service to customers, rather brought disappointments to the customers. there are issues of network failure, fraud, unreliable machines, etc. with these disappointments, it is unclear if electronic banking is actually helping banks in their marketing effort to acquire new customers. this study therefore investigated the influence of electronic banking on marketing performance of deposit money banks in uyo, akwa ibom state. the survey research design was used. primary data were collected from senior staff members of four deposit money banks in uyo metropolis. the banks were first bank plc, zenith bank plc, united bank for africa plc, and guaranty trust bank plc. census technique was adopted to reach out to the respondents since the population was not very large, and questionnaire was used in collecting data. the proxies of electronic banking were automated teller machines, point of sales, internet banking, and mobile banking, while the proxy of marketing performance was customer acquisition. the regression results revealed that electronic banking significantly influence marketing performance of deposit money banks. thus, it was concluded that adopting electronic banking innovations can enhance customer acquisition efforts of deposit money banks. it was therefore recommended among others that deposit money banks should continue to deploy electronic banking services through the use of automated teller machine, point of sales, internet banking, and mobile banking, as this will help them to keep winning new customers and remain competitive. keywords: electronic banking, deposit money bank, banking innovations, marketing performance, business performance, customer acquisition. introduction 1.1 background to the study electronic technology has significantly altered the way things are done in today’s world. now, almost every facet of human existence has an electronic aspect. thus, we have such concepts as electronic learning, electronic voting, electronic signature, etc. the business sector is not left out of this electronic revolution, as we dr. aniebiet etuk, aniefiok okon akpan and aniekan eyo awah (2023) 24 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe have electronic commerce, which consists of several electronic sub-systems, one of which is electronic banking (acha, 2008). the concept of electronic banking (e-banking), according to batchelor (2017), began in the mid-1970s. however, due to lack of internet users, coupled with the cost associated with offering electronic banking services, its growth was hindered. but, following the internet explosion in the late 1990s, e-banking received a boost and bounced back, as many people became more comfortable with monetary transactions on the web. since then, adoption of e-banking has continued to increase. in nigeria, electronic banking began in the 1980s, when automated teller machines (atms) were introduced by some banks. this was followed by tele-banking, introduced in the 1990s among corporate customers. quoting zarma (2001), acha (2008) noted that corporate customers also enjoyed the introduction of intranet banking, which provided them the opportunity of transacting business with their banks through the use of personal computers. then later on, different forms of smart cards were introduced in to the nigerian electronic banking environment. today, a wide range of electronic banking services are offered by nigerian banks such as mobile banking, internet banking, point of sales (pos), etc. the emergence of e-banking in nigeria has greatly helped deposit money banks to enhance their performance. it has helped them to reduce their cost of operation and then make more profit (jimoh, 2019). ebanking is increasingly playing a great role in determining how banks profitably serve their customers in nigeria. it has brought an average customer, a convenient way of handling financial transactions (mapharing & basuhi, 2017) 1.2 statement of the problem electronic banking is gaining acceptance and popularity in nigeria. this is reflected in the huge volume of financial transactions done through electronic channels (enoruwa, ezuem & nwani, 2019). the inefficiency in service delivery, which characterized the traditional banking system, led to the emergence of electronic banking. however, the introduction of electronic banking for the purpose of delivering affective and efficient service to customers rather brought disappointments to the customer (sigyanbola, 2013). there are issues of network failure, fraud, unreliable machines, etc. (agbaje & ayanbadejo, 2013).with these disappointments, it is unclear if electronic banking is actually helping banks in their marketing effort to acquire new customers. although many studies have been done to ascertain the contributions of electronic banking to the performance of banks in nigeria (deekor, 2021; kabir, kurfi & isa, 2021; ekele & ukpata, 2020; aduaka & awolusi, 2020; jimoh, 2019; enoruwa, ezuem & nwani; 2019; ajayi&enitolo, 2016; ojokuku & sajuyigbe, 2012), however, most of these studies focused on financial performance. no study was found on the influence of electronic banking on marketing performance of banks in nigeria. this creates a gap in literature. this study therefore contributes to closing the gap by investigating the influence of electronic banking (represented by automated teller machine (atm), point of sales (pos), internet banking and mobile banking) on marketing performance (represented by customer acquisition) ofdeposit money banks in uyo, akwa ibom state. 1.3 objectives of the study the main objective of the study was to investigate the influence of electronic banking on marketing performance of deposit money banks in uyo, akwa ibom state. the specific objectives of the study were to; dr. aniebiet etuk, aniefiok okon akpan and aniekan eyo awah (2023) 25 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe (i) assess the influence of automated teller machine (atm) on marketing performance (customer acquisition) of deposit money banks in uyo, akwa ibom state. (ii) investigate the influence of point of sales (pos) on marketing performance (customer acquisition) of deposit money banks in uyo, akwa ibom state (iii) examine the influence of internet banking on marketing performance (customer acquisition) of deposit money banks in uyo, akwa ibom state (iv) ascertain the influence of mobile banking on marketing performance (customer acquisition) of deposit money banks in uyo, akwa ibom state. 1.4 research questions the following research questions were raised: 1. how does automated teller machine (atm) influence marketing performance of deposit money banks in uyo, akwa ibom state? 2. what influence does point of sales (pos) have on marketing performance of deposit money banks in uyo, akwa ibom state? 3. to what extent does internet banking influence marketing performance of deposit money banks in uyo, akwa ibom state? 4. what influence does mobile banking have on marketing performance of deposit money banks in uyo, akwa ibom state? 1.5 hypotheses of the study the following null hypotheses were formulated to guide the study: hoi: automated teller machine (atm) has no significant influence on marketing performance of deposit money banks in uyo, akwa ibom state. ho2: point of sales (pos) does not significantly influence marketing performance of deposit money banks in uyo, akwa ibom state. ho3: internet banking does not significantly influence marketing performance of deposit money banks in uyo, akwa ibom state. ho4: mobile banking has no significant influence on marketing performance of deposit money banks in uyo, akwa ibom state. 1.6 significance of the study this study focuses on the influence of electronic banking on marketing performance of deposit money banks in uyo, akwa ibom state. the outcome of the study will help deposit money banks to adjust their e-banking strategies to acquire more customers. this will no doubt enhance their profitabilityand overall performance. the study will also add to the body of knowledge in electronic banking. 1.7 scope of the study the study covered the period 2013 to 2022, and considered four major e-barking channels namely automated teller machine (atm), point of sales (pos), internet banking and mobile banking. it focused on marketing performance in term of customer acquisition. the study concentrated on four deposit money banks in uyo metropolis namely, first bank of nigeria plc, zenith bank plc, united bank for african plc, and guaranty trust bank plc. dr. aniebiet etuk, aniefiok okon akpan and aniekan eyo awah (2023) 26 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe literature review 2.1 conceptual review 2.1.1electronic banking electronic banking involves the use of electronic channels and devices to perform banking operations. it can remotely deliver financial services to bank customers (ekele & sunday, 2020). electronic banking is an innovative solution to financial service delivery that offers a wide range of services. according to rad, rasoulian, mirzaei & sharifipour (2017), electronic banking offers such services as cash withdrawal, funds transfer, cash deposit, balance enquiry, account statement, signature verification, etc. the emergence of electronic banking has made business transactions seamless and almost effortless. the impact is felt not only in the banking/financial sector but also in the entire economy (aduaka & awolusi, 2020). the major channels of electronic banking are automated teller machine, point of sales, internet banking and mobile banking (demaki, eromafuru & festus, 2021). these channels are used as measures of electronic banking in this study. automated teller machine (atm) atm is an electronic machine that has record-keeping system and vault, permitting bank customers to enter the book-keeping system of the bank through the use of an electronic card, having a personal identification number (pin), and providing customers a 24/7 access to their accounts (deekor, 2021; jimoh, 2019). a major advantage is that atm does not necessarily need to be located within the bank premises. it can be located in stores, shopping malls, restaurants, fuel stations, open market, and any social place. atm permits bank customers to use any other atm around the world to conduct financial transactions. it is regarded as the basic form of non-branch banking. according to jegede (2014), atm has significantly enhanced the performance of deposit money banks in nigeria. point of sales (pos) this is a retail payment system used to process card payments using pin. it can be used to make payment in retail places like supermarkets, eateries, fuel stations, etc (deekor, 2021). in nigeria today, pos has become a form of business, where people perform financial transactions such as cash withdrawal, deposits, transfer, etc. at a fee. pos transfers funds from the customer’s account to the merchant’s account, and records every transaction. it can print receipts if needed. the device reads information embedded in the customer’s credit/debit card, checks if funds available in the customer’s account are sufficient, and then carries out the required transaction. internet banking internet banking involves using the internet to conduct banking activities via the bank’s website. it provides home banking services to customers. (demaki, eromafuru & festus, 2021). internet banking can be done anywhere and anytime, provided the enabling facilities are available, such as internet connection and personal computer (pc). according to hassan, mamman & farouk (2013), internet banking is used for a variety of vital banking services such as payment for goods and services, funds transfer, viewing and printing of account statement, etc. dr. aniebiet etuk, aniefiok okon akpan and aniekan eyo awah (2023) 27 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe mobile banking mobile banking is one of the most recent forms of electronic banking. it involves the use of mobile devices such as mobile phones to conduct banking activities. it can be done with or without the use of internet. it helps to process and execute transactions on the go (deekor, 2019). services that can be performed using mobile banking include among others, payment for goods and services, funds transfer, purchase of airtime / data for phone, credit application, and checking of account balance (ndunga, njati & rukangu, 2016) 2.1.2marketing performance marketing performance is simply the results of marketing activities in relation to marketing goals (allocadia, 2021). there are many marketing performance measures available in literature. the concern is always with the one(s) to choose (gronholdt & martensen, 2006). such measures include brand awareness, customer engagement, customer loyalty/ retention, customer acquisition, revenues and sales, etc. the measure has to be simple enough to be useable and comprehensive enough to assess the marketing performance. however, the measure to use depends on the core objectives the marketer intends to achieve as enshrined in the marketing plan (wrike, 2022). for this study, the measure chosen is customer acquisition because the objective has to do with the influence of electronic banking on marketing efforts of banks to acquire new customers. 2.1.3deposit money banks in nigeria the central bank of nigeria (cbn), defines deposit money bank as a financial institution licensed by the regulatory authority to mobilize deposits from the surplus unit and channel the funds through loans to the deficit unit and performs other financial services activities (cbn, n.d.). all commercial banks in nigeria such as first bank of nigeria plc, guaranty trust bank plc united bank for africa plc. zenith bank plc, etc are deposit money banks. according to adesola & ewa (2020), the most important institutions for savings mobilization and allocation of financial resources are the deposit money banks (dmbs). thus, dmbs occupy prominent positions in economic growth and development in nigeria. it is therefore pertinent to continue to carry out researches aimed at enhancing the performance of these banks. 2.2 theoretical framework bank focused theory (kapoor, 2010) this study was anchored on bank focused theory propounded by kappor (2010). the theory aims at explaining how branchless banking is done. it also highlights the risks and opportunities that come with it. this theory has been used widely in electronic banking related studies (chimezic, chukuwuemeka & uche, 2019; dzombo, kilika & maingi, 2017; mwanda, 2013). the bank focused theory proposes that traditional banks can use non-traditional, inexpensive channels to deliver banking services to their existing customers. examples include using automated teller machines, internet banking, and mobile banking among others to provide banking services to bank customers (kapoor, 2013). the theory indicates that although branchless banking provides financial institutions with more control and brand visibility, it also has challenges, as customers are primarily concerned about such issues as quality, reliability and accessibility of service, security of transactions, ease of usage, etc. dr. aniebiet etuk, aniefiok okon akpan and aniekan eyo awah (2023) 28 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe 2.3 review of empirical studies deekor (2021) investigated the impact of electronic banking on deposit money banks’ performance in nigeria using secondary data obtained from quarterly reports of the central bank of nigeria, from 2010 to 2018. the author measured electronic banking using four variables; automated teller machine (atm), point of sale (pos), mobile banking, and web pay. bank performance was measured in terms of net interest margin. jarquebera normality and diagnostic tests as well as augmented dickey fuller unit root test were used on the variables, and the results showed atm, pos, and web pay as being insignificant to net interest margin, while mobile banking had a positive and significant impact on bank performance. a similar study was conducted by demaki, eromafuru & festus (2021) to examine the relationship between electronic banking and the performance of deposit money banks in nigeria. ex-posit facto research design was employed for the study. time series data were obtained from the central bank of nigeria quarterly bulletin on automated teller machine,internet banking, point of sales and return on assets, from 2009-2019. descriptive and inferential statistical techniques such as mean, standard deviation, pearson correlation, unit roots, co-integration, error correction model jacque-beta test and variance inflation factor test were used. results showed that automated teller machine, mobile banking and point of sales were significant in enhancing banks’ performance. internet banking was found to have insignificant influence on banks’ performances. kabir, kurfi & isa (2021) examined the impact of electronic banking on financial performance of deposit money banks in nigeria. the study used secondary data obtained from publications and reports covering the period 2013 to 2017. the electronic banking variables of interest were atm, mobile banking and internet banking, while financial performance was represented by return on assets. a multiple linear regression model was used to determine the relationship between electronic banking and return on assets. findings revealed that electronic banking variables (atm, mobile banking and internet banking) were positively and significantly related with the performance of nigeria deposit money banks. another study to assess the impact of electronic banking and profitability in the nigerian banking industry was carried out by aduaka & awolusi (2020). the survey research design was adopted and primary data were collected through the use of questionnaire. the primary data were complemented with secondary data obtained from the audited financial reports of the surveyed banks for the period 2010 to 2017. descriptive and inferential statistics were used to analyzed the data. hypotheses were tested using multiple regression analysis. the independent variable (electronic banking) was represented by point of sales (pos), automated teller machine (atm), cards, internet banking, mobile banking, and corporate payments, while the dependent variable (profitability) was represented by net interest margin. the results showed that electronic banking significantly influenced profitability of the surveyed bank (access bank plc). ekele & sunday (2020) investigated the implications of electronic banking on commercial banks’ performance in nigeria between 2000 and 2017. the study adopted ex-post facto research design. secondary data on personal costs, profit, cost of training and pension benefit were obtained from the audited annual reports of the deposit money banks surveyed. analysis of data was done using panel regression techniques. findings showed that there is a significant relationship between electronic banking and the performance of commercial banks in nigeria. on his part, jimoh (2019) examined the effect of electronic banking on the profitability of deposit money banks in nigeria. the independent variable (electronic banking) was internet banking, mobile banking, pos, and dr. aniebiet etuk, aniefiok okon akpan and aniekan eyo awah (2023) 29 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe atm, while profit margin was used to represent the dependent variable. time series data were obtained from annual reports of nigerian deposit money banks covering the period 2006 to 2015. four hypotheses formulated were tested using least square regression technique.the results revealed the existence of a positive relationship between mobile banking and profitability of deposit money banks. also, the relationship between pos, atm, mobile banking and profitability was found to be statistically significant, while that of internet banking was statistically insignificant. enoruwa, ezuem & nwani (2019) studied the relationship between electronic banking and bank performance in nigeria using ex-post facto research design. secondary data were obtained for the study from the central bank of nigeria bulletin covering the period between 2009 and 2017. the authors used the total bank deposit to measure bank performance while transactional values of automated teller machine, mobile banking, point of sales and web pay were used as proxies for electronic banking. pearson correlation analysis was carried on the data and the results showed the existence of significant positive relationship between each of the electronic channels and bank performance. the study also revealed a high correlation existing between the predictors. in kenya, ogutu & fatoki (2019) examined the effect of e-banking on financial performance of listed commercial banks in the country. four objectives were formulated to guide the study in order to be able to establish the effect of mobile banking, atm banking, agency banking, and online banking on financial performance of commercial banks in kenya. quantitative research design was adopted for the study. secondary data used in the study were obtained from the banking supervisory reports of the central bank of kenya and annual reports of kenyan commercial banks. descriptive and inferential statistics were used to analyze the data, and the results showed a strong positive relationship existing between mobile banking, atm banking, agency banking, online banking and financial performance of banks in kenya. similarly, mapharing & basuhp (2017) earlier carried out a study on the relationship between electronic banking and bank performance in botswana. the study employed the descriptive design to find out if electronic banking indicators such as automated teller machine, electronic fund transfer, cheque clearance, and electronic cash transfer at point of sale have an effect on financial performance of banks in botswana. secondary data for a period of ten years were obtained from the financial statistics reports of the bank of botswana. the data were analyzed using multiple regression technique to determine the relationship between the dependent variable (profitability, measured by return on assets) and the independent variable (electronic banking indicators). the results showed that the relationship between electronic fund transfer, automated teller machine, electronic fund transfer at point of sale and financial performance was statistically insignificant. it was only cheque clearance that had statistically significant relationship with bank performance. ajayi & enitilo (2016) investigated the impact of electronic banking on bank performance in ekiti state, nigeria. the authors adopted census sampling technique and collected primary data from one hundred and twenty eight senior staff members of the seventeen deposit money banks surveyed. the data were analyzed using multiple regression to achieve the objectives of the study. results of the analysis revealed that electronic banking has significant influence on bank performance. dr. aniebiet etuk, aniefiok okon akpan and aniekan eyo awah (2023) 30 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe 2.4 conceptual model based on the hypotheses, the following conceptual model was constructed independent variables dependent variable fig 1: research model of electronic banking and marketing performance source: researcher’s construct 2023 section 3: methodology 3.1 research design for this study, the survey research design was adopted to investigate the influence of electronic banking on marketing performance of deposit money banks in uyo, akwaibom state. 3.2 population and sample size the population of the study comprised senior bank staff (bank managers, marketing managers/officers, operation managers, and customer experience officers) in all the branches of the selected deposit money banks (first bank plc, zenith bank plc, united bank for africa plc, and guaranty trust bank plc) in uyo metropolis, akwa ibom state. the total population was 114 as detailed below: table 3.1 population of the study banks no. of branches no of staff members qualified for the study first bank plc 5(aka rd., abak rd., udo udoma ave.,91oron rd; and 252 oron rd.) 35 zenith bank plc 4 (aka rd., abak rd., oron rd., and udo udoma ave.) 30 united bank for africa plc 4(aka rd, abak rd, nwaniba rd, and udoudoma ave) 32 guaranty trust bank plc 2 (abak rd & udoudoma ave) 17 total 15 114 source: field survey, 2022 since the population was not very large (less than 200) the population was taken as sample, so as to obtain a meaningful result (israel, 2003). thus, the sample size was 114. automated teller machine point of sales internet banking mobile banking marketing performance (i) customer acquisition electronic banking dr. aniebiet etuk, aniefiok okon akpan and aniekan eyo awah (2023) 31 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe 3.3 sampling technique the census technique was adopted to reach members of the population to obtain data. census in a quantitative research technique that involves collecting information on all elements of the population (cantwell, 2011). 3.4 research instrument the research instrument was a structured questionnaire. the instrument was divided into two sections: a and b. section a contained personal data of the respondents, while section b contained likert scale items used in testing the hypotheses. 3.5 validity and reliability of the instrument to ensure that the instrument measured what it was supposed to measure (validity), few copies of the questionnaire were given to research experts within the university community to critique and make necessary inputs. the inputs were incorporated into the questionnaire before the final copy was produced and administered. to test for the reliability of the instrument, twenty copies of the questionnaire were distributed to twenty members of the population. cronbach alpha test was applied on the data obtained to compute the reliability coefficient. the reliability scores for all variables were above the 0.7 threshold of acceptable cronbach alpha value. 3.6 method of data analysis data were analyzed using descriptive and inferential statistics. thus, frequency count and simple parentages were used in analyzing personal data of the respondents, while regression analysis was carried out on the four hypotheses. section 4: data analysis, results and discussion 4.1 data analysis and results table 4.1 questionnaire administration items number of copies of questionnaire percentage (%) returned in useable form 104 91.23 not returned/ un-useable 10 8.77 total 114 100 table 4.1 above shows that out of the 114 copies of questionnaire that were administered to the respondents, 104, representing 91.23% were returned in a useable form while the remaining 10 copies representing 8.77% were either returned in unusable form or not returned at all. table 4.2 gender of respondents frequency percent (%) valid male 46 44.23 female 58 55.77 total 104 100.0 table 4.2above shows that 46(44.23%) out of the 104 respondents were male while 58(55.77%) of the respondents were female. which implies that majority of the respondents were female. dr. aniebiet etuk, aniefiok okon akpan and aniekan eyo awah (2023) 32 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe table 4.3 age of respondents frequency percent valid 20-29 years 6 5.8 30-39 years 33 31.7 40-49 years 58 55.8 50 years and above 7 6.7 total 104 100.0 table 4.3 above indicates that those between the ages of 20-29 years made up 5.8% (6) of the respondents, 33 (31.70%) were those within the age bracket of 30-39 years, 58 (55.8%) were those within the age bracket of 4049 years while the respondents who were 50 years of age and above were 7 (6.7%). table4.4 educational qualification of respondents frequency percent valid hnd/bsc/pgd 61 58.7 masters and above 43 41.3 total 104 100.0 table 4.4 above shows that respondents who were holders of hnd/bsc/pgd were 58.7% (61) while those with masters degree and above were43 (41.3%). table 4.5 working experience in banking frequency percent valid less than 10 years 7 6.7 10-14 years 9 8.7 15-19 years 52 50.0 20 years and above 36 34.6 total 104 100.0 table 4.5 indicates the respondents' level of experience in the banking industry. those with less than 10 years of experience were 7 (6.7%), 9 (8.7) of them were those who have between 10-14 years of experience in the banking sector. respondents with 15-19 years of experience in the field were 52 (50.0%) while those with 20 years of experience and above were 36 (34.6%). test of hypothesis one h01: automated teller machine has no significant influence on marketing performance of deposit money banks in uyo, akwa ibom state. dr. aniebiet etuk, aniefiok okon akpan and aniekan eyo awah (2023) 33 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe table 4.6 model summary for hypothesis one model summary model r r square adjusted r square std. error of the estimate 1 .713a .698 .689 2.38794 a. predictors: (constant), automated teller machine anovaa model sum of squares df mean square f sig. 1 regression 213.080 1 213.080 211.067 .001b residual 1963.911 102 19.254 total 2176.990 103 a. dependent variable: marketing performance b. predictors: (constant), automated teller machine coefficientsa model unstandardized coefficients standardized coefficients t sig. b std. error beta 1 (constant) 8.608 1.320 6.520 .000 automated teller machine .312 .094 .313 3.327 .001 a. dependent variable: marketing performance the table above with r value of 0.713 indicates that there is astrong relationship between the independent and the dependent variables. the r-square value of 0.698 implies that about 69.8% of the variation in marketing performance was explained by automated teller machine.the constant value of 8.608 indicates that keeping independent variable (automated teller machine) constant, marketing performancewill remain at8.608. the coefficient of automated teller machine was 0.312 which means that a unit change in automated teller machine will lead to 0.312 unit change in marketing performance. the p-value of 0.000 means that the effect of automated teller machine on marketing performance was statistically significant. test of hypothesis two h02: point of sales has no significant influence on marketing performance of deposit money banks in uyo, akwa ibom state. table 4.7 model summary for hypothesis two model summary mode l r r square adjusted r square std. error of the estimate 1 .829a .709 .700 2.36189 a. predictors: (constant), point of sales dr. aniebiet etuk, aniefiok okon akpan and aniekan eyo awah (2023) 34 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe anovaa model sum of squares df mean square f sig. 1 regression 236.329 1 236.329 312.421 .001b residual 1940.661 102 19.026 total 2176.990 103 a. dependent variable: marketing performance b. predictors: (constant), point of sales coefficientsa model unstandardized coefficients standardized coefficients t sig. b std. error beta 1 (constant) 8.669 1.237 7.008 .000 point of sales .333 .094 .329 3.524 .001 a. dependent variable: marketing performance the table (4.7) above with r value of 0.829 indicates that there is astrong relationship between the dependent and the independent variables. the r-square value of 0.709 implies that about 70.9% of the variation in marketing performance was explained by point of sales. the constant value of 8.669 indicates that keeping independent variable (point of sales) constant, marketing performance will remain at 8.669. the coefficient of point of sales was 0.333which means that a unit change in point of sales will lead to 0.333 unit change in marketing performance. the p-value of 0.000 means that the influence of point of sales on marketing performance was statistically significant. test of hypothesis three h03: internet banking has no significant influence on marketing performance of deposit money banks in uyo, akwa ibom state. table 4.8 model summary for hypothesis three model summary mode l r r square adjusted r square std. error of the estimate 1 .854a .725 .717 2.32036 a. predictors: (constant), internet banking anovaa model sum of squares df mean square f sig. 1 regression 273.111 1 273.111 214.632 .000b residual 1903.880 102 18.665 total 2176.990 103 dr. aniebiet etuk, aniefiok okon akpan and aniekan eyo awah (2023) 35 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe a. dependent variable: marketing performance b. predictors: (constant), internet banking coefficientsa model unstandardized coefficients standardized coefficients t sig. b std. error beta 1 (constant) 8.992 1.072 8.387 .000 internet banking .327 .085 .354 3.825 .000 a. dependent variable: marketing performance table 4.8 above with r value of 0.854 indicates that there is a significant relationship between the dependent and the independent variables. the r-square value of 0.725 implies that about 72.5% of the variation in marketing performance was explained by internet banking. the constant value of 8.992 indicates that keeping the independent variable (internet banking) constant, marketing performance will remain at 8.992. the coefficient of internet banking was 0.327which means that a unit change in internet banking will lead to 0.327 unit change in marketing performance. the p-value of 0.000 means that the influence of internet banking on marketing performance was statistically significant. test of hypothesis four h04: mobile banking has no significant influence on marketing performance of deposit money banks in uyo, akwa ibom state. table 4.9 model summary for hypothesis four model summary mode l r r square adjusted r square std. error of the estimate 1 .864a .733 .724 1.90252 a. predictors: (constant), mobile banking anovaa model sum of squares df mean square f sig. 1 regression 288.800 1 288.800 228.601 .000b residual 1888.190 102 18.512 total 2176.990 103 a. dependent variable: marketing performance b. predictors: (constant), mobile banking dr. aniebiet etuk, aniefiok okon akpan and aniekan eyo awah (2023) 36 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe coefficientsa model unstandardized coefficients standardized coefficients t sig. b std. error beta 1 (constant) 8.368 1.189 7.036 .000 mobile banking .377 .095 .364 3.950 .000 a. dependent variable: marketing performance table 4.9 with r value of 0.864 indicates that there is a strong relationship between the dependent and the independent variables. the r-square value of 0.733 implies that about 73.3% of the variation in marketing performance was explained by mobile banking. the constant value of 8.368 indicates that keeping independent variable (mobile banking) constant, marketing performance will remain at 8.368. the coefficient of mobile banking was 0.377which means that a unit change in mobile banking will lead to 0.377 unit change in marketing performance. the p-value of 0.000 means that the influence of mobile banking on marketing performance was statistically significant. 4.2 discussion of findings the study revealed that electronic banking has a significant influence on marketing performance of deposit money banks in uyo, akwa ibom state. the regression result indicated that the use of automated teller machine can enhance customer acquisition amongst nigerian deposit money banks. the result also showed that point of sales is significant in helping banks to acquire new customers. again, the result revealed that internet banking can make the task of getting new customers easy for banks. furthermore, the result established that mobile banking can enhance marketing success of deposit money banks in uyo, akwa ibom state. these results are in agreement with deekor (2021) who investigated the impact of electronic banking on deposit money banks’ performance in nigeria and found that automated teller machine, point of sales, mobile baking and web pay have a positive and significant impact on bank performance. the results are also in consonant with the findings of other similar studies such as demaki, eromatun & festus (2021); kabir, kurfi & isa (2021); aduaka & awolusi (2020), and jimoh (2019) among others. the implication of the result is that for deposit money banks to be able to acquire new customers in today’s competitive business environment, they need to continue to adopt electronic banking innovations as such innovations will help them to enjoy competitive advantage. 5.1 summary the objective of the study was to investigate the influence of electronic banking on marketing performance of deposit money banks in uyo, akwa ibom state. questionnaire was the instrument used in collecting primary data dr. aniebiet etuk, aniefiok okon akpan and aniekan eyo awah (2023) 37 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe and the hypotheses formulated were tested using simple regression. the proxies of electronic banking (automated teller machine, point of sales, internet banking and mobile banking) and that of marketing performance were examined. hypothesis one stated that automated teller machine has no significant influence on marketing performance of deposit money banks in uyo, akwa ibom state. the results showed that automated teller machine has a significant influence on marketing performance of the banks. hypothesis two stated that point of sales does not significantly influence marketing performance of deposit money banks in uyo, akwa ibom state. findings contradicted this hypothesis by showing that point of sales significantly influences marketing performance of deposit money banks. hypothesis three, which stated that internet banking does not significantly influence marketing performance of deposit money banks in uyo, akwa ibom state, was rejected. as results showed that internet banking significantly influences marketing performance of the banks. hypothesis four which stated that mobile banking has no significant influence on marketing performance of deposit money banks in uyo, akwa ibom state, was also rejected because the results revealed that mobile banking has significant influence on marketing performance of the banks. 5.2 conclusion the study aimed at investigating the influence of electronic banking on marketing performance of deposit money banks in uyo, akwa ibom state. based on the results, it was concluded that: • automated teller machine (atm) has significant influence on marketing performance of deposit money banks in uyo, akwa ibom state. • point of sale (pos) significantly influences marketing performance of deposit money banks in uyo, akwa ibom state. • internet banking significantly influences marketing performance of deposit money banks in uyo, akwa ibom state • mobile banking has significant influence on marketing performance of deposit money banks in uyo, akwa ibom state. 5.3 recommendations on the basis of the findings, the following recommendations were made: (i) deposit money banks should continue to deploy electronic banking services through the use of automated teller machine, point of sales, internet banking, and mobile banking, as this will help them to keep winning new customers and remain competitive. (ii) deposit money banks should always look out for emerging electronic banking technologies to ensure continuous growth in their customer base and general performance (iii) staff members of deposit money banks, who are in-charge of the operations of the electronic banking channels, should be trained and motivated on a continuous basis to deliver top notch service that will attract new customers (iv) deposit money banks should strive to resolve the challenges that surround electronic banking, such as network failure, fraud, faulty machine, etc in order for customers to enjoy effective and efficient electronic banking services. dr. aniebiet etuk, aniefiok okon akpan and aniekan eyo awah (2023) 38 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe 5.4 suggestions for future research future research should be done on the relationship between electronic banking and customer loyalty, because it is one thing to win a new customer and it is another thing to retain that customer. references acha, i. a. (2008). electronic banking in nigeria: concept, challenges and prospects. international journal of development and management review, 3 (1) adosola, a, & ewa, u. (2020). deposit money banks services and economics growth in nigeria. international journal of finance and acconnting,9(2), 3141 aduaka, u. & awolusi, o. d. (2020). electronic banking and profitability in the nigerian banking industry. information management and business review, 12(2),20-37 affiah, e.a., akpan, a.o. & mark, r.m. (2022). store layout and purchase behaviour of consumers in selected supermarkets in uyo metropolis. innovative journal of research in marketing and customer success, 2(10) ajayi, i. e & enitilo, o (2016). impact of electronic banking on bank performance in ekiti state, nigeria. international journal of multidisciplinary and current research, 4 (826-835) akpan, a.o., ezenyilimba, e. & mbah, c.c. (2019). age and online consumer behaviour in nigeria. economics and social services academic journal, 1(5). akpan, a.o., mark, r.m. & affiah, e.a. (2022). determinants of mobile phone brand preference among university students in akwa ibom state. british international journal of business and marketing research, 5(5). akpan, a. o., mbah, c. c. & ezenyilimba, e. (2019). service quality dimensions and customer loyalty in the nigeria telecommunication industry. contemporary marketing research journal, 6(1). akpan, a.o., mfon, a.a. & ibok, n.i. (2022). disruptive innovations and marketing performance of online marketers in uyo, akwa ibom state. world journal of advanced research and reviews, 16(02), 181-192. akpan, a. o., promise, c.o. & mbah, c.c. (2019). analysis of the effect of gender on online shopping in nigeria. international journal of research in management, 3(8). akpan, a.o., sampson, e.a. and udoka, m.o. (2022). drug advertising and purchase behaviour of residents of uyo metropolis. a study of the retail pharmaceutical industry. european journal of marketing and management science, 5(1), 1-18. dr. aniebiet etuk, aniefiok okon akpan and aniekan eyo awah (2023) 39 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe allocadia (2021). marketing performance. retrieval from https:11 allocadia.com/blog/performance/ what – is – marketingperformance. awah, a.e., akpan, a.o. & anamelechi, c.c. (2020). internal marketing and customer loyalty among microfinance banks in akwa ibom state, nigeria. international journal of marketing and management research 11 awah, a.e, akpan, a.o. & eno, n.a. (2019). pull promotion in the marketing of bank services among microfinance banks in akwa ibom state. advance journal of economics and marketing awah, e.a., akpan, a.o. & sampson, e.a. (2021). public relations and savings mobilization drive of microfinance banks in akwa ibom state, nigeria. contemporary marketing research journal, 8(3) awah, e.a., akpan, a.o. & ele, l.e. (2021). personal selling and savings mobilization drive of uniuyo microfinance bank. international journal of research in finance and marketing, 11(10) batchelor, b. (2017). the history of e-banking..retrieved from bizfluent.com cantwell, p.j. (2011). census. retrieved from https:// methods .sagepub.com/reference/encyclopedia – of – surveyresearch – methods/n61.xmll cbn(n.d.) all financial institutions. retrieved from https://www.cbn.gov.ng/supervision/allfininstitutions.asp chimezie, o.s, chukwuemeka, i, & uche, s.d.(2019).electronic banking and commercial bank’s performance in nigeria: an ardl approach journal of finance and business policy, 4(1), 10-27 deekor, l. n (2021).electronic banking and deposit money bank’s performance in nigeria.cross current international journal of economics, management and media studies, 3(6), 71-81 demaki, g.o. eromafuru, e. g. & festus, i. o, (2021). electronic banking and bank performance in nigeria: a co-integration and error correction model approach. journal of contemporary issues in accounting,1(1), 12-26 dzombo, g. k, kilika, j. m. & maingi, j.(2017). the effect of branchless banking strategy on the financial performance of commercial banks in kenya.international journal of financial research,8(4), 167-183 ekele, j. s. & sunday, u. i. (2020).implications of electronic banking on commercial banks’ performance in nigeria (2000-2017). international journal of modern management sciences, 8 (1),42-60) https://www.cbn.gov.ng/supervision/allfininstitutions.asp dr. aniebiet etuk, aniefiok okon akpan and aniekan eyo awah (2023) 40 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe enoruwa, k. o ,ezuem, d. m. & nwani, c. o (2019). electronic channels and bank performance: empirical evidence from nigeria. international journal of economics and management studies, 6(5), 37-46 etuk, a. (2015) is marketing strategies applicable here? greener journal of business and management studies ,5 (2),057-061, etuk, a., akpan, a.o. & awah, a.e. (2022). factors influencing adoption of mobile apps among young people in nigeria. a study of university of uyo students. european journal of business and management, 14(3), 65-73. etuk, a., anyadighibe, j. a., amadi, c. & james, e. e. (2022). service quality delivery and consumers’ choice of fast-food outlets. international research journal of management, it & social sciences. issn: 23957492 https://doi.org/10.21744/irjmis.v9n2.2038. etuk, a., anyadighibe, j. a., james, e. e., & egemba, p. m. (2022). trade sales promotion and distributors’ performance of fast-moving consumer goods (fmcgs). international research journal of management, it and social sciences, 9(2), 254-263. etuk, a., awah, a.e. & akpan, a.o. (2022). e-marketing and savings mobilization drive of selected microfinance banks in uyo metropolis, akwa ibom state. international journal of business, marketing and management, 7(3) 1-6 etuk, a. & emenyi e. o. (2022). advertising and profitability: evidence from selected smes in uyo. british journal of marketing studies,10, (2),1-12 etuk, a., joseph a.a., james, e, e. & mbaka, r. (2021), service quality and passengers’ loyalty of public transportation companies. british journal of management and marketing studies 4(4), 82-98. doi: 10.52589/bjmmslrq7javx. etuk, a. & udonde e. u. (2023). the interplay of digital marketing dimensions and customer’s patronage of fast-food industries in akwa ibom state, nigeria. european journal of business and innovation research,11(3)70-97 ezenyilimba, e. & akpan, a. o. (2019). income and buying behavior of online shoppers in nigeria. advance journal of economics and marketing research, 4(3). gronholdt, l. & martensen, a. (2006). key marketing performance measures.the marketing review,6(3), 243252. hassan, s. u., mamman, a, & farouk, m,a.(2013).electronic banking products and performance of nigerian deposit money banks. american journal of computer technology and application, 1 (10), 138145 https://doi.org/10.21744/irjmis.v9n2.2038 dr. aniebiet etuk, aniefiok okon akpan and aniekan eyo awah (2023) 41 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe israel, g.d.(2003). determining sample size.institute of food and agricultural sciences (ifas), university of florida. peod6 jegede, c. a. (2014). effects of automated teller machine on the performance of nigerian banks.american journal of applied mathematics and statistics,2(1), 40-46 jimoh, a. (2019). effect of electronic banking on the profitability of deposit money banks in nigeria. journal of advances in education and philosophy, 3 (11), 405-413 jimoh, a. (2019). effect of electronic banking on the profitability of deposit money banks in nigeria.journal of advances in education and philosophy 3 (11), 450-413 kabir, n, kurfi, s. a., & isa, m. a. (20210.the impact of electronic banking on the financial performance of nigerian deposit money banks.journal of accounting and finance research, 1(1) 19-39 kapoor, s.(2010), succeeding in uk with the bank – focused model of mobile banking. finale whiteboard. retrieved from http://www.intosublogs.com/finacle/2010/03/succeeding _ withthe bankfocus.html mapharing, m. & basuhi, e. (2017). electronic banking and bank performance: botswana context. journal of accounting, business and finance research 1 (1), 84-93 mark, r.m., affiah, e.a. & akpan, a.o. (2022). effect of sales follow-up strategies on market share of selected money deposit banks in uyo, akwa ibom state. european journal of marketing and management science, 5(6). mbah, c.c., odike, m.,& akpan, a.o. (2019). effect of education on online shopping behaviour in nigeria. advance journal of economics and marketing research, 4(4). mwando, s.(2013).contribution of agency banking on financial performance of commercial banks in keya. journal of economics and sustainable development, 4(20), 26-34 ndunga,r.m,njati ,i. c, & rukangu, s (2016). influence of technological innovation on bank performance in meru town, kenya. international journal of economics, commerce and management,4 (11). 1-15 ogutu, m. & fatoki, o. i.(2019). effect of e-banking on financial performance of listed commercial banks in kenya.global scientific journals, 7(1), 722-738. ojokuku, r.m. & sajuyigbe, a.s.(2012). the impact of electronic banking on human resources performance in the nigerian banking industry.international journal of economic development research and investment,3(2), 61-68 http://www.intosublogs.com/finacle/2010/03/succeeding dr. aniebiet etuk, aniefiok okon akpan and aniekan eyo awah (2023) 42 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe rad, h.s, rasoulian, a. mirzael, m & sharifipour, a.(2017). electronic banking: a new strategic to create customer’s loyalty to investment and its impact on economic initiatives. international journal of management, accounting and economics, 4(4), 431-442 siyambola, t. t. (2013). the influence of cashless banking on nigerian economy. e-canadian journal of accounting and finance, 1(2),0-19 udonde, u.e., akpan, a.o. & awah, a.e. (2022). internal marketing and employee performance in insurance industry in nigeria. british international journal of business and marketing research, 5(1). uford, i. c. & mfon, a. a. & charles, i. i. (2023). review of covid-19 crisis and telework: measuring the performance of banks’ marketers in akwa ibom state, nigeria. european journal of management and marketing studies, 8(2), 136-157 wrike (2022). what is marketing performance, retrieved from https:/www.wrike.com/marketing – guide/faq/whatis – marketingperformance/ american interdisciplinary journal of business and economics issn: 2837-1909| impact factor : 6.71 volume. 11, number 4; october-december, 2024; published by: scientific and academic development institute (sadi) 8933 willis ave los angeles, california https://sadijournals.org/index.php/aijbe| editorial@sadijournals.org 1 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe impact of forensic accounting on tax administration in nigeria eke robert ike, ph.d., fca and ogedegbe osariemen department of accounting and finance school of management and social sciences, wellspring university benin city, edo state. robbyeke19@yahoo.com ; robert.eke@wellspringuniversity.edu.ng (+2348034712733) / ogedegbeosariemen@yahoo.com (+2348028389275). doi: https://doi.org/10.5281/zenodo.13933785 abstract: traditional tax administration can no longer be sustained in the present it powered environment that most organizations operate in. this study is set to examine forensic accounting as tool for effective tax administration in nigeria with edo state in focus. the specific objectives are to examine the impact of forensic tax assessment and forensic tax audit on tax administration in edo state. survey research design was adopted and a sample of 347 questionnaires was distributed to tax practitioners and staff both federal and state revenue services operating in benin-city edo state. simple percentages, tables were used to analyze the data while regression analysis was used to test the hypothesis. the outcome of the findings shows that there is positive and significant relationship between forensic tax assessment and forensic tax audit on tax administration in nigeria. the study concluded that there is positive and significant relationship between forensic accounting and tax administration in edo state. the study therefore recommends that all tax authorities both at federal and state level should engage the services of forensic accountants in their offices to curb the spate of tax fraud that has adversely affected tax revenue generated. keywords: forensic accounting, tax administration, forensic tax assessment, forensic tax audit, tax fraud introduction the revenue nigeria generates from oil can no longer fully support her developmental objectives due to the serious decline in price of oil in recent years which in turn led to a decrease in the funds available to the government. there is therefore the need for government to generate revenue internally to help finance public expenditures. this need underscores the eagerness on the part of government to look for new sources of revenue or to become aggressive and innovative in the mode of collecting revenue from existing sources. one of these existing sources is taxation. maisiba and atambo (2016) described tax as a compulsory levy used by the government to provide security, social amenities and create conditions for the economic well being of the society, it is imposed on a subject and any property that might be in the subject’s name. to help the government to achieve better revenue collection, there is a need for her to introduce a better and convenient way to collect tax from her citizens which is through forensic accounting. mailto:robbyeke19@yahoo.com mailto:robert.eke@wellspringuniversity.edu.ng mailto:ogedegbeosariemen@yahoo.com https://doi.org/10.5281/zenodo.13928896 eke robert ike and ogedegbe osariemen (2024) 2 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe the incidence of frauds in modern organizations has become sophisticated and this has made traditional auditing and investigation inefficient and ineffective in the detection and prevention of the various types of frauds, confronting businesses worldwide. onuorah and appah (2012) argue that the level of fraud continues to increase across private and public sector organizations and across nations. fraud is a universal problem as no nation is resistant, although developing countries and their various states suffer the most pain. today, modern organized financial crimes have emerged. financial crimes such as employee theft, payroll frauds, fraudulent billing systems, management theft, corporate frauds, insurance fraud, embezzlement, bribery, bankruptcy, security fraud (efcc, 2004), among others, have taken the center stage in the scheme of things; and has immersed itself in private, public and governmental preference. financial crimes today have grown wild, and the emergence of computer software coupled with the advent of internet facilities has compounded the problem of financial crimes. tax fraud, tax evasion and tax non-compliance has become an alarming situation in most developing countries, and these are the greatest problems afflicting tax administration in nigeria. tax fraud is pertinent, it involved tax evasion, avoidance and non-compliance by individuals and firms. fraud is the deliberate action, false depiction or suppression of material facts for the purpose of deceiving another to act upon it in order to be cheated. all fraud is violation of trust. the essence of tax fraud is the individuals or firms’ ability to evade tax through false representation, fraudulent practices or concealment of tax material facts, in order to deceive government and reduce the tax liabilities and payments. a taxpayer who is accused of tax fraud or tax evasion commits an act of fraudulent behavior against the tax law. the increasing complexity of tax fraud require urgent attention and the service of forensic accountant to investigate and prosecute tax evaders and other related fraudulent activities. therefore, one way of reducing this menace, and to instil tax compliance on individual or firm by complying with actual tax assessment and payment, is the application of forensic accounting techniques. tax fraud has grown rapidly over the last few years, and there is need to consider the services of professionals such as forensic accountants to reduce the pressure and potentials of tax frauds (abdullahi and mansor, 2015). regardless of the type or nature of tax fraud and the sectors it occurs, its’ effect on tax revenue generation cannot be overemphasized (manning, 2023) thus the role of forensic accountants in preventing such financial illegality is eminent. as mentioned in murray (2017), taxes have always been the most important source of the state budget. but taxpayers are constantly looking for ways to avoid paying taxes or to reduce the amount of tax liability which is why some tax payers result to tax fraud. tax fraud is currently a serious problem of each economy in the world. according to onyeka and nwankwo (2016), tax fraud has a negative effect on the state budget and on the situation of public finances. tax fraud is carried out as the result of the economic behaviour of taxpayers, which in most cases the tax payer thinks it is as a result of lacunas in tax laws and administration (saxunova, sulíkova & szarkova, 2017). the integration of accounting, audit and investigation skills yield the specialty known as forensic accounting (islam, rahman and hossan. 2011). forensic accounting services involves application of specialized knowledge and investigative skills possessed by forensic accountants to collect, analyze and evaluate evidential matters and to interpret and communicate the finding in the courtroom, boardroom or other legal administration forum. the service includes disputes resolution, litigation support, bankruptcy proceedings, and fraud and special investigations. forensic accounting services utilizes the practitioner’s specialized accounting, auditing, economics, tax and other business skills to perform number of consulting services. the provision of forensic accounting services requires the practitioner to serve as witness expert depending on the assignment. disputes eke robert ike and ogedegbe osariemen (2024) 3 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe resolution services assist with parties with settlement of or determination of disputes. litigation services involve pending or potential legal or regulatory proceeding before trier of fact in connection with resolution of a dispute between parties. bankruptcy support services assist debtors, creditors, and other interested parties and court with pending or potential formal legal bankruptcy proceedings. fraud and special investigations involve investigation of known or suspected frauds or event using recognized forensic techniques (aicpa). forensic accounting is an investigative style of accounting used to determine whether an individual or an organization has engaged in any illegal financial activities. professional forensic accountants may work for government or public accounting firm. although, forensic accounting has been in existence for several decades, it has evolved over time to include several types of financial information scrutiny. forensic accounting can, therefore, be seen as an aspect of accounting that is suitable for legal review and offering the highest level of assurance (apostolou, hassell and webber, 2000). fagbemi, uadiale and noah (2010), mentioned that the federal inland revenue services (firs) report presented to the federal executive council on national tax policy for 2009, says that sustainable development in the context of tax refers to the pattern of revenue generation, which is able to meet the needs of the present generation of nigerians, without negatively impacting the ability of future generations to meet their own needs. generally, taxation is regarded as a sustainable source of government revenue due to the stability and certainty of the tax system (almustapha & hamza, 2016). there are seemingly, inadequate competent professionals to handle cases of fraud as stated by (owolabi, dada and olaoye (2013) and the judicial system is slow leading to a delay in the prosecution process. from recent development, electronic (e) banking, e-business, e-fraud, e-corruption and e-financial scandals, it is almost obvious that he traditional or conventional accountant may not be able to meet up with the level of sophistication of fraud. objectives of the study the general objective of this study is to assess the impact forensic accounting as a tool for effective tax administration in nigeria.  to assess the impact of forensic tax assessment in tax administration in nigeria.  to ascertain the impact of forensic tax audit in tax administration in nigeria research questions the study seeks to provide solutions to the following questions  what is the effect of forensic tax assessment in tax administration in nigeria?  does forensic tax audit have improved tax administration in nigeria? statement of hypotheses the study is guided by the following hypothesis stated in null form, i. forensic tax assessment does not have significant impact in tax administration in nigeria. ii. forensic tax audit does not have positive impact in tax administration in nigeria literature review concept of forensic accounting the term “forensic accounting was coined by peloubet in 1946, he said, forensic accounting is the application of accounting knowledge and investigative skills to identify and resolve legal issues. it is the science of using accounting as a tool to identify and develop proof of money flow. these tools and/or techniques, skills and eke robert ike and ogedegbe osariemen (2024) 4 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe knowledge can be invaluable for fraud and forensic accounting investigators.” forensic accounting is the integration of accounting, auditing and investigative skills dada, owolabi and okwu,(2013). eliezer and emmanuel (2015) defined forensic accounting as the application of accounting concepts and techniques to legal problems. it demands reporting, where accountability of the fraud is established and the report is considered as evidence in the court of law or in administrative proceedings. according to the association of certified fraud examiners (acfe), forensic accounting is the use of skills in potential or real civil or criminal disputes, including generally accepted accounting and auditing principles; establishing losses or profit, income, property or damage, estimations of internal controls, frauds and others that involve inclusion of accounting expertise into the legal system. okoye and gbegi, (2013) agrees that forensic accounting also called investigative accounting or fraud audit is a merger of forensic science and accounting. in the view of howard and sheetz (2006), forensic accounting is the process of interpreting, summarizing and presenting complex financial issues clearly, succinctly and factually often in a court of law as an expert. it is concerned with the use of accounting discipline to help determine issues of facts in business litigation okunbor and obaretin, (2010). forensic accounting is a discipline that has its own models and methodologies of investigative procedures that search for assurance, attestation and advisory perspective to produce legal evidence. a forensic investigation may be grounded in accounting, medicine, engineering or some other discipline. forensic audit is an examination of evidence regarding an assertion to determine its correspondence to established criteria carried out in a manner suitable to the court. basic skills of a forensic accounting tax practitioner there are numerous opinions on the skills a forensic accounting tax practitioner should have. harris and brown (2000) while investigating the qualities of a forensic accountant, identifies specialized skills and abilities that should be possessed by experts of their nature. they discovered that a forensic accountant should be conversant with civil and criminal law. also, they stressed the need for understanding of court room procedures and expectations, investigative skills, creative thinking as well as clear and precise communication skills. forensic tax audit a forensic audit examines and evaluates a firm's or individual's financial records to derive evidence used in a court of law or legal proceeding. forensic auditing is a specialization within accounting, and most large accounting firms have a forensic auditing department. forensic audits require accounting and auditing procedures and expert knowledge about the legal framework of such an audit. forensic audits cover a wide range of investigative activities. a forensic audit is often conducted to prosecute a party for fraud, embezzlement, or other financial crimes. in the process of a forensic audit, the auditor may be called to serve as an expert witness during trial proceedings. forensic audits could also involve situations that do not include financial fraud, such as disputes related to bankruptcy filings, business closures, and divorces forensic audit investigations can uncover or confirm various types of illegal activities. usually, a forensic audit is chosen instead of a regular audit if there's a chance that the evidence collected would be used in court. forensic tax assessment tax assessment is a method of determining the amount of tax to be paid by a tax payer directly or indirectly. tax assessment is part of tax administration and is done by officials of tax authorities. tax assessment using manual means can lead to loss of revenue to government due to inability of the tax officials to ascertain the correct tax liability. https://www.investopedia.com/terms/a/accounting.asp https://www.investopedia.com/terms/a/audit.asp https://www.investopedia.com/terms/f/fraud.asp https://www.investopedia.com/terms/b/bankruptcy.asp eke robert ike and ogedegbe osariemen (2024) 5 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe according to enofe et al (2015) application of forensic accounting in tax assessment can to a large extent reduce the issue of loss of revenue due to various fraudulent practices perpetrated by taxpayers. there has been a widespread nature and increasing dynamics in tax fraud especially in the areas of tax return and these have combined to making reliance on conventional or traditional auditing tool grossly insufficient to address the overwhelming challenges. oil and gas is a big business in nigeria as it accounts for over 70% of its foreign earnings and therefore, the chances are also high that tax revenue from the companies in that sector if adequately returned will also be huge (chepngeno and fred 2020). however, it was noticed by the federal government that tax return of the oil companies does not commensurate with the expected tax revenue and therefore the needs for forensic analysis into the books of the company to investigate their level and extent of tax returns. based on this, the problem identified by this study is to consider whether government forensic analysis has had any impact on the level of tax fraud prevention of oil companies operating in nigeria. concept of tax administration gray (2008) defined tax administration as the department of the government responsible for the management of tax obligations specified by the tax law. its primary task is to ensure that the right amount of tax is paid by the right taxpayer at the right time, providing the government with the needed revenue to deliver goods and services as planned meaning that an administration that achieves this task is effective. an administration that does so at a reasonable, minimal cost to the government is efficient. however modern tax administration seeks to focus on three key objectives: facilitating voluntary compliance, providing adequate tax records for easy communication of information, and efficiently minimizes cost of collection. this served as the main function which led to the most prevalent use of it systems in tax administrations through the undertaken of the core tax administration tasks and collecting relevant information. the adaptation of information technology in the enforcement of core tax processes such as registration, filling of returns, payments and general maintenance of database brought about what is now known as an ―electronic based tax system popularly referred to as e-tax. electronic taxation can then be defined as the automation of core tax processes. despite the effort of government to maximize revenue and minimize the cost of collection, the issue of tax fraud is still prevalent in nigerian tax system, hence the need to introduce forensic accounting in nigerian tax system to prevent and detect these practices that has been denying government its resources. concept of tax fraud fraud is stealing by deceit and tricks. it is a deceptive trick to cheat or mislead someone. it is the use of deceit to gain unjust or illegal advantage over another person or organization. tax fraud is the deliberate deception and tricks to minimize tax payment or refusal in tax payment through falsification of tax returns or evasion. it is an intentional wrongdoing by taxpayer with a specific purpose of evading tax payment. tax fraud is an intentional deception by taxpayer that result in an injury (tax loss) to the government. it involves both underpayment of tax and fraudulent intent. this can be committed against the government and tax authorities that collect taxes in the federal, state and local government. tax fraud have both domestic and international dimension. the domestic dimension is in the form of tax evasion, especially as a result of high number of informal sector or shadow economy. the international dimension is the type carried out by companies, corporations and high net worth individuals through profit shifting and offshore holdings of financial assets. creative accounting techniques are adopted by many firms and individuals to dodge tax payments through falsification of accounting records, financial facts and accounting figures. the tax system in nigeria focused on voluntary tax systems where the taxpayers’ files tax returns when required for tax assessment and further payment eke robert ike and ogedegbe osariemen (2024) 6 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe of tax. while some individual obliges to this rule and pay their tax obligation, some individual taxpayers are not honest thereby not paying taxes or rather underpay their taxes. this intentional and wilful act to underpay taxes is called tax fraud, ways to defraud the tax authority and the government. fraud management an understanding of effective fraud and forensic accounting techniques will assist professional forensic accountants in identifying illegal activity and discovering and preserving evidence (hadi et al 2018). hence, it is important to understand that the role of a forensic accountant is different from that of regular auditor. crumbley and apostolou (2005) as cited by okoye and gbegi, (2013) describes a forensic accountant as someone who can look behind the faced-out, accept the records, at their face value-someone who has a suspicious mind that (considers that) the documents he or she is looking at may not be what they purport to be and someone who has the expertise to go out and conduct very detailed interviews of individuals to develop the truth, especially if some are presumed to be lying. forensic accounting as a field of specialization that has to do with provision of information that is meant to be used as evidence especially for legal purposes. the persons practicing in this field (i.e. forensic accountants) investigate and documents financial fraud and white-collar crimes such as embezzlement and investigate allegations of fraud, estimates losses damages and assets and analyses complex financial transactions. they provide those services for corporation, attorney, criminal investigators and the government (coenen, 2005, zysman, 2001) the forensic accountant’s engagements are usually geared towards finding where money went, how it got there, and who was responsible. according to bhasin (2007), forensic accountants are trained to look beyond the numbers and deal with the business realities of situations. analysis, interpretation, summarization and the presentation of complex financial business-related issues are prominent features of the profession. he further reported that the activities of forensic accountants involve: investigating and analyzing financial evidence; developing computerized applications to assists in the analysis and presentation of financial evidence; communicating their findings in the form of reports, exhibits and collections of documents; and assisting in legal proceedings, including testifying in courts, as an expert witness and preparing visual aids to support trial evidence. theoretical underpinning this study is anchored on theory of inverse logic. the theory of inverse logic in a nutshell illustrates the advantages of looking both ways, forwards and backwards, in given situations to get multidimensional views. the theory propounded by dr joseph t. wells in 2005, a chartered accountant and a certified fraud examiner illustrates application of certain reality tests on evidence, particularly documentary evidence. a document may appear to indicate something routine or normal but when examined forensically with reality tests, the presence of fraud or deception may be spotted. thus, in addition to the normal investigation and auditing techniques (which are absolutely necessary) certain reality tests and tests of ‘reasonableness’ using reverse logic may yield new results. in addition, the theory is supported with links to access the author’s videos explaining and discussing concepts and case studies. the videos will facilitate better understanding of the theory of inverse logic. the author has extensively used illustrations, experiences with frauds that have happened in the past to demonstrate how the new theory could assist auditors, investigators and even cost & finance controllers in corporate sector. empirical review various researches have been conducted on the impact of forensic accounting on fraud detection and deterrent in organization. the research confirms that there is appositive correlation between forensic accounting and prevention of frauds. eke robert ike and ogedegbe osariemen (2024) 7 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe enofe, utomwen and danjuma (2023) examine the role of forensic accounting in curbing financial crimes. the study adopts a survey research design. the population of the study comprises of staffs of selected banks. primary data was used for the purpose of this research. this research work employed the use of structured questionnaire in eliciting the required data needed to test the formulated hypotheses. regression analysis was utilized as the method of data analysis and the results will be used in testing the hypotheses specified in the study. the study reveals that there is need for forensic accountants in the nigerian banking system; forensic accounting is an effective tool for addressing financial crimes in the banking. their study also reveals that there is a need for forensic accountants in the nigerian banking system, forensic accounting is an effective tool for addressing financial crimes in the banking system and finally that conventional accounting techniques are not effective in curbing financial crimes. imoniana,antunesand formigoni (2013) conclude that the idea that frauds have been least detected by auditors begins to gain shape as auditors are more adequately trained to detect frauds instead of emphasizing the traditional segregation of duties and safeguard of assets. most of these studies have explored forensic accounting to an extent but there is need to examine the extent of forensic auditor in combating fraudulent activities in order to impact on corporate governance of nigerian corporate organizations. other, instance of corporate financial fraud could be drawn from recent bank failure in nigeria where management has fraudulently given loans without board approval and yet such bank annual report has been unqualified. from the above it could be said that the external auditors have continued to certify fraudulent financial statement as unqualified audit report thus, leads to detriment of investors and most times corporate collapse and economic crisis. modugu (2023) pointed out that fraud has become real and prevalent in the contemporary business environment. his study found that there is significant agreement among stakeholders on the effectiveness of forensic accounting in fraud control, improving financial reporting and internal controls. he noted that forensic accountants can provide significant assistants in preventing, investigating and resolving such issues. he recommended for the formalization and specialization of the profession by the national association of accountants in nigeria. locally there has also been research conducted on the subject and results tend to confirm the positive correlations between forensic accountings services and reductions of frauds as indicated by below researcher. eke and alohan (2022) the study examined the impact of e – taxation on tax administration in nigeria. the work was set out to determine whether e – taxation has made tax administration more effective in the country. the study employed primary data. the population for the study consisted of tax payers, tax professionals, chartered accountants, tax administrators from the federal inland revenue service benin and auchi branches. the sample size selected for the study was 399 using stratified random sampling technique. data were collected with the aid of structured questionnaire. a total of 390 copies of questionnaire were retrieved from the respondents. the study carried out using descriptive statistics, correlation analysis and panel regression to analyse the variables using spss 23. the result of the analyses showed that (1) e – taxation exhibits negative impact (0.032) on ease of paying taxes and not statistically significant (p = 0.221) at 5% level, meaning that e – taxation has not significantly made it easier to pay taxes in nigeria. (2) e – taxation exhibits a negative impact (-0.129) on processing time of tax returns and assessment and it is statistically significant (p = 0.013) at 5% level, meaning that e – taxation has helped to achieve a 12.9% reduction in the processing time of tax returns and assessment. the study recommended that tax payers should be trained on how to pay taxes electronically especially with the newly introduced taxpro max;the e – tax system should be constantly reviewed so as to make it more swift. eke robert ike and ogedegbe osariemen (2024) 8 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe khershiat (2018) studied the role of forensic accountant in the detection of tax fraud in financial statement in order to combat fraud. the study revealed that forensic accountant has the expertise, required qualification and skills to detect tax fraud and other irregular manipulation in the financial statements. also, in the studied of role of forensic accounting in limiting tax evasion in public industrial shareholding companies, in jordan by alsharairi (2018) the study revealed that there is statistically significant role of forensic accounting in limiting tax fraud and evasion. the study recommends that government should recognize the role of forensic accountant in limiting cases of tax fraud and evasion. hadi, abed, and kadim (2018) studied the role of forensic accounting and its relationship with taxation system in iraq. the study revealed the necessity of forensic accounting in the introduction of tax reform in iraq. the study recommends the establishment of forensic accounting units in all legal institutions in the country while educational institutions should ensure the inclusion of forensic accounting in their curriculum. besides, enofe, olorunnuho, and eboigbe (2015) studied accountants’ perception of financial accounting and fraud investigation. the study revealed the need for services of forensic accountant for fraud and corruption related issue in nigeria economy while, friday and micah (2019) studied financial statement fraud and tax compliance using tax audit. in their study, they revealed that companies intentionally manipulate records and financial statement in order to evade taxes. it was reported that this tax crime calls for tax audit, while whistleblowing issues becomes important with appropriate protection for whistle-blowers. amah and nwaiwu (2018) used ordinary least squares to investigate self-employed tax avoidance and evasion attitudes (ols). the study examines ethical viewpoints on educational accomplishment, religious and cultural practices, tax administration methods, and tax avoidance actions. the statistics show that tax evasion is considered ethical, meaning that ethical perspectives on educational accomplishment, religion, and cultural practices are linked to tax administration method. the report also advised that authorities be subjected to frequent assessments of tax rates and policies in order to stay up with economic realities, that tax laws and processes be simplified to make them less technical and flexible, and that all necessary help be provided at all times. adebisi & gbeji (2019) examined the effect of forensic accounting on fraud detection in deposit money banks (dmbs) in nigeria. structured questionnaire was administered on 40 forensic accountants. the study reveals a positive link between forensic accounting, proxied by investigation of fraud, analysis of fraud, prevention of fraud, and deterrence in fraud and fraud detection in the banking industry. gosh y. and banegie (2021) conceptually reviewed the impact of forensic accounting toward utilizing professional judgments, accounting skills, auditing and law procedures to fight the dreaded disease of corporate liquidation and the paper concluded that forensic auditing can go a long way to prevent financial scandals in corporate organizations. bressler (2021) studied the perception of attorney and judges in the court system as to what might enhance understanding of the role of forensic accountants in fraud investigation. the researcher employed conceptual analysis and found that forensic accountants must be well trained in the rules of evidence, financial data, accounting information system, and software and communication skills. summary of literature review and gap identified from the empirical literature reviewed, majority of the researches carried out so far in the area of forensic accounting looked at its impact on tax fraud which majority has positive and significant influence. in this research we are looking at how specific skills of forensic accountant impacts on specific area of assessment, audit and eke robert ike and ogedegbe osariemen (2024) 9 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe investigation. it also focused on edo state nigeria. other research in this area to the best of my knowledge has not focused in these two approaches. methodology for the purpose of this research, survey design has been employed in order to answer the research questions and test the hypotheses formulated. since it is a survey design that needs people’s opinion, it was chosen for easy accessibility in order to administer questionnaires to the respondents. this research will cover edo state, nigeria. for the purpose of this study, a finite population of tax professionals, chartered accountants, tax administrators from edo state internal revenue services (eirs) and federal inland revenue service benin and auchi branches (which are the only firs offices in edo state and), made up the target population. information gotten from this group of people was used in this research work. preliminary findings by the researcher revealed the following figures about the population for the study. table 1. population size for the study respondent group population senior staff of edo state board of internal revenue 1,054 senior staff of federal inland revenue service benin & auchi 86 chartered accountants 850 chartered tax practitioners 630 total 2,620 source: eirs, firs, ican (benin district) and citn (benin district) respectively (2024). the sample size of 347 was derived through taro yamane formula, from the population of the study. the questionnaire to be administered to the selected staff of different categories stated above. the sample size was derived using the taro yamane formula. applying the taro yamane formular, 𝑛 𝑁 1+𝑁(𝑒)2 n = sample size n = population e = error limit therefore, 𝑛 2620 1+2620(0.05)2 𝑛 2620 7.55 = 347 source: researcher’s compilation, 2023 the primary data of the study was a closed ended questionnaire. questionnaire was used to get the responses from the respondents of the study. the research instrument entails two sections, the first part containing information relating to bio-data of the respondents, while the second part focused on questions relating to variables of the study. structured questionnaire was used because it allows for high degree of anonymity and the use of standardized question for all respondent. the responses of the respondent in the questionnaire was stated in form of ‘strongly agree’, ‘agree’, ‘disagree’ and ‘strongly disagree’. therefore, the study adopted a four-point likert scale in analyzing the responses of the respondents of the study. for this study, content validity was used. in order to ascertain the content validity of the research instrument used for data collection, the questionnaire will be given to lecturers with knowledge on the subject matter in the department of accounting, wellspring university, benin city, for useful criticism and corrections. the reliability eke robert ike and ogedegbe osariemen (2024) 10 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe of this research is tested through the use of cronbach's alpha (saunders et al., 2016). the cronbach's alpha statistic is usually adopted to measure the consistency of responses of a given set of questions (scale items) that are combined as a scale to measure a particular concept. it consists of an alpha co-efficient with a value between 0 and 1. a value of 0.7 or above indicates that statements in the questionnaire are all consistent and have captured the information about the variables, thus, having a high level of internal consistency (saunders et al., 2016). method of data analysis the study employed both descriptive and inferential statistics. the descriptive statistics include frequency and percentage presented in tables. the study also employed the deductive approach in which inferential computation will be used to explain the relationship between variables under investigation. therefore, regression analysis and annova was employed to test the hypotheses and make inference on the study. analysis was done with the help of statistical package for social sciences (spss) version 26. model specification for the purpose of this study the model used for the regression analysis specifying dependent and independent variable are as specified below. tad = a0 + β1ftai + β2 ftaui+ ε………………….…. (1) where; tad = tax administration; fta = forensic tax assessment; ftau = forensic tax audit; ε = the stochastic error term; β0 = intercept; β1, β2, = parameter estimate; apriori expectation are β1>0, β2>0, which suggests that the independent variables are expected to have positive and significant relationship with tad (i.e good predictors of tad) specifically to be consistent with existing theory (technology acceptance model) on which this study is anchored. thus, β1>0: an increase in forensic tax assessment will result in an improvement in tax administration β2>0: an increase in forensic tax audit will result in an improvement in tax administration presentation, analysis and interpretation of data presentation of data this chapter deals with the presentation and analysis of the data obtained from the respondents in the accountants operating in edo state. the study was conducted to examine the impact of forensic accounting in tax administration in nigeria. a total of three hundred and twenty-three (347) copies of questionnaires were distributed, out of which, three hundred (300) copies were fully completed and returned while twenty-three (47) copies were not returned. hence, for this research study, feedback of ninety-three percent (93%) in this research is therefore taken to be acceptable. table 1: reliability statistics cronbach’s alpha n of items 0.892 25 source: author’s computation, 2024 eke robert ike and ogedegbe osariemen (2024) 11 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe the table above revealed the reliability statistics of the 0.892. that is 89% reliable. analysis of research questions what is the impact of forensic tax assessment in tax administration in nigeria? table 2 : impact of forensic tax assessment in tax administration in nigeria s/n items sa a n d sd 1. forensic tax assessment leads to correct assessment of taxpayers 114 (42%) 21 (7%) 24 (8%) 63 (21%) 66 (22%) 2. fraudulent financial statements are detected by forensic accountants working in tax offices 147 (49%) 39 (13%) 30 (10%) 36 (12%) 48 (16%) 3. through forensic assessment filling of fake returns are easily detected. 186 (62%) 27 (9%) 9 (3%) 36 (12%) 39 (13%) 4. through forensic accounting tax assessment goes beyond normal financial statement filled by clients. 69 (23%) 126 (47%) 24 (8%) 30 (10%) 36 (12%) source: fieldwork, 2024 from table 2 above, a greater percentage of the respondents agreed that forensic tax assessment has significantly made it easier for tax administration in nigeria. this is evidenced by the percentage of respondents that agreed and strongly agreed. some of the respondents however disagreed that forensic tax assessment has impacted on tax administration in nigeria. this implies that forensic tax assessment has noticeable effects on tax administration in nigeria. table 3: what is the impact of forensic tax audit on administration in nigeria? s/n items sa a n d sd 5. forensic tax audit will expose fraudulent practices of tax payers 117 (39%) 102 (34%) 36 (12%) 12 (4%) 30 (10%) 6. forensic tax audit will ensure more tax revenue is generated by government. 63 (21%) 39 (13%) 33 (11%) 138 (46%) 27 (9%) 7. forensic tax audit minimizes the fraudulent disclosure of income by taxpayers. 138 (46%) 63 (21%) 0 (0%) 66 (22%) 33 (11%) 8. forensic tax audit will ensure tax payers prepare authentic financial statement before filling their returns. 51 (17%) 129 (43%) 27 (9%) 42 (14%) 51 (17%) source: fieldwork, 2024 from table 3 above, a greater percentage of the respondents agreed that forensic tax audit has significantly made it easier for tax administration in nigeria. this is evidenced by the percentage of respondents that agreed and strongly agreed. this implies that forensic tax audit plays a significant role in tax administration in nigeria. descriptive statistics this section gives a brief analysis of the responses of the respondents used for this study. as mentioned earlier, the research instrument used for this study is the questionnaire. the likert summated 5-point rating scale was adopted by the researcher in the questionnaire. the points were allocated as follows: strongly agreed (sa) 5, agreed (a) 4, undecided (u) 3, disagreed (d) 2 and strongly disagreed (sd) 1. eke robert ike and ogedegbe osariemen (2024) 12 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe table 4: descriptive statistics table fta ftau mean 4.201 3.441 maximum 5.0 5.0 minimum 2.3 2.4 std. dev. 0.4487 0.4341 std. error 0.0229 0.0221 source: researcher’s compilation, 2024 the table 4. above gives a description of the measures of central tendency, measures of dispersion and measure of normality. from the result above, it was observed that the mean value of forensic tax assessment stood at a value of 4.201 meaning that more of the respondents agree that forensic tax assessment assists in tax administration in nigeria. the standard deviation measuring the spread of the distribution stood at a value of 0.4487, the variable is normally distributed. forensic tax audit was found to have a mean value of 3.441 meaning that forensic tax audit has positive effect on tax administration, the standard deviation measuring the spread of the distribution stood at a value of 0. 4341.. correlation of variables the pearson correlation coefficient was used to establish the kind of relationship that exists between the independent and dependent variables in this research work. the criteria are that if pearson correlation (r-value) is positive, then, there is a relationship between the dependent and independent variables. however, if pearson correlation (r-value) is negative, there is no relationship between the variables. furthermore, a variable is said to be significant at 5% level of significance if its p-value is less than 0.05. while it is insignificant if its p-value is greater than 0.05. table 5: correlation result: forensic accounting and tax admiration. correlation probability observations fta ftau fta r value 1 p value n 300 ftau r value .299 1 p value .002 n 300 300 source: output from spss (2024) **. correlation is significant at the 0.01 level (2-tailed). *. correlation is significant at the 0.05 level (2-tailed). note: r-value = pearson correlation p-value = sig (2 tailed) from the table above, it was observed that forensic tax audit was found to be positively correlated with forensic tax assessment. it was also found to be statistically significant when tested at 5% level of significant (p>0.05). this means that at the moment with forensic tax audit, it possible for forensic tax assessment to be possible. this means that as improvement in full forensic tax audit aids tax administration since a positive relationship exists between the two variables. regression analysis eke robert ike and ogedegbe osariemen (2024) 13 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe table 6: regression model summary model summaryb model r r square adjusted r square std. error of the estimate 1 .704a .689 .621 0.154 a. predictors: (constant), forensic tax assessment, forensic tax audit, b. dependent variable: tax administration source: author’s computation, 2024 the table above reveals the model summary of the study. the adjusted r-squared stood at 0.704. it implies that about 70.4% of the systematic variation is caused by independent variable of the study. however, 30. % of the systematic variation are caused by other variables not used in the model but was adequately accounted for by the standard error of the regression, se = 0.154. table 7: model fitness anovaa model sum of squares df mean square f sig. 1 regression 6.915 1 6.915 39.452 .002b residual 65.411 388 0.168 total 72.326 389 a. dependent variable: tax administration b. predictors: (constant), forensic tax assessment, forensic tax audit, source: author’s computation, 2024 the anova table revealed that the model was statistically fit, f = 39.452, df = 1,388, p = 0.002< 0.05. table 8: regression coefficient dependent variable: tax administration. source: author’s computation, 2024 regression analysis was used to establish the impact of impact of the independent variable on the dependent variables. the rule is that if the coefficient is positive, then there is a positive relationship between dependent and independent variables. however, if the coefficient is negative, there is a negative relationship between the variables. furthermore, the result is said to be statistically significant at 5% level of significance if its probability value (p-value) is less than 0.05. while it is insignificant if its probability value (p-value) is greater than 0.05. discussion of findings the discussion of the results is based on the regression tables 6. the results are discussed below; forensic tax assessment and tax administration. the results in table 8 show that forensic tax assessment exhibits a positive impact (0.235) on tax administration and statistically significant (p = 0.002) at 5% level. this suggests that forensic tax assessment has significantly model 1 predictors unstandadized coefficients std error standadized coefficients beta t sig (constant) fta 3.155 0.154 0.235 19.019 0.002 ftau 3.165 0.150 0.253 19.057 0.000 eke robert ike and ogedegbe osariemen (2024) 14 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe made it easier for tax administration. also, based on the statistically significant criterion (p = 0.002<0.05), we reject the null hypothesis and conclude that ‘forensic tax assessment has significantly impacted on tax administration’. forensic tax audit and tax administration. the results in table 8 show that forensic tax audit exhibits positive impact (0.253) on tax administration and it is statistically significant (p = 0.000) at 5% level. this suggests that forensic tax audit significantly makes it easier for tax administration. based on the statistically significant criterion (p = 0.000<0.05), we reject the null hypothesis and conclude that forensic tax audit significantly enhances tax administration. discussion of findings the broad objective of this study was to examine the impact of forensic accounting on tax administration in nigeria. the specific objectives were to ascertain the impact of forensic tax assessment on tax administration in nigeria; determine the effect of the forensic tax audit on tax administration in nigeria and examine the impact of forensic tax investigation on tax administration in nigeria. the result from the least squares regression analysis it was revealed that forensic tax assessment has significantly made it easier for tax administration in nigeria. the finding is consistent with the works of kharshiat (2018) who found positive relationship between forensic tax assessment and tax administration in nigeria. islam, rahman and hossan (2011) also found positive influence of forensic accounting on tax administration. secondly, the result from the least squares regression revealed that forensic tax audit has positive and significant effect on tax administration in nigeria. this finding is in tandem with the work of hadi, abedi and kadim (2018); & enofe et al (2018. however, in contrast to the work of iyesi and ezuwore (2014) who did not find relationship between forensic tax audit and tax administration. summary of findings the primary aim of this research work is to examine the impact of forensic accounting in tax administration in nigeria. from the result of the analysis of the data in chapter four using the regression technique, the following findings were obtained. 1. there is a significant relationship between forensic tax assessment and tax administration in nigeria. 2. forensic tax audit has a significant impact in tax administration in nigeria. conclusion the study therefore concludes that the role of forensic accountant in tax administration in nigeria is vital. forensic accountants help lawyers, courts and regulatory bodies through application of investigative, data mining and analytical skills in tax administration. this is also because forensic accountants possess skills and experience in accounting, auditing, taxation business operations, management and internal controls. it should be emphasized that whether in the business world or the department of the anticorruption agencies in nigeria, the ultimate responsibility for discouraging and detecting fraud practices rests with the management. fraud detection therefore is a major aspect of daily business activities which should be performed through engagement of forensic accountants. recommendations since there is a general belief that no nation can grow when corruption is seen as normal way of life, there is therefore, urgent need to tackle the endemic fraud and corruptible tendencies in our tax administration and politics so that the nation’s economy can develop like that of other nations. based on the findings of this study, the following recommendations will help reduce fraud in nigeria. eke robert ike and ogedegbe osariemen (2024) 15 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe 1. tax authorities in both federal and state level will need to engage the services of forensic accountant to compliment efforts of other professionals in reducing fraudulent activities and installing fraud proof internal control system in revenue offices. 2. tax authorities both at state and federal level should execute tax audit with more of forensic accountants in their tax audit team 3. practicing accountants in the country should work towards specialization and possibly establishing firms for forensic accounting practice only. today we have chartered institute of forensic accountants and auditors in nigeria 4. the academia should emphasize skill development in the field of forensic accounting so that students at an early stage would become familiar with it. references abdullahi, r., & mansor, n. (2015). concomitant debacle of fraud incidences in the nigeria public sector: understanding the power of fraud triangle theory. international journal of academic research in business and social sciences, 5(5), 312-326. abdullahi, r., & mansor, n. (2015). fraud triangle theory and fraud diamond theory: understanding the convergent and divergent for future research. international journal of academic research in accounting, finance and management sciences, 5(4), 38–45. almustapha, a., & hamza, m. (2016). determinants of informal sector tax evasion in sokoto metropolis. igbinedion university journal of accounting, 2(1), 127-147. adebisi, j. f., & gbegi, d. o. (2019). effect of tax avoidance and tax evasion on personal income tax administration in nigeria. american journal of humanities and social sciences, 1(3), 125-134. amah, c. o., & nwaiwu, j. n. (2018). tax audit practice and down south tax revenue generation in nigeria. international journal of innovative finance and economics research, 6(1), 99-112. bressler, l. (2021). the role of forensic accountants in fraud investigations: importance of attorney and judge's perceptions. journal of finance and accountancy, 11(27), 1-9. chapgeno, h., & fred, k. n. (2020). risk management and ethical environment: effects on internal audit and accounting control procedures. journal of applied management accounting research, (winter), 11-30. dada, s. o., owolabi, s. a., & okwu, a. (2013). forensic accounting: a panacea to alleviation of fraudulent practices in nigeria. international journal of business management and economic research, 4(5), 787792. dada, y., owolabi, i., & olaoye, k. k. (2021). forensic accounting: another feather in the hat of accounting. the chartered accountant, october, 60–63. eke robert ike and ogedegbe osariemen (2024) 16 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe eke, r. i., & aloha, b. o. (2022). impact of e-taxation on tax administration in nigeria. ican conference proceedings of 2022. eliezer, o., & emmanuel, b. (2015). relevance of forensic accounting in the detection and prevention of fraud in nigeria. historical research letter, 23(1), 17-25. enofe, a. o., utomen, p. o., & danjuma, e. n. (2023). the impact of forensic accounting on fraud detection. journal of business and management, 5(26). enofe, a. o., olorunnuho, m. s., & eboigbe, k. o. (2015). accountants’ perception of forensic accounting and fraud investigation. journal of accounting and financial management, 1(8), 94-111. fagbemi, m., uadiale, h., & noah, j. (2010). forensic accounting as an investigative tool: developing a model curriculum for fraud and forensic accounting (ethics). the cpa journal, 12(5). hadi, a. m., abed, a. r., & kadim, h. o. (2018). the role of forensic accounting and its relationship with the taxation system in iraq. academy of accounting and financial studies journal, 22(4), 1-10. harris, c. k., & brown, a. m. (2000). the qualities of a forensic accountant. pennsylvania cpa journal, 71, 23. howard, c. e., & sheetze, u. k. (2008). financial statement fraud: insights from the academic literature. auditing: a journal of practice & theory, 27(2), 231-252. https://doi.org/10.2308/aud.2008.27.2.231 islam, r., rahman, p., & hossan. (2011). forensic accounting and fraud investigation for non-experts. nj: john wiley and sons inc. khersiat, o. m. (2018). the role of the forensic accountant in the detection of tax fraud in financial statements: a survey study in the jordanian accounting and auditing offices and firms. international journal of economics and finance, 10(5), 145-153. https://doi.org/10.5539/ijef.v10n5p145 maisiba, m., & atambo, g. (2016). the study of the effects of tax evasion and tax revenues on economic stability. international journal of academic research in business and social science, 3(3). manning, (2023). effectiveness of the application of forensic accounting services in nigerian organizations. aau journal of management science, 1(1), 171-184. onuorah, m., & appah, m. (2012). forensic accounting as an investigative tool: developing a model curriculum for fraud and forensic accounting (ethics). the cpa journal, 12(5). okoye, p., & gbeji, d. (2013). forensic accounting and auditing: compared and contrasted to traditional accounting and auditing. american journal of business education, 1(2), 115-126. https://doi.org/10.2308/aud.2008.27.2.231 https://doi.org/10.5539/ijef.v10n5p145 eke robert ike and ogedegbe osariemen (2024) 17 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe okunbor, f. f., & obaretin, a. s. (2021). economic and financial crime in nigeria: forensic accounting as an antidote. british journal of arts and social sciences, 6(78), 37-50. onyeka, v., & nwankwo, c. (2016). the effect of tax evasion and avoidance on nigeria’s economic growth. european journal of business and management, 8(24), 158-166. saxunova, d., sulíkova, r., & szarkova, r. (2017). tax management hierarchy: tax fraud and a fraudster. management international conference, venice, italy, may 24-27. zimbelman, m. f., albrecht, c. c., albrecht, w. s., & albrecht, c. o. (2012). forensic accounting (4th ed.). canada: south-western cengage learning. american interdisciplinary journal of business and economics issn: 2837-1909 | impact factor: 6.71 volume. 10, number 4; october-december, 2023; published by: scientific and academic development institute (sadi) 8933 willis ave los angeles, california https://sadijournals.org/index.php/aijbe | editorial@sadijournals.org 14 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe influence work-life balance on employee performance in commercial banks in enugu state ekpechi, sandra chinemerem and rev. fr. assoc. prof. a.a. igwe department of business management, faculty of management and social sciences, godfrey okoye university enugu doi: https://doi.org/ 10.5281/zenodo.10137856 abstract: this study examines the influence of work-life balance on employee performance in commercial banks in enugu state, focusing on specific objectives: (i) assessing the impact of workload pressure on employee engagement and (ii) determining the influence of role conflict on employee motivation in selected banks. the research adopts a descriptive survey design, employing a structured questionnaire as the primary data collection tool. both primary and secondary data sources are utilized, with a target population comprising the staff of selected money deposit banks in enugu state. the creation of the research questions and hypotheses took into account the study objectives. this study used a survey research design to analyze five commercial banks in enugu state. the sample size was calculated using the taro yamane method and was found to be 189 for the 359 participants in the study as a whole. an organized questionnaire guide served as the research instrument for this study. linear regression was used in the hypothesis testing process. version 22 of the statistical package for social sciences (spss) program was employed. the result of the study shows that workload pressure significantly affects employee engagement (p=0.01), role conflict significantly affects employee motivation (p=0.01). it was concluded that workload pressure significantly diminishes employee engagement, aligning with broader scholarly discourse on the intricate interplay between workload and workforce productivity. furthermore, the study underscores the detrimental impact of role conflict on employee motivation, emphasizing the critical need for organizations to proactively address and manage conflicting roles within their structures. it was recommended that commercial banks should implement flexible work arrangements, such as telecommuting and flexible schedules, to allow employees to better balance their work and personal lives. keywords: workload pressure, employee engagement, role conflict, employee motivation introduction the evolution of work-life balance as a crucial aspect of modern workplace culture is rooted in historical developments that shaped labor practices. the late stages of the industrial revolution, commencing in 1760, marked a period when people endured excessive work demands. as labor reformers recognized the detrimental effects of prolonged working hours, the united kingdom introduced the factory acts to limit the labor hours of females and minors while enhancing working conditions in factories. this legislative intervention aimed to improve the quality of life for workers (rama & mohapatra, 2015). ekpechi, sandra chinemerem and rev. fr. assoc. prof. a.a. igwe (2023) 15 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe simultaneously, the united states, amidst the growing industrialization, began quantifying employee work hours. the findings revealed that, on average, employees were working more than 100 hours per week, posing significant risks to their health and safety. in response to these challenges, the u.s. enacted the fair labor standards act on october 24, 1940, establishing the 40-hour work week and providing the first legal steps towards affording employees additional time for personal activities (mayeesha, 2019). the success of flexible working hours at the w.k. kellogg company served as inspiration for other companies to adopt similar programs. today, work-life balance initiatives are considered integral to modern workplace practices (rama & mohapatra, 2015). the pivotal moment for recognizing the importance of work-life balance in organizational settings came with the publication of rosabeth moss kanter's foundational book, "work and family in the united states: a critical review and agenda for research and policy," in 1977. this book urged businesses to foster family-friendly workplaces (pooja, shashi & kavita, 2022). the 1980s in the united kingdom saw the emergence of the phrase "work-life balance" as part of the women's liberation movement. the movement advocated for women's rights, including maternity leave and flexible work schedules. the focus was on challenging the societal expectations that women, unlike men, were burdened with both professional and domestic responsibilities. despite these early efforts, progress in achieving genuine worklife balance was limited (parkash & jyoti, 2015). the 1990s witnessed the implementation of various work-life balance programs, but their effectiveness was questionable, as they failed to address the core difficulties employees faced in their daily lives (abhinandan, 2021). the inadequacies of these early programs prompted a shift in perspective towards work-life balance initiatives. work-life professionals emerged as a response to the need for specialized individuals who could design and implement effective programs tailored to meet the diverse needs of employees and their families (mwangi, et al., 2017). the subsequent decades saw an evolution in work-life programs that transcended gender distinctions and extended beyond familial commitments. these initiatives have been proven not only to enhance employee happiness and job satisfaction but also to contribute to increased productivity, reduced absenteeism, and lower turnover rates. consequently, they have become invaluable investments for companies (jacqueline, chrine, crispin & febby, 2021). in addition to the organizational benefits, the personal toll of career imbalance on employees' mental health and well-being cannot be overstated. okeke (2017) highlights the nigerian banking sector's reputation for a long-hour culture and high workload, emphasizing the potential negative consequences on the mental health of employees. the banking sector in nigeria has undergone significant changes, adopting new technologies and digital solutions to enhance efficiency and customer experience. this has resulted in a more competitive and innovative sector, but it has also increased expectations on employees (okeya, et al., 2020). the demanding nature of the banking industry, characterized by excessive workloads and high expectations, raises concerns about the potential misalignment of employees' priorities, impacting their personal lives (abhinandan, 2021). admiral and rahmi (2018) acknowledge the significant time spent by banking staff on routine tasks, which can be taxing on their mental health. the recognition of human resources as more than just tools for productivity ekpechi, sandra chinemerem and rev. fr. assoc. prof. a.a. igwe (2023) 16 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe underscores the importance of promoting work-life balance for both employees and employers (abhinandan, 2021). in contemporary organizational settings, the promotion of work-life balance is not only a matter of employee well-being but also a strategic imperative. employers who prioritize work-life balance experience benefits such as increased productivity, higher employee engagement, and a more positive work culture. conversely, the absence of work-life balance can result in poor performance, decreased production, absenteeism, higher turnover, and increased staffing and training costs (pooja, shashi & kavita, 2022). to address these challenges, organizations have implemented work-life benefits such as flexible work hours, remote work options, paid time off, and family leave. these initiatives play a crucial role in supporting employees in managing their personal and professional lives, fostering greater job satisfaction and loyalty to the organization (jacqueline, et al., 2021). the tension between work and home responsibilities, if not properly managed, can lead to negative consequences for both employees and employers, affecting productivity and overall organizational success (ethelmary & nebolisa, 2019). the importance of workplace happiness in attracting and retaining highly qualified employees cannot be overstated. organizations that prioritize work-life balance and employee health are more likely to experience stronger employee engagement, lower turnover rates, and a positive reputation in the job market. these factors contribute to long-term success and make them more appealing to top talent (kaur & venkateswaran, 2020). despite these overarching trends and insights at a global level, the enugu state banking sector has not been subjected to in-depth research on work-life balance and its implications for employee performance, job satisfaction, and organizational success. the existing gap in understanding the specific factors influencing employees' ability to balance their personal and professional lives in the local context necessitates a focused inquiry. therefore, this research aims to fill this void by investigating the impact of work-life balance on selected commercial banks in enugu state. 1.2 statement of problem the nigerian banking sector's entrenched long-hour culture and high workload present significant challenges to the well-being and productivity of employees. the lack of work flexibility, coupled with prolonged work hours, is causing stress and negatively affecting the work-life harmony of many employees. this scenario is particularly pronounced in enugu state, where the banking sector is known for its demanding work environment. personal challenges faced by employees outside of work, compounded by excessive working hours, may demoralize them and subsequently impact their service delivery to customers. the potential consequence of this situation is broken homes, as employees struggle to balance the demands of work and personal life. the resultant strain on the mental and emotional well-being of employees can lead to reduced job performance, poor service delivery, and health-related issues. the nigerian banking sector's unique challenges, including a lack of flexibility, high work pressure, and extended working hours, may pose a threat to employee performance and job satisfaction. the potential breakdown of work-life balance incentives, such as leave entitlements, flexible work hours, and family and welfare policies, ekpechi, sandra chinemerem and rev. fr. assoc. prof. a.a. igwe (2023) 17 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe may contribute to employees working around the clock, neglecting personal and familial responsibilities. this situation has the potential to lead to broken families, poor parental upbringing, and customer dissatisfaction, with clients threatening to withdraw their patronage from the banks. against this backdrop, the need to comprehensively understand and address the influence of work-life balance on employee performance in commercial banks in enugu state becomes imperative. this study seeks to explore these dynamics, providing insights into the challenges faced by employees in balancing work and personal life and proposing effective strategies for promoting work-life balance in the local banking sector. 1.3 objectives of the study the overarching goal of this study is to assess the impact of work-life balance on employee productivity and job satisfaction in selected banks in enugu state. the specific objectives are: i. to assess the influence of workload pressure on employee engagement in selected banks in enugu state. ii. to ascertain the influence of role conflict on employee motivation in selected banks in enugu state. 1.4 research questions to guide the investigation and achieve the specified objectives, the following research questions have been formulated: i. to what extent does workload pressure influence employee engagement in selected commercial banks in enugu state? ii. to what extent does role conflict influence employee motivation in selected commercial banks in enugu state? 1.5 research hypotheses the study will test the following hypotheses, aligning with the research questions and objectives: ho1: workload pressure has no significant influence on employee engagement in selected commercial banks in enugu state. ho2: role conflict has no significant influence on employee motivation in selected commercial banks in enugu state. 2.1.1 work-life balance work-life balance is a critical aspect influencing the effective performance and satisfaction of employees within organizations. in today's dynamic and fast-paced work environment, achieving a satisfactory balance between personal and professional responsibilities has become increasingly challenging. this challenge is exacerbated by various factors, including demographic shifts, technological advancements, and organizational changes (hudson, 2015). the traditional functions of human resources, such as recruitment, training, and compensation, are no longer sufficient in addressing the complex needs of modern employees. companies must foster a culture that recognizes employees as individuals with personal lives and responsibilities outside of work. ekpechi, sandra chinemerem and rev. fr. assoc. prof. a.a. igwe (2023) 18 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe the definition of work-life balance goes beyond merely dividing time between work and personal activities. it encompasses a broader perspective, emphasizing the need for individuals to harmonize their professional commitments and personal well-being (greenhaus, collins, & shaw, 2016). achieving work-life balance is not just a personal benefit; it also contributes to a happier, healthier, and more productive workforce, benefiting both individuals and the organization. work-life balance initiatives involve collaboration between employers and employees to establish policies that consider business requirements while respecting the personal lives of the workforce (de cieri and bardoel, 2019). the term "work-family balance" has evolved into "work-life balance," reflecting a comprehensive approach that recognizes the diverse roles individuals play in their lives beyond the workplace. work-life balance is a multifaceted concept that addresses the interplay of paid employment with other activities, such as family and community engagement, recreation, and personal development (clarke, koch, & hill, 2018). it promotes the idea that work and personal life can coexist and enhance progress toward an individual's life goals. the key is to establish mechanisms that involve both employers and employees, ensuring a mutually beneficial approach to managing work and personal responsibilities. as organizations increasingly recognize the importance of work-life balance, implementing policies and programs that support this balance has become integral to fostering employee satisfaction, well-being, and overall organizational success. 2.1.2 workload "workload" constitutes a crucial factor influencing the well-being and performance of employees within organizational settings. defined as the number of tasks a person must complete, workload is a significant stressor that can impact various aspects of an individual's professional and personal life (gibson, 2009). the challenges associated with workload manifest in different forms, including the pressure of completing too many responsibilities and doubts about one's ability to fulfill specific tasks (tufail & sultan, 2019). striking a balance between work capacity, workload, and the work environment is essential for achieving optimal productivity and maintaining a healthy workforce. time pressure, work schedule, role ambiguity, noise, information overload, and repetitive actions are among the factors influencing workload (virgolino et al., 2017). the length of time required to complete work, the complexity of information received, and the nature of work schedules can contribute to the perceived demands of a job. it is crucial for organizations to recognize the impact of workload on employee well-being and performance (rajan, 2017). while an excessive workload can lead to negative outcomes such as burnout, reduced commitment, and dissatisfaction, an insufficient workload may result in indolence and decreased job engagement. striking the right balance is essential to foster a work environment where employees can operate healthily without compromising their well-being. addressing workload-related challenges requires organizations to consider various elements, including workload distribution, work hours, and the overall work environment (hart and staveland, 1998). employers need to implement policies and practices that promote a healthy workload for employees, ensuring that tasks are manageable, deadlines are realistic, and employees have the necessary resources to perform their duties ekpechi, sandra chinemerem and rev. fr. assoc. prof. a.a. igwe (2023) 19 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe effectively. by understanding the complexities of workload and its impact, organizations can create environments that enhance employee satisfaction, well-being, and overall productivity. 2.1.3 role conflict role conflict is a significant aspect of the psychological and emotional challenges individuals face within their professional roles. it occurs when individuals are confronted with conflicting expectations stemming from various positions or roles they hold (farr and ford, 1990). these conflicting expectations can lead to stress, job dissatisfaction, and a deterioration of trust in superiors and the organization. role conflict can manifest in different ways, including conflicting norms, incompatible messages, and conflicting requirements for a particular role (ahmad et al., 2021). according to role theory, individuals experience role conflict when faced with competing demands related to their roles in the workplace (kahn et al., 1964). stress resulting from role conflict interferes with regular behavioral patterns, impacting unique or creative responses (jex, 1998). different types of role conflict, such as intra-sender conflict, inter-sender conflict, inter-role conflict, and role-person conflict, highlight the multifaceted nature of challenges individuals face in managing conflicting expectations. despite the potential negative impacts of role conflict, some studies suggest that it may have positive effects on creativity (lenaghan and sengupta, 2007). the notion that individuals playing multiple roles can lead to a positive impact emphasizes the complexity of the relationship between role conflict and individual well-being. understanding the nuances of role conflict is crucial for organizations seeking to create environments that support employees in managing and resolving conflicting role expectations. implementing strategies to mitigate role conflict, such as clear communication, role clarification, and organizational support, can contribute to a healthier work environment and improved employee satisfaction. 2.1.4 job satisfaction job satisfaction is a critical aspect that reflects the level of contentment or dissatisfaction individuals experience in their work roles (aziri, 2019). it is a multifaceted concept, encompassing emotional, cognitive, and behavioral components that collectively contribute to one's overall attitude toward their job (hassan, tahir, & muhammad, 2019). the significance of job satisfaction is underscored by its impact on organizational behavior, serving as a crucial variable in the examination and interpretation of various phenomena within the workplace (luthans, 2018). understanding job satisfaction involves exploring factors such as the nature of the work, compensation, advancement prospects, leadership, and relationships with coworkers (lumley et al., 2019). employees' reactions to their jobs are influenced by intrinsic and extrinsic factors, with intrinsic satisfaction arising from a sense of accomplishment and self-actualization, and extrinsic satisfaction derived from external factors such as compensation and acknowledgment (martin and roodt, 2018). job satisfaction is not only an individual experience but also a collective reflection of the overall positive or negative attitudes employees hold toward their workplace and employer (martin & roodt, 2018). researchers have developed various measures to gauge job satisfaction, focusing on elements such as pay, growth opportunities, workplace relationships, and ekpechi, sandra chinemerem and rev. fr. assoc. prof. a.a. igwe (2023) 20 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe supervision (smith et al., 1969; cross, 2016). recognizing and addressing the determinants of job satisfaction is crucial for organizations seeking to enhance employee well-being and performance. 2.1.7 employee engagement employee engagement has become a focal point in organizational management, but a lack of consistent academic literature has led to confusion regarding its definition and measurement. employee engagement, as defined by kahn (1990), involves the physical, psychological, and emotional expression of individuals while performing their roles. the cognitive component of engagement encompasses perceptions and assumptions about the organization, its leaders, and the workplace. the psychological aspect delves into how employees feel and behave toward these elements, while the physical component relates to the actual work and energy individuals invest in their roles. the concepts of "flow" and "job involvement" are closely associated with employee engagement (may et al., 2004; csikszentmihalyi, 1975). flow represents the holistic feeling individuals experience when fully immersed in an activity, emphasizing continuous challenges that eliminate the need for external incentives (csikszentmihalyi, 1975). job involvement, on the other hand, highlights the psychological identification individuals have with their work, emphasizing the connection between personal investment and attachment to work (kanungo, 1982). employee engagement is distinct in its emphasis on both feelings and actions, encompassing a longer and more comprehensive involvement in job tasks (kahn, 1990; holbeche & springett, 2003). understanding and promoting employee engagement is vital for organizations aiming to cultivate a motivated and committed workforce. 2.1.8 employee motivation employee motivation is a fundamental aspect influencing behavior related to work, encompassing intrinsic and extrinsic factors. intrinsic motivation is driven by personal preferences, enjoyment, and the inherent qualities of the work itself (osabiya, 2015). it stems from the sense of accomplishment, self-actualization, and identity with the task. in contrast, extrinsic motivation is associated with external factors such as financial rewards, advancement, job security, and other tangible benefits offered by the organization (salem, 2019). motivation serves as a powerful tool in the workplace, inspiring employees to operate at their highest levels of productivity (helie & sun, 2016). motivation is a multifaceted concept with various goals linked to an individual's intrinsic and extrinsic desires (bari, arif, & shaib, 2015). intrinsic motivation is closely connected to the inherent excitement and personal fulfillment derived from the task itself, while extrinsic motivation involves tangible rewards and incentives provided by the organization (hassouna, 2018). recognizing the diverse nature of motivational factors is essential for organizations aiming to create work environments that cater to the intrinsic and extrinsic needs of their employees. the understanding of motivation as a driving force behind behavior provides insights for organizations to design effective strategies that enhance employee engagement and overall performance. ekpechi, sandra chinemerem and rev. fr. assoc. prof. a.a. igwe (2023) 21 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe 2.2.2 work-family border theory when the term "work-family boundary" is employed, only the realms of work and family are mentioned. popularity of this theory led to the development of the concept of "work-family balance," which is defined as "a least amount of role conflict and satisfaction, and effective both at work and at home." (clark, 2020). it further differs from boundary theory in that, per desrochers and sargent (2019), its notion of boundaries contains both psychological classifications physical barriers that mark the times, locations, and individuals linked with work and family. as stated by clark, the theory of the work-family boundary (2020), "explains how individuals their personal and professional life in balance by controlling and negotiating the boundaries between them." this ideology's fundamental tenet is the assumption that "work" and "family" are separate worlds or realms of influence on each other. work and home could be as opposed to two different nations with different vocabulary, attitudes to appropriate behavior, and methods of carrying out activities because of their divergent goals and cultures. 2.3 empirical review 2.3.1 the influence of workload pressure on employee engagement herawati, kurniawan, and azhari (2021) used loyalty mediation to examine the degree to which workload, corporate culture, and motivation affected ocb. 50 pt bummy harapan umat yogyakarta personnel were randomly chosen as study participants. both the sobel test and multiple regression analysis were applied during the testing. the results of the study showed that loyalty can mitigate the detrimental impacts of job load, business culture, and employee motivation. sipayung (2021) conducted a study at the environmental services office of the deli serdang regency on the effects of job satisfaction as an intermediary variable on employee performance in relation to motivation, workload, and work environment. validity, reliability, traditional assumption tests (normality, multicollinearity, heteroscedasticity, and linearity), and hypothesis testing (path analysis approach and sobel test) were the data analysis approaches used. the outcomes revealed that work satisfaction was a strong correlation with and significantly influenced by motivation and workload, but not by the workplace environment. the workload and motivation of employees had a significant and favorable impact on their performance, however the office setting had no discernible impact. employee performance was positively and significantly impacted by job satisfaction. work, workload, and inspiration researchers janib, rasdi, omar, alias, zaremohzzabieh, and ahrari (2021) looked at the connection between academic achievement and job workload among malaysian university academic staff. the research also makes an effort to examine the two methods of mediation (career commitment and job satisfaction) that clarify the main connection between the demands of employment and school achievement, as well as the subsequent search for empirical evidence for each. data from a cross-sectional study were used gathered from academic personnel members working in malaysian research universities (mrus) to examine the three presented hypotheses. smartpls 3.3.3 was used to analyze the 191-person final sample is valid and comprehensive responses in order to assess the theories. the results showed a negative linking among workload and academic staff productivity. additionally, job satisfaction serves acting as a bridge between workload and job satisfaction and academic staff performance. these results highlight the crucial function that job happiness plays in reducing the detrimental ekpechi, sandra chinemerem and rev. fr. assoc. prof. a.a. igwe (2023) 22 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe impacts of academic job performance personnel and workload. as opposed to what we had anticipated, the study has shown that the connection between occupational requirements and academic staff performance is not mediated by career commitment. through the use of intervening variables, this study advances our understanding of how job workload affects university academic staff performance. at the pem plant pt. schneider electric manufacturing batam, grace and rahmat (2019) evaluated the workload effects on production operator and staff performance. descriptive analysis and multiple linear regression analysis, together with simultaneous and partial t-tests and f-tests, were employed in this study's data analysis. in light of the findings of multiple linear regression, the external has a workload variable limited impact a bearing on worker performance is the workload variable while the internal workload variable has no such impact. both internal workloads and external workload what factors influence how well employees perform simultaneously. stress and strain at work's effects on workers' performance was explored by wahyuni, musnadi, and faisal (2020). all bpka (aceh financial management board) personnel are the target. the study's sample consists of equal to the population, or 130 respondents, because the sample was taken using the cencus method. the testing results show that role conflict affects employee performance, workload does not affect employee performance, conflict of role affects employee work strain, workload affects employee work strain, employee performance affects employee work strain, employee work stress partially mediates the influence of role conflict on employee performance, and employee work strain fully explains the impact of workload on employee performance. these are all novel outputs from the development of the model, and the item itself is new. ijie, zhen, and korankye (2021) examined the psychological capital's effects on nigerian industrial workers' creative behavior organizations. the study specifically hypothesizes that employee innovation is negatively impacted by workload. the connection between workload and employee innovation is controlled by psychological capital, which has a favorable impact on employees' inventive behavior. a sample size of 315 employees from nestle nigeria plc, unilever nigeria plc, nigerian breweries company, and nigeria bottling company completed online questionnaires served as the basis for the study. the associations were examined using correlation, multiple regression, and hierarchical moderated multiple regression. the results show that although psychological capital had positive and significant influence on employees' innovative behavior, workload had a negative and important effects. results also show that psychological capital considerably and favorably impacted the association between employee innovation and workload. inegbedion, inegbedion, peter, and harry (2020) looked into how employees perceived the balance of their workloads and how satisfied they are with their jobs in their workplaces. it aimed the extent to which employees' perceptions of workload balance affect their level of job satisfaction. 764 employees from 8 international companies were chosen at random and 2 private institutions in nigeria made up the study's participants. the use of structural equation modeling was made. the results show that comparisons between an the workload of an employee and their coworkers, the fit between a job's requirements and the employee's skills, and opinions of the organization's staff strength and workload balance can significantly affect how a person feels about the balance of their workload and their degree of pleasure at work. ekpechi, sandra chinemerem and rev. fr. assoc. prof. a.a. igwe (2023) 23 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe 2.3.2 the influence of role conflict on employee motivation to determine if the variables role conflict and role overload affect job satisfaction, haholongan and kusdinar (2019) conducted research. 130 respondents made up the study's sample. utilizing multiple linear regression analysis, this test is run. role conflict and role overload have a 47.2% effect on job satisfaction. according to the research, it is projected that the organization would be able to diminish the excessive workload by providing employees with empathy, incentives, and bonuses to make strenuous work more manageable and to increase job satisfaction. using a total sample size of 154 individuals, bongga and susanty (2018) investigated the effects impact role ambiguity and role conflict on indonesian transportation businesses' employee work satisfaction. utilizing path analysis, the data is examined. using the coefficient of determination (cd) or r square (r2), the study's findings' role conflict and ambiguity were evaluated. for these variables, the overall r square (r2) value was 62.8%. employee job satisfaction is significantly impacted negatively by role conflict and role ambiguity, both simultaneously and partially. therefore, transportation businesses in indonesia need to reduce the rate of role conflict and role ambiguity in order to increase employee job satisfaction. it is advised that indonesian transportation firms foster open communication and increase evaluation irfan, indradewa, syah, and fajarwati (2021) looked at the impact of role conflict and workplace culture on job satisfaction and worker performance at pt alpha sistem kreasi. the data in this study are evaluated using the structural equation model (sem) with the option partial least square. use the alternative pls method since it makes use of warppls 7.0 statistics and anticipatory measures with variable indicator non-parametric features. at the conclusion of this inquiry, the role of conflict has a good impact on satisfaction. the workplace has a good influence on happiness. satisfaction has a beneficial effect on worker performance. positive performance effects are caused by the role conflict. there is no performance impact of the workplace. role conflicts' impact on performance by at pt alpha sistem kreasi, irfan, indradewa, syah, and fajarwati (2021) studied how the workplace atmosphere and role conflict affected productivity and job satisfaction. the data in this study are evaluated using the structural equation model (sem) with the option partial least square. use the alternative pls method since it makes use of warppls 7.0 statistics and anticipatory measures with variable indicator nonparametric features. according to the findings of this investigation, conflict plays a positive role in contentment. contentment is positively impacted by the work environment. satisfaction has a beneficial effect on worker performance. positive performance effects are caused by the role conflict. there is no performance impact of the workplace. with work satisfaction and commitment as modifying factors, hakim and sudarmiatin (2018) investigated the connection between intention and workplace stress to leave. pt infomedia solusi humanika in malang doing research explanatory research using a quantitative methodology is the study design. 203 contract workers made up the study's sample population, which was calculated using slovin's formula. after that, 135 workers from pt infomedia solusi humanika-malang in east java who were chosen at random to complete the instrument served as the study's sample. the data is also analyzed using a route-based approach. the examination of the data revealed that work stress significantly and favorably affects organizational commitment, satisfaction at work and intention to stay with the organization. work commitment is favorably and strongly impacted by job satisfaction, ekpechi, sandra chinemerem and rev. fr. assoc. prof. a.a. igwe (2023) 24 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe organizational dedication, intention to leave the company, and work stress. this the conclusion can be used as a starting point for further research, along with the inclusion of extra variables and cutting-edge techniques to make it successful. cross (2019) looks into how work-related stress affects employee output, including the type of of stress, different types of stress, and how work stress affects employee performance. in spite of significant investments made in employee performance, nigerian organizations have yet to determine the underlying reasons behind workplace stress. the issue has not been the subject of many investigations. this study's main objective is to determine how work-related stress affects employees' performance. employee performance may be affected by workplace stress. productivity declines along with increases in absenteeism, turnover, and medical costs when stress is not properly controlled. in order to reduce its bad effects and perform at your best, stress needs to be well managed. the fact that most employees contemplated leaving their employment and felt the corporation didn't care about them revealed the overwhelming discontent that undoubtedly reduced performance. the organization needs to assess whether or not an employee support program is necessary. a program for assisting employees must be put into place for the early diagnosis and intervention of issues in order to increase performance levels. dodanwala and santoso (2020) looked at the mediation effect impact occupational stress on sri lankan construction industry specialists have studied the relationship between job satisfaction variables and exit intention. the information was gathered by a cross-sectional survey of 274 project-level workers from 10 sri lankan construction firms. in order to analyze the research hypotheses, a path analytical model is developed. the study's findings confirmed the mediation model of job stress, which postulates that a drop in job stress was influenced by job stability and satisfaction with direct supervision stress levels and a corresponding decline in turnover intentions. while complete mediation is seen through monitoring, a small amount of mediation is seen from employment stability. satisfaction with compensation and coworkers was a direct predictor of decreased a desire to depart the organization. promotions, plans to increase turnover, and stress at work were not conclusively linked, the authors found, contrary to their expectations. the results also showed that demographic factors including gender, age, and employment history with the company, have an impact on how stressed out employees are. methodology 3.1 research design a descriptive survey research design was employed, aiming to gather data on principles, attitudes, and opinions through interviews. this systematic approach involved collecting data consistently from a discernible population to describe current phenomena (mugenda & mugenda, 2016; oso & onen, 2019). 3.2 source of data data collection involved primary and secondary sources. primary data were obtained through a structured questionnaire, while secondary sources, such as journals and books, were utilized to supplement the study's information (mugenda & mugenda, 2016). ekpechi, sandra chinemerem and rev. fr. assoc. prof. a.a. igwe (2023) 25 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe 3.2.1 primary data a questionnaire served as the primary data collection tool, incorporating structured questions to guide respondents' opinions. 3.2.2 secondary data secondary data were drawn from earlier academic works, including journals, books, and online publications, to enhance the study's foundation. 3.3 population of the study the target population comprised staff from selected money deposit banks in enugu metropolis, enugu state. the population distribution was provided by the banks, specifying the number of senior and junior staff in each bank. table 3.1: population distribution s/n senior staff junior staff total 1 first bank of nigeria, okpara avenue 24 50 74 2 zenith bank, okpara avenue 18 48 66 3 united bank of africa, okpara avenue, 14 60 74 4 fidelity bank okpara avenue 20 41 61 5 access bank okpara avenue 24 60 84 total 100 259 359 (field survey, 2022) 3.4 sample size determination a sample size of 189 was determined using straightforward random sampling and the taro yamane technique, considering a 5% degree of error (mugenda & mugenda, 2016). 3.5 sampling techniques bowle's formula for proportional distribution was employed to proportionally distribute the sample among the chosen banks, ensuring fair representation. the formula is this: nh = 𝑛𝑁ℎ 𝑁 where: nh = sample allocation to homogenous group or level n = overall sample size nh = the stratum population of each homogenous group. n = the population of the study ekpechi, sandra chinemerem and rev. fr. assoc. prof. a.a. igwe (2023) 26 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe therefore, the sample of each user group becomes 1. first bank = 74x189 359 = 39 2. zenith bank = 66x189 359 = 35 3. united bank of africa = 74x189 359 = 39 4. fidelity bank = 61x189 359 = 32 5. united bank of africa = 84x189 359 = 44 3.6 instrument for data collection a self-administered questionnaire with two parts was utilized, focusing on respondents' biographical data and specific study objectives, utilizing a five-point likert scale. 3.7 validity of research instrument the questionnaire's validity was ensured through review by industry professionals, incorporating feedback for contrast, substance, criterion, and readability. 3.8 reliability of research instrument pilot testing was conducted, and the cronbach's alpha coefficient indicated high internal consistency for both work-life balance (0.74) and job satisfaction (0.77). 3.9 method of data analyses statistical procedures, including descriptive statistics, frequency analysis, anova, and regression analysis, were employed using spss. the decision rule for hypothesis testing used a significance level of 0.05. decision rule a p-value less than 0.05 indicated a significant impact of independent variables on the dependent variable. the simple regression formula represented the research findings, evaluating relationships between variables. ekpechi, sandra chinemerem and rev. fr. assoc. prof. a.a. igwe (2023) 27 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe result presentation table 4.1.6: mean rating of responses of respondents on the influence of workload pressure on employee engagement in selected banks in enugu state s/n items sa a u d sd n fx x decision 1 works i get from the office can be time consuming most times 29 93 13 50 185 593 3.2 accepted 2 there is general knowledge of workload pressure management in our organization 97 82 2 4 185 821 4.4 accepted 3 when work is not time pressuring, i find it easier to engage in the work 58 91 34 2 185 724 3.9 accepted 4 allotting tasks with achievable time encourages employee engagement 93 88 1 3 185 822 4.4 accepted 5 our organisation reduces paperwork in order to give employees time to prepare effectively 80 95 10 185 800 4.3 accepted total mean 4.2 accepted source: field survey, 2022. the mean score based on replies from respondents about the impact of workload pressure on employee engagement at particular banks in enugu state is displayed in table 4.1.6 above. according to the decision rule, x is regarded acceptable if it is 2.5 or higher and rejected if it is less than 2.5. the fact that all of the items in the table were accepted despite having a mean score of 2.5 and an overall mean of 4.2 shows that workload pressure has an impact on employee engagement in particular enugu state banks. table 4.1.7: mean rating of responses of respondents on the influence of role conflict on employee motivation in selected banks in enugu state s/n items sa a u d sd n fx x decision 1 my helpfulness or unwillingness to say "no" to things assigned to me at work usually leads to job stress for me. 95 60 21 9 185 766 4.1 accepted 2 most times i spend longer hours at the workplace and this often makes me to quit my job 90 85 5 4 185 804 4.3 accepted 3 when the company’s target and demand are too difficult for me to reach, my job becomes burdensome to me 125 49 8 185 837 4.5 accepted 4 when any of the employee experiences dysfunctional stress the individual usual leave the organisation 98 85 1 1 185 834 4.5 accepted 5 sometimes, i think that i got some options to leave this company 71 100 5 9 185 774 4.2 accepted total mean 4.2 accepted source: field survey, 2022. the mean score based on replies from the respondents on the impact of role conflict on employee motivation in particular enugu state banks is displayed in table 4.1.7 above. according to the decision rule, x is regarded acceptable if it is 2.5 or higher and rejected if it is less than 2.5. the fact that all of the items in the table were ekpechi, sandra chinemerem and rev. fr. assoc. prof. a.a. igwe (2023) 28 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe accepted despite having mean scores of 2.5 and an overall mean of 4.2 suggests that role conflict affects employee motivation in particular enugu state banks. 4.2 test of hypotheses regression analysis was used to evaluate the four (4) hypotheses that were offered. when the significant (sig) outcome of a regression analysis is less than 0.05 for a 95% confidence level or less than 0.01 for a 99% confidence level, or vice versa, we accept the alternative hypothesis and reject the null hypothesis. the idea was examined with the use of linear regression analysis. test of hypothesis one ho: in some enugu state banks, workload pressure has no discernible impact on staff engagement. hi: employee engagement in the selected commercial banks in enugu state has been significantly impacted by workload pressure. table 4.2.1a: model summary model r r square adjusted r square std. error of the estimate 1 .663 a .440 .431 .37617 a predictors: (constant), workload pressure table 4.4.1a above shows that in a selection of enugu state banks, there is a substantial association between workload pressure and employee engagement, with an r-value of.663. when you take a deeper look at the table, you'll see that the r square value is.440, which means that workload pressure is probably to blame for 44% of the changes and has a big impact on how engaged employees are, especially in selected commercial banks in enugu state. table 4.2.1b: anova model sum of squares df mean square f sig. 1 regression 20.123 3 6.708 47.403 .000 b residual 25.612 181 .142 total 45.735 184 a predictors: (constant), workload pressure b dependent variable: employee engagement according to table 4.4.1b, the f-value equals the mean square residual (0.142) divided by the mean square regression (6.708), yielding a value of f=47.403. based on the results, it can be concluded that the model in this table is statistically significant (sig =.000). so, at f (3,184) = 47.403, workload strain significantly predicts employee engagement. ekpechi, sandra chinemerem and rev. fr. assoc. prof. a.a. igwe (2023) 29 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe table 4.2.1c: coefficients(a) model unstandardized coefficients standardized coefficients t sig. b std. error beta (constant) .782 .236 3.309 .001 1 wp .230 .054 .266 4.272 .000 a. dependent variable: employee engagement the workload pressure's level of impact on employee engagement and its relative importance were shown in the table above. workload pressure; =.230; t=4.272; p0.01 are the statistical findings. according to the statistical findings, a workload-related stressor can predict employee engagement in a way that is statistically significant. linear regression model is given as y = a + βx where y = employee engagement a = constant βx = coefficient of x therefore, employee engagement = .782 + 0.230wp the decision criterion, which called for a 0.05 p-value, specified that the null hypothesis was accepted if the p value was higher than 0.05 and rejected if it was lower than 0.05. based on the data in the aforementioned anova table, we accept the alternative hypothesis and reject the null hypothesis. this is because each item's significance level is less than 0.01. this situation, where workload pressure is present at a few enugu state institutions, has a significant effect on employee engagement. test of hypothesis two ho: role conflict has no significant influence on employee motivation in selected banks in enugu state. hi: role conflict has a significant negative influence on employee motivation in selected banks in enugu state. table 4.2.2a: model summary model r r square adjusted r square std. error of the estimate 1 .250 a .063 .047 .45468 a predictors: (constant), stress management the level of employee turnover and stress management have a r =.250 association, as seen in table 4.4.2a above. the table's r square value of.063 indicates that stress management only accounts for 6.3% of changes that significantly affect the rate of staff turnover in a subset of enugu state's banks. ekpechi, sandra chinemerem and rev. fr. assoc. prof. a.a. igwe (2023) 30 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe table 4.2.2b: anova model sum of squares df mean square f sig. 1 regression 2.503 3 .834 4.035 .008 b residual 37.418 181 .207 total 39.921 184 a predictors: (constant), role conflict b dependent variable: employee motivation role conflict and employee motivation are correlated at a r =.250 level, as seen in table 4.4.2a above. the table's r square value of.063 indicates that only 6.3% of variables with a substantial impact on employee motivation may be attributed to stress management. table 4.2.2c: coefficientsa model unstandardized coefficients standardized coefficients t sig. b std. error beta 1 (constant) 3.638 .286 12.735 .000 rc .229 .093 .259 2.459 .015 a. dependent variable: employee motivation the extent of stress management's impact on employee turnover and its significance were shown in the table above. as for the statistical findings, they are as follows: (role conflict =.019; t=.171; p>0.05). role conflict is a statistically significant predictor of employee motivation, according to the statistical outcome. linear regression model is given as y = a + βx where y = employee motivation a = constant βx = coefficient of x therefore employee motivation = 3.638 + 0.019rc the decision rule stated that the null hypothesis was accepted unless the p value was less than 0.05 and the pvalue was fixed at 0.05. based on the results in the aforementioned anova table, we accept the alternative hypothesis and reject the null hypothesis because the significance level for role conflict is less than 0.01. at a few enugu state organizations, role conflict has a detrimental impact on employee engagement. 4.3 discussion of findings 4.3.1 influence of workload pressure on employee engagement the study's results reveal a significant and negative influence of workload pressure on employee engagement within the selected commercial banks in enugu state. this aligns with the findings of janib et al. (2021), ekpechi, sandra chinemerem and rev. fr. assoc. prof. a.a. igwe (2023) 31 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe indicating a weak association between workload and academic staff performance, where job satisfaction acts as a mediator. the study underscores the crucial role of job satisfaction in mitigating the adverse impacts of job workload on employee productivity. this observation resonates with ijie, zhen, and korankye's (2021) research, which identifies a substantial negative impact of workload on employees' innovative behavior. moreover, the study establishes that psychological capital plays a significant role in positively influencing the relationship between workload and employee innovation. 4.3.2 influence of role conflict on employee motivation the outcomes revealed that role conflict had a negative, considerable impact on staff motivation in the selected commercial banks in enugu state. this finding is consistent with that of bongga and susanty (2018), who found that employee work happiness is significantly impacted negatively by both role conflict and role ambiguity, simultaneously as well as separately. in order to improve employee work satisfaction, transportation companies in indonesia must lower the percentage of role conflict and role ambiguity. as set forth in the arrangement, role conflict and role overload have a 47.2% impact on job satisfaction, according to haholongan and kusdinar (2019). according to the research, it is projected that the organization would be able to reduce the excessive workload by providing employees with empathy, incentives, and bonuses to make strenuous work more manageable and to increase job satisfaction. conclusion in conclusion, this study delves into the intricate dynamics of workload pressure and role conflict within selected commercial banks in enugu state and their profound implications on employee engagement and motivation. the investigation has unearthed compelling evidence showcasing that heightened workload pressure significantly diminishes employee engagement, aligning with broader scholarly discourse on the intricate interplay between workload and workforce productivity. furthermore, the study underscores the detrimental impact of role conflict on employee motivation, emphasizing the critical need for organizations to proactively address and manage conflicting roles within their structures. these findings carry substantial implications for organizational management, urging a paradigm shift in approaches to workload distribution and role delineation. to enhance employee engagement, the study recommends tailored training programs for workload management, fostering transparent communication channels, and instituting flexible work arrangements. similarly, for mitigating role conflict's adverse effects on motivation, the study advocates for role clarification initiatives, conflict resolution training, and the establishment of robust employee support systems. the synergy of these measures aims not only to alleviate immediate stressors but also to cultivate a workplace culture prioritizing employee well-being. in navigating the complexities of the contemporary work landscape, organizations must be attuned to the nuanced needs of their workforce. regular employee feedback mechanisms and continuous evaluation of workload and role dynamics are indispensable components of an adaptive management strategy. moreover, proactive initiatives promoting employee well-being, such as wellness programs and work-life balance policies, are crucial for sustaining a positive organizational culture. in essence, this study provides a comprehensive framework for organizational leaders to reevaluate and recalibrate their approaches, fostering a workplace conducive to optimal ekpechi, sandra chinemerem and rev. fr. assoc. prof. a.a. igwe (2023) 32 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe employee engagement and sustained motivation. as the corporate landscape evolves, the cultivation of a harmonious and supportive work environment emerges as a strategic imperative for organizational success and longevity. 5.3. recommendations the following suggestions are hereby offered in light of the findings of this study: 1. commercial banks should implement flexible work arrangements, such as telecommuting and flexible schedules, to allow employees to better balance their work and personal lives. 2. in other to reduce workload pressure, commercial banks should offer employee wellness programs, such as fitness classes and mental health resources, to support employees' physical and mental well-being. references admiral c., & rahmi, f. (2018). work-life balance analysis among banking sector employees: case study in bank x branch office padang, indonesia. journal of education & practice, 9(27). clarke, m., koch, l., & hill, e. (2018). the work–family interface: differentiating balance & fit. family & consumer sciences research journal, 33(2), 121-140. cross, o. d. (2019). effects of job stress on employee’s performance. international journal of business, management & social research, 06(02), 375-382. ethelmary, d., & nebolisa, o. t. (2019). work-life balance & job satisfaction of selected commercial banks in south-east nigeria. international journal of entrepreneurship & business innovation, 2(1), 63-76. gibson, ivancevich donelly (2009). effect of workload and job stress on employee performance at tax consultant office lucky kartanto and partners in sidoarjo organization. jakarta: erland. greenhaus, j., & beutell, n. (2019). sources of conflict between work & family roles. academy of management review, 1(9), 76-88. hart, s. g., & staveland, l. e. (1998). development of nasa-tlx (task load index): results of empirical and theoretical research. hassan, i., tahir, m. q., & muhammad, a. k. (2019). the retrenchment effect on job performance with mediating effect of work-life balance. african journal of business management, 5(21), 8642-8648. hudson resourcing. (2015). the case for work/life balance: closing the gap between policy & practice. hudson australia & new zealand. available on www.hudson.com. jacqueline, s., chrine, h., crispin, k., & febby, l. m. (2021). exploring the effects of work-life balance on employee performance in the banking sector: a case study of ab bank in lusaka-zambia. international journal of scientific & research publications, 11(6). jex, s., & guadonowski, d. (2018). efficacy beliefs & work stress: an exploratory study. journal of organizational behaviour, 13, 509-517. ekpechi, sandra chinemerem and rev. fr. assoc. prof. a.a. igwe (2023) 33 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe kaur, m., & venkateswaran, c. (2020). a comparative study of job satisfaction of women employees working in the banking sector. sustainable humanosphere, 16(1), 1598-1603. lero, d. s., & bardoel, a. (2019). including the social-cultural & policy contexts in our multi-level, multinational study of work-family conflict. report to the international workshop. guelph, on. martins, l., eddleston, k., & veiga, j. (2018). moderators of the relationship between work-family conflict & career satisfaction. academy of management journal, 45(2), 399-409. mayeesha, f. r. (2019). work-life balance as an indicator of job satisfaction among female bankers in bangladesh. european journal of business & management, 11(6). mwangi, l. w., boinett, c. c., tumwet, e., & bowen, d. (2017). effects of work-life balance on employees’ performance in institutions of higher learning: a case study of kabarak university. kabarak journal of research & innovation, 4(2), 01-23. okeke, m. n. (2017). work-life balance & job satisfaction in selected banks in anambra state. global journal of applied, management & social sciences (gojamss), (14), 80–95. pooja, a., vidyavathi, b., keerti, k., & p. mamata (2016). work-life balance policies, practices & its impact on organizational performance. international journal of latest technology in engineering, management & applied science (ijltemas), 5(7). rajan d (2017). negative impacts of long working hours: a comparative study among nurses. moj app bio biomech, 1(2). rama, v. k., & mohapatra, b. (2015). impact of work-life balance on the performance of employees in the organizations. global journal of business management. tufail, m., & sultan, f. (2019). examining the effect of challenge-hindrance stressors on work attitude and behavior. fwu journal of social sciences, 13(1). virgolino, a., coelho, a., & ribeiro, n. (2017). the impact of perceived organizational justice, psychological contract, and burnout on employee performance: the moderating role of organizational support, in the portuguese context. international journal of academic research in business and social sciences, 241263. american interdisciplinary journal of business and economics issn: 2837-1909| impact factor : 6.71 volume. 10, number 3; july-september, 2023; published by: scientific and academic development institute (sadi) 8933 willis ave los angeles, california https://sadipub.com/journals/index.php/aijbe| editorial@sadipub.com 10 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe sectoral employment and fdi investments in ghana: a comprehensive analysis riccardo .c, ganau, roberto, and storper, m. faculty of business and economics, mendel university, brno, czech republic https://doi.org/10.5281/zenodo.8234146 abstract: in the context of increasing foreign direct investment (fdi) inflows to the african continent, this study delves into the distribution and impact of fdi-registered projects across sectors in ghana. while these investments have been anticipated to catalyze economic growth, the disparate contributions of sectors to the country's total gross domestic product (gdp) raise questions about the effectiveness of fdi in driving sectorspecific development. this paper seeks to comprehensively investigate the influence of fdi and local investments on key sectors in the ghanaian economy. the study concentrates on the agriculture, building & construction, manufacturing, and service sectors, meticulously analyzing the role of fdi in fostering job creation within these domains. drawing on data spanning from 2001 to 2018, sourced from the ghana investment promotion centre, the research employs a battery of tests including multivariate, multicollinearity, unit-root, correlation, and auto-correlation analyses to unveil both short and long-term relationships among the variables. ordinary least squares (ols) regression provides a foundational basis for simple linear regression. findings illuminate a positive and significant impact of fdi on the service sector, contrasted by its relatively muted influence on agriculture and manufacturing industries, where its significance wanes at the 5% confidence level. intriguingly, the study also reveals that employment generation, stemming from fdiregistered projects, does not significantly affect the manufacturing sector. as an actionable recommendation, the paper suggests governmental provision of incentives to attract investment into underperforming sectors, thereby stimulating employment opportunities and fostering economic expansion. this study contributes substantively to the existing literature by shedding light on the nuances of fdi's contribution to the economy, offering insights into sector-specific responses to fdi, and deciphering the multifaceted factors that shape investment inflows. ultimately, the findings underscore the importance of targeted policies for reinvigorating sectors and driving holistic economic advancement. keywords: foreign direct investment (fdi), economic growth, sectoral distribution, ghanaian economy, job creation introduction: as foreign direct investment (fdi) flows to the african continent continue to rise, the distribution of fdi registered projects among sectors has fueled expectations of increased economic growth in ghana. however, the contribution of each sector to total gdp varies. this paper aims to investigate the impact of registered projects through fdi and local investments on key sectors of the ghanaian economy. the research focuses on riccardo .c, ganau, roberto, and storper, m. (2023) 11 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe assessing the role of fdi in generating jobs in the agriculture, building & construction, manufacturing, and service sectors. the study uses data from the ghana investment promotion centre for the period 2001 to 2018. through a series of tests, including multivariate, multicollinearity, unit-root, correlation, and auto-correlation analyses, the study determines the short and long-term relationships between variables. ordinary least squares (ols) regression is used to obtain a simple linear regression. results indicate that fdi had a positive impact on the service sector, but lacked significant impact on agriculture and manufacturing industries at a 5% significance level. additionally, employment creation through registered investment projects had no significant effect on the manufacturing sector. the paper recommends that the government provide incentives to attract more investors in the non-performing sectors to boost employment generation and facilitate economic growth. this study contributes to the existing literature on the significance of fdi's contribution to an economy, including the various sectors' response to fdi, and the factors that affect inflows. 1.1. objective the motivation for this paper is the result of the recent increase in fdi flow to the african continent, from which ghana is not an exception. the distribution of fdi registered projects among the various sectors has inspired a high level of expectation of economic growth in ghana. the contribution of each sectoral level is measured as a proportion of total gdp. as numerous studies have shown fdi to play a significant role in many economies, there is a need for us to assess the significance of fdi and local investments in the sectors of the ghanaian economy. this study has two main goals. the first is to investigate the impact of registered projects through fdi and domestic investments on the agriculture, building & construction, manufacturing, and service sectors. the second is to examine the employment created through investment registered projects and how this is distributed among the selected sectors. 2. literature review the effect of fdi influx into the industrial, construction, and service sectors on economic growth was investigated in a panel of 16 central, eastern, and southern european cese nations, using data from different periods between 1998 and 2012. the analysis of the decomposition of fdi showed that fdi in the industrial and service sectors has a positive and significant impact on economic growth (miteski & stefanova, 2017). another study considered the impact of fdi in the agriculture, manufacturing, and service sectors on economic growth. this empirical analysis used panel data from 2000 to 2015 from five countries: china, pakistan, india, bangladesh, and sri lanka. the results revealed that fdi in manufacturing has the greatest potential to increase economic advancement compared to investment in other sectors (haider & muhammad, 2016). other studies have evaluated the relationship between fdi and growth at the sector level. in one study, the effect was examined using a panel cointegration test followed by a random-effects model. the results showed that at the sector level, growth affects fdi, but fdi does not affect growth (areej & shahid, 2017). another study applied the autoregressive distributed lag (ardl) method to investigate the relationship between fdi and growth in the mining sector using data from1988 to 2018. the results indicated that in this sector, fdi has a significant positive relationship with a country’s gdp in the long run. fdi in mining was revealed to have relatively greater effects compared to fdi in non-mining sectors and domestic investment (plaxedes & seetanah, 2020). investigating the nature and behavior of total and sectoral fdi inflow in south asian countries in recent years, another study adopted a holistic approach to studying and analyzing the fdi-growth dynamics. the results showed that the impact of fdi in south asia is influenced by the sectoral composition of the fdi (saswata, nitya, & bhawna, 2020). furthermore, the relationship between fdi and income inequality has been analyzed. one study estimated the impact of fdi from a sector perspective and identified 3 major sectors: the primary riccardo .c, ganau, roberto, and storper, m. (2023) 12 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe sector, manufacturing industry, and services. using panel data for 13 economies from 1980 to 2009, the study found a positive effect of fdi on income inequality in the service and manufacturing sectors (macarena, 2016). using a multiple linear regression model and ordinary least squares (ols) estimation, the influence of fdi on economic growth has been examined. one study distinguished ten different sectors in the united states. according to its findings, not all forms of fdi appear to be advantageous to host economies. however, certain industries have a favorable impact on economic growth, while others have a negative effect (donny, 2018). another study used a sample of 10 cee for the period 1995–2019 and looked at the system determinants and transmission mechanisms of the sectoral structure of fdi inflows. this study followed on from earlier research, and the empirical component included the construction of a panel model. the results showed that the most effective strategy to attract developmentally-efficient fdi is to change the local economy's structure through explicit industrial and investment policies (mario, kusanović, & jakovac, 2021). using the vector autoregressive (vars) model, fdi has been shown to have a considerable beneficial impact on economic growth in both the short and long run (saidatulakmal & abdillahi, 2021). a study revealed that, in the long run, both the rate of fdi inflows and the rate of foreign tourism have had a favorable impact on the rate of economic growth in estonia (amin & glenn, 2021). using sectoral data as the primary source of information to determine the direct effect of fdi on gdp, another analysis forecasted that fdi in the industry, tourism, and agriculture sectors has an overall highly favorable and significant impact on gdp over a ten-year period (ram & seema, 2018). 2.1. fdi and employment generation the impact of fdi inflows on lowand high-skilled workers' employment and wages in mexico's manufacturing and service sectors has been investigated. the study used a quarterly panel dataset spanning mexico's 32 states from 2005 to 2018. according to the findings, increased fdi influx into the manufacturing sector had a favorable influence on lowand high-skilled employment. in the service sector, however, the results are inconclusive throughout the model for both types of employment (eduardo, ozuna, & zamora, 2020). another study indicated a general positive correlation between external investment and local employment at the national level, although it identified significant variances between regions and sectors (riccardo, ganau, & storper, 2022). using johansen's cointegration approach and toda and yamamoto's granger causality test, other researchers investigated the long-run link between outbound fdi and employment in china. according to the data, outward fdi from china resulted in favorable job development, particularly in the tertiary sector (huiqun & lu, 2011). another study examined the impact of fdi and economic growth in turkey on overall employment and female employment. the findings demonstrated that fdi harms overall employment and female employment, whereas economic growth has a beneficial impact on overall employment and female employment (umit & alkan, 2016). using suitable descriptive analysis, a further study analyzed the impact of fdi on job creation in india. the results demonstrated that the impact on job creation in india is obvious, but fdi inflows may not play a key role in the country's growth rate. (ronismita & swapnamoyee, 2020). a single equation error correction model was used to examine the impact of fdi on employment in macedonian industrial sectors. the findings showed that fdi and human costs are statistically significant determinants that positively affect employment in the manufacturing subsectors, implying that, as a result of their interaction, companies with fdi may have higher productivity (dimitar, 2017). in another study, using panel data from 1994 to 2017, the authors examined the impact of fdi on youth unemployment in the southern african development community (sadc) area. the findings suggested that fdi has a slight impact on lowering youth riccardo .c, ganau, roberto, and storper, m. (2023) 13 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe unemployment in the sadc region (dadirai et al., 2021). finally, providing a general overview of the flow of fdi to ghana by considering the overall number of registered projects and using employment creation to assess their significance, yeboah and anning (2020) showed that ghanaians enjoyed about 85% of the total jobs created between 2013 and 2018. 3. methodology and data this study seeks to investigate the comparative influence of fdi and domestic registered projects and investment on employment generated in the various sectors of the ghanaian economy. however, to avoid having too wide a focus, we have focused on the agriculture, building & construction, manufacturing, and service sectors. to assess the impact of fdi on an economy, a series of tests must be carried out to ascertain the short and long-run relationships between the variables. these tests include multivariate, multicollinearity, unit-root, correlation, and auto-correlation (among the error terms) analyses. these tests are carried out to obtain a simple linear regression using ordinary least squares (ols). the study used secondary data from gipc for the period 2001 to 2018. first, a summary statistic was carried out of all the variables to obtain the means and standard deviations; these are shown in table 1. moreover, figure 1 shows the time trends of fdi projects in the various sectors. we tested for unit root presence in the variables using the kwiatkowski-phillips-schmidt-shin (kpss) test. under the null hypothesis (𝐻0), 𝜇𝑡 is constant, and the variance of 𝜀𝑡 is zero. on the other hand, under the alternative hypothesis (𝐻1), 𝜇𝑡 is a random walk, and the variance of 𝜀𝑡 is positive. the kpss test thus shows a unit root presence in each of the variables (agriculture sector, building & construction sector, manufacturing sector, and service sector). it is known that time series involve a different approach to the analysis of economic data (granger, 1981). secondly, a multicollinearity test was carried out using variance inflation factors (vif). the symptoms of multicollinearity in a regression model include an increase in the variance of regression coefficients. the vif approach ( ̂𝑗) indicates the relative variance of the j-th coefficient of regression. it holds that vif ( ̂𝑗) 1. if vif ( ̂𝑗) exceeds the limit of 10, it is an indication of severe multicollinearity in the model. the variance of the j-th regression coefficient can be written as in equation 1. ̂ 𝜎 ̂ ̂ ̅ ̂ )= 𝑛𝑖 ̅ (1) the last test is to verify that there is no autocorrelation between predicted variables and the error terms from the regression outputs. using the durbin-watson (dw) autocorrelation test, the hypotheses are h0: there is no first-order autocorrelation, and h1: there is first-order autocorrelation. the calculation for this test is shown in equation 2. ∑ 𝑑 = (2) the dw test is not capable of testing for a higher order of autocorrelation of the error terms. the rule of dw states that 1.5< d <2.5 is the no autocorrelation range. model equation 3 contains non-significant regressors (agriculture and manufacturing sectors). the p-value of the explained sum of squares reduction f-test suggests that non-significant coefficients are zeros and can be removed from the model. the backward elimination method can be applied to remove the non-significant explanatory variables and enhance the performance of the resulting model. it begins with the removal of the non-significant coefficients as indicated by the high p-value. after applying the backward elimination method, we arrived at model equation 4. riccardo .c, ganau, roberto, and storper, m. (2023) 14 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe in model equation 4, the constant is non-significant, and it is affected by pure heteroskedasticity. pure heteroskedasticity is due to a correct model specification and does not cause a systematic error (bias). because the error term does not have a constant variance, it is necessary to find out which regressor is causing the heteroskedasticity. heteroskedasticity violates classical assumption number five, which makes model 4 less than ideal. after applying the principles and steps for handling pure heteroskedasticity, we obtained model equation 5 by removing the manufacturing sector from the equation. 𝑇𝑜𝑡𝑎𝑙 𝐹𝐷𝐼 𝑝𝑟𝑜𝑗𝑒𝑐𝑡𝑠𝑡=𝛽0 + 𝛽1𝐴𝑔𝑟𝑖𝑐𝑢𝑙𝑡𝑢𝑟𝑒𝑡 + 𝛽2building and construction𝑡 + 𝛽3manufacturing𝑡 + 𝛽4service𝑡 + 𝜀𝑡 (3) 𝑇𝑜𝑡𝑎𝑙 𝐹𝐷𝐼 𝑝𝑟𝑜𝑗𝑒𝑐𝑡𝑠𝑡= 𝛽0 +𝛽1building and construction𝑡+𝛽2manufacturing𝑡 + 𝛽3service𝑡 + (4) 𝑇𝑜𝑡𝑎𝑙 𝐹𝐷𝐼 𝑝𝑟𝑜𝑗𝑒𝑐𝑡𝑠𝑡 = 𝛽0 +𝛽1building and construction𝑡 + 𝛽2service𝑡 + 𝜀𝑡 (5) to assess fdi registered projects’ impact on the total number of jobs, we considered the number of jobs created in the selected sectors. the total number of jobs for ghanaians and expatriates in each of the sectors is modeled on the overall employment from fdi. model equations 6 and 7 are generated by the logarithm transformation of each of the variables. the estimate of the expected number of jobs to be created from the registered investment projects is thus: 𝑙𝑛total fdi employment 𝑡=𝛽0 + 𝛽1 𝑙𝑛agriculture𝑡 + 𝛽2 𝑙𝑛building and construction𝑡 + 𝛽3𝑙𝑛manufacturing𝑡 + 𝛽4𝑙𝑛service𝑡 +𝜀𝑡 (6) 𝑙𝑛total fdi employment 𝑡= 𝛽0 +𝛽1 𝑙𝑛agriculture𝑡 + 𝛽2 𝑙𝑛building and construction𝑡 + 𝛽3𝑙𝑛service𝑡 + 𝜀𝑡 (7) under the model estimation of the impact of fdi registered projects, the total of fdi projects is the dependent variable, whereas the agriculture, building & construction, manufacturing, and service sectors are the explanatory variables. the total number of fdi registered projects is measured in hundreds, whereas the total fdi employment is measured in thousands. 𝛽1,2, 𝛽3,𝑎𝑛𝑑 𝛽4 are the regression coefficients, while 𝜀𝑡 indicates the error term, and 𝛽0 represents the constant term of the obtained model. all the analyses were carried out using gretl software. the significance level of p-values is set at 5%. the p-values can be used as an index of the “strength of the evidence” against the null hypothesis (h0) (fisher, 1925). having chosen the statistic from the data for this study and the probability associated with this statistic, if the probability is smaller than 5%, we reject h0. according to the literature, the proposed level of p=0.05 means that a “1 in 20 chance is being exceeded by chance”, and this is a suitable limit for statistical significance (fisher, 1935). fisher explained that it is usual and convenient for experimenters to take 5% as a standard level of significance and to ignore all outcomes which fail to reach this standard (fisher, 1925). this leads to their elimination from further discussion. table 1. summary statistics. variable mean median s.d. min max total fdi projects 252.7 202.0 109 138.0 514.0 service 76.8 63.5 42.7 37.0 195.0 manufacturing 53.2 51.0 13.0 39.0 86.0 building and construction 22.8 19.0 14.8 8.00 61.0 agriculture 10.0 10.5 4.63 1.00 16.0 4. results and discussion the summary statistics of the variables in table 1 show that the service sector had the highest median with 63.5%, followed by the manufacturing sector with 51%, and building & construction with 19%, whereas the riccardo .c, ganau, roberto, and storper, m. (2023) 15 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe agriculture sector had the lowest median with 10.5%. similarly, the time series plots in figure 1 show an upward trend of fdi-distributed projects in the service, manufacturing, and building & construction sectors, while the agriculture sector had a downward trend. in addition, table 2 below shows the results of the multicollinearity test of the regression outputs. the table shows no multicollinearity among the variables. model 1 in table 3 shows a non-significant impact of fdi registered projects on the agriculture and manufacturing sectors. the constant of model 1 is also non-significant. however, the impact on the service and building & construction sectors is significant. the regression output for model 2 is indicated in table 4; the constant is zero because it is not statistically significant. however, the coefficient of the manufacturing sector became statistically significant after applying backward elimination to the agriculture sector. figure 1. time series trends per sector. table 2. multicollinearity test. variables variance inflation factor service 2.981 manufacturing 1.325 building and construction 3.259 agriculture 1.112 riccardo .c, ganau, roberto, and storper, m. (2023) 16 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe table 3. model1 estimation. variables coefficient std. error t-ratio p-value constant 7.056 27.32 0.2584 0.8002 service 1.414 0.245 5.780 6.38e-05*** manufacturing 1.113 0.535 2.083 0.0576* building and construction 2.791 0.736 3.795 0.0022*** agriculture 1.320 1.378 0.958 0.3553 model 1 variants. regression statistics figure regression statistics figure mean dependent var 251.67 s.d. dependent var 108.62 sum squared residuals 8073.49 s.e. of regression 24.920 r-squared 0.959 adjusted rsquared 0.947 f (4, 13) 77.55 p-value(f) 6.15e-09 log-likelihood −80.49 akaike criterion 170.98 schwarz criterion 175.44 hannan-quinn 171.60 rho −0.480 durbin-watson 2.919 note: significance codes: ‘***’ 0.001, ‘*’ 0.05. table 4. model 2 estimation. variables coefficient std. error t-ratio p-value constant 14.50 26.12 0.55 0.5875 service 1.44 0.243 5.92 3.73e-05*** manufacturing 1.17 0.529 2.21 0.0439** building and construction 2.82 0.732 3.86 0.0017*** model 2 variants. regression statistics figure regression statistic s figure mean dependent variance 251.67 s.d. dependent var 108.7 sum squared residuals 8644.09 s.e. of regression 24.84 r-squared 0.956 adjusted r-squared 0.947 f (3, 14) 103.69 p-value(f) 8.47e-10 log-likelihood −81.11 akaike criterion 170.21 schwarz criterion 173.78 hannan-quinn 170.70 rho −0.402 durbin-watson 2.78 note: significance codes: ‘***’ 0.001, ‘**’ 0.01. the coefficients of model 1 show a positive response from the various sectors in response to fdi and local registered investment projects. the dw value shows a higher negative serial correlation. the percentage of variation explained in the dependent variable was about 96%. model 2 in table 4 shows autocorrelation due to the dw test value. riccardo .c, ganau, roberto, and storper, m. (2023) 17 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe model 3 in table 5 indicates that the total of fdi registered projects has a positive impact on both the service and building & construction sectors. however, the significance level of the service sector is higher than that of the building & construction sector. also, the constant has become statistically significant (nonzero). model 3 shows no serial correlation based on the figure for dw in the output. however, the information criterion has increased compared to models 1 and 2. figure 2 indicates a normal distribution of the error term from the regression output. table 5. model 3 estimation. variables coefficient std. error t-ratio p-value constant 65.46 13.86 4.722 0.0003*** service 1.440 0.272 5.286 9.14e-05*** building and construction 3.319 0.783 4.236 0.0007*** model 3 variants. regression statistics figure regression statistics figure mean dependent variance 251.67 s.d. dependent var 108.66 sum squared residual 11671.78 s.e. of regression 27.89 r-squared 0.94 adjusted r-squared 0.934 f (2, 15) 121.48 p-value(f) 5.42e-10 log-likelihood −83.81 akaike criterion 173.62 schwarz criterion 176.29 hannan-quinn 173.99 rho −0.159 durbin-watson 2.298 note: significance codes: ‘***’ 0.001. figure 2. normality test result from model 3 estimation output. to assess the impact of fdi and local registered investment projects on employment creation in the sectors, we needed to use the total estimated number of jobs created. the values for the time series were transformed into logs for a correct model specification. figure 3 shows the log transformation of the time series plots for the agriculture, building & construction, manufacturing, and service sectors. riccardo .c, ganau, roberto, and storper, m. (2023) 18 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe figure 3. time series plot (fdi and domestic employment) in the sectors. the regression output from model 4 in table 6 on the employment impact of fdi on the sectors shows that the coefficients of the manufacturing and building & construction sectors are non-significant. this means that the nonsignificant p-values of the regressors need to be removed from the model to obtain the final regression model (model 5). table 6. model 4 estimation. variables coefficient std. error t-ratio p-value constant 0.787 1.556 0.504 0.6221 l_agriculture 0.278 0.053 5.230 0.0002*** l_service 0.319 0.098 3.263 0.0062*** l_buildingconst 0.181 0.086 2.096 0.0562* l_manufacturing 0.373 0.186 2.006 0.0661* model 4 variants. regression statistics figure regression statist ics figure mean dependent variance 9.901 s.d. dependent var 0.992 sum squared residual 1.570 s.e. of regression 0.347 r-squared 0.906 adjusted r-squared 0.877 f (4, 13) 31.39 p-value(f) 1.44e-06 log-likelihood −3.589 akaike criterion 17.179 schwarz criterion 21.63 hannan-quinn 17.793 rho −0.258 durbin-watson 2.483 note: significance codes: ‘***’ 0.001 ‘*’ 0.05. the results of model 5 in table 7 indicate a significant impact of fdi on employment in the agriculture, building & construction, and service sectors. the constant is statistically significant and nonzero. however, the agriculture and service sectors respond more significantly to fdi than the building & construction sector. comparing the information criteria in model 4 to model 5, it is clear that model 4 has the lowest information criteria, but a nonsignificant coefficient does not provide any economic meaning to those variables. model 5 is burdened with firstorder autocorrelation. regarding model 5, the constant, agriculture, and service sectors were below a 1% significance level, while the building & construction sector was around 2%. table 7. model 5 estimation. riccardo .c, ganau, roberto, and storper, m. (2023) 19 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe variables coeffici ent std. error t-ratio p-value constant 3.610 0.731 4.938 0.0002*** l_agriculture 0.251 0.057 4.425 0.0006*** l_service 0.335 0.107 3.110 0.0077*** l_buildingconst 0.223 0.092 2.418 0.0298** model 5 variants. regression statistics figure regression statistics figure mean dependent variance 9.90 s.d. dependent var 0.992 sum squared residual 2.06 s.e. of regression 0.383 r-squared 0.87 adjusted r-squared 0.851 f (3, 14) 33.3 p-value(f) 1.25e-06 log-likelihood −6.1 akaike criterion 20.14 schwarz criterion 23.6 hannan-quinn 20.53 rho 0.28 durbin-watson 1.367 note: significance codes: ‘***’ 0.001 ‘**’ 0.01. the results indicated that from 2001 to 2018, the distribution of fdi registered projects among the various sectors was not significant in the agriculture and manufacturing sectors. this implies that greater effort is needed to enhance the performance of both the agriculture and manufacturing sectors in terms of attracting fdi and domestic investment. regarding employment creation from fdi through the registered projects, only the manufacturing sector seemed not to have a significant response in terms of the number of jobs generated through investment during the selected period. a critical point of the analysis is that more fdi projects are allocated to the service sector than to other sectors in the ghanaian economy. the recent efforts in the manufacturing sector on the part of the current administration seek to address the low performance in that sector. the excellent performance of the building & construction sector in terms of fdi employment is due to the huge investment in housing and construction activities in the country in recent years. the results of all the models show that the manufacturing sector’s responses to fdi and local investment were at a 5% significance level, which indicates a less significant impact. however, based on the results, we cannot rule out that fdi and domestic investment have no effect on the manufacturing sector. we excluded the significance level of investment in the manufacturing sector as a result of our restriction to a 5% significance level. the r-squared from all the models indicates an excellent fit. 5. conclusion this study has confirmed the significance of fdi and domestic investment registered projects distributed among the agriculture, building & construction, manufacturing, and service sectors. the kpss test indicated a unit root presence in the selected time series variables. ols regression showed that registered fdi projects have no significant effect on the agriculture and manufacturing sectors. however, the building & construction and service sectors enjoy a significant impact from the registered investment projects. on the other hand, when testing for the influence of fdi on the employment created in the selected sectors, no significant effect was found on job creation in the manufacturing sector. conversely, fdi did have a positive impact on employment generated in the agriculture, building & construction, and service sectors. this study has significant implications for policymakers and the government of ghana since the outcome showed that some sectors are riccardo .c, ganau, roberto, and storper, m. (2023) 20 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe not responding optimally to fdi and domestic registered investment projects. manufacturing is an essential tool for transforming an economy, and there is a need for the government to improve the investment situation in the manufacturing sector. however, there are fewer registered projects in the agriculture sector, although it serves as a source of employment for most people in the country. it would be helpful for the government to boost these non-performing sectors with incentives to attract more investors. also, there is a need to modernize the agriculture sector to enhance its efficiency. based on the results, the service sector performs better than the other sectors. however, this outcome may not be sufficient to explain the factors behind the nonperformance of the manufacturing sector in terms of employment creation from investment. as the results confirm that the agriculture and manufacturing sectors are not responding optimally to fdi and domestic investments, it would be good to allocate resources and incentives to boost their performance. the findings apply to the situation in ghana and would differ for other countries. references alhassan, m., gakpetor, e. d., kyei, s. n. k., & akomeah, e. (2018). foreign direct investment (fdi), economic growth and bank performance in ghana. international journal of finance and accounting, 7(4), 97-107. amin, s., & glenn, p. j. (2021). impact of foreign direct investment and international tourism on long-run economic growth of estonia. journal of economic studies, 49(2), 364-378.available at: https://doi.org/10.1108/jes-11-2020-0543. areej, s., aftab, & shahid, a. (2017). impact of foreign direct investment on sectoral growth of indian economy. international journal of economics and financial issues, 7(3), 477-488. dadirai, m., adane, h. t., arega, d. a., julius, m., shiferaw, f., tahirou, a., & victor, m. (2021). the effects of foreign direct investment on youth unemployment in the southern african development community. development southern africa, 38(6), 863-878.available at: https://doi.org/10.1080/0376835x.2020.1796598. dimitar, n. (2017). the impact of foreign direct investments on employment: the case of the macedonian manufacturing sector. eastern journal of european studies, 8(2), 147-165. donny, s. (2018). the impact of foreign direct investment on economic growth( a causal study in the united states). bise: journal of business education and economics, 4(1), 50-63. ebenezer, a. b., agoba, a. m., & abebreseh, r. (2017). foreign direct investment in ghana: the role of infrastructural development and natural resources. african development review, 29(4), 575588.available at: https://doi.org/10.1111/1467-8268.12297. eduardo, s., ozuna, t., & zamora, h. (2020). the effect of fdi on low and high-skilled employment and wages in mexico: a study for the manufacture and service sectors. journal for labour market research, 54(1), 1-15. riccardo .c, ganau, roberto, and storper, m. (2023) 21 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe evans, k., samuel, m., & prince, m. s. (2021). effect of foreign direct investment on economic growth in ghana: the role of institutions. economics of dvelopment, 20(1), 23-34.available at: https://doi.org/10.21511/ed.20(1).2021.03. evans, y., & rose, g. k. (2021). an overview of employment generation in the sectors of ghana’s economy: foreign direct investment perspective. global journal of business, economics and management: current issues, 11(1), 48-57. fisher, r. (1925). statistical methods for research workers. edinburgh, scotland: oliver & boyd. fisher, r. (1935). the design of experiments. london: collier macmillan. gipc. (2021). quarterly investment report. accra: ghana investment promotion centre. granger, c. w. (1981). some properties of time series data and their use in econometric model specification. journal of econometrics, 16(1), 121130.available at: https://doi.org/10.1016/0304-4076(81)900798. haider, a., & muhammad, t. a. (2016). the role of the sectoral composition of foreign direct investment on economic growth: a policy proposal for cpec and regional partners. paper presented at the the pakistan development review papers and proceedings: the 32nd conference of the pakistan society of development economists december 13 15 (pp. 89-103). islamabad: pakistan institute of development economics. huiqun, l., & lu, j. (2011). the home-employment effect of fdi from developing countries: in the case of china. journal of chinese economic and foreign trade studies, 4(3), 173-182.available at: https://doi.org/10.1108/17544401111178212. kusi, g. (2012). regulatory framework for investing in ghana. accra: ghana investment promotion centre. macarena, s. (2016). foreign direct investment and income inequality in latin america: a sectoral analysis. cepal review, 118, 45-61.available at: https://doi.org/10.18356/13c68e36-en. mario, p., kusanović, t., & jakovac, p. (2021). the determinants of fdi sectoral structure in the central and east european eu countries. economies, 9(2), 66.available at: https://doi.org/10.3390/economies9020066. miteski, m., & stefanova, d. j. (2017). the impact of sectorial fdi on economic growth in central, eastern and southeastern europe. working paper, no. 1/2017. national bank of the republic of macedonia. okwu, a. t., oseni, i. o., & obiakor, r. t. (2020). does foreign direct investment enhance economic growth? evidence from 30 leading global economies. global journal of emerging market economies, 12(2), 217-230.available at: https://doi.org/10.1177/0974910120919042. riccardo .c, ganau, roberto, and storper, m. (2023) 22 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe plaxedes, g., & seetanah, b. (2020). the effect of mining foreign direct investment inflow on the economic growth of zimbabwe. journal of economic structures, 9(1), 1-17.available at: https://doi.org/10.1186/s40008-020-00230-4. ram, k. p., & seema, s. (2018). a sectoral analysis of foreign direct investment on the economic growth of nepal. journal of business and social sciences research, 3(1), 1-14.available at: https://doi.org/10.3126/jbssr.v3i1.24834. riccardo, c., ganau, roberto, & storper, m. (2022). does foreign investment hurt job creation at home? the geography of outward fdi and employment in the usa. journal of economic geography, 22(1), 53-79.available at: https://doi.org/10.1093/jeg/lbab016. rodan, g. (1997). singapore: economic diversification and social divisions. in: rodan, g., hewison, k. and robison, r, (eds.) the political economy of south-east asia: an introduction. melbourne: oxford university press. ronismita, m., & swapnamoyee, p. (2020). role of fdi on employment scenario in india. international journal of recent technological engineering, 8(6), 1481-1489.available at: https://doi.org/10.35940/ijrte.f7777.038620. saidatulakmal, m., & abdillahi, n. m. (2021). impact of foreign direct investment on economic growth in ethiopia: empirical evidence. latin american journal of trade policy, 4(10), 56-77. saswata, c., nitya, n., & bhawna, t. (2020). impact of fdi on economic growth in south asia: does nature of fdi matters? review of market integration, 12(1-2), 51-69.available at: https://doi.org/10.1177/0974929220969679. sayre, s. (1994). structural adjustment in africa: a failing grade so far. the journal of modern african studies, 32(4), 679 -692.available at: https://doi.org/10.1017/s0022278x00015901. umit, a. o., & alkan, h. i. (2016). the effects of foreign direct investments and economic growth on employment and female employment: a time series analysis with structural breaks for turkey. international journal of business and economic sciences applied research, 9(3), 4349. unctad. (1999). foreign direct investment and the challenge of development. paper presented at the geneva, switzerland: united nations conference on trade and development. unctad. (2020). world investment report; international production beyond the pandemic. paper presented at the geneva: united nations conference on trade and development. world bank. (2010). world investment report 2010: investing in a low-carbon economy. washington dc: world bank. yeboah, e., & anning, l. (2020). investment in ghana: an overview of fdi components and the impact on employment creation in the ghanaian economy. economics, management and sustainability, 5(1), 6-16.available at: https://doi.org/10.14254/jems.2020.5-1.1. american interdisciplinary journal of business and economics issn: 2837-1909| impact factor: 6.72 volume. 10, number 2; april-june, 2023; published by: scientific and academic development institute (sadi) 8933 willis ave los angeles, california https://sadipub.com/journals/index.php/aijbe | editorial@sadipub.com 40 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe exploring the relative significance of banking and stock market development in promoting economic growth in developing countries levin h. institute of islamic banking and finance, international islamic university malaysia 50400 kuala lumpur, malaysia abstract: this study investigates the relative contributions of banking sector and stock market development on the economic growth of developing countries. using panel data from 20 developing countries over the period 1989 to 2010, the study adopts panel co-integration and fully modified ordinary least squares techniques to analyze the data. the results indicate that intermediated funds have a more significant contribution to the growth process than the stock market, and banks and stock markets are substitutes rather than compliments in financing economic activities in these countries. in addition, the study finds a strong positive influence of financial development on economic growth. the findings highlight the importance of deepening and strengthening the financial systems of developing countries and promoting financial integration locally and across borders. keywords: banks, stock market, development, developing countries, panel co-integration, economic growth introduction: the role of financial sector development in enhancing economic growth has been a widely debated issue in recent years. various studies have explored the nexus between financial sector development and economic growth, and the results have been mixed. while some studies suggest a significant positive relationship, others find no significant relationship or even a negative one. the specifics of the relationship between financial sector development and economic growth vary across countries due to differences in financial systems, institutional frameworks, and economic conditions. developing countries, in particular, face significant challenges in financing economic activities, especially through the banking and stock markets. these challenges have prompted policymakers to implement reforms aimed at deepening and strengthening the financial systems of these countries. nevertheless, there are still unresolved issues in the finance-growth literature, particularly in the context of developing countries. this study seeks to contribute to this literature by examining the relative contributions of banking sector and stock market development to economic growth in developing countries. the study uses a panel dataset of 20 developing countries over the period 1989 to 2010, employing panel co-integration and fully modified mailto:editorial@sadipub.com levin h. (2023) 41 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe ordinary least squares techniques to analyze the data. the study provides insights into the extent to which intermediated funds and stock markets contribute to the growth process in developing countries, as well as the relationship between banks and stock markets in financing economic activities. the findings of this study have significant implications for policymakers and provide insights into the ways in which developing countries can deepen and strengthen their financial systems to promote economic growth. 2.0 literature review in a pioneer work, king and levine (1993) investigate the finance-growth relationship in a cross-country study involving 80 countries and found that financial development is strongly associated with real per capita gdp growth, the rate of physical capital accumulation and improvements in the efficiency with which economies employ physical capital. this finding is further reinforced by levine and zervos (1998) who found that both stock market liquidity and banking development positively predict growth, capital accumulation and productivity even after controlling for economic and political factors. their results also revealed that stock markets provide different category of financial services from banks. in another perspective, rioja and valev (2003) investigate the effects of financial development on the sources of growth in countries belonging to different income group. the results showed that finance has a strong positive influence on productivity growth primarily in higher income economies, whereas in lower income economies, the effect occurs primarily through capital accumulation. this has revealed that financial intermediaries in the developing countries lack the capacity to effectively select and monitor most profitable investments, rather some social and political parameters are used in providing funding. this might lead to moral hazard and financial instability, which may stifle the contribution of finance to growth or even making financial development to adversely affect growth. this finding is further supported by dufrenot, mignon, and peguin-feisolle (2010). they found that, while financial intermediation is a positive determinant of growth in developed countries, it acts negatively on the economic growth of developing countries. in contrast, baliamoune-lutz (2010) found that there was no strong evidence that finance leads economic development in 18 sub-saharan africa (ssa) countries. on the other hand, kiran, yavuz and güriş (2009) investigate the long-run relationship between financial development and economic growth in 10 emerging countries for the period 1968 to 2007. employing the panel co-integration technique and fully modified ols the study finds that financial development has a significant positive influence on economic growth. similarly, in africa, ahmed (2010) employed the same set of techniques and finds a long-run equilibrium relationship between financial development and economic growth; furthermore, financial development is found to cause economic growth. on whether stock markets and banks are compliments or substitute, dey (2007) found that bank credit and stock market liquidity are inversely related and they substitute each other in providing external financing to firms. these conflicting findings suggest that there are still unresolved issues in the financegrowth literature, especially in the context of the developing countries. more so, the afore reviewed studies were silent on the relative importance of bank and stock market development to growth and whether the increasing role of stock market in developing countries is at the expense of banks or it is just complimenting it. this study is an attempt to fill the literature gap by using more recent methods and wider dataset involving several developing countries. levin h. (2023) 42 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe 3.0 data and methodology based on the extant literature and insight from the endogenous growth model, the following model is specified to investigate the relationship between financial development and economic growth in developing countries: lngdpit 1i lnfdit 2i lngfcfit 3i lncvit (1) where gdp is the real gdp, fd is a vector of financial development indicators, gfcf is gross fixed capital formation, cv is a vector of control variables; all are in natural log, the disturbance term it is assumed to be white noise and follows a one-way error component model.eight different specifications of the above model were estimated. the first four measure the independent effects of broad money, bank credit, stock market capitalization and stock market turnover on economic growth. the fifth and sixth specifications measure the contemporaneous effect of banking sector and stock market development on economic growth. the last two specifications, involve the interactive terms of banking and stock market development. it is used to investigate whether they are substituting or complimenting each other. the financial development indicators used are ratio of broad money to gdp (bmg) and ratio of private credit by the banking sector to gdp (crd). the bmg is used to measure the overall financial depth of the economy or the level of monetization in the economy. however, in developing countries, where a large component of the broad money stock is currency held outside the banking sector, broad money is less indicative of the degree of financial intermediation by banking institutions (esso, 2010). mckinnon (1973) hypothesis however, posits that in developing countries, a broadly defined demand for money complements the demand for physical capital. this position is derived from an outside money model in which economic units are constrained to self-finance and there are considerable indivisibilities in investment. therefore, cash balance holdings are positively related to the propensity to invest, this informs the choice of this indicator in this study. specifically, banking sector development is measured by the ratio of private credit by deposit money bank to gdp; it is included to reflect the actual financial intermediation activity of commercial banks. two indicators of stock market development are employed, namely market capitalization (mcp) and stock traded (str) both as ratios of gdp, representing the size and liquidity of the stock market, respectively.the first equals the value of the shares of listed companies on domestic exchanges; it reflects the ability to mobilize capital and diversify risk, whilethe second indicator measures the activity of the stock market trading volume relative to the size of the economy, thus,it reflectsthe liquidity that stock market provide to economic agents (mohtadi & agarwal, 2004). gross fixed capital formation is used as a proxy for capital accumulation. furthermore, some variables are included in the model to control for the possible effects of other growth determining factorsin order to avoid misspecification bias. these variables are total government expenditure (tge) and trade openness (opn). government expenditure may lead to budget deficit, which if financed by borrowing from the financial system and has the potential of crowding-out private investment and hence negatively affects growth. alternatively, government spending if effectively carried-out, may contribute positively to growth.trade openness may contribute positively to economic growth by providing domestic entrepreneurs access to foreign markets. data utilized in this research is on annual basis and in 2005 constant us dollars (usd), covering the period from 1989 to 2010 for each country, hence constituting a balanced panel. the data is obtained from the world development indicatorsand global financial development databaseof the world bank.the list of the countries considered in this study and descriptive statistics of the variables are contained in appendices1 and 2 respectively. 0 i it levin h. (2023) 43 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe to estimate the long run relationship between financial development and economic growth in the panel of 20 countries over the period 1989 to 2010 panel co-integration test is adopted. generally, panel co-integration involves three stages; firstly, panel unit root tests panel co-integration test and estimation of long run coefficients. the levin and lin (1993) and levin, lin and chu (2002) panel unit root test -llc, im, pesaran and shin (2003) –ips, breitung (2000) and maddala and wu (1999) -mw the advantage of mw test over ips is that its value does not depend on different lag lengths in the individual adf regressions (kiran, yavuz & güriş, 2009; bangake & eggoh, 2010). residual-based panel co-integration test by pedroni (1999, 2000 & 2004) is adopted. the test takes into account the heterogeneity of the cross-section units, by using idiosyncratic parameters, which are allowed to vary across the cross-section unitsthe test considers the following regression equation: yit i it 1i x1i,t 2i x2i,t ... mi xmi,t ei,t (2) t 1...t,i 1...n where t is the number of observations over time; n represents number of cross section units (countries); m is the number of the regression variables; y and x are assumed to be integrated of order one and αi varies across individual countries in the panel. the residual, which is to be tested for stationarity is given by: eit eit 1 uit or by the following augmented equation: (3) pi eit i eit 1 ij eit j vit (4) j 1 the study adopted the pedroni (2000; 2001) fully modified ols (fmols) estimator, which is based on the correction of the dependent variable using the long‐run covariance matrices in order to remove the nuisance parameters and then applies the standard ols estimation technique to the corrected variables. this method has many advantages, among them are; it accounts for the serial correlation and endogeneity in the regressors that are usually present when long-run relationship exists. in addition, it tackles the problems of nonstationarity in regressors and simultaneity bias as well as generates consistent estimates of the β parameters in small samples (christopoulos & tsionas, 2003; kiran, yavuz & güriş, 2009). 4. results and discussions 4.1 results the results of the panel unit root tests at the levels of the variables are presented in table 1. deterministic trend and individual effects (intercept) are included in the tests, going by the plot of the variables, which shows the presence of linear trend and intercept. generally, the null hypothesis of unit root could not be rejected at 5%, implying that the variables are not stationary at levels. however, there is an exception in the cases of lcrd, lgfcf and lmcp, which were respectively reported to be stationary by the mw, llc and ips tests. but given the weaknesses of these tests as highlighted earlier and that in all the three cases, the other three tests reported the variables to be non-stationary, the variables are considered to be non-stationary at levels. table1.results of panel unit root test at levels variables common unit root process individual unit root process llc breitung ips mw lbmg -0.314 0.482 0.703 35.530 lcrd 1.227 1.257 -0.251 66.935*** levin h. (2023) 44 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe lgdp -0.164 1.893 0.438 45.876 lgfcf -3.482*** -0.837 2.974 29.688 lmcp -0.244 -1.283 -1.665** 51.354 lopn 0.170 0.045 -1.042 51.423 lstr -0.013 -0.643 -0.914 50.003 ltge 0.815 -1.311 4.836 15.297 note: ***, ** and * denote statistical significance at 1%, 5% and 10%, respectively. selection of lag length is based on schwarz information criteria. upon taking the first difference of the variables, the null hypothesis of unit root was unanimously rejected by all the tests at 1%, thus, the variables turned out to have no unit rootas reported in table 2. this means that, all the variables are stationary at first difference and hence, integrated of order one. consequently, the basis toinvestigate the existence of long run relationship through panel co-integration test is provided. table 2.results of panel unit root test at first difference variable common unit root process individual unit root process llc breitung ips mw lbmg -11.838*** -8.663*** -12.817*** 202.433*** lcrd -7.465*** -5.086*** -10.615*** 172.129*** lgdp -10.170*** -5.333*** -8.466*** 137.850*** lgfcf -10.162*** -7.345*** -8.458*** 136.748*** lmcp -11.480*** -8.368*** -10.257*** 164.668*** lopn -13.209*** -3.264*** -10.127*** 161.404*** lstr -10.513*** -4.723*** -11.344*** 187.615*** ltge -11.228*** -5.300*** -12.611*** 202.262*** notes: ***, ** and * denote statistical significance at 1%, 5% and 10%, respectively. selection of lag length is based on schwarz information criteria. the results of the pedroni panel co-integration tests for the various specifications statedearlier are contained in tables three and four. like in the case of the unit root tests, deterministic trend and individual effects are also included in the co-integration tests; this is because including time specific effects makes the pedroni panel cointegration tests more powerful (carlsson, lyhagen & österholm, 2007). table 3.results of pedroni panel co-integration tests for banking and stock market independent models levin h. (2023) 45 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe private credit market broad money capitalisation stock turnover statistic ρ value statistic ρ statistic value ρ value statistic ρ value levin h. (2023) american interdisciplinary journal of business and economics | 46 https://sadipub.com/journals/index.php/aijbe panel statistics within-dimension panel v statistic 26.589*** 0.000 27.700*** 0.000 21.153*** 0.000 23.938*** 0.000 panel rho statistic 1.997 0.977 1.764 0.961 2.500 0.994 1.602 0.946 panel pp statistic -3.137*** 0.001 -3.733*** 0.000 -1.786** 0.037 -3.313*** 0.001 panel adf statistic -3.006*** 0.001 -3.623*** 0.000 -2.105** 0.018 -4.256*** 0.000 group statistics between dimension group rho statistic 3.987 1.000 4.190 1.000 4.443 1.000 3.994 1.000 group pp statistic -4.340*** 0.000 -1.933** 0.027 -1.789** 0.037 -1.720** 0.043 group adf statistic -3.588*** 0.000 -2.268** 0.012 -2.938*** 0.002 -3.774*** 0.000 note: ***, ** and * denote statistical significance at 1%, 5% and 10%, respectively. the results in table 3, revealed that three of the five within dimension and two of the three between dimension pedroni panel co-integration tests, have rejected the null hypothesis of no co-integration. therefore, we can deduce that a long run equilibrium relationship exists between economic growth on one hand and monetary, banking and stock market development represented by broad money, private credit, market capitalization and market turnover as well as other control variables on the other hand. table 4.results of pedroni panel co-integration tests for concurrent banking and stock market models crd*mcp crd*str crd & mcp crd & str statistic ρ value statistic ρ ρ statistic value value statistic ρ value panel statistics within-dimension panel v-statistic 21.153*** 0.000 23.938 0.000 24.375*** 0.000 27.301*** 0.000 panel rho statistic 2.500 0.994 1.602 0.946 2.845 0.998 2.569 0.995 panel pp-statistic -1.786** 0.037 -3.31*** 0.001 -3.188*** 0.001 -3.157*** 0.001 panel adf statistic -2.105** 0.018 -4.26*** 0.000 -3.529*** 0.000 -3.785*** 0.000 group statistics between-dimension group rho statistic 4.443 1.000 3.994 1.000 4.878 1.000 4.672 1.000 group pp statistic -1.789** 0.037 -1.720** 0.043 -4.775*** 0.000 -3.667*** 0.000 group adf statistic -2.938*** 0.002 3.774*** 0.000 -4.687*** 0.000 -4.738*** 0.000 levin h. (2023) american interdisciplinary journal of business and economics | 47 https://sadipub.com/journals/index.php/aijbe notes: crd*mcp and crd*str are models involving the interactive terms (product of) private credit and market capitalisation and stock turnover ratio respectively, while crd&mcp and crd&str are models simultanously involving private credit and each of market capitalisation and stock turnover respectively. ***, ** and * denote statistical significance at 1%, 5% and 10%, respectively. similarly, table 4 shows that majority of the seven pedroni panel co-integration tests reject the null hypothesis of no co-integration at 1% or 5% level of significance. this means the long run relationship between economic growth and the various measures of financial development in developing countries is robust irrespective of whether banks and/or stock market are considered independently or jointly. however, the results from both tables have shown thatpanel rho and group rho-tests consistently accept the null of no co-integration. but this is not worrisome; since a monte carlo simulation by pedroni (2004) shows that the two tests tend to underestimate the rejection of the null when n and t are small. therefore, we conclude that long run relationship exists between the variables and thus proceed to estimate the long run coefficients. the long run coefficients of the co-integratingvector are estimated using the fmols estimator for the various specifications; the results are presented in table 5. in all cases the dependent variable is real gdp.in the first model (involving bank private credit) presented in panel one of table 5, it is clear that private credit is significantly contributing to economic growth, with every 1% increase in private credit resulting into 0.36% increase in real gdp. the other variables in the model are equally important for growth, as a percentage increase in gross fixed capital formation and trade openness are causing real gdp to increase by 0.21% and 0.52% respectively. the only exception is government expenditure, which turnout to have negative influence on growth, though in negligible amount compared to other variables in the model. the positive effect of financial development on growth is even higher when the ratio of broad money to gdp is used as a proxy for financial development. the results in panel one of table 5, show that a 1% increase in broad money will lead to 0.56% increase in real gdp,which is 0.20% larger than the effect of private credit.the same goes for gross fixed capital formation, which contribute 0.25% to gdp for every percentage increase. these phenomena have implied that to a large extent, investment in developing countries is selffinanced. however, the effect of trade openness is suppressed and government expenditure is no longer having any impact on gdp. both indicators of stock market development, that is market capitalization and stock turnover are also significantly influencing real gdp, but to a lesser degree than private credit and broad money. from the results in panel two of table 5, a 1% increase in market capitalization leads to 0.13% increase in real gdp. on the other hand, stock turnover, brings about only 0.06% increase in real gdp, this is indicative of low activities in the stock market of developing countries. other variables in the stock market models exhibit about the same pattern as in the broad money and private credit models. trade openness is still making tremendous positive contribution to gdp (0.40% and 0.57%, respectively) and government expenditure exert negative influence in only the stock turnover model. the effect of gross fixed capital formation is very insignificant in the market capitalization model, but slightly significant in the stock turnover model. table 5.long run estimates using fmols banking and monetary sectors variables coefficient t-stat ρ-value variables coefficient t-stat ρ-value lcrd 0.361*** 8.241 0.000 lbmg 0.564*** 7.587 0.000 lgfcf 0.211*** 2.775 0.006 lgfcf 0.252*** 3.185 0.002 ltge -0.116* -1.836 0.067 ltge -0.066 -0.991 0.322 levin h. (2023) american interdisciplinary journal of business and economics | 48 https://sadipub.com/journals/index.php/aijbe lopn 0.515*** 8.976 0.000 lopn 0.392*** 6.133 0.000 stock markets lmcp 0.131*** 5.542 0.000 lstr 0.057*** 2.891 0.004 lgfcf 0.000*** 2.983 0.003 lgfcf 0.169* 1.848 0.065 ltge -0.017 -0.242 0.809 ltge -0.172** -2.385 0.018 lopn 0.402*** 6.036 0.000 lopn 0.570*** 8.658 0.000 banks and stock market concurrent lcrd 0.291*** 6.600 0.000 lcrd 0.364*** 8.327 0.000 lmcp 0.093*** 4.178 0.000 lstr 0.018 1.074 0.284 lgfcf 0.153** 2.057 0.040 lgfcf 0.176** 2.258 0.025 ltge -0.017 -0.276 0.783 ltge -0.125** -2.032 0.043 lopn 0.385*** 6.319 0.000 lopn 0.499*** 8.865 0.000 banks and stock market interaction lcrd*lmcp -0.083*** -8.538 0.000 lcrd*lstr -0.065*** -7.049 0.000 lgfcf 0.164** 2.205 0.028 lgfcf 0.060 0.720 0.472 ltge 0.036 0.566 0.571 ltge -0.099 -1.498 0.135 lopn 0.389*** 6.656 0.000 lopn 0.523*** 8.806 0.000 notes:the coefficient of lgfcf in the lmcp model is 0.000000000010 and cannot be contained in the column, this is why 0.000 is written. ***, ** and * denote statistical significance at 1%, 5% and 10%, respectively. in the above models, roles of banks and stock market to economic growth are treated independently. however, in reality the two runs concurrently in financing real economic activities. in most cases firms do not restrict their sources of external finance to either banks or stock market alone, they rather explore both sources. based on this assumption, models were estimated that combine bank credit on one hand and market capitalization and turnover on the other hand. the results in panel three of table 5, revealed that banks still dominate the financing of real economic activities; a 1% increase in bank private credit accounts for 0.29% increase in real gdp as against mere 0.09% by market capitalization. the effect of banks become even more domineering, when stock market development is represented by market turnover ratio, which turn out to have no significant influence on real gdp. having been able to ascertain the relative significance of banks and stock market to real gdp, the next task is to find out whether bank and stock market are compliments or substitutes. this is very relevant, because stock markets in many developing countries came into existence much later than banks, which means they either take away some part of the market share of banks or compliment them in providing finance to the private sector. the results in panel four of table 5, shows thatthe interactive term of both bank private credit and market capitalization as well as stock turnover, are negative and statistically significant. this means that bank and stock market in developing countries are substitutes, rather than compliments. 4.2 discussions of findings from the empirical results presented and analyzed in the previous section, broad money appeared to be the most influential contributor to real gdp, above other financial development indicators. this implied that selffinance still dominates the economies of many developing countries, thereby conforming to the mckinnon (1973) hypothesis. according to this hypothesis, economic units are constrained to self-finance in developing countries, which are characterized by small-sized private firms. under this condition, money plays an levin h. (2023) american interdisciplinary journal of business and economics | 49 https://sadipub.com/journals/index.php/aijbe important role in increasing the amount of physical investment, therefore, cash balances holdings are positively related to propensity to invest. moreover, banks appeared to greatly play more roles in influencing real gdp than stock market. this shows that banks still dominate the financial system of developing countries; the obvious reason for this might be that the real sectors in developing countries are dominated by small and medium scale enterprises, which cannot access the stock market. this result confirmed kronberger (2002) and baliamoune-lutz (2010) assertions that the financial systems of developing countries are dominated by banks, hence the bulk of investment financingis sourced from the banking sector. market capitalization is also found to be more significant in influencing real gdp than market turnover. this is indicative of the fact that there are low activities in the stock markets of many developing countries. most of the stock markets in developing countries were established recently, therefore, the stock market capitalisation largely represents initial public offerings by private firms and in some cases by privatized public enterprises. thus, market capitalisation tends to have more effect on real gdp than stock turnover. the individual contribution of banks to real gdp is not significantly improved when stock market was introduced and vice versa. in the case of stock market, the introduction of banks even reduces its contribution to real gdp. this is indicative to the fact that the two are not compliments. in fact, the results clearly suggest that banks and stock market are substitute rather than compliment. this confirmed the findings of dey (2007) and contradicts the findings of boyd and smith (1998).overall, the findings of this study revealed that financial development in the form of monetary, banks and stock market development are positively influencing real gdp in developing countries. these results confirmed the findings of levine and zervos (1998) and kiran, yavuz and güriş (2009). conclusionand recommendations the study concluded that the overall depth of the financial sector represented by broad money is the most significant contributor to growth; meaning that self-finance still largely constitutes the mode of financing real economic activities, which are majorly in the form of small and medium enterprises. on the relative importance of banks and stock market, the study found that the banking sector is to a large extent relatively more significant in financing real gdp than the stock market. this has confirmed the claim that the financial systems of developing countries are dominated by banks, with the stock market gradually catching up. the stock markets of developing countries are also found to have low activities, as market capitalization plays significantly more role than stock turnover. moreover, banks and stock markets are found to be substitutes, rather than compliments; meaning that they are competing for both savers funds and investment opportunities to finance; this will lead to efficiency in the activities of both. it also suggests that the introduction of stock markets in developing countries is gradually diversifying their financial system and lessening the traditional dominance of the banking system. the policy implication of these findings is that financial reforms should be implemented across the board that is in all the sectors of the financial system as against selective policy. this will ensure that the real economy gets the best from the financial system. references ahmed, a. d. (2010). financial liberalisation, financial development and growth linkages in sub-saharan african countries.studies in economics and finance.27(4): 314-339. allen, f. & gale, d. (2000). comparing financial systems. cambridge, ma: mit press. bailey, o. (2010). developments in emerging equity markets. bulletin, december quarter, 2010, reserve bank of australia. levin h. (2023) american interdisciplinary journal of business and economics | 50 https://sadipub.com/journals/index.php/aijbe baliamoune-lutz, m. (2010).financial development and income in developing countries. international centre for economic research, working paper no. 9/2010. baltagi, b. (2005). econometric analysis of panel data, 3rd ed. john wiley and sons, england. bangake, c. &eggoh. j. c. (2010). finance-growth link in oecd countries: evidence from panel causality and co-integration tests. brussels economic review, 53(3/4), 375-392. boyd, j. h. & prescott, e. c.(1986). financial intermediary-coalitions.journal of economics theory, 38 (2), 211-32. boyd. j. h. & smith, b. d. (1998). the evolution of debt and equity market in economic development.economic theory, 12, 519-560 breitung, j. (2000). the local power of some unit root tests for panel data. in b. baltagi (ed.), nonstationary panels, panel co-integration, and dynamic panels, advances in econometrics, 15, jai, amsterdam, 161-178. carlsson, m., lyhagen, j. &österholm, p. (2007).testing for purchasing power parity in co-integrated panels.imf working paper, wp/07/287. chou, y. k. and chin, m. s. (2001). human capital, financial innovations and growth: a theoretical approach. research paper number 836, department of economics, the university of melbourne. christopoulos, d. k. & tsionas, e. g. (2003). financial development and economic growth: evidence from panel unit root and co-integration test. journal of development economics.issue 7, 55-74. dey, m. k. (n.d.). are banks and stock markets compliments or substitutes? morgan state university, baltimore dufrenot, g., mignon, v. & penguin-feissolle, a. (2010). testing the finance-growth link: is there a difference between the developed and developing countries? document de travail no. 2010-44. esso, (2010). re-examining the finance-growth nexus: structural break, threshold cointegration and causality evidence from the ecowas.journal of economic development. 35(3): 57-79. im, k., pesaran, h., & shin, y. (2003). testing for unit roots in heterogeneous panels.journal of econometrics, 115, 53-74. kao, c. (1999). spurious regression and residual-based tests for co-integration in panel data.journal of econometrics, 90, 1-44. king, r.g., & levine, r. (1993). finance and growth: schumpeter might be right. thequarterly journal of economics.108(3), 717-737. kiran, b., yavuz, n. c. & güriş.b. (2009). financial development and economic growth: a panel data analysis of emerging countries. international research journal of finance and economics, issue 30, 87-94. kronberger, r. (2002). a cost-benefit analysis of a monetary union for mercosur with particular emphasis on the optimum currency area theory.integration & trade, no. 16 (january – june, 2002), intal inter-american development bank, buenos aires. levin, a., & lin, c. f. (1993). unit root tests in panel data: new results. discussion paper, department of economics, uc-san diego. levin, a., lin, c., & chu, c. (2002). unit root test in panel data: asymptotic and finite sample properties. journal of econometrics, 108 (1), 1-24. levine, r. & zervos, s. (1998). stock markets, banks, and economic growth.american economic review, 88, 537-558. levin h. (2023) american interdisciplinary journal of business and economics | 51 https://sadipub.com/journals/index.php/aijbe maddala, g., & wu, s. (1999). a comparative study of unit root tests with panel data and a new simple test. oxford bulletin of economics and statistics, 61, 631652. mckinnon, r, (1973) money and capital in economic development.washington: the brookings institute. mohtadi, h. & agarwal, s. (2004). stock market development and economic growth: evidence from developing countries, oxford university press, new york. odhaimbo, n. m. (2010). are banks and stock markets positively related? empirical evidence from south africa. the journal applied business research, 26(6),17-26. pedroni, p. (1999). critical values for co-integration tests in heterogeneous panels with multiple regressors. oxford bulletin of economics and statistics, 61, 653670. pedroni, p. (2000). fully modified ols for heterogeneous co-integrated panels. advances in econometrics, 15, 93-130. pedroni, p. (2001). purchasing power parity tests in co-integrated panels. review of economics and statistics, 83, 727-731. pedroni, p. (2004). panel cointegration: asymptotic and finite sample properties of pooled time series tests with an application to ppp hypothesis. econometric theory, 20(3), 597-625. rajan, r.g. & zingales, l. (1998).financial dependence and growth. the american economic review. 88(3): 559-586. rioja f. &valev n. (2003). does one size fit all? a re-examination of the finance and growth relationship. social science research network. american interdisciplinary journal of business and economics issn: 2837-1909| impact factor : 6.71 volume. 11, number 1; january-march, 2024; published by: scientific and academic development institute (sadi) 8933 willis ave los angeles, california https://sadijournals.org/index.php/aijbe| editorial@sadijournals.org 39 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe tarkett group expansion strategies in nigeria and senegal: dunning's oli approach sakpaide efe joseph, ph.d. department of business administration, delta state university, abraka, nigeria email: efesakpaide44@gmail.com doi: https://doi.org/10.5281/zenodo.11190773 abstract: any business hoping to succeed must first expand internationally and must also tradeoff between the benefits and potential pitfalls that may be associated with such strategies. consequently, this research did a comparative analysis on the expansion plan of tarkett group to invest in either nigeria or senegal. accordingly, the research began by providing an overview of the tarkett group, including its history, products and services, and current operations using the archival retrieval approach. the study anchored on the dunning's oli theory. this case study undertake a comprehensive analysis of two potential markets (nigeria and senegal) by evaluating cultural, administrative, geographic, and economic factors to identify the most favourable market for expansion. data with regards to the gross domestic products of both target countries were sourced from world bank data base, 2022 from 2007 to 2021. data for three (3) macroeconomic variables (inflation rate, exchange rate and unemployment rates) were also sourced from the world bank data base, 2022. the data was interpreted using descriptive statistics and trend analysis. the research confirmed that, the target company's entry mode is built on the dunning's oli theory and is willing to undertake foreign direct investment to overcome barriers encountered in australia. also, tarkett company's international business expansion plan is more likely to succeed in nigeria than in senegal, despite the challenges posed by nigeria's macroeconomic turbulence, currency depreciation, and low ease of doing business. hence, the study submits that, for tarkett to succeed in nigeria, the company should opt for foreign direct investment (fdi) rather than exporting its products. keywords: tarkett group, internationalization strategies, comparative analysis, expansion plan, emerging countries. introduction one of the critical issues which affect firm going concern is the firm’s internationalization strategy (ighosewe, uyagu & iyere, 2020). the term “firm internationalization strategy” centers on exporting goods and services to overseas markets while keeping the production headquarters domestic. this implies businesses may avoid spending money on employees and facilities abroad. the domestic market is the primary focus of business objectives, while there are some that also pertain to the global market. to enjoy the gains inherent in internationalization, firms may decide to opt for either multi-domestic business approach, transactional business mailto:efesakpaide44@gmail.com sakpaide efe joseph, ph.d. (2024) 40 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe approach or global business approach. specifically, the multi-domestic business approach stresses on firm’s decision to invest in a global market and customizing items for the local market with the intent to interact foreign audience, businesses modify their goods and products and realign their marketing approaches. this entails considering the traditions, customs, and cultural characteristics of other countries. companies that use a multi-domestic business model frequently keep their headquarters in their home nation (iheanachor, & ozegbe, 2021). nevertheless, the business could set up a localized headquarters abroad so that they can more readily handle their business dealings with international clients. again, the transitional business approach is where both global and multi-domestic tactics are incorporated into the transnational business plan. as a result, the company continues to run out of its headquarters in its home nation while simultaneously being able to grow and launch full-fledged operations in other countries. global corporations provide their goods and services for sale in several nations. the ways that the product is marketed in each nation vary. regardless of the country in which it is marketed, a transnational product is the same. the product is universal and isn't altered to accommodate regional tastes or customs. lastly, businesses that adopt a global business strategy regard the entire globe as a single market and take benefit of economies of scale in order to enhance reach and revenue (enakirerhi, & ighosewe, 2024). however, these companies tend to have minimal local difference since they homogenize their goods and services to save money and reach as many people as possible (omokaro‐romanus, anchor, & konara, 2019). rather, they grow into international markets while maintaining their central office or headquarters in their nation of origin. also, adopting a worldwide approach has many drawbacks, like setting up sales offices overseas, overseeing global logistics, and ensuring that the suppose business conforms to international trade laws. again, one of the policy challenges facing companies’ expansion plans lies on the choice of internationalization model to follow. as such, any business hoping to succeed must first expand internationally and must also tradeoff between the benefits and potential pitfalls that may be associated with such strategies (adeleye, iheanachor, ogbechie, & ngwu, 2015) being one of the top french public limited companies in the flooring sector, tarkett group is established more than 140 years ago under the name "allibert and sommer," the business has expanded to offer a wide variety of goods and services and has taken up other globally recognized entrepreneurial brands. 46% of the company's products are vinyl and laminate, 22% are sports, 17% are commercial carpets, 7% are wood and laminate, and 8% are rubber and accessories. the firm, which employs over 12,000 people and has over 34 industrial locations, sells more than 1.3 million square meters of flooring every day in more than 100 countries. as part of the company's international expansion and acquisition strategy, the sports division is strategically located in france and germany, the two major sport hubs in the world. the company has implemented a new strategic plan, "impact 2027," which aims to make the company the easiest, most highly innovative, most sustainable and desirable flooring and sport surfaces company in the world. this plan is based on four major premises: a. offer customers a best-in-class experience by focusing on product design, recommendation, availability, delivery, installation, and services with speed and agility. b. create innovative products and services by leveraging expertise in using recycled floorings and reused recycled materials and ensuring that products reach customers on time and as specified. c. lead with sustainability by focusing on environmental and social responsibility. sakpaide efe joseph, ph.d. (2024) 41 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe d. empower high-performing teams by providing entrepreneurial orientation courses to equip them with the skills to take calculated risks and achieve the company's mission and vision. the tarkett group's strategic plan "impact 2027" aimed at becoming the easiest, most highly innovative, most sustainable, and desirable flooring and sport surfaces company in the world, it is a well-established company in the flooring industry, with a diverse range of products and services, and a strong international presence. the company is committed to offering customers a best-in-class experience, creating innovative products and services, leading with sustainability, and empowering high-performing teams. the company's entry mode is built on the dunning's oli theory, and the company is willing to undertake foreign direct investment to overcome barriers encountered in australia. the company's entry mode is built on the dunning's oli theory, which states that the entry mode of a company is based on ownership/firm-specific advantage, location advantage, and internationalization advantage. the prevalent exchange rate also affects the company's entry mode and contractual arrangements. currently, tarkett group is evaluating the potential entry modes of foreign direct investment (fdi) and exporting to establish a successful presence in the targeted country. through a comprehensive analysis of cultural, administrative, geographic, and economic factors, tarkett will determine the most favourable market for expansion. additionally, the company will consider its current international expansion strategy, entry mode, and potential barriers that may be encountered in the target country in order to make an informed decision. the company's goal is to identify the entry mode that will best align with its strategic goals and maximize its chances of success in the target market. consequent upon the information presented above, the researcher will undertake a comprehensive analysis of two potential markets (nigeria vs senegal) by evaluating cultural, administrative, geographic, and economic factors. this will assist us in identifying the country that presents the most favourable market for the tarkett group to expand into. additionally, we will consider the company's current international expansion strategy, entry mode, and potential barriers that may be encountered in each market. this suggests that the company is open to using different entry modes depending on the market conditions and the advantages and disadvantages of each mode. based on the comprehensive analysis of two potential markets (nigeria vs senegal), the researchers formulated conclusions and provide recommendations on the optimal country for expansion and the appropriate course of action for the company to take. 2. literature review since its inception, tarkett has established itself as a highly competitive player in the flooring industry, despite the fierce competition present in the european union market. according to the united nations conference on trade and development (unctad, 2022), a country has a revealed comparative advantage in a particular product when the ratio of its export of that product relative to its total exports exceeds unity. in the case of tarkett, the company has a revealed comparative advantage in the flooring industry, as evidenced by its wide variety of product portfolios and strategic location of its sports division in france and germany, two major sports hubs in the world. furthermore, tarkett's strategic plan, "impact 2027," which emphasizes offering customers a best-in-class experience, creating innovative products and services, leading with sustainability, and empowering high-performing teams, also contribute to its competitive advantage. additionally, the company's business model of manufacturing in the european union and exporting internationally, as well as its willingness sakpaide efe joseph, ph.d. (2024) 42 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe to undertake foreign direct investment and entry mode based on the dunning's oli theory; also play a role in tarkett's competitiveness in the european union market. where: • p -aggregate products (with i∈p), • xai – particular country's particular product say product i, • xwi world's exports of product i, • σj∈pxaj – particular country a's total exports; and • σj∈pxwj is the world's total exports (of all products j in p). according to the unctad 2022 data reveals that france and germany are both competitive producers and exporters of various inorganic chemicals, plastics in primary forms, monofilaments of plastics with crosssections greater than 1mm, and other power generating machinery and parts. france has a comparative advantage in these products with rca values of 1.1276, 1.7989, 1.1524 and 1.3126 respectively while germany has greater comparative advantage in these products with rca values of 1.5449, 2.1504, 3.8095, and 2.3926 respectively. this implies that it will take germany less cost to produce and export these products than france as presented in figure 1 figure 1: relative cost advantage for both france and germany’s targeted products source: unctad (2021) report the new trade theory, first introduced by paul krugman in 1979, argues that firms and countries can benefit from trade flows by incorporating factors such as technology, quality, brand names, and customer loyalty into 1.1276 1.7989 1.1524 1.3126 1.5449 2.1504 3.8095 2.3926 other inorganic chemicals other plastics, in primary forms monofilaments, of plastics, cross-section > 1mm other power generating machinery & parts, n.e.s. france germany sakpaide efe joseph, ph.d. (2024) 43 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe explanations of trade flows. this theory differs from the traditional comparative advantage theory by david ricardo and the heckscher-ohlin (h-o) theory, in that it accounts for internal (firm-specific) and external (dynamic) economies of scale, monopolistic competition, and clustering and network effects. according to markusen and venables (1998) in their study "international trade and industrial upgrading", the new trade theory is an industrial/organization approach to trade that adds elements of imperfect competition, increasing returns to scale, and product differentiation to the determinations of foreign trade conventional comparative foreign advantage models. figure 2: michael porter’s national competitive advantage diamond source: business-to-you.com (b2u) (2022) the porter's national competitive advantage diamond, as proposed by michael porter in 1990 in his book "the competitive advantage of nations," is a framework that helps explain why some countries and companies are more competitive than others. according to porter, a country or company that has a strong competitive advantage in one or more of these areas will be more likely to succeed in the global marketplace (ighosewe, 2021). in the case of tarkett, the company is leveraging its european manufacturing competitiveness and incorporating factors such as technology, quality, brand names, and customer loyalty into its trade flows. this approach is supported by the new trade theory, which argues that firms and countries can only benefit from trade flows if they incorporate these types of factors into their trade strategies. justifiably, germany and france, appear to have achieved huge success over the past 3-5 years—in parallel with the emergence of berlin and paris as hotspots for start-ups and the establishment of a few unicorns in both countries. also, both countries scored 66.5% and 64.0% in terms of strong institutional qualities. meanwhile, in sakpaide efe joseph, ph.d. (2024) 44 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe terms of upgrade of infrastructure, france (82.6%) scored a higher value than germany (79.6%). on the overall, both germany and france are technologically ready. 3. methodology this research did a comparative analysis on the expansion plan of tarkett group to invest in either nigeria or senegal. accordingly, the research began by providing an overview of the tarkett group, including its history, products and services, and current operations using the archival retrieval approach. the study anchored on the dunning's oli theory. this case study undertake a comprehensive analysis of two potential markets (nigeria and senegal) by evaluating cultural, administrative, geographic, and economic factors to identify the most favourable market for expansion. data with regards to the gross domestic products of both target countries were sourced from world bank data base, 2022 from 2007 to 2021. the data was interpreted using descriptive statistics and trend analysis. data for three (3) macroeconomic variables (inflation rate, exchange rate and unemployment rates) were also sourced from the world bank data base, 2022. 4. result and discussions 4.1 comparative analysis of expansion in nigeria versus senegal a comparative analysis of expansion in nigeria and senegal using the cage framework can provide a comprehensive understanding of the similarities and differences between the two countries. a comparative analysis of expansion in nigeria and senegal using the cage framework highlights the similarities and differences between the two countries in terms of culture, administration, geography, and economy. businesses looking to expand in either country should take these factors into consideration and conduct thorough research to understand the opportunities and challenges in each market. consequent upon the above exposition, both target countries are compared below using the cage framework: a. geographical distance between target countries trade and investment flows may be significantly impacted by the distance between the target nations. according to jan tinbergen's gravitation international commerce theory, which dates back to the 1960s, factors such as economic mass, comparable consumer tastes, proximity to one another, and level of development all have an impact on trade between nations (tinbergen, 1962). senegal and nigeria have close geographic ties, which is significant for their commercial connections. table 1 show that nigeria is closer to germany than senegal. given that it is closer and more accessible; its closeness may encourage commerce and investment between nigeria and germany. it should be mentioned, nevertheless, that nigeria has a more typical layout than france, despite senegal being closer to france in terms of miles and kilometers. this suggests that nigeria's logistics and transportation systems could be more advanced, making france more accessible there. a significant factor in trade and investment flows is the destination nations' economic mass. known as the "giant of africa," nigeria has a greater population than senegal and the continent's largest economy. nigeria may become a more alluring market as a result for traders and investors. although it is not the sole issue, senegal's geographic distance from nigeria affects their commercial connections. in addition to transportation infrastructure and logistics networks, economic mass, cultural, political, and historical linkages are significant factors in the flow of investment and commerce between the two countries. sakpaide efe joseph, ph.d. (2024) 45 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe table 1: geographical distance between the target countries by flight target countries distance to france average layout time distance to germany average layout time nigeria (lagos airport) 4718 km (2,582 miles) 2 hours, 39 minutes 4,669 kilometers. (2,873 miles) 6 hours, 9 minutes senegal (dakar) 2413 miles (3884 km) 4 hours, 18 minutes 6,041 kilometers (2,886 miles) 6 hours, 13 minutes source: webometrics (2023) b. hofsteed’s cultural (c) dimension: geert hofstede, a dutch management researcher, created the hofstede's cultural dimensions framework in 1980. it is a helpful tool for comparing and assessing cultural variations among nations. using hofstede's framework of cultural dimensions, we are able to compare and contrast the cultural values of senegal and nigeria. the six cultural elements that hofstede identified are power distance index (pdi) this dimension measures the extent to which a society accepts unequal distribution of power. both nigeria and senegal have a high-power distance, indicating that they both have a strong acceptance of unequal distribution of power. individualism vs. collectivism (idv) this dimension measures the degree to which individuals act on their own or in groups. senegal has a higher score on this dimension than nigeria, indicating that senegal is more collectivistic, and nigeria is more individualistic masculinity vs. femininity (mas) this dimension measures the degree to which a society values traits traditionally associated with men or women. both nigeria and senegal have a relatively high score on this dimension, indicating that they both value traits traditionally associated with men, such as assertiveness and competitiveness. uncertainty avoidance index (uai) this dimension measures the degree to which a society is comfortable with uncertainty and ambiguity. nigeria the same score on this dimension senegal, and nigeria. long-term vs. short-term orientation (lto) this dimension measures the degree to which a society values long-term versus short-term goals. senegal has a higher score on this dimension than nigeria, indicating that senegal values long-term goals more than nigeria. indulgence vs. restraint (ivr) this dimension measures the degree to which a society allows for the free expression of desires and feelings. both nigeria and senegal have a relatively low score on this dimension, indicating that they both value restraint rather than indulgence. table 2: cultural basis of comparison between the home and target countries dimensions target countries home countries senegal nigeria france germany power distance 70 80 68 35 individualism 25 30 71 67 masculinity 45 60 43 66 uncertainty avoidance 55 55 86 65 long term orientation 25 13 63 83 indulgence --84 48 40 source: hofstede insight estimated (2022) in terms of non-tariff barriers, senegal has an import coverage and frequency ratios of 48.30% and 28.77% and export coverage and frequency ratios of 32.94% and 10.49%. meanwhile, nigeria has an import coverage and sakpaide efe joseph, ph.d. (2024) 46 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe frequency ratios of 94.33% and 85.90% and export coverage and frequency ratios of 1.02% and 24.41%. this implies that the non-tariff barriers in nigeria are higher than those in senegal, making it more difficult for businesses to trade with nigeria. it's important to note that non-tariff barriers are not the only factor to consider when making an investment decision. other factors such as the ease of doing business, political stability, and the overall economic environment of the country should also be taken into consideration. when deciding which country to invest in, it is important to consider the percentage of non-tariff barriers, import and export coverage, and other relevant economic indicators. while nigeria has higher non-tariff barriers than senegal, it's important to consider other factors and conduct a thorough market research before making any investment decision. a. gdp comparison between the home and target countries table 3: selected countries’ average gdp year target countries home countries nigeria-ngn senegal-cfa germany-deu france-fr 2002-2006 149,936,655,804.02 9,711,778,659.01 2,647,209,325,702.91 1,996,613,762,076.62 2007-2011 338,840,572,141.90 16,185,935,538.77 3,546,217,300,048.34 2,760,425,563,616.55 2011-2016 491,189,564,129.66 18,638,374,892.90 3,595,496,014,530.96 2,652,733,219,327.22 2017-2021 423,727,495,531.00 23,926,163,991.53 3,940,624,470,116.01 2,742,373,326,312.39 source: researcher’s compilation from world bank data base, 2022 table 3 nigeria has a far higher gdp than senegal-cfa. this indicates that nigeria has a more developed and stable economy, which can provide a larger market for goods and services and potentially a more viable environment for investment. thus, if tarkett were to decide to invest in either of the two target countries, it would be more beneficial to invest in nigeria, as it has a higher gdp and a more developed economy. table 4, which has been generated from the information presented in table 3, provides a visual representation of the extent to which the home country’s gdp differs from the target countries. this table shows the gdp gap between each country and the home country, france. the gdp gap between france and nigeria is significantly larger than the gdp gap between france and senegal-cfa. this further supports the conclusion that nigeria would be a more viable target country for investment than senegal-cfa. table 4: distances/difference among countries’ average gdp year ngn to cfa deu to ngn deu to cfa fr to deu fr to nga fr to cfa 2002-2006 15.44 17.66 272.58 0.75 13.32 205.59 2007-2011 20.93 10.47 219.09 0.78 8.15 170.54 2011-2016 26.35 7.32 192.91 0.74 5.40 142.33 2017-2021 17.71 9.30 164.70 0.70 6.47 114.62 note: ngn-nigeria; cfa-senegal; deu-germany; & fr-france source: researcher’s compilation from world bank data base, 2021 table 4 indicates that from 2002 to 2006, germany's gdp was 17.66 times higher than nigeria's gdp and 272.58 times higher than senegal's gdp. similarly, france's gdp was 13.32 times higher than nigeria's gdp and 205.59 times higher than senegal's gdp. it can be observed that the gdp of both home countries is closer to nigeria's gdp than senegal's gdp. based on this data, it is recommended that tarkett should consider investing in nigeria as it presents a more favorable economic environment when compared to senegal. sakpaide efe joseph, ph.d. (2024) 47 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe b. inflation rate comparison between the home and target countries figure 1: home countries (germany & france) inflation rate movement from 2002-2021 (20 year observations) source: world bank data base, 2022 figure 1. another theory that may be relevant is the international fisher effect (ife), which states that the difference in nominal interest rates between two countries is equal to the difference in expected inflation rates. this suggests that to determine which country would be a better investment opportunity, one would need to compare the expected inflation rate in nigeria to the expected inflation rate in senegal. in this case, by considering the inflation rate of nigeria and senegal, it appears that senegal has a lower inflation rate than nigeria. as of 2021, nigeria has an inflation rate of 14.33% while senegal has an inflation rate of 1.50%. this suggests that senegal may be a better investment opportunity, as the lower inflation rate may result in a more stable economic environment and higher returns on investment. c. unemployment rate comparison between the home and target countries in analyzing the unemployment rate of nigeria versus senegal, one would likely consider several economic theories. one theory that may be relevant is the okun's law, which states that there is an inverse relationship between unemployment rate and economic growth. this suggests that a country with a lower unemployment rate may indicate a stronger economy and potentially better investment opportunities. according to data from the world bank, as of 2021, the unemployment rate in nigeria was estimated to be around 27%, while in senegal it was around 13.5%. the high unemployment rate in nigeria can be explained by several factors, including a lack of investment in the country's education and training systems, as well as a lack of investment in the country's infrastructure, which limits the ability of businesses to expand and create new jobs. additionally, the nigerian economy is heavily dependent on the oil industry, which is subject to fluctuations in global oil prices, further exacerbating the problem of unemployment. on the other hand, senegal has a more diversified economy and has been able to attract more foreign investment, which has helped to create jobs and reduce unemployment. however, it is worth to note that the 0.0000 0.5000 1.0000 1.5000 2.0000 2.5000 3.0000 3.5000 germany france sakpaide efe joseph, ph.d. (2024) 48 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe covid-19 pandemic has had a significant impact on the global economy and may have affected the unemployment rates in both countries. however, it's important to also consider other factors such as economic stability, political situation, and level of development before making any investment decision. d. exchange rate comparison between the home and target countries the report by thomson reuters (2022) suggests that the exchange rate between france, nigeria, and senegal is expected to fluctuate in the near future. according to the report, the french currency is currently traded at a forward discount, meaning that it is expected to decrease in value relative to other currencies. on the other hand, the senegalese currency is expected to appreciate, while the nigerian currency is currently traded at a forward premium, meaning that it is expected to increase in value relative to other currencies. the increase in the exchange rate of the nigerian currency is expected to have negative effects on the country's economy. it is expected to reduce the purchasing power of the nigerian currency, increase domestic inflation relative to foreign inflation, decrease exports, increase imports, and depress the economy. additionally, it is also likely to increase interest rates in coming years. also notes that these effects can be mitigated by foreign direct investment (fdi). this means that if a company like tarkett sports were to invest in nigeria, they would likely benefit more than if they were to invest in senegal. overall, the report suggests that the exchange rate between france, nigeria, and senegal is expected to fluctuate, and companies considering investing in these countries should take this into account when making their decisions. it is worth to mention that the report is based on a specific date and the exchange rate can change over time, it's important to conduct a thorough analysis of the current and expected exchange rate when making an investment decision. 5. conclusion and recommendations it is argued that, despite the difficulties brought on by nigeria's macroeconomic volatility, currency devaluation, and poor ease of doing business, the tarkett company's plan for worldwide business development is more likely to succeed in nigeria than in senegal. the rationale for this is that tarkett's products have a larger potential market in nigeria due to its larger economy than senegal. nigeria is the biggest economy in africa, which makes it a desirable market for tarkett's goods. due to its broader market, tarkett will have access to a wider range of potential clients, which might boost sales and propel the business's expansion. tarkett's products and services are in increased demand in nigeria due to the country's enormous population. additionally, the nigerian government has been working to make doing business easier, which might make it a more desirable market for tarkett to enter. senegal is another possible target market for tarkett, however because to its smaller economy, there may not be as much of a demand there as there is in nigeria, which might restrict the company's ability to develop. senegal is a less desirable market for tarkett to enter than nigeria since it is harder to do business there due to its lower population and smaller market than nigeria. according to the report, tarkett company would be better off pursuing foreign direct investment (fdi) than product exports. this is due to the fact that fdi makes it possible to have more direct and solid relationships with the local market and to have more control over the products' manufacturing and distribution. furthermore, fdi makes it possible to access local resources more easily and have a deeper grasp of the local market, both of which can improve tarkett company's prospects of success in nigeria. nigeria offers a wider potential market for tarkett's products because of its larger economy, higher population, and improved ease of doing business, sakpaide efe joseph, ph.d. (2024) 49 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe all of which increase the likelihood that the company's international growth strategy would succeed there. tarkett's odds of success will rise as a result. references a.i. olayinka & o.r. adebayo (2017). the role of fdi in economic growth. journal of economics and sustainable development, 6(17), 1 adeleye, i., iheanachor, n., ogbechie, c., & ngwu, f. (2015). firstbank of nigeria: developing an internationalization strategy. in the changing dynamics of international business in africa (pp. 262288). london: palgrave macmillan uk. business-to-you.com (b2u) (2022) available at https://www.business-to-you.com/porter-diamond-model/ accessed on 27th april, 2024. enakirerhi, l. i., & ighosewe, f. e. (2024). growth in revenue and earnings management practices in nigeria pre-and post-ifrs adoption periods. international journal of applied economics, finance and accounting, 18(1), 88-97. hilmola, o. p. (2023). in the midst of the coronavirus and geopolitical crises—inventory efficiency and challenges faced in finland. journal of risk and financial management, 16(1), 12. hofstede insight (1980). country comparison. https://www.hofstede-insights.com/country-comparison/. accessed on 13th april, 2024 hofstede, g. (1980). culture’s consequences: international differences in work-related values. beverly hills, ca: sage. ighosewe, e. f. (2021). corporate sustainability disclosure and the nigerian industrial/consumer goods sectorâ€™ s performance: a panel data approach. international journal of research and innovation in social science, 5(3), 622-627. ighosewe, e. f., uyagu, d. b., & iyere, s. i. (2020). effect of corporate governance characteristics on sustainability reporting: empirical evidence from listed food and beverage firms in nigeria. the academy of management. integrating sustainability into management education in africa: issues, strategies and perspectives, 43. iheanachor, n., & ozegbe, a. e. (2021). the role of networks in the internationalization process of firms from emerging economies: the nigerian perspective. international journal of management, economics and social sciences (ijmess), 10(1), 9-31. krugman, p. (1979). increasing returns, monopolistic competition, and international trade. journal of international economics, 9(4), 469-479. https://www.business-to-you.com/porter-diamond-model/ https://www.hofstede-insights.com/country-comparison/ sakpaide efe joseph, ph.d. (2024) 50 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe mariadoss, b. j. (2017). global market opportunity assessment – cage analysis. core principles of international marketing [pressbooks edition]. cc by nc sa 3.0. washington state university. https://opentext.wsu.edu/mktg360/chapter/6-3-selecting-target-markets-and-target-marketstrategies. markusen, j. r., & venables, a. j. (1998). multinational firms and the new trade theory. journal of international economics, 46(2), 183-203. omokaro‐romanus, c., anchor, j. r., & konara, p. (2019). the internationalization of nigerian firms: motivations and location patterns. thunderbird international business review, 61(1), 75-88. sarel, m. (1996). nonlinear effects of inflation on economic growth. staff papers, 43(1), 199-215. sharmiladevi, j. c. (2017). understanding dunning’s oli paradigm. indian journal of commerce and management studies, 8(3), 47-52. the united nations commodity trade database (2022). revealed comparative advantage (rca). available at https://artnet.unescap.org/aptiad/rca.pdf. accessed on 13th may, 2024 thomson reuters (2022) fx rates selected west african countries. accessed 5th may, 2024 from https://eikon.thomsonreuters.com/index.html thomson reuters (2022). "exchange rate comparison between the home and target countries" tinbergen, j. (1962). shaping the world economy: suggestions for an international economic policy. the twentieth century fund. un comtrade report (2020). un comtrade data base. available at https://comtrade.un.org/. . accessed on 12th may, 2024. unctad (2022). revealed comparative advantage (rca). available at https://unctadstat.unctad.org/en/rcaradar.html. accessed on 12th may, 2024. ventresca, r. (2023). anti-inflationary commitment in the post-bretton woods era: italy's road to stabilityoriented monetary policies, 1975–81. journal of contemporary history, 58(1), 177-199. wef global competitiveness report (2020). how countries are performing on the road to recovery. https://www3.weforum.org/docs/wef_theglobalcompetitivenessreport2020.pdf. accessed on 12th april, 2024. world bank data (2021). doing business 2004 to 2020. available at https://archive.doingbusiness.org/en/doingbusiness. accessed on 13th may, 2024 https://creativecommons.org/licenses/by-nc-sa/3.0 https://opentext.wsu.edu/mktg360/chapter/6-3-selecting-target-markets-and-target-market-strategies/ https://opentext.wsu.edu/mktg360/chapter/6-3-selecting-target-markets-and-target-market-strategies/ https://artnet.unescap.org/aptiad/rca.pdf https://eikon.thomsonreuters.com/index.html https://comtrade.un.org/ https://unctadstat.unctad.org/en/rcaradar.html https://www3.weforum.org/docs/wef_theglobalcompetitivenessreport2020.pdf https://archive.doingbusiness.org/en/doingbusiness sakpaide efe joseph, ph.d. (2024) 51 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe world bank report (2021). gdp of different countries. available at https://data.worldbank.org/ accessed on 13th april, 2024 world factbook (2022). cage comparator. available at https://www.cia.gov/the-world-factbook/countries/ accessed on 19th may, 2024. world trade organization report (2021). tariff data. available at http://tariffdata.wto.org/default.aspx?culture=en-us. accessed on 13th may, 2024 https://data.worldbank.org/ https://www.cia.gov/the-world-factbook/countries/ http://tariffdata.wto.org/default.aspx?culture=en-us american interdisciplinary journal of business and economics issn: 2837-1909| impact factor : 6.71 volume. 10, number 4; october-december, 2023; published by: scientific and academic development institute (sadi) 8933 willis ave los angeles, california https://sadijournals.org/index.php/aijbe| editorial@sadijournals.org 1 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe effect of protectionist policies on economy development in nigeria balogun david ibukun and prof. okechukwu e. u. department of business administration, esut business school, enugu state university of science and technology doi: https://doi.org/10.5281/zenodo.10018687 abstract: the study was carried out to determine the effect of protectionist policies on economic development, in nigeria the specific objectives are to: examine the existence of a long run relationship between trade openness and economic development in nigeria, evaluate the effect of trade openness on economic development in nigeria and evaluate the effect of import tariffs and exchange rate on economic development in nigeria. this study employs the classical linear regression model to investigate the effect of protectionist policies on economic development in nigeria. the classical linear regression model is useful when the relationship that exists between variables is linear. the results of the ordinary least squares indicate that protectionist policies have a mixture of significant and insignificant effects on gross domestic product. the protectionist variables used in the study include import tariffs, exchange rates, and trade openness. the study recommended among others that there should be a deliberate effort on the part of the government to make policies that will favour the exportation of products. this is because doing such means a high trade openness, and will have a positive effect on the economic development of the country, with the market for local goods being expanded, and the pool of natural resources and human resources widened. keywords: development, economy, effect, policies, protectionist 1.1 introduction protectionism refers to government policies that restrict international trade to help domestic industries. protectionist policies are usually implemented with the goal to improve economic activity within a domestic economy but can also be implemented for safety or quality concerns. protectionist policies are typically focused on imports but may also involve other aspects of international trade such as product standards and government subsidies. the need for the promotion of economic development, revenue generation, and trade surplus led nigeria in the early 60s to embark on economic strategies that reinforce the effect of trade on economic development in the early 1960s. these policies aimed to address issues concerning the shrinking foreign exchange reserve and the weakening exchange rate (madichie, osagu & eze, 2018). in an attempt to revive the manufacturing sector, the government in the third quarter of 2019 closed all its land borders restricting all manufactured goods, especially rice, poultry products, and textiles that can be produced locally from being imported into the country, especially through the land border. the justification by the government was premised on the ground that it has been difficult for the agricultural and manufacturing sector to function optimally due to the influx of foreign products that can be produced locally; that the land borders has been a medium of evading duties, especially at the benin republic axis of the country which has majorly become an entrepôt for already manufactured goods which have the final destination as nigeria (eselebor, 2020). goods are also routed through balogun david ibukun and prof. okechukwu e. u. (2023) 2 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe the benin axis in order to evade import duties and quality assurance. the government also maintained that the land borders have been a channel through which illegal arms get into the country and this, therefore, made combating insecurity an uphill task coupled with being the media for illegal exporting of subsidized petroleum products which has a devastating effect on the economy (mbaye, golub, cheihk, 2019). despite the justification of this policy, critics have maintained that nigeria is both a sovereign, developing country and also a member of many international organizations such as the economic community of west african states (ecowas), african union (au), and world trade organisation (wto) which support free trade and that she also signed the free trade agreement as a member of the african continental free trade area (aftfca). in light of this, the policy was viewed by the critics as a violation of agreements of these international organisations and most especially just signed aftfca as the tenets of these organisations contradict the operation of trade protectionism (kolawole, ojelade & mosobalaje, 2020). the critics also maintained that the world economy has become increasingly linked through expanded international trade in services, primary and manufactured goods, international portfolio investments thereby encouraging importing and exporting of these goods among nations and that closing these borders would only mean dragging the nigerian economy back to the stone age (ugwuja and chukwukere, 2021). despite these arguments, the federal government has maintained that no criticism can sufficiently supersede the issue of insecurity, unemployment and protection of local manufacturing industries which dominates the manufacturing sector and the economy as a whole. “nigeria’s trade policy has moved in a heavily protectionist direction, with an escalation of import restrictions through higher tariffs and levies, import bans, foreign exchange limitations, and border closures. in 2015, the central bank of nigeria announced restrictions on access to foreign exchange for the importation of certain products that could be produced locally, with the aim of bolstering foreign exchange reserves and supporting domestic industries. the border closure was accompanied by a significant rise in inflation, especially for food products that are affected by foreign exchange restrictions. despite the seemingly high rate of trade protectionist policy in nigeria, economic development has been relatively low (vagianou, 2016). the study is being carried out to examine the effect of protectionist policies on economic development. 1.2 statement of the problem protectionism or the use of tariffs, subsidies, import quotas and other trade restrictive policies to protect domestic industries is fast increasing on the global landscape and prompting a major shift away from global free trade. between 2009 and 2015, over 6,000 new protectionist measures were implemented globally, as opposed to the 2,500 policies that support free trade, nigeria inclusive. nigeria has continued to experience underdevelopment despite the economic growth of the early and late sixties. the crisis is evidenced in low productivity, high rates of inflation, high rates of unemployment, deterioration in standard of living, huge external debts, social and political chaos etc. governments often implement protectionist policies with a view to improving national economic activities, but such policies has triggered a ripple of negative consequences for both the individual countries and the global economy as a whole. amongst others, protectionism stifles innovation and competition, reduces consumer spending, and triggers trade wars among nations, leading to stagnation of economic growth. 1.3 objectives of the study the general objective of this study is to determine the effect of protectionist policies on economic development, nigeria while the specific objectives are to: i. examine the existence of a long-run relationship between trade openness and economic development in nigeria. ii. evaluate the effect of trade openness on economic development in nigeria. iii. evaluate the effect of import tariffs and exchange rates on economic development in nigeria. balogun david ibukun and prof. okechukwu e. u. (2023) 3 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe 1.4 statement of hypotheses i. there is no existing long-run relationship between protectionist policies and economic development in nigeria ii. there is no significant effect of trade openness on economic development in nigeria iii. there are no significant effects of import tariffs and exchange rates on economic development in nigeria review of related literature 2.1 conceptual review 2.1.1 protectionist policies protectionism consists of managing the international exchanges of goods and services between national and regional economies. this falls into regulation of imports and the management of exports, which itself is divided into export promotion and import controls. trade restrictions are designed to protect domestic interests threatened by foreign competition. as a result, national governments have resorted to a growing range of measures aimed at supporting both small and large exporting companies, whether through technical assistance, or trade incentive. a protectionist trade policy allows the government of a country to promote domestic producers, and thereby boost the domestic production of goods and services by imposing tariffs or otherwise limiting foreign goods and services in the marketplace. (cfi team, 2019). types of protectionism protectionist policies come in different forms, including: 1. tariffs: the taxes or duties imposed on imports are known as tariffs. tariffs increase the price of imported goods in the domestic market, which, consequently, reduces the demand for them. consider the following example, which analyzes the uk market for us-made shoes. due to the imposition of tariffs, the price for the product increases from gbp100 (p1) to gbp120 (p2). the demand for us-made shoes in the uk market decreases (from q2 to q4). 2. quotas: quotas are restrictions on the volume of imports for a particular good or service over a period of time. quotas are known as a “non-tariff trade barrier.” a constraint on the supply causes an increase in the prices of imported goods, reducing the demand in the domestic market. 3. subsidies: subsidies are negative taxes or tax credits that are given to domestic producers by the government. they create a discrepancy between the price faced by consumers and the price faced by producers. 4. standardization: the government of a country may require all foreign products to adhere to certain guidelines. for instance, the uk government may demand that all imported shoes include a certain proportion of leather. standardization measures tend to reduce foreign products in the market. an economy usually adopts protectionist policies to encourage domestic investment in a specific industry. for instance, tariffs on the foreign import of shoes would encourage domestic producers to invest more resources in shoe production. in addition, nascent domestic shoe producers would not be at risk from established foreign shoe producers. although domestic producers are better off, domestic consumers are worse off as a result of protectionist policies, as they may have to pay higher prices for somewhat inferior goods or services. protectionist policies, therefore, tend to be very popular with businesses and very unpopular with consumers (cfi team, 2019). real exchange rate exchange rate is the relative value between two currencies. it is the rate at which the amount of one currency can exchange for another (kathleen crislip, 2018). the exchange rate is the price of one currency quoted in terms of another currency. it is the price at which one nation’s currency is exchanged for some other nation’s currency. it could be at par, high, or relatively low. thus, the exchange rate fluctuates relative to the comparative usage and need of the currencies concerned. according to kimberly (2018), most exchange rates are determined by the foreign exchange market or forex. that is called a flexible exchange rate. for this reason, exchange rates fluctuate on a moment-by-moment basis. the real effective exchange rate (reer) is the weighted average of a country's currency in relation to an index or basket of other major currencies. the weights are determined by comparing balogun david ibukun and prof. okechukwu e. u. (2023) 4 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe the relative trade balance of a country's currency against that of each country in the index. an increase in a nation's reer is an indication that its exports are becoming more expensive and its imports are becoming cheaper. it is losing its trade competitiveness (adam, 2021). trade openness trade openness refers to the outward or inward orientation of a given country's economy. outward orientation refers to economies that take significant advantage of the opportunities to trade with other countries. inward orientation refers to economies that overlook taking or are unable to take advantage of the opportunities to trade with other countries. some of the trade policy decisions made by countries that empower outward or inward orientation are trade barriers, import-export, infrastructure, technologies, scale economies, and market competitiveness. trade openness is the liberalization of the exchange of goods and services across borders through increased integration among countries. these countries are joined together in terms of the free movement of capital and labour, and free foreign trade and finance (igudia, 2016). however, the debate surrounding the relationship between trade openness and economic growth in developing economies is between pro-traders and anti-traders (oluwatoyin & folasade, 2014). import tariff a tariff is a tax imposed by the government of a country or by a supranational union on imports or exports of goods. besides being a source of revenue for the government, import duties can also be a form of regulation of foreign trade and policy that taxes foreign products to encourage or safeguard the domestic industry. protective tariffs are among the most widely used instruments of protectionism, along with import quotas and export quotas, and other non-tariff barriers to trade. tariffs can be fixed (a constant sum per unit of imported goods or a percentage of the price) or variable (the amount varies according to the price). taxing imports means people are less likely to buy them as they become more expensive. the intention is that they buy local products instead, boosting their country's economy. tariffs, therefore, provide an incentive to develop products and replace imports with domestic products. tariffs are meant to reduce pressure from foreign competition and reduce the trade deficit. they have historically been justified as a means to protect infant industries and to allow import substitution industrialization. tariffs may also be used to rectify artificially low prices for certain imported goods, due to 'dumping', export subsidies, or currency manipulation (poole, 2014). there is a near-unanimous consensus among economists that tariffs have a negative effect on economic growth and economic welfare, while free trade and the reduction of trade barriers have a positive effect on economic growth. although trade liberalization can sometimes result in large and unequally distributed losses and gains, and can, in the short run, cause significant economic dislocation of workers in import-competing sectors, free trade has the advantage of lowering costs of goods and services for both producers and consumers. import tariffs are taxes charged by the customs authority on the importation of goods into a country. usually, the value of the imported goods determines the amount that will be levied on them. in some contexts, import tariffs also mean import duties, customs duties, tariffs, or import tax. economically, import tariffs are charged to generate revenue for the government and to protect local goods against the dominance of foreign products. however, there are other reasons for imposing taxes. one of them is to restrict foreign products from flooding the local market. moreover, import tariffs are charged to penalize a country by means of a sanction mechanism (rosenfeld, 2016). economic development the economic development of a country is defined as the development of the economic wealth of the country. economic development is aimed at the overall well-being of the citizens of the country, as they are the ultimate beneficiaries of the development of the country. it is an increase in living standards, improvement in self-esteem needs, and freedom from oppression as well as a greater choice (aliyu, 2013). the most accurate method of measuring development is the human development index, (hdi), which takes into account literacy rates and life expectancy which affects productivity and could lead to economic growth. it also leads to the creation of more opportunities in the sectors of education, healthcare, employment, and the conservation of the environment. balogun david ibukun and prof. okechukwu e. u. (2023) 5 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe galloping (2014), emphasized that development is not synonymous with economic growth. development according to him involves qualitative transformation, while growth is essentially quantitative increase. the goal of development is to increase the quality of life of the human population; economic growth is only one means to this end (sunday, 2013). the development reflects social and economic progress and requires economic growth. growth is a vital and necessary condition for development, but it is not a sufficient condition as it cannot guarantee development. the extent to which a country has developed may be assessed by considering a range of narrow and broad indicators, including per capita income, life expectancy, education, and the extent of poverty. in general, economic development is usually the focus of federal, state, and local governments to improve our standard of living through the creation of jobs, the support of innovation and new ideas, the creation of higher wealth, and the creation of an overall better quality of life. economic development is often defined by others based on what it is trying to accomplish. many times these objectives include building or improving infrastructure such as roads, bridges, etc.; improving our education system through new schools; enhancing our public safety through fire and police service; or incentivizing new businesses to open a location in a community. economic development often is categorized into the following three major areas: governments working on big economic objectives such as creating jobs or growing the economy. these initiatives can be accomplished through written laws, industry regulations, and tax incentives or collections. programs that provide infrastructure and services such as bigger highways, community parks, new school programs and facilities, public libraries or swimming pools, new hospitals, and crime prevention initiatives. job creation and business retention through workforce development programs help people get the needed skills and education they need. this also includes small business development programs that are geared to help entrepreneurs get financing or network with other small businesses (song, g. qi, zhang, &. vernooy 2013). 2.2 theoretical framework 2.2.1 mercantilism theory mercantilism is economic nationalism for the purpose of building a wealthy and powerful state. adam smith coined the term “mercantile system” to describe the system of political economy that sought to enrich the country by restraining imports and encouraging exports. this system dominated western european economic thought and policies from the sixteenth to the late eighteenth centuries. the goal of these policies was, supposedly, to achieve a “favorable” balance of trade that would bring gold and silver into the country and also to maintain domestic employment. in contrast to the agricultural system of the physiocrats or the laissez-faire of the nineteenth and early twentieth centuries, the mercantile system served the interests of merchants and producers such as the british east india company, whose activities were protected or encouraged by the state. mercantilism is an economic theory that emphasizes self-sufficiency through a favorable balance of trade. mercantilist policies focus on the accumulation of wealth and resources while maintaining a positive trade balance with other countries. by maximizing exports and minimizing imports, mercantilism is also viewed as a form of economic protectionism (magnusson, 1994). originating in 16th-century europe, mercantilism is now viewed as a mostly outdated economic theory, replaced by the supply and demand forces of the market economy. present-day mercantilism commonly refers to economic policies that restrict the importation of foreign goods. the dominant economic theory was that the global supply of wealth was finite, and it was in the nation’s best interest to accumulate as much as possible. during that time, wealth was measured by a country’s quantity of silver and gold. to accumulate more wealth, european countries, such as britain and france, would focus on maximizing their exports and minimizing imports, which resulted in a favorable balance of trade. for countries with a negative trade balance with a mercantilist country, the difference would be paid back in silver or gold. to maintain a favorable trade balance, the early mercantilist countries would enact imperialist policies by setting up colonies in smaller nations. the aim was to extract raw material to send back to the home country, where it would be refined into manufactured goods. the goods would then be resold balogun david ibukun and prof. okechukwu e. u. (2023) 6 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe to the colonies, allowing early mercantilist nations to accumulate wealth through a positive trade balance (smith, 1937). as an economic theory, mercantilism relies on government intervention to regulate international trade and protect domestic industries. mercantilist policies involve the protection of domestic corporations through regulations and the promotion of trade surpluses. in the context of international trade, a favorable trade balance is achieved through government regulations, such as tariffs and restrictions on imports. on the domestic side, mercantilist policies support domestic industries by establishing monopolies and allocating capital to encourage growth. such policies are a form of economic protectionism meant to encourage self-sufficiency and are in direct opposition to the free-market economics of trade and globalization. 2.3 empirical review temidayo, opeyemi & grace (2022) carried out a study on institutional quality, trade protection policy, and macroeconomic performance in nigeria. annual data on the exchange rate, corruption, unemployment, economic growth, trade protectionist policy, government capital expenditure, government expenditure on education, and government effectiveness covering the period from 1981 to 2019 were sourced from world bank development indicators (wdi), central bank of nigeria (cbn) statistical bulletin and international country risk guide (icrgs). data collected were analyzed using the autoregressive distributed lag (ardl) model and var granger causality test. the results showed that due to the high level of corruption and low level of government effectiveness in the economy, institutional quality plays a negative role in the relationship between trade protectionist policy and macroeconomic performance in nigeria. the study also found that trade protectionist policy causes and significantly explains changes in the exchange rate and economic growth in nigeria while unemployment causes and explains changes in trade protectionist policy in nigeria. this study concluded that the absence of institutional quality mitigates the effectiveness of trade protectionist policy on macroeconomic performance in nigeria. olufunke & olufemi (2022) carried out a study on trade protectionism and the manufacturing sector: a review of border closure policy in nigeria. this study empirically investigates to ascertain the impact of trade protection vis-à-vis border closure policy on the manufacturing sector in nigeria between january 2018 and june 2021 using monthly secondary data. the study employs the traditional theory of protectionism as its theoretical framework. the chow breakpoint result revealed that there is a significant change in the parameters of the model in july 2019 which coincides with the time the policy implementation started. it employs a dummy variable to investigate the impact of the policy on manufacturing sector output as against the use of two regression models. the regression analysis revealed that in the short run, the impact of the border closure on the manufacturing sector was positive but later became adverse in the long run. also, the interaction of the border closure with the inflation rate revealed that the inflation rate became high during the period but the government generated income from tariff increases. this revealed that there are leakages through the land borders that need to be curbed through legislation. sequel to these findings, the study makes the following recommendations: government should not consider closing the borders again as closures constitute a drag to the manufacturing sector growth; rather than closing borders, the government should formulate policies to enforce trade protection; lastly, should it become exigent for the government to close the border, they should allow moderate inflation rate that the economy can tolerate in order to spur manufacturing output. li and whilley (2021) examined the relationship between trade protectionism and manufacturing sector employment in the united states of america (usa) over the period of 1976–2008 employing the general equilibrium model. the study established that trade protectionism could increase the demand for usa domestic manufactured goods as a result of decreased foreign demand but the simulation results showed that usa trade protectionism reduced manufacturing sector employment. ugwuja and chukwukere (2021) examined the concept of trade protectionism and border closure in nigeria from the political economy perspective by reviewing rice production from 1984 till date. this study established that balogun david ibukun and prof. okechukwu e. u. (2023) 7 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe even though trade protectionism will boost the domestic economy which is in line with the international trade theory, not all stakeholders will benefit from it as there was evidence of food inflation within the period under review. cheng et al. (2021) studied the impacts of trade protectionism on the indian economy especially on the manufacturing sector from 1970 to 2017 using the ordinary least square (ols) econometric technique. the study opined that there are two sides to the trade protectionism theory. in their analysis, it was stated that even though trade protectionism provides a less competitive market for domestic industries and provides a relatively stable environment for their growth; encourages exports, and also increases revenue to the government, the policy may not be sustainable as the high tariff rate will eventually harm the economy gdp. abegunde and fabiyi (2020) reviewed the implication of the recent nigeria-benin border closure on nigeria’s economic development. he employed the ols technique and affirmed that border closure which had the major aim of protecting the economy has only increased smuggling which is carried out by citizens of both countries. he also established that domestic production, income, and patronage increased with reduced national fuel consumption and increased seizure of contraband goods. he, therefore, concluded that the border closure was not to the economic development of nigeria. 3 methodology descriptive analysis was used. it entails the systematic collection and prescription of data to give a clear picture of a particular situation. it can be carried out on a small or large scale (eboh, 1998). this study employs the classical linear regression model to investigate the effect of protectionist policies on economic development in nigeria. the classical linear regression model is useful when the relationship that exists between variables is linear. functional form of the model rgdp = f(to, exr, imt, inf) mathematical form of the model gdp𝑡 = β0 + β1to + β2exr + β3imt + β4inf econometric form of the model gdp𝑡 = β0 + β1to + β2exr + β3imt + β4inf + ut where gdp = gross domestic product to = trade openness exr = exchange rate imt = import tariffs inf = inflation rate β0 = intercept parameter β1 – β3= coefficients of the variables ut = error term 4. data analysis preliminary descriptive statistics test for stationarity (unit root test) the augmented dickey fuller (adf) was employed for this study, to determine if the variables in the model are stationary, that is to ascertain whether the mean, variance, covariance of each of the variables used in the model are constant over time, generated through a stochastic process. for the adf test, a variable is stationary if the absolute adf value is greater than any of the absolute mckinnon critical values (at either 5%, 1% or 10%). h0: the time series variables have unit root. h1: the time series variables are stationary. decision rule: reject h0 of the absolute value of adfis greater than any of the mckinnon critical values in absolute terms. we fail to reject, if otherwise. balogun david ibukun and prof. okechukwu e. u. (2023) 8 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe table1: result of adf unit root tests variable level form 5% critical value first difference 5% critical value order of integration lgdp -4.186 -2.954 __ __ i(0) imt -2.299 -2.954 -5.953 -2.957 i(i) to -3.402 -2.954 __ __ i(0) exr 1.161 -2.954 -4.536 -2.957 i(1) inf -3.377 -2.957 __ __ i(i) source: e-views 9 software the data for the variables gross domestic product and trade openness are all integrated at levels, while data for the variables import tariffs, inflation and exchange rate are integrated at i(i). this is also to say that these variables do not have a unit root or that they are stationary. since these variables are stationary, we are going to carry out the co-integration test to determine if they have a long run relationship. co-integration test variables might not be stationary at levels but from their linear combination might be stationary at level form. since all the variables are stationary, we adopt the co-integration test, to check for long-run relationships in the model. this study adopted the johansen co-integration test methods. in this test, trace statistics were used to interpret the outcome. test of hypothesis: h0: there are no co-integrating equations. h1: co-integrating equations exist. decision rule: reject the null hypothesis if trace statistics > 5% critical value. do not reject if otherwise. table 2: output from the johansen co-integration test hypothesized no. of ce trace statistics 0.05% critical value none* 112.7775 69.8189 at most 1* 54.87491 47.8561 at most 2 23.86100 29.7971 at most 3 10.56256 15.4947 at most 4 0.006139 3.84146 source: e-views 9 software from the table 4.3, it is evident there exist a long-run relationship since the trace statistics is greater than the 0.05 critical value. the co-integrating rank is 2 (i.e., number of variables of study minus number of co-integrating vectors: 5 – 2 = 3). thus, at 0.05 level of significance, we reject the null hypothesis and conclude that there is cointegration amongst the variables in the model. this suggests long run relationship amongst the variables. regression results (ols) after the application of the ordinary least square (ols) estimation method on the model earlier suggested in the previous chapter, the following results shown in the table below was obtained. table 3: ols estimation result (dependent variable: lgdp) newey-west hac applied variable coefficient standard error t-stat p-value imt -0.0037 0.0189 -0.2001 0.8427 exr 0.0160 0.0031 5.0756 0.0000 to 0.0354 0.0241 1.4668 0.1532 inf -0.0137 0.0135 -1.0183 0.3169 c 27.299 1.5058 18.128 0.0000 r2 = 0.83, adjusted r2 = 0.81, f-stat = 37.8969, prob(f-stat) = 0.0000 dw = 0.357 balogun david ibukun and prof. okechukwu e. u. (2023) 9 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe source: e-views 9 software discussion of results import tariff has a coefficient of -0.003, and this shows that a unit increase in the import tariff will reduce the gross domestic product of nigeria by 0.003 units, which is insignificant. the exchange rate has a coefficient of 0.016. this means that a unit increase in the exchange rate will increase the gross domestic product in nigeria by 0.016 units. the value of the t-statistics and the p-value indicate that this effect is statistically significant. the fact that the inflation rate has a coefficient of –0.013, shows that a unit increase in the inflation rate is going to cause the gross domestic product to decrease by -0.013 units. however, the effect of the inflation rate on gross domestic product is insignificant as shown in the t-statistics, which is lesser than 2. trade openness has a coefficient of 0.035 which shows that a unit increase in trade openness is going to increase the gross domestic product of nigeria by 0.035 units. this goes in line with the a priori expectation because an increase in the rate of export as a ratio of imports adds extra value to economic output. diagnostic tests 1. test for multicollinearity: one of the assumptions of the ols is the assumption of no multi-collinearity among the regressors in the model. in carrying out this test, a simple rule of thumb is used to search for a high pairwise or zero-order correlation between any two regressors. if the correlation coefficient is in excess of 0.8, then multi-collinearity is a serious problem (gujarati and sangeetta, 2007). decision rule: if the correlation coefficient is in excess of 0.8, then there is multi-collinearity between two regressors. table 4 correlation matrix lgdp imt exr inf to lgdp 1.000000 -0.603506 0.880708 -0.581218 -0.093181 imt -0.603506 1.000000 -0.544250 0.794118 0.002611 exr 0.880708 -0.544250 1.000000 -0.451688 -0.342143 inf -0.581218 0.794118 -0.451688 1.000000 -0.216832 to -0.093181 0.002611 -0.342143 -0.216832 1.000000 source: e-views 9 software the correlation matrix above tells us that the independent variables used in this study are not strongly correlated with one another. this is because the correlation coefficients between the variables are all less than 0.8, as explained by gujarati (2005). 2. test for heteroskedasticity: the white general test for heteroskedasticity (gross terms) is employed in this study. that is, the squared residuals from the original regression are regressed on the original regressors, their squared values, and the cross product(s) of the regressors. h0: the variances are homoscedastic vs h1: the variances are heteroskedastic decision rule: if the p-value of the chi-square <0.05, we reject the null hypothesis. and we fail to reject if otherwise. source: e-views 9 software heteroskedasticity test: white f-statistic 1.424338 prob. f(14,19) 0.2330 obs*r-squared 17.41069 prob. chi-square(14) 0.2350 scaled explained ss 5.484663 prob. chi-square(14) 0.9779 source: eviews 10.0 since the probability of chi-square is 0.2350 which is greater than 0.05, we do not reject the null hypothesis and conclude that there no is heteroskedasticity in the model. balogun david ibukun and prof. okechukwu e. u. (2023) 10 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe 3. test for autocorrelation: the purpose of this test is to verify whether the errors corresponding to different observations are uncorrelated. the breusch-godfreytest is adopted for this test. h0: there is no autocorrelation decision rule: if the value of the p-value of chi-square <0.05, we reject the null hypothesis. we fail to reject if otherwise. breusch-godfrey serial correlation lm test: f-statistic 35.54655 prob. f(2,27) 0.0000 obs*r-squared 24.64154 prob. chi-square(2) 0.0000 source: e-views 9 software since the probability of chi-square is 0.0000 which is less than 0.05, we reject the null hypothesis and conclude that there is autocorrelation in the model. this presence of autocorrelation in the model means that the standard errors of the estimation may be bloated due to the serial correlation of the error term. in order to correct this, the newey-west hac method was employed in the regression estimation process. evaluation of research hypotheses the research hypothesis of this study is evaluated in this section. as a reminder, our stated hypothesis includes; h01: there is no existing long-run relationship between protectionist policies and economic development in nigeria h02: there is no significant effect of trade openness on economic development in nigeria h03: there is no significant effects of import tariffs and exchange rate on economic development in nigeria hypothesis one states that there is no existing long run relationship between protectionist policies and economic development in nigeria. however, the johansen cointegration tests conducted in the study highlighted the presence of two cointegrating equations, indicating that a long-run relationship exists between protectionist policies such as import tariffs, exchange rate and trade openness, and economic development in nigeria. hypotheses two state that there is no significant effect of trade openness on economic development in nigeria. the regression analysis reveals a p-value of 0.1532 for trade openness, (the proxy for protectionist policies), which is greater than 0.05. this means that trade openness has a positive and insignificant effect on economic development in nigeria. hypothesis three states that there are no significant effects of import tariffs and exchange rates on economic development in nigeria. the regression analysis reveals a p-value of 0.8427 for import tariffs, which is greater than 0.05, and a p-value of 0.0000 for the exchange rate, (the proxy for protectionist policies), which is lesser than 0.05. this means that the exchange rate has a positive and significant effect on economic development in nigeria, while import tariffs have an insignificant negative effect on economic development. conclusion the results of the ordinary least squares indicate that protectionist policies have a mixture of significant and insignificant effects on gross domestic product. the protectionist variables used in the study include import tariffs, exchange rates, and trade openness. recommendations these recommendations bellowed are very important because they will create a net positive impact on the nigerian economy. the government and all concerned parties are advised to heed these recommendations. autarky, or government policies aimed at stifling the free flow of goods and services in and out of a country, have over time, been found to negatively hinder the economic activities of such nations. they are unable to make use of the various comparative and absolute advantages available due to such a situation. a nation prospers because it modifies its activities, by adapting to high-yielding economic practices, which is hardly possible in a protectionist regime. balogun david ibukun and prof. okechukwu e. u. (2023) 11 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe the study recommends the following; i. there should be a deliberate effort on the part of the government to make policies that will favour the exportation of products. this is because doing such means a high trade openness, and will have a positive effect on the economic development of the country, with the market for local goods being expanded, and the pool of natural resources and human resources widened. ii. also, import tariffs are used by the government to control imports into the country, and also as a source of revenue. given that the study found import tariffs to have a negative effect on economic development, the study recommends that government reduces its import tariffs so as to help boost the overall economic output within the country. iii. furthermore, the study found exchange rates to positive impact on economic development. therefore, the study recommends a strong exchange rate regime that will help local companies to compete with their global counterparts. also, the exchange rate will help the country in building its foreign reserves. and inflation rate has a negative effect on economic growth, and rightly so, as inflation increases the cost of production of business organizations. the government is advised to apply all necessary measures to check the rate of inflation increase in the country. references frederick odo eze ph.d. and elizabeth uzoamaka okechukwu ph.d. (2022) handbook of research methodology a step-by-step guide for researchers. abegunde o, fabiyi r (2020) nigeria-benin border closure, the implication for economic development in nigeria. j hum social sci stud 2:56 abegunde o, fabiyi r (2020) nigeria-benin border closure, the implication for economic development in nigeria. j hum social sci stud 2:56 abegunde o, fabiyi r (2020). nigeria-benin border closure, the implication for economic development in nigeria. j hum social sci stud 2:56 adam, h.(2021).what is the real effective exchange rate (reer) and its equation? retrieved from https://www.investopedia.com/terms/r/reer.asp aliyu, c. u. (2013). some aspects of economic growth and development: a comparison among the views of prominent islamic and secular thinkers on stages of economic growth and development. unpublished m.sc. a thesis submitted to the faculty of economics and management, international islamic university, malaysia. aniukwu c (2020) nigeria's border closure policy: appraising its impacts and prospects. https://researchgate.net/publication/349723199 barattieri a, cacciatore m, ghironi f (2021) protectionism and the business cycle. j int econ 129:103417. https://doi.org/10.1016/j.jinteco.2020.103417 cfi team, (2019). protectionism. retrieved from https://corporatefinanceinstitute.com/resources/economics/protectionism/ balogun david ibukun and prof. okechukwu e. u. (2023) 12 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe cheng x, fu x, tang y, wang z (2021). the impacts of trade protectionism on the indian economy. in: 2021 3rd international conference on economic management and cultural industry (icemci 2021). atlantis press, pp. 1213–1219 constanze b (2014) cross-border flows between nigeria and benin: what are the challenges for (human) security? friedrich-ebert-stiftung, regional office abuja, nigeria. https://library.fes.de/pdffiles/bueros/nigeria/10883.pdf eselebor wa (2020). seme border, nigeria: safety and collective vulnerability; borders in globalization review 2,(1) (fall/winter 2020): 46–49. https://doi.org/10.18357/bigr2120201986return to ref 1 in article godwin om, olorunfemi jf, aiyegbajeje fo (2020) legal viable options to incessant closure of nigeria’s international borders. afr identities. https://doi.org/10.1080/14725843.2020.1828037 igudia, p. (2016). globalization and economic development: nigeria’s experience and prospects, globalization and africa’s economic development, ibadan: nigerian economic society, 347-375 kathleen, c. (2018). what is an exchange rate and what does it mean? edited by joe cortez, march 2018 downloaded on 18 july 2018. kimberly, a. (2018). exchange rates explained downloaded on 18 july 2022 kituyi m (2020) a new take on trade. retrieved from unctad: https://unctad.org/news/newtake-trade kolawole a, ojelade m, mosobalaje t (2020) assessment of land border closure on the socio-economic development of people in saki metropolis. int j innov dev policy stud 8(3):30–34 li c, whalley j (2021). trade protectionism and us employment. econ model 96:353–361. https://doi.org/10.1016/j.econmod.2020.03.017 madichie, c., osagu, f., & eze, e. (2019). economic diversification: imperative for trade and industrial policies in nigeria. timisoara journal of economics and business, 1(11), 67–86. magnusson, l.(1994). mercantilism: the shaping of an economic language. london: routledge. mbaye a, golub s, cheihk a (2019) the effects of nigeria’s closed borders on informal trade with benin. brooking’s policy reports, african in focus. 13 nwidoko, e., "trade and protectionism in nigeria: effects on employment and income distribution" (1988). etd collection for fordham university. aai8818470. https://research.library.fordham.edu/dissertations/aai8818470 okere k, iheanacho e (2016) the impact of trade protectionism theory on the economic growth of nigeria. int j financ account 5(4):171–183. https://doi.org/10.5923/j.ijfa.20160504.02 okere, k. & iheanacho, e. (2016). the impact of trade protectionist policy on the economic growth of nigeria. 5. 10.5923/j.ijfa.20160504.02. https://doi.org/10.18357/bigr2120201986 https://fbj.springeropen.com/articles/10.1186/s43093-022-00170-4#ref-link-section-d141585207e493 balogun david ibukun and prof. okechukwu e. u. (2023) 13 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe oladehinde o.(2022). protectionist policies cost nigeria $18bn in 10 years – world bank. retrieved from https://businessday.ng/big-read/article/protectionist-policies-cost-nigeria-18bn-in-10-years-world-bank/ olufunke i. a. & olufemi s. a. (2022). trade protectionism and the manufacturing sector: a review of border closure policy in nigeria. future business journal, https://doi.org/10.1186/s43093-022-00170-4 oluwatoyin, m. a., & folasade, a. b. (2014). trade openness, institutions and economic growth in sub-saharan africa (ssa). developing country studies, 4(8), 1-14. poole, w. (2014). "free trade: why are economists and noneconomists so far apart" (pdf). federal reserve bank of st. louis review. 86 (5): 1. doi:10.20955/r.86.1-6. archived (pdf) from the original on 201712-07. retrieved 2023-06-14. "most observers agree that '[t]he consensus among mainstream economists on the desirability of free trade remains almost universal.' rosenfeld, e. (2016). "here's why everyone is arguing about free trade". cnbc. archived from the original on 12 march 2016. retrieved 10 august 2021. smith, a.(1937). the wealth of nations. edwin cannan edition. available online at: http://www.econlib.org/library/smith/smwn.html song, y., g. qi, y. zhang, and r. vernooy (2013). “farmer cooperatives in china: diverse pathways to sustainable rural development”. international journal of agricultural sustainability sunday, o.d. (2013). impact of public expenditure on economic growth in nigeria: a test of co-integration using vector error correction mechanism, unpublished ph.d. proposal, department of economics, udu sokoto. temidayo o. a,.opeyemi n. o.& grace e.y. (2022). institutional quality, trade protection policy and macroeconomic performance in nigeria. african journal of economic review, volume 10 (4),43 ugwuja aa, chukwukere c (2021) trade protectionism and border closure in nigeria: the rice economy in perspective. ujah unizik j arts humanit. https://doi.org/10.4314/ujah.v22i1.4 victor u. i.(2019). impact of trade openness on economic growth among ecowas countries: 1975-2017. cbn journal of applied statistics 10(1)(june, 2019) 75-96 wayas d, onyinye m (2014) empirical analysis of trade barriers and economic growth in nigeria. eur j social sci 2:2347–5544 world bank report (2021). doing business 2021: comparing business regulation in 190 economies (nigeria) by world bank group, 17th series https://businessday.ng/big-read/article/protectionist-policies-cost-nigeria-18bn-in-10-years-world-bank/ https://doi.org/10.4314/ujah.v22i1.4 american interdisciplinary journal of business and economics issn: 2837-1909| impact factor : 6.71 volume. 11, number 1; january-march, 2024; published by: scientific and academic development institute (sadi) 8933 willis ave los angeles, california https://sadijournals.org/index.php/aijbe| editorial@sadijournals.org 23 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe effect of internal environmental factors on growth of pharmaceutical companies in south east nigeria chime, eric chibueze1, okechukwu, elizabeth uzoamaka2 and nwekwo, ngozi mabel, ph.d.3 1&2department of business administration, faculty of management sciences, enugu state university of science & technology 3accountancy department, faculty of business administration university of nigeria, enugu campus doi: https://doi.org/10.5281/zenodo.10822333 abstract: the study examined the effect of internal environmental factors on growth of pharmaceutical companies in south east nigeria. specifically, the study examined the effect of financial capability on profit growth of pharmaceutical companies in south east nigeria; the effect of marketing capability on sales growth of pharmaceutical companies in south east nigeria; the effect of managerial capability on employment growth of pharmaceutical companies in south east nigeria. the study employed survey research design. the population of the study was all 270 management and senior staff of 10 pharmaceutical companies in enugu and anambra states. since the population was not large, the whole population completed a structured questionnaire. data were analyzed with pearson product moment correlation coefficient (rs) with the aid of statistical package for social sciences (spss 20.0). the result showed that financial capability has a positive significant correlation with profit growth of pharmaceutical companies in south east nigeria (correlation coefficient of .770); marketing capability has a positive significant correlation with sales growth of pharmaceutical companies in south east nigeria (correlation coefficient of .828), managerial capability has a positive significant relationship with employment growth of pharmaceutical companies in south east nigeria (correlation coefficient of .768). the study concluded that internal environmental factors have effect on growth of pharmaceutical companies in south east nigeria. it was recommended that pharmaceutical companies in south east nigeria should source for finance in order to implement strong financial strategies. keywords: internal, environmental factors, growth, pharmaceutical companies introduction 1.1 background of the study the modern business manager operates in more dynamic and turbulent environment. the change in the environment has been rapid and unpredictable. economic variables have been complex both in form and impact on the practice of business in nigeria. consumers and clients have been showing complex behaviours both in chime, eric chibueze, okechukwu, elizabeth uzoamaka and nwekwo, ngozi mabel, ph.d. (2024) 24 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe local and international markets. the most dramatic change has been that exhibited by competitive pressures. competitors have been applying one strategy or the other to adapt to the dynamic and unpredictable nature of the business environment (adagba, & shakpande, 2017). the dynamic environment in which a business operates provides opportunities for it to grow develop and create value and wealth. it also poses some threats to the business. the primary concern is how the business affects people and natural environment as it produces and sells products necessary to satisfy customers, stakeholders and other constituents. by building key stakeholder relationships among government agencies, consumer entities, environmental groups and other constituents, a business can anticipate and manage issues and concerns that might otherwise have gone undetected until they had grown into major problems. the most significant component in setting a company's direction and differentiating itself from competitors is the internal environment (simon, joshua & mildren, 2014). this macro environment has a variety of qualities that a corporation can use to respond to the constantly changing external environment effectively. the internal environment of a corporation, in contrast to the external environment, is mostly controlled by management. tangible business resources, people, management, competencies, production, marketing, and strategic decisions are all traditional components of any firm's effective and efficient functioning (simon, joshua & mildren, 2014). abera (2012) finds out the eight most important challenges which appear to affect the overall performance of mses include the following: inadequate finance, lack of working premises, advertising and marketing problems, inadequate infrastructures, negative management practices, and technological, entrepreneurial, and politico-legal problems which includes bureaucratic bottleneck system. the findings similarly point out that there exists linear and superb massive ranging from tremendous to the strong relationship located between independent variables and dependent variable (islami, mulolli, & mustafa, 2018). the study found that internal business factors have a larger positive impact on a firm’s performance than industry factors. and in a study by ibrahim and harrison (2019), the results show that external factors, in particular, competitors’ marketing mix elements, have a greater influence on a company’s business performance than internal (marketing and non-marketing) strategy variables. 1.2 statement of the problem enterprises are subsumed in the environment with which they interact. the environment poses opportunities and challenges which may impact positively or negatively on business operations and performance. in fact, organizations and their environment are in mutually inter-dependent interaction with one another. an organization exists in the world of resources, opportunities, and limits. it can survive and thrive only when the environment desires its output of goods and services and is prepared to approve and endorse its activities. the available literature gives mixed results when it comes to the impact of internal business environment features on firm success. this study is therefore examined the effect of internal environmental factors on growth of pharmaceutical companies in south east nigeria. 1.3 objectives of the study the objective of the study was to examine the effect of internal environmental factors on growth of pharmaceutical companies in south east nigeria. specific objectives include: 1. to examine the effect of financial capability on profit growth of pharmaceutical companies in south east nigeria 2. to examine the effect of marketing capability on sales growth of pharmaceutical companies in south east nigeria chime, eric chibueze, okechukwu, elizabeth uzoamaka and nwekwo, ngozi mabel, ph.d. (2024) 25 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe 3. to examine the effect of managerial capability on employment growth of pharmaceutical companies in south east nigeria 1.4 research questions from the objectives, the following research questions were derived: 1. what is the effect of financial capability on profit growth of pharmaceutical companies in south east nigeria? 2. what is the effect of marketing capability on sales growth of pharmaceutical companies in south east nigeria? 3. what is the effect of managerial capability on employment growth of pharmaceutical companies in south east nigeria? 1.5 statement of hypotheses from the objectives and research questions, the following hypotheses were postulated: 1. there is no significant effect of financial capability on profit growth of pharmaceutical companies in south east nigeria 2. there is no significant effect of marketing capability on sales growth of pharmaceutical companies in south east nigeria 3. there is no significant the effect of managerial capability on employment growth of pharmaceutical companies in south east nigeria 1.6 scope of the study the study examined the effect of internal environmental factors on growth of pharmaceutical companies in south east nigeria. the study concentrated on examining the effect of three environmental factors namely financial, marketing and managerial capabilities on three proxies of business growth namely profit, sales and employment growth. review of related literature 1.1 conceptual review 1.1.1 internal environmental factors abolaji and oni (2015) stated that the internal environment of an organization consists of factors related to the firm that influences its ability to achieve the stated objectives, and develop as well as implement feasible plans, which consequently contribute to its performance. the internal environment can also be described as internally controlled forces operating within the organization itself that has a direct impact on organizational performance. this includes financial resources, information and knowledge, corporate capabilities, incentives, organizational demographics such as the size of inter-institutional relationship, corporate objectives, and employee skills (freeman and reid, 2006 in abolaji and oni, 2015). meanwhile, the research results of bouazza et al. (2015) indicated that entrepreneurial characteristics, low managerial skills, lack of marketing skills, and low technological capacity are the major environmental factors affecting the growth of smes in algeria. wheelen and hunger (2001) divided the internal environment into three important categories: 1) structures – the way in which a company is organized in terms of communication, authority, and workflow; 2) cultures – the pattern of beliefs, expectations, and values shared with the members of an organization in which organizational norms specifically conjure up and define the acceptable behaviors of the members of top managers to operational employees; and 3) resources – the assets in the form of raw materials for production process of goods/services contained in the organization of the company. chime, eric chibueze, okechukwu, elizabeth uzoamaka and nwekwo, ngozi mabel, ph.d. (2024) 26 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe in another side, david (2009) divided the internal forces into six important categories, consisting of the functions of management, marketing, financial/accounting, production and operation, research and development, and management information system. if the various things in the internal environment are done well, it will be very potential that the success of a strategy can be achieved as desired by the company (pearce and robinson, 2014). according to adagba & shakpande (2017) a firm's internal analysis involve examination and appraisal of such factors as its management, marketing and finance, operational/production and human resource. ghani, nayan, izaddin, ghazali, and shafie, (2010) identify strength variables or factors of the business entity to include: experienced and skillful work force: this enhances rational decisions and fulfillment of project requirement (abdul and abdul, 1999). feasible objectives: the business should have achievable strong short and long term objectives, and strategic managers could analyze the performance of any projects undertaken and at the same time plan for potential future development projects strong financial sources: these facilitate further expansion of the business, allow the business to invest in more modern and sophisticated product concepts to satisfy customers' needs, satisfy the firm's constituents and abide by the government policy effective and efficient management and administration system: this ensures smooth operation. good image and reputation: this attracts potential investors and confers competitive and market position advantages on the firm currency of techniques, technology and processes: the use of current technique, technology and processes confers competitive advantage of unequal measure on the firm in its procurement projects, design, concept and quality of inputs and products. timely information: this enables a firm to explore a competitive opportunity relative to its competitors in the industry. a good example is zenith bank's initial public offer in 2004 shortly before the central bank of nigeria's n25 billion bank recapitalization policy. weakness variables or factors of the firm include: under capacity utilization: this results to suboptimal allocation of firm's scarce resources, competitive disadvantage and unattained organizational objectives. inadequate experience and technical skills: this leads to low quality of strategy, concept, design, processes and products. inadequate financial resource and inefficiency in financial management: this results to loss of opportunities and increases susceptibility to threats inadequate know-how on evolution and application of current technology: this leads to inappropriate strategies, designs and processes and culminates to inability to explore opportunities inability to attract skilled and professional indigenous workers: this leaves the firm with the alternative of parading low profile work force with its attendance competitive disadvantage. according to hubeis and najib (2014), the internal environment refers to the environmental organizations that exist in a normal firm and have immediate consequences. it's a collection of resources, talents, and skills that will be used to develop a market position based on the company's own assumptions. as a result, the internal environment analysis includes a study of the company's resources, expertise, and competency (rita &miswar, 2018). a small business's success or failure is not solely determined by the external business environment. it also depends on the internal critical and strategic components of the organization, such as financial, marketing, and management capabilities (aishatu, tende, & toriola, 2022). chime, eric chibueze, okechukwu, elizabeth uzoamaka and nwekwo, ngozi mabel, ph.d. (2024) 27 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe financial capability financial capability is the set of attitudes, knowledge, skills, and self-efficacy required to make and implement money management decisions that are best suited to one's individual circumstances, all while operating in an enabling environment that includes, but is not limited to, appropriate financial services (morgan, hui, & kimberly, 2017). financial capability implies that financial education and inclusion are merely means to an end. the goal is to improve one's financial situation. providing consumers with new information about money management and financial services isn't enough. people should get financial education in a way that encourages them to improve their habits. access to formal and semi-formal financial systems is also insufficient, if not downright dangerous. what is required is the building of an enabling environment that assists poor and excluded people in making sound financial decisions and taking the appropriate actions (martina, hana, & jiří., 2015). financial competency is defined as "a loosely connected set of strategic financial objectives, criteria, and standards that drive such planning," according to svatoova (2017). according to aishatu et al, 2012), financial strategy consists of two parts: efficiently producing funds needed by the corporation and regulating how those funds are used within the organization, including the decision to distribute or reinvest any additional returns. in order to achieve successful financial management in all areas, the major purpose of implementing a financial strategy in a company is to find a balance between controlling mechanisms, high business performance, and lower financial alternative costs (jesús, martha, & miguel, 2015). they went on to say that financial strategy is a type of functional strategy that incorporates a company's whole business plan, is created through time, and is strongly linked to investment activities. financial capacity, according to murtala and mohammed noor (2016) and svatoova (2017), is concerned with financial management, raising capital for the firm, and reinvesting profits. marketing skills the ability of a firm to promote her products and services is one of the most important factors of the survival and success of the organisation. according to van scheers (2011) a lack of marketing abilities hurts small business success. pandya (2012) contrasts the marketing constraints of a small business to other constrained resources including financial and human resources. marketing expertise marketing capabilities are defined in general marketing literature as a company's capacity to use available resources to execute marketing operations in ways that result in desired marketing outcomes (morgan, constantine, & douglas, 2012). in developing a durable competitive advantage and improved firm performance, marketing competencies are unique and non-replaceable (morgan, et al., 2017). marketing skills have also been shown to boost international business success by increasing the quantity and longevity of recognized positioning advantages (tan & sousa 2015). managerial capacities several studies have identified the senior management team's managerial abilities as critical to small business success. management capacities, according to olawale and garwe (2010), are sets of knowledge, skills, and competences that can help small businesses become more efficient. management abilities, according to singh, garg, and deshmukh, are essential for smes to survive and prosper (2008). according to aylin, garango, cocca, and bitichi (2013), management skills are a critical component of smes' growth, and a lack of management skills is a barrier to growth and one of the causes of failure. according to pasanen, the growth patterns of small businesses are linked to their managerial abilities (2007). one of the most important difficulties that smes face, according to bhide (1996), is a lack of core competence and a well-trained senior management team. chime, eric chibueze, okechukwu, elizabeth uzoamaka and nwekwo, ngozi mabel, ph.d. (2024) 28 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe managerial skills, according to horng et al. (2011), are a specialized subset of competencies that demonstrate the intent to achieve specified goals. according to hogg (2009), management competences aid in the display of abilities and talents, resulting in efficient performance in a certain occupational domain. managerial competency models are built around the managerial competencies required for average and exceptional results. observed behavior is used to evaluate these performance-based talents (chong 2011). according to krajcovicova et al., managerial abilities are becoming more relevant in a variety of businesses (2016). businesses want to keep pushing their employees to reach new heights of performance. the distinction between mediocre and great managers can be made using competencies. having excellent or above-average individuals is perhaps a firm's greatest strength, which can be achieved by weeding out typical personnel and providing them with ongoing education and personality development. putting a competency approach into practice, despite the plethora of theoretical knowledge and concepts, is a difficult task. at first appearance, it appears to be a shift in strategy aimed at boosting overall performance. as a result of these realities, each employee's behavior is required to alter (krajcovicova, et al., 2016). 1.1.2 business growth growth is increase in size or quality improvement, resulting from development in which the interacting internal changes series will increase size (funk, 2022). it will be accompanied by changes in the characteristics of the growing object. the assets, net profits, and sales will increase. cost reduction is crucial if the firm's industry proliferates and the competitors are involved in the wards of prices with attempts of increasing market shares. firms not gaining the needed economy of the large productions will face significant losses unless they find and fill small and profitable niches if special features of products or services offset the high prices. the business growth indicators indicators of growth in your business are simply the metrics used to determine how well your business is performing. understanding the relevant growth indicators of your business helps you as the owner and manager to fully recognize the dynamics of your business. it also helps you determine if the performance of your business meets your expectations. the indicators fall under four major groups, capacity, business outcomes, qualitative indicators, and business outputs (funk, 2022). the outcome indicators include the profit, which is the difference between the costs and revenues. the profit any company makes is the function of the revenues it generates and its efficiency level. if the profits increase, it will show that the efficiency and the sales have increased. therefore, it is possible to see the company's growth through an increase in efficiency and sales. output indicators are the sales of the products. the level of production is a reasonable business size indicator as it the business capacity and the potential the business have for making a profit. the value of the produced goods is not available to people outside. thus, the value of sales is used to indicate growth. when the produced business products increase, it shows that a business is growing. the capacity indicators reflect the business's potential of producing outcomes and outputs. they will include the invested capital, workforce size, assets value, and production capacity. managers will realize the growth of their business through observing an increase in the production capacity and assets, not forgetting the invested capital and increase in employees' number. chime, eric chibueze, okechukwu, elizabeth uzoamaka and nwekwo, ngozi mabel, ph.d. (2024) 29 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe the qualitative indicators include the management practices, formalization degree, and the structure of the business. when the business structure is expanded, allowing decentralization, and when the practices of management increase and are more complicated, the formalization degree will increase, meaning there is growth in the business. safiruyu (2012) noted that there are qualitative and quantitative growth indicators of businesses. both are necessary and should be considered to ensure the sustainable growth of your business. qualitative growth indicators are indicators that cannot be quantified, i.e., these are the type of growth indicators that are not measured in numbers. customer satisfaction, customer loyalty, good business reputation, good customers’ reviews, etc. are some of the key qualitative growth indicators of businesses. these metrics are very crucial as they help measure how well the business is doing and the business’ growth potential. positive, honest reviews from your customers help recognize how well your business is doing. the level of loyalty maintained by your customers towards your business as well as the satisfaction your customers derive from your products/services are important metrics for your business’ growth. quantitative growth indicators are measured in numbers. the quantitative business growth indicators are the most concentrated on due to their popularity. sales growth, cost of production, gross profit growth rate, customer retention rate, inventory level, labour turnover rate, improving cash flow, operational performance and productivity, assets efficiency rate, etc. these variables are some of the key quantitative business growth indicators. rapid sales growth rate, falling or declining cost of production, increasing gross profit margin, high customer retention rate are indicators of a growing business. other researchers have proposed the sales growth, employment growth, income growth, and market share growth as the most important measurement of small enterprises performance (ontorael, & suhadak, 2017). this is also based on an argument stating that growth is a more appropriate and accessible indicator than financial performance indicators. it is appropriate to view financial performance and growth as different aspects of performance, in which each has important and unique information. together, financial growth and performance provide a wider description of the company’s actual performance rather than using individual measurements. the sales growth (and/or market share) is one of those conventional indicators that most directly indicates the ability of a business entity to maintain/reduce/increase the level of their market competitiveness, and at the same time it is considered to be the result and the measure of entrepreneurial orientation (dragnić, 2014) 1.2 theoretical framework the resource-based view (rbv) hypothesis was used to evaluate the impact of internal business environmental components on the performance of small and medium firms in adamawa state. according to the theory, the key to improving a company's performance is to look at its internal aspects (barney, 2001). the existence of an organization's resources, which are appreciated, valuable, and difficult to copy and substitute by competitors, explains performance discrepancies (barney, 2001). it's a good idea to establish a resource before going on to the small company resource requirements. a company's resources are its tangible and intangible assets (galbreath, 2005). financial resources, physical resources (plant, equipment, machine, etc.), people resources, and technological resources are tangible assets, whereas knowledge, skills, reputation, and capabilities are intangible assets. businesses typically strive to gain and maintain permanent or semi-permanent control of resources that will offer them a competitive advantage over their rivals. because they may have differing degrees of control over various sorts of resources, businesses will be diverse in terms of the products or services they supply. chime, eric chibueze, okechukwu, elizabeth uzoamaka and nwekwo, ngozi mabel, ph.d. (2024) 30 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe human resources, management policies, and skills are among the organizational assets that organizations utilize to develop and implement strategies or new innovations. the firm will profit from highly trained human resources and good alignment between the capabilities represented in the firm and those required by the firm's strategic needs (crook, todd, combs, woehr, &ketchen, 2011). as a result, a company's internal growth and success are the most important sources of growth and success. to put it another way, companies with greater resources and capabilities will establish the foundation for acquiring and maintaining a competitive edge. the rbv hypothesis is especially important in the context of small businesses because it implies that a company's long-term existence is dependent on its distinctive services. the organization's main talents are fostered over time to create this identity. small businesses are sometimes impeded by a scarcity of resources, causing them to operate under significant financial and personnel constraints (phillipson, bennett, lowe, & raley 2004; zucchella &siano, 2014). furthermore, a shortage of resources can cause small businesses to focus on short-term rather than longterm goals, limiting their ability to develop and capitalize on environmental opportunities. as a result, the rbv technique is helpful since it allows the success of a small business to be quantified in terms of internal resources and skills. 1.3 empirical review aishatu, tende, & toriola, (2022) examined effect of internal business environment on the performance of small and medium enterprises (sme’s) in adamawa state. the study looked at the impact of the internal business environment (as evaluated by financial competence, marketing competency, and management competency) on the success of smes in adamawa state, nigeria. the total population of the study was 1,776 people (adamawa state chamber of commerce and industry, adamawa state, 2019), with a sample size of 239 people chosen using yamane's (1967) method and convenience sampling strategy. data collected using questionnaire was analyzed via descriptive statistics, as well as correlation analysis and multiple regression technique. according to the study, financial aptitude, marketing ability, and managerial ability all have a positive and significant impact on the development of smes in adamawa state. as a result, the study advises smes (entrepreneurs) and corporate leaders to re-vitalize their companies' financial capacity through smart financial planning. engidaw (2021) explored internal business factors and their impact on firm performance: small business perspective in ethiopia. the study employed a descriptive and explanatory research design and used a quantitative research approach. the study is conducted on amhara region, north wollo zone, lalibela city administration microand small-scale enterprise operators, and in this study, the dependent variable is the performance of smes while independent variables are managerial factors, workplace factors, and entrepreneurial factors. to achieve the objectives of the study, 199 sample micro and small enterprises are selected from the 395 target populations. it used an explanatory design with stratified and simple random sampling techniques. the study employed descriptive and inferential statistical data analysis methods. the finding shows that the independent variables managerial factors and workplace-related factors have a positive and significant effect on small business performance in the study area. also, there is an insignificant relationship between entrepreneurial factors and the dependent variable. wahab, ismail, & muhayiddin (2019) examined the effect of internal environmental factors on operational excellence of manufacturing industry: a pilot study. the objective of this paper is to measure the reliability and validity of internal environmental factors and its construct. a pilot study was conducted among 30 smes company in terengganu which represented by the managerial level who are closely linked to the manufacturing operations. chime, eric chibueze, okechukwu, elizabeth uzoamaka and nwekwo, ngozi mabel, ph.d. (2024) 31 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe this study adopted a survey method by using simple random sampling method for the data collection. the reliability and validity of the instrument were examined through content validity, face validity and reliability based on expert assessment and the data was analyzed using the statistical software spss version 22. the result shows that the survey instrument is reliable and valid. therefore, this study expected will help the malaysian smes manufacturing sector in determining the effect of internal environmental factors on operational excellence. ontorael, & suhadak (2017) analyzed of the influence of external and internal environmental factors on business performance: a study on micro small and medium enterprises (msmes) of food and beverage. this study aimed to analyze and explain the influence of external environmental factors on internal environmental factors, along with the influence of external and internal environmental factors on business performance. this research was an explanatory research, using the questionnaire as the primary data and appointing the owners/managers of the enterprises as the object of the research. the total sample of this research was 108 respondents of msmes in the sector of food and beverage that were registered in the office of cooperatives, smes, industries, and trades of batu city. the data analysis of this research indicated that external environmental factors had a positive and significant influence on internal environmental factors. similarly, external and internal environmental factors also had a positive and significant influence on business performance. methodology 3.1 research design the research design for this study is a survey research design. this design requires the use of questionnaire as instrument of data collection. collecting information through a tactfully designed survey research can be much more effective and productive with large population and sample. 3.2 study area the south east (often written as south-east) is the one of the six geopolitical zones of nigeria representing both a geographic and political region of the country's inland southeast. it comprises five states – abia, anambra, ebonyi, enugu, and imo. the zone is bounded by the river niger on the west, the riverine niger delta on the south, the flat north central to the north, and the cross river on the east. it is divided between the cross–niger transition forests ecoregions in the south and the guinean forest–savanna mosaic in the drier north. culturally, the vast majority of the zone falls within igboland–the indigenous cultural homeland of the igbo people, a group which makes up the largest ethnic percentage of the south-eastern population. 3.3 sources of data two sources of data are identified for this study. the primary source was the questionnaire, while the secondary sources include documents, archives, statistics, research paper depositories, personal diaries/journals, etc. 3.3.1 primary sources the primary source of data was 270 management and top senior staff of the 10 pharmaceutical companies who responded to the questionnaire. they were expected to generate sufficient data for finding answers to the research questions and testing the hypotheses. 3.3.2 secondary sources this source provides information for the literature reviews completed in this work. the journal articles, theses, and other cognate publications by scholars on this research subject formed the secondary sources of data for this study. https://en.wikipedia.org/wiki/geopolitical_zones_of_nigeria https://en.wikipedia.org/wiki/states_of_nigeria https://en.wikipedia.org/wiki/abia_state https://en.wikipedia.org/wiki/anambra_state https://en.wikipedia.org/wiki/ebonyi_state https://en.wikipedia.org/wiki/enugu_state https://en.wikipedia.org/wiki/imo_state https://en.wikipedia.org/wiki/river_niger https://en.wikipedia.org/wiki/niger_delta https://en.wikipedia.org/wiki/north_central_nigeria https://en.wikipedia.org/wiki/cross_river_(nigeria) https://en.wikipedia.org/wiki/cross%e2%80%93niger_transition_forests https://en.wikipedia.org/wiki/guinean_forest%e2%80%93savanna_mosaic https://en.wikipedia.org/wiki/igboland https://en.wikipedia.org/wiki/igbo_people chime, eric chibueze, okechukwu, elizabeth uzoamaka and nwekwo, ngozi mabel, ph.d. (2024) 32 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe 3.4 population of the study the study population was all management and senior staff of pharmaceutical companies in the south-east nigeria. since it was difficult to study all the states, two states with the highest number of pharmaceutical companies were studied namely anambra (16) companies and enugu (15) companies. also, since all the 31 companies were difficult study, 5 companies were selected from each state. the total number of management and senior staff in the ten companies was 270 their details was shown in table 3.1 3.5 sample size determination since the population is small, we adopted a complete enumeration of the population by surveying the entire population 3.6 instrument of the study the instrument of study is a simple structured questionnaire, which was organized in a manner that addresses the key issues in the study objectives and research questions. the document is comprehensive and is made easy to understand by the respondents. the method of questioning used is the semantic differential type such as: strongly agree, agree, undecided, disagree and strongly disagree. 3.7 validity of the research instrument. the instrument is validated at two stages; first, the document is subjected to a small group of respondents called (pilot group) for completion, and propositions that were not clear to the respondents were dropped from the final document. second, the instrument is submitted to the research expert for vetting. this stage also caused more questions to be dropped from the draft. the final document was considered good for the respondents and good to capture the purpose and objectives of the study. 3.8 reliability of the instrument the study adopted the cronbach alpha approach to test the reliability of the study instrument. this approach yielded an index of 0.82 which implies that the instrument was reliable to the tune of 82%. this showed that the questionnaire is reliable. 3.9 method of data analysis pearson product moment correlation coefficient (rs) was used to analyze the hypotheses with the aid of statistical package for social sciences (spss 20.0) data presentation and analysis 4.1 questionnaire response rate questionnaire was distributed to 270 respondents, out of which 240 returned, representing a response rate of 83%. the response rate table is given below. table 4.1: questionnaire response rate respondents distributed 270 returned 240 % returned 88 not returned 30 % not returned 12 source: field survey, 2023 chime, eric chibueze, okechukwu, elizabeth uzoamaka and nwekwo, ngozi mabel, ph.d. (2024) 33 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe 4.2 data analyses 4.2.1: the effect of financial capability on profit growth of pharmaceutical companies in south east nigeria table 4.2 effect of financial capability on profit growth options strongly agree agree undecided disagree strongly disagree total responses 90 110 10 20 10 240 % 38 46 4 8 4 100 source: field survey 2023 table 4.2 showed that 90 respondents (38%) strongly agreed that financial capability has effect on profit growth of pharmaceutical companies in south east nigeria, 110 (46%) agreed; 10 (4%) were undecided; 20 (8%) disagreed; while 10 (4%) strongly disagreed. since more than 50 percent agreed, it showed that financial capability has effect on profit growth of pharmaceutical companies in south east nigeria. 4.2.2: the effect of marketing capability on sales growth of pharmaceutical companies in south east nigeria table 4.3 effect of marketing capability on sales growth options strongly agree agree undecided disagree strongly disagree total responses 100 90 20 20 10 240 % 42 38 8 8 4 100 source: field survey 2023 table 4.3 showed that 100 respondents (42%) strongly agreed that marketing capability has effect on sales growth of pharmaceutical companies in south east nigeria, 90 (38%) agreed; 20 (8%) were undecided; 20 (8%) disagreed; while 10 (4%) strongly disagreed. since more than 50 percent agreed, it showed that that marketing capability has effect on sales growth of pharmaceutical companies in south east nigeria 4.2.3: the effect of managerial capability on employment growth of pharmaceutical companies in south east nigeria table 4.4 effect of managerial capability on employment growth options strongly agree agree undecided disagree strongly disagree total responses 80 90 20 20 30 240 % 32 38 8 8 12 100 source: field survey 2023 table 4.4 showed that 80 respondents (32%) strongly agreed that managerial capability has effect on employment growth of pharmaceutical companies in south east nigeria, 90 (38%) agreed; 20 (8%) were undecided; 20 (8%) chime, eric chibueze, okechukwu, elizabeth uzoamaka and nwekwo, ngozi mabel, ph.d. (2024) 34 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe disagreed; while 30 (12%) strongly disagreed. since more than 50 percent agreed, it showed that managerial capability has effect on employment growth of pharmaceutical companies in south east nigeria 4.3 hypotheses testing 4.3.1 ho1: there is no significant effect of financial capability on profit growth of pharmaceutical companies in south east nigeria table 4.5 correlation between financial capability and profit growth financial capability profit growth financial capability pearson cor 1 .770** sig (2-tailed 214 .000 n 240 240 profit growth pearson cor .770** 1 sig (2-tailed .000 n 240 240 ** correlation is significant at the 0.05 level (2-tailed). decision rule: reject the null hypothesis if correlation coefficient is significantly different from zero, but accept the null hypothesis if correlation coefficient is not significantly different from zero (it is close to zero). table 4.5 above shows the result of bivariate analysis between financial capability and profit growth. from the table, financial capability has a positive significant correlation with profit growth with a high correlation coefficient of .770 and a p-value of .000. thus, the null hypothesis is hereby rejected and alternate hypothesis accepted. 4.3.2 ho2: there is no significant effect of marketing capability on sales growth of pharmaceutical companies in south east nigeria table 4.6: correlation between marketing capability and sales growth marketing capability sales growth marketing capability pearson cor 1 .828** sig (2-tailed 214 .000 n 240 240 sales growth pearson cor .828** 1 sig (2-tailed .000 n 240 240 ** correlation is significant at the 0.05 level (2-tailed). chime, eric chibueze, okechukwu, elizabeth uzoamaka and nwekwo, ngozi mabel, ph.d. (2024) 35 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe decision rule: reject the null hypothesis if correlation coefficient is significantly different from zero, but accept the null hypothesis if correlation coefficient is not significantly different from zero (it is close to zero). table 4.6 above shows the result of bivariate analysis between training and sales growth. from the table, marketing capability has a positive significant correlation with sales growth with a high correlation coefficient of .828 and a p-value of .000. thus, the null hypothesis is hereby rejected, and alternate hypothesis accepted. 4.3.3 ho3: there is no significant the effect of managerial capability on employment growth of pharmaceutical companies in south east nigeria table 4.7: correlation between effect of managerial capability and employment growth managerial capability employment growth managerial capability pearson cor 1 .768** sig (2-tailed 214 .000 n 240 240 employment growth pearson cor .768** 1 sig (2-tailed .000 n 240 240 ** correlation is significant at the 0.05 level (2-tailed). decision rule: reject the null hypothesis if correlation coefficient is significantly different from zero, but accept the null hypothesis if correlation coefficient is not significantly different from zero (it is close to zero). table 4.7 above shows the result of bivariate analysis between managerial capability and employment growth. from the table, managerial capability has a positive significant relationship with employment growth with a high correlation coefficient of .768 and a p-value of .000. thus, the null hypothesis is hereby rejected, and alternate hypothesis accepted. 5.1 summary of findings from the analyses, the following findings were made: i. financial capability has a positive significant correlation with profit growth of pharmaceutical companies in south east nigeria (correlation coefficient of .770) ii. marketing capability has a positive significant correlation with sales growth of pharmaceutical companies in south east nigeria (correlation coefficient of .828) chime, eric chibueze, okechukwu, elizabeth uzoamaka and nwekwo, ngozi mabel, ph.d. (2024) 36 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe iii. managerial capability has a positive significant relationship with employment growth of pharmaceutical companies in south east nigeria (correlation coefficient of .768) 5.2 conclusion the study examined the effect of internal environmental factors on growth of pharmaceutical companies in south east nigeria. the study found a positive effect of internal environmental factors like financial capability, marketing capability and marketing capability on indicators of business growth such as profit growth, sales growth and employment growth. the study therefore concluded that internal environmental factors have effect on growth of pharmaceutical companies in south east nigeria. 5.3 recommendations from the findings and conclusion, the following recommendations were made: 1. in order to re-establish their enterprises' financial competence; pharmaceutical companies in south east nigeria should source for finance in order to implement strong financial strategies. 2. pharmaceutical companies in south east nigeria should always adopt a strong marketing plan since it will enable them to meet the needs and wants of the targeted consumers. 3. pharmaceutical companies in south east nigeria should always ensure that the right people are employed to run the companies references abdul, r. a. a., & abdul, a. h. (1999). pengurusan projek: perspektif industri pembinaan pulau pinang. penerbit usm. abera, a. (2012). factors affecting the performance of micro and small enterprises in arada and lideta subcities. addis ababa university. retrieved from http://etd.aau.edu.et/handle/123456789/13199. abolaji, o., & oni, i. (2015). the effect of internal environment on the performance of small and medium scale enterprise in kano metropolis. international journal of management and commerce innovations, 3, 45– 56. adagba, d. t., & shakpande, c. (2017). effect of environmental factors on business performance. nigerian journal of management sciences, 6(1), 17–23. aishatu, a. u., tende, s., & toriola, k. a. (2022). effect of internal business environment on the performance of small and medium enterprises (sme’s) in adamawa state. journal of tianjin university science and technology, 55(2), 422–437. banda, g. (2020). effects of environmental factors on the performance of a company: a case study of patents and company registration agency’(pacra). master's dissertation, cavendish university. barney, j. b. (2001). resource-based theories of competitive advantage: a ten-year retrospective on the resourcebased view. journal of management, 27(6), 643–650. chime, eric chibueze, okechukwu, elizabeth uzoamaka and nwekwo, ngozi mabel, ph.d. (2024) 37 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe bouazza, a. b., ardjouman, d., & abada, o. (2015). establishing the factors affecting the growth of small and medium-sized enterprises in algeria. american international journal, 4(2), 75–82. crook, t. r., todd, s. y., combs, j. g., woehr, d. j., & ketchen jr, d. j. (2011). does human capital matter? a meta-analysis of the relationship between human capital and firm performance. journal of applied psychology, 96(3), 443–456. dangana, a. a., ishaka, m. s., bello, a., muhammad, a., & dangana, a. a. (2017). effects of environmental factors on the performance of small and medium enterprises (smes) in abuja, nigeria. ijmsr, 5(1), 79– 98. david, f. r. (2009). manajemen strategis: konsep (edisi ke-12). terjemahan oleh dono sunardi. salemba empat. dragnić, d. (2014). impact of internal and external factors on the performance of fast-growing small and medium businesses. management, 19(1), 119–159. engidaw, a. e. (2021). exploring internal business factors and their impact on firm performance: small business perspective in ethiopia. journal of innovation and entrepreneurship, 10(25), 1–17. funk, p. (2022). business growth. retrieved from https://www.researchgate.net/publication/363255945_business_growth/link/6313. galbreath, j. (2005). which resources matter the most to firm success? an exploratory study of resource-based theory. technovation, 25(9), 979–987. ghani, k. d. a., nayan, s., izaddin, s. a., ghazali, s. m., & shafie, l. a. (2010). critical internal and external factors that affect firms strategic planning. international research journal of finance and economics, 8, 25–32. hubeis, & najib. (2014). strategic management in the development of the competitiveness of an organization. elex media komputindo. ibrahim, e. b., & harrison, t. (2019). the impact of internal, external, and competitor factors on marketing strategy performance. journal of strategic marketing, 28(7), 639–658. islami, x., mulolli, e., & mustafa, n. (2018). the effect of industrial and internal factors on the firm’s performance. journal of social sciences and entrepreneurship, 14, 154–166. jesús, s., v., f., martha, g., a., & miguel, a., o., t. (2015). financial strategies, the professional development of employers and performance of sme's (aguascalientes case). procedia social and behavioral sciences, 174, 768–775. chime, eric chibueze, okechukwu, elizabeth uzoamaka and nwekwo, ngozi mabel, ph.d. (2024) 38 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe khadijat, m. r., mohammad, n. m., & suhana, m. a. (2017). the impact of internal factors on small business success: a case of small enterprises under the felda scheme. asian academy of management journal, 22(1), 27–55. martina, k., hana, u., & jiří, f. (2015). identification of managerial competencies in knowledge-based organizations. journal of competitiveness, 4(1), 129–142. morgan, n., hui, f., & kimberly, a., w. (2017). marketing capabilities in international marketing. journal of international marketing, 26(1), 61–95. morgan, n., constantine, s. k., & douglas w., v. (2012). export marketing strategy implementation, export marketing capabilities, and export venture performance. journal of the academy of marketing science, 40(2), 271–289. murtala, a. i., & mohammed noor, m. s. (2016). mediating role of access to finance on the relationship between strategic orientation attributes and smes performance in nigeria. international journal of business and society, 17(3), 473–496. ontorael, r., & suhadak, m. m. k. (2017). analysis of the influence of external and internal environmental factors on business performance: a study on micro small and medium enterprises (msmes) of food and beverage. rjoas, 6(66), 47–56. pearce, j. a., & robinson, r. b. (2014). strategic management. penerbit salemba empat. mcgraw hill. phillipson, j., bennett, k., lowe, p., & raley, m. (2004). adaptive responses and asset strategies: the experience of rural micro‐firms and foot and mouth disease. journal of rural studies, 20, 227–243. rita, s., & miswar, b. w. (2018). the effects of internal and external environment on smes empowerment-based environmental management. in proceedings of the 7th international conference on multidisciplinary research (icmr 2018 american interdisciplinary journal of business and economics issn: 2837-1909| impact factor : 6.71 volume. 10, number 4; october-december, 2023; published by: scientific and academic development institute (sadi) 8933 willis ave los angeles, california https://sadijournals.org/index.php/aijbe| editorial@sadijournals.org 34 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe ensuring organizational performance through measured change management: focus on the telecommunication industry kifordu a. anthony department of business administration, faculty of management sciences delta state university, abraka email: aakifordu@delsu.edu.ng/ anthony.kifordu@yahoo.com doi: https://doi.org/10.5281/zenodo.11190846 abstract: the study looked at organizational performance through measured change management with a focus on the telecommunication industry in delta state. for the study, a cross-sectional survey research design approach was used. the approach of stratified random sampling was utilised in the investigation. a structured questionnaire was employed in the study as the data-gathering tool. a test-retest methodology was used to determine the instrument's dependability. multiple regression analysis, correlation, and descriptive statistics were applied. results indicated that the change management process accounted for 70% of organisational performance changes. the following was found; that preparing for change (ß = 0.183, p<0.05) and creating a vision for change (ß = 0.084, p<0.05), significantly improve organisational performance in telecommunication firms in warri. among other things, the study suggested that establishing the framework, procedures, and systems necessary to steer and oversee a business in a way that increases long-term shareholder value by holding management accountable and boosting organisational performance is known as creating a vision for change. it offers the framework for establishing the organization's goals, as well as the means of accomplishing them and keeping track of performance also the concluded organizations should employ the service of internal change managers to work together with such experts employed externally to facilitate growth in performance and smooth change implementation. managers are advised to anticipate change, especially in the telecommunication industry where changes occur every second. the study recommended that change is a crucial component of success if it is purposefully established, properly implemented, and adapted, change in an organization's strategy can affect how it functions, affecting everything from the organizational structure to employees' everyday activities. keywords: change management, create a vision, implementation of change, telecommunications industry, and organizational performance introduction the term 'change management' refers to the planned, managed, or systematic implementation of changes (burns, 2018). the rate of change is so rapid, and the degree of obsolescence for organisations that resist change is so kifordu a. anthony (2023) 35 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe great that many individuals are forced to choose between embracing change and perishing. due to technological, economic, political, and social upheavals, the business climate of the twenty-first century is characterised by rapid change (oluwaleke, akhimie, abdulraseed & olanrewaju, 2023). consequently, managing change includes controlling its human impact. the term 'change management' refers to the planned, managed, or systematic implementation of changes (burns, 2018). the rate of change is so rapid, and the degree of obsolescence for organisations that resist change is so great that many individuals are forced to choose between embracing change and perishing. due to technological, economic, political, and social upheavals, the business climate of the twentyfirst century is characterized by rapid change (ubi, ojie & akaa, 2020). resistance management is essential to effectively embrace new processes and systems in an ongoing organisation, which is the primary objective of this transformation. consequently, managing change includes controlling its human impact. in the past fifty years, more and more businesses have grown quickly, which means that change management skills are needed to keep up with the speed of change. this is because of tough competition, new technologies that make business and operating models more flexible, and the progress of economies around the world (agbo, 2018); aninkan, 2018). hence, "change" is now impossible to avoid. for some reason, it seems to have become an inevitable part of doing business. it can't be stopped from happening (ekechi & umar, 2020). but companies should be ready to deal with change so that their success keeps getting better (ike & azeez, 2020; lovely, onyiyechukwu & joseph, 2020). ofuoku and ogisi (2020) say that organisations that don't get ready for change management will have a limited future. since change is a natural part of life, people who are too focused on the present or their memories of the past may put their future at risk. this is because the business world is becoming less predictable. big names in nigeria's phone industry right now are mtn, airtel, globacom, and the new companies 9mobile and visafone (thomas, 2014; kimhi & oliel, 2019). as the business world becomes less stable, it's clear that change management is needed to fix poor performance, adapt to new changes in the external environment, maintain a competitive edge (in terms of lower costs and higher quality), and ensure clear progress (cross, 2019). usually, powerful change comes from two main places: the inside and the outside. improvements in technology or pressure from outside the group, such as the government or business rivals, are the first two. the second source comes from people, such as donors, managers, and workers. regardless of the two sources, management is always faced with problems about how to handle change that is either inevitable or necessary. they aren't sure if they should change their organisational change goals or strategies to make the needed changes, or if they should just keep the same technology, hr, organisational structure, or business environment (daniel, okafor & emerole, 2019). mtn, airtel, globacom, and, more recently, 9 mobile and visafone are the big players in the nigerian mobile phone market right now. the last two have been in the country for less than five years. businesses have to deal with change because the business world is becoming more unstable. this could be done to fix any or all of these problems: bad performance, adapting to changes caused by outside pressures, getting or keeping a competitive edge (through lower prices and higher quality), and clear innovation (egbosionu, 2020). there are two main places where organisational change comes from. the outside source and the inside source, external sources could be better technology, pressure from outside groups like the government or competitors in the same business, or changes in the organisation itself (ekechi & umar, 2020). people inside the company, like shareholders, management, or workers, could be the source of change. anyone can see that things are changing, and when they do, management always has to figure out what to do about it. kifordu a. anthony (2023) 36 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe the problem the research problem statement serves as the foundation for any research study, guiding the investigation and framing the issues to be addressed. in the context of the effect of change management processes on the organizational performance of selected telecommunication firms in delta state, nigeria, a potential research problem statement could be as follows: the reason many telecom companies have gone out of business is that the industry's change management isn't working well. the rate of powerless endurance shows that there isn't a solid framework for how to carry out and manage hierarchical change. again, this shows that there is a lot to learn about managing change. this investigation was started because of small changes in the telecommunications industry. its goal is to show the hidden truths about how new ideas affect performance. if change isn't handled well, it could hurt the organization's performance, which could lead to the closing of the business, the loss of valuable employees, or the inability to meet the goals of investors. customers could also become unhappy, which would mean they would likely switch to a close competitor, which would also hurt the overall performance of the business. the number of enterprises in the industry in 2001, when it was deregulated, and the few remaining today is puzzling, the conclusion is that many of these enterprises that went under because they failed to manage the industry transformation that swept them away. the lack of a suitable framework for organisational change is shown in the low survival rate. thus, change management requires extensive study. using subtle developments in the telecommunications business, this study reveals how technological change is altering it. change that is poorly managed can hurt performance, leading to the closure of the company, the loss of valued employees, the failure to meet shareholder financial goals, and customer dissatisfaction that could lead to them switching to competitors. the telecommunication industry in delta state, nigeria, is undergoing rapid transformations driven by technological advancements, market dynamics, and regulatory changes. as telecommunication firms navigate these challenges, the impact of change management processes on organizational performance becomes a critical area of investigation. however, a gap exists in understanding the specific nuances of change management within the local context and its direct influence on the performance metrics of selected telecommunication firms in delta state. thus, investigating how change management processes affect the organizational performance of selected telecommunication firms in asaba, delta state, nigeria is now the main focus of this study. study objectives  to examine the impact of preparation for change on the organizational performance of selected telecommunication firms under study.  to ascertain the impact of creating a vision for change on the organizational performance of selected telecommunication firms under study. research hypotheses h01: there is no significant relationship between preparing for change and organizational performance of selected telecommunication firms under study. there is no significant relationship between creating a vision for change and organizational performance of selected telecommunication firms under study. kifordu a. anthony (2023) 37 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe literature foundations change management the term "change management" is broad and encompasses any method that aids a business in managing change, whether it be gradual or abrupt. change management has grown in importance in today's world of increasing globalization and competition (ufua, osabohien, imhonopi, olujobi & ogbari, 2020). managers described the current business environment and market needs as chaotic, uncertain, disruptive, ever-changing, and complex. complexity, connection, interconnectedness, and speed have significantly expanded over the past 20 or 30 years, producing a fundamentally new environment that necessitates the use of cutting-edge change management techniques (ugwu, osisioma, onwuzuligbo and nnaji-ihedinmah, 2020). change management (cm) is the study of how individuals survive in organizations that are changing as well as the theory and practice of reshaping companies to adapt and prosper in a dynamic environment. an organization's direction, structure, and capabilities must be updated consistently to meet the constantly changing needs of both internal and external consumers, according to moran and brightman (2018). according to zhang, kuchinke, woud, velten and margraf, (2018), change management is a group of core tools or frameworks made to keep any change initiative under control. the goal is frequently to lessen the effects and disruptions of the transition. an organization's direction, structure, and capabilities must constantly be reinvented to meet the changing expectations of internal and external clients as well as the environment (onyema & onuoha, 2020). change management process the change management process is a systematic approach to transitioning individuals, teams, and organizations from their current state to a desired future state. it involves a set of processes, tools, and techniques designed to effectively plan, implement, and manage change within an organization (daniel, okafor & emerole, 2019). here is a general overview of the change management process: prepare for change: identify the need for change by determining the reasons and objectives behind the proposed change. this may be driven by internal factors such as performance improvement or external factors such as market shifts, by assessing the organization's readiness for change by evaluating the organization's capacity, culture, and the level of support from leadership and employees (egbosionu, 2020). by identifying and analyzing stakeholders: understand who will be affected by the change and how. this includes employees, customers, suppliers, and other relevant parties. communicate the need for change, involve key stakeholders in the decisionmaking process, and address concerns to gain their support (ekechi & umar, 2020). create a vision for change: develop a comprehensive plan by outlining the scope, objectives, timelines, and resources required for the change initiative. identifying risks by anticipating potential challenges developing strategies to mitigate risks and establishing measurable metrics to assess the success of the change (etikan & bala, 2017). also, clearly articulate the reasons for the change, its benefits, and how it will be implemented, by ensuring that employees have the necessary knowledge and skills to adapt to the changes. training programs may include workshops, seminars, and online resources (fadila & umar, 2021). organizational performance shariff, nasir, ramli and zahari, (2020)noted that organizational performance is positively impacted by the presence of change management practices, change management tends to create a significant contribution to organizational competencies, and in turn, becomes a great advance for further enhancing innovativeness. performance may be measured using different matrices such as revenue, profitability, customer count, staff counts, market segment occupancy, and even sales volume. irrespective of the matrix being used, several factors influence the level of performan kifordu a. anthony (2023) 38 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe conceptual model of the study the conceptual model of the study depicts the independent and dependent variables of the study in figure 2.1 below; figure 2.1: conceptual framework source: authors conceptual model, 2024. preparing for change and organization performance change is an inevitable and essential aspect of organizational life in today's dynamic and competitive business environment (abdullah, 2019). organizations are constantly faced with the need to adapt to external and internal forces that require them to evolve and transform to remain relevant and successful (abdullahi, shehu, usman, & gumawa, 2020). the ability of an organization to effectively prepare for and manage change plays a crucial role in determining its overall performance and long-term success. the process of preparing for change involves a strategic and proactive approach to anticipating, initiating, and implementing changes within an organization. this includes conducting thorough assessments of current structures, systems, and processes, identifying the need for change, setting clear objectives and goals, engaging stakeholders, developing a change management plan, and implementing strategies to facilitate a smooth transition (agama, sylvanus & kenneth, 2023). the impact of effective preparation for change on organizational performance is significant and multifaceted. by preparing for change, organizations can enhance their agility, flexibility, and responsiveness to market dynamics and emerging trends (agbo, 2018). this enables them to stay ahead of the competition, capitalize on opportunities, and mitigate potential risks and disruptions. moreover, a well-prepared organization is better positioned to minimize resistance to change, foster a positive organizational culture, and boost employee morale and engagement (aninkan, 2018). this, in turn, can lead to higher levels of productivity, innovation, and overall performance across the organization (atmowardoyo, 2018). in this context, the relationship between preparing for change and organizational performance is clear: organizations that invest in proactive and strategic change management processes are more likely to achieve sustained growth, profitability, and competitive advantage in the long run (awiti, imbambi, mande & machuki, 2020). therefore, organizations must prioritize the readiness and readiness for change as a key driver of success in today's dynamic business landscape. independent variable: change management process prepare for change organizational performance create a vision for change kifordu a. anthony (2023) 39 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe creating a vision for change and organization performance creating a vision for change is a fundamental aspect of organizational development and growth. organizations that successfully establish a clear and compelling vision for change can significantly enhance their performance and unlock new opportunities for success (bansal & gupta, 2019). a well-defined vision serves as a guiding beacon, aligning the efforts of employees towards a common goal and motivating them to work collaboratively towards achieving it (bengat, odenyo & rotich, 2018). the effect of creating a vision for change on organizational performance is multifaceted and can result in various positive outcomes. one of the primary impacts of a vision for change on organizational performance is increased employee engagement and motivation (bennis & thomas, 2019). when employees understand and resonate with the vision of the organization, they are more likely to feel connected to their work and be inspired to contribute their best efforts. this heightened sense of purpose and direction can lead to improved productivity, creativity, and overall job satisfaction among employees. furthermore, a clear vision for change can foster a culture of innovation and adaptability within the organization (bersenaite, saparnis & saparniene, 2019). by outlining specific goals and objectives for the future, organizations can encourage employees to think creatively, experiment with new ideas, and adapt to changing market conditions (caldwell, chatman, reilly, ormiston & lapiz, 2018). this proactive approach to change management enables organizations to stay ahead of the curve, seize growth opportunities, and remain competitive in a rapidly evolving business landscape. moreover, a well-defined vision for change can enhance organizational alignment and cohesiveness. when all members of the organization are aligned around a common vision, silos are broken down, communication is improved, and collaboration becomes more effective (christoffels, 2019). this alignment enables departments to work cohesively towards shared goals, leading to improved coordination, efficiency, and synergy across the organization. in addition, a compelling vision for change can attract top talent to the organization and retain high-performing employees. when potential hires and existing employees see a clear direction and purpose in the organization's vision, they are more likely to be drawn to the organization and remain committed to its success. this can result in a more skilled and engaged workforce, better equipped to drive organizational performance and achieve strategic objectives (chukwuemeka, 2020). theoretical review burkelitwin model of organizational change the study was anchored on the burke-litwin model of organisational change, also known as the causal model of organisational change and performance, which suggests that both internal and external factors should be linked to performance (udeme& umar, 2021). the theoretical model was created by burke and litwin in 1989. it gives us a good way to look at parts of the organisation and surroundings that are necessary for a change to work. this shows even more how the parts or characteristics are connected in a casual way to cause a difference in performance. the burke-litwin model shows how different measurements work together to make a change. in addition, it shows how outside factors affect the different parts of the organisation. this theory is very important because it gives us a way to plan and carry out organisational analysis and change management that clearly shows a cause-and-effect connection (udeme & umar, 2021).this model by burke and litwin shows how the outside environment, the organization's strategy and mission, its culture, its structure, the practices of management, its systems, the climate in the work units, people's jobs and skills, their needs and values, and their motivation are all likely to affect their performance as well as the performance of the organisation as a whole. however, the model had some problems when it came to managing change plans so that an organisation could do its job well. some people don't like this model because they think it oversimplifies the different factors of change, which leads to the creation of sub-factors that make the model more complicated. kifordu a. anthony (2023) 40 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe empirical review in 2023, agama, sylvanus, and kenneth investigated how organisational change affected the success of some construction companies. the people living their work for and are executives at five nigerian building companies: rcc building company, abacus building services, dumez nigeria plc, and enerco nigeria limited. the companies were picked because they were on the list made by the federation of the construction industry (foci). some of the criteria were size, number of current projects, geographic spread, and service portfolio. twelve hundred and four people worked on the chosen construction site (1204), and the workers were first put into groups using the stratification method. a group of 300 people who answered the survey was chosen by taro yamane. these people were then statistically tested using pearson product moment correlation. the study found a strong connection between not wanting to change and poor performance; important factors for managing change will have an impact on performance; and putting changes into action will have an impact on the performance of certain building firms. so, it was suggested that businesses find the best change model for their projects and then make changes to fit the situation. companies should get information from more than one source, especially when looking for skill gaps, and workers should pay attention to training programmes set up by management. oluwaleke, akhimie, abdulraseed and olanrewaju (2023) examined change management in the fmcg industry using selected firms in lagos state with specific goals to investigate how much employee involvement, employee training, resources, and leadership affect change management in lagos. the study adopted a descriptive research design, and the study population consists of all the managerial staff of the 25 most rated companies in the fmcg industry in lagos. the sample size was 100 respondents. the online survey was used, and the data collected were analyzed using factor analysis. the empirical results indicate that all selected key factors contribute towards achieving effective change management as hypothesized. the results of this work may benefit enterprise managers planning, executing, and assessing change processes, as proper considerations of the factors discussed throughout this work may increase the chances of the change process success, resulting in a better performing and competitive enterprise. tools and methods the study adopted a descriptive survey design. its purpose was to establish relationships between and among independent variables of study and organizational performance. the population of this study is limited to members of staff of selected telecommunication firms in warri delta state nigeria, but targeting mtn, glo and airtel offices in asaba, delta state, nigeria from 2023 to 2024. the population used for this work comprises the employees, supervisors, and top managers of mtn, glo and airtel offices in asaba, delta state. hence, the staff of mtn, glo and airtel offices in asaba, delta state would serve as our respondents and the population of the study. the breakdown of the population is mtn(30), glo(28) and airtel(17) medium and upper-level categories of management staff including contract carders. due to the size, the entire population was used as the sample size while construct validity referred to the degree to which a construct's operationalization did measure what the theory said it did. quantitative data collected was analyzed using descriptive statistics using spss version 23 and presented through percentages, means, standard deviations and frequencies. the data was split down into different aspects of the change management process on organizational performance. results and discussion presentation of data analysis from the field survey pattern focused number administered number returned unused copies number used response rate employees 75 70 5 70 93.33 source: distributed questionnaire kifordu a. anthony (2023) 41 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe 70 of the 75 copies of the questionnaire that were distributed were returned, five were incomplete, and 70 were functional. consequently, the study presented in this chapter was predicated on the 93.3% response rate acceptable sample size. table 4.2: analysis of respondents profile s/n variables frequency percentage (%) 1 gender: male female total 25 45 70 36 64 100 2 age range: below 30 years 31-40 years 41years and above total 10 40 20 70 14.2 57 28 100 3 marital status: single married total 25 45 70 40 60 100 4 educational qualification waec/ond/nce hnd/b. sc masters/mba total 53 17 70 76 24 100 5 level of management lower middle top total 12 40 18 70 17 57 26 100 source: field survey, 2024. table 2 exhibited the background characteristics of the various respondents. it indicated on the gender composition of the respondents representing 36% of the sample were males while 64% were females. according to the respondents' age brackets, 15% of the respondents were under the age of 30, 57% were between the ages of 31 and 40, and 28% were over the age of 41. the marital mix of the respondents revealed that 40% of the sample respondents were single, while 60% of the others were married. according to the respondents' educational backgrounds76 percent had an hnd/b.sc, and 17 percent had a master's degree. on the level of management of staff, it was indicated that 17% of the respondents have lower management in the telecommunication industry. 57% of the respondents are middle level in the management . and lastly 34% of the respondents have above 11years working experience in the banking industry. analysis of other research data the analysis of the other research data and the testing of the earlier postulated hypotheses in previous chapter was done here to arrive at a conclusion and generalization. kifordu a. anthony (2023) 42 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe table 3 inter-correlations and descriptive statistics for study variables s/n variables 1 2 3 4 5 m sd 1. prepare for change (pc) 24.568 .6890 2. create a vision for change (cvc) .088 24.473 .8188 55. organizational performance .585** .361** .036 .434** .691** 24.500 .9580 **. correlation is significant at the 0.01 level (2-tailed). *. correlation is significant at the 0.05 level (2-tailed). table 4. the guideline for pearson correlation coefficients s/n coefficient value strength of association 1 2 3 0.1 < r < 0.3 0.3< r < 0.5 r > 0.5 small correlation medium/moderate correlation large/strong correlation source: based on cohen (2024) table 3 displayed the descriptive statistics and intercorrelations for the study variables. prepare for change is a highly good indicator of organizational performance, as evidenced by the positive correlation coefficient (0.585) that was found between preparing for change and organisational performance.the moderately positive correlation coefficient (0.361) between create a vision for change and organizational performance suggests that preparing for change is an excellent indicator of organizational performance. the small positive correlation coefficient (0.036) between implementing change and organisational performance indicates that implementing change is highly effective in ensuring organizational performance.embed and solidify is a highly good indicator of change management, as evidenced by the positive correlation coefficient (0.434) that was found between embed and solidify and organisational performance. table 4: regression analysis of change management and organizational performance coefficientsa model unstandardized coefficients standardized coefficients t sig. b std. error beta 1 (constant) -15.178 2.128 -7.131 .000 prepare for change .367 .060 .264 6.110 .000 create a vision for change .215 .046 .183 4.664 .000 workplace environment .596 .049 .519 12.116 .000 a. dependent variable: organizational performance table 4. displayed the multiple regression analysis result for change management and organizational performance. it was indicated that prepare for change which is the first variable has positive effect on organizational performance (ß = 0. .264, p<0.05). create a vision for change which is the second variable has positive effect on organizational performance (ß = 0.183, p<0.05). similarly, it was reported that implement change which is the third variable has positive effect on organizational performance (ß = 0.084, p<0.05). it was also indicated that embed and solidify change which is the fourth variable has positive effect on organizational performance (ß = 0.278, p<0.05).. kifordu a. anthony (2023) 43 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe the general form of the equation to predict op = βo + β1 pc +β2cvc + β3ic + β4esc + ε op = -15.178+ (0.367×pc) + (0.215×cvc) + (0.110×ic) + (0.327×esc) table 5 fitness of the model (analysis of variance) anovaa model sum of squares df mean square f sig. 1 regression 141.243 5 28.249 101.164 .000b residual 59.757 214 .279 total 201.000 219 a. dependent variable: organizational performance b. predictors: (constant), embed and solidify change, implement change, create a vision for change, prepare for change (pc) table 5 f-ratio evaluates how well the regression model fits the data. according to the table, organisational performance is strongly predicted by the change management dimensions (f=101.164, p< 0.05). this suggests that the regression model fits the data quite well. table 6 model summary model summary model r r square adjusted r square std. error of the estimate 1 .838a .703 .696 .5284 a. predictors: (constant), embed and solidify change, implement change, create a vision for change, prepare for change (pc) table .6 presents the degree to which the dimensions of change manageemnt explained the variation in organisational performance. the r square value indicates that change management accounts for 70% (0.696) of the variation in organisational performance. the r square shows the extent to which variations in the predictor variable can account for variation in the dependent variable. hypotheses testing the multiple regression analysis was adopted as an analytical technique for testing the hypotheses. the p-values reported in the regression coefficient tables were used for testing the study hypotheses. the decision rule the null hypothesis will be accepted, and the alternative hypothesis will be rejected if the critical value is determined above the probability level of significance, and vice versa. if the probability value of 0.000 is less than the crucial value of 5% (i.e., 0.000 0.05), there is no need to conclude that the supplied parameter is significantly essential. in this case, it is permissible to accept the alternative and reject the null hypothesis. when we reject the null hypothesis, we state our results are statistically significant, and vice versa (gujarati and porter, 2009). ho1: prepare for change (pc) has no significant positive effect on the organizational performance of the telecommunication industry under study. kifordu a. anthony (2023) 44 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe the null hypothesis was rejected, and the alternate was accepted since the p-value critical is at 0.05 (5%) i.e., the level of significance, or the admissible error in estimate, is less than the computed level of significance (0.000 < 0.05) in table 4. this suggests that delta state's deposit money banks' organisational performance is significantly improved by prepare for change (pc). h02: creating a vision for change has no significant positive effect on the organisational performance. telecommunication industry under study. the computed level of significance, as shown in table .4, is less than the p-value of 5%, i.e. (0.000 0.05). this finding suggests that creating a vision for change significantly improves the organisational performance of telecommunication firms in warri, rejecting the null hypothesis and accepting the alternative. discussion of results the explanation of the study's findings is given below by the data analysis completed in chapter four and the chapter two survey of relevant literature. the characteristics of change management strongly predict organizational performance, as shown by the f-ratio in table 5 test (f = 101.164, p<0.05). this suggests that the regression model fits the data quite well. table .6 demonstrates that change management accounts for 70% (0.696) of the variation in organisational performance. prepare for change (pc) and organizational performance according to table 3, prepare for change (pc) and organizational success have a positive correlation coefficient (0.585), indicating that preparing for change is an excellent indicator of how well a company manages its reputation. preparing for change (pc) improves organisational performance, according to table 4 (ß = 0.264, p<0.05). the alternate hypothesis was approved since the p-value critical is at 0.05 (5%) i.e., the level of significance, or the allowable error in the estimate, is less than the computed level of significance (0.000 < 0.05) in table 4. this suggests that prepare for change greatly enhances the performance of delta state's deposit money banks. this is in line with the research conducted by egbosionu (2020) who found that preparing for change is driven by internal factors such as performance improvement or external factors such as market shifts, by assessing the organization's readiness for change by evaluating the organization's capacity, culture, and the level of support from leadership and employees. also, this corroborates the findings of ekechi & umar (2020), who state that by identifying and analyzing stakeholders: understand who will be affected by the change and how. this includes employees, customers, suppliers, and other relevant parties. communicate the need for change, involve key stakeholders in the decision-making process, and address concerns to gain their support. create a vision for change and organizational performance according to table 3, create a vision for change and organisational success have a positive correlation coefficient (0.361), suggesting that creating a vision for change is an excellent indicator of how well a company manages its reputation. according to table .4, creating a vision for change improves organisational performance (ß = 0.183, p<0.05). according to table 4, the computed level of significance is less than the 5% p-value, or (0.000 < 0.05). the alternative hypothesis, which maintains that creating a vision for change greatly enhances the organisational performance of telecommunication firms in warri, was accepted because of this study. the results of the study are in line with those of etikan & bala (2017) who found a comprehensive plan by outlining the scope, objectives, timelines, and resources required for the change initiative. identifying risks by anticipating potential challenges developing strategies to mitigate risks and establishing measurable metrics to assess the success of the change (fadila & umar, 2021) also, clearly articulate the reasons for the change, its benefits, and how it will be kifordu a. anthony (2023) 45 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe implemented, by ensuring that employees have the necessary knowledge and skills to adapt to the changes. training programs may include workshops, seminars, and online resources). conclusion the study concluded that organisational performance in telecommunication firms in warri is highly impacted by change management telecommunication firms in warri, preparing for change and creating a vision for change, organizations should employ the service of internal change managers to work together with such experts employed externally to facilitate growth in performance and smooth change implementation. managers are advised to anticipate change, especially in the telecommunication industry where changes occur every second. recommendations  the study recommended that change is a crucial component of success if it is purposefully established, properly implemented, and adapted, change in an organization's strategy can affect how it functions, affecting everything from the organizational structure to employees' everyday activities.  a clear vision for change can foster a culture of innovation and adaptability within the organization  preparing for change must be considered as a valuable strategic tool that could enhance smooth business operations. references abdullah, j. (2019). impact of change management on the performance of employees in university libraries in jordan. european journal. business management, 5(2), 169–178. abdullahi, m. s., shehu, u. r., usman, b. m., & gumawa, a. m. (2020). relationship between total quality management and organizational performance: empirical evidence from selected airlines in nigeria aviation industry. asian people journal, 3(1), 30-44. agama, e. j., sylvanus, u. f., & kenneth, d. o. (2023). impact of organisational change performance of selected construction firms. open journal of business and management, 11,2731-2742. agbo, m. u. (2018). effect of change management on organizational performance of nigerian telecommunication, a study of airtel of nigeria, enugu, enugu state. international journal of management studies, business & entrepreneurship research, 3(1), 148-161. aninkan, d. o. (2018). organizational change, change management, and resistance to change–an exploratory study. european journal of business and management, 10(26), 109-117. atmowardoyo, h. (2018). research method in tefl studies: descriptive research, case study, error analysis, and r & d. journal of language teaching and research, 9(1), 197-208. awiti, l., imbambi, r. m., mande, w., & machuki, v. n. (2020). moderating effect of technology on the relationship between change management and performance of companies listed in the nairobi securities exchange in kenya. international journal of business management and economic review, 2(4), 1-22. kifordu a. anthony (2023) 46 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe bansal, a. & gupta, r. p. (2019). employees' attitude and behaviour towards organizational change. international journal of management, 9(1), 134-148. bengat, j., odenyo, m., & rotich, j. (2018). organizational change and resistance dilemmas resolution approach dilemmas' resolution approaches and mechanisms. international journal of economics, commerce and management. bennis, w.g. & thomas, r. j. (2019). crucibles of leadership. harvard business school press. bersenaite j.; saparnis, g. & saparniene, d. (2019). psychosomatics of employee's images when identifying a boston. harvard business school press. caldwell, d.f.; chatman, j.; reilly c.o., ormiston, m. & lapiz, m. (2018). implementing strategic change in a california management review, 32(2), 77-97 christoffels, m. (2019). a framework for managing change leadership in a digital transformation environment, in ecmlg. 15th european conference on management, leadership and governance, p.428. chukwuemeka, s. o. (2020). employee participation in decision making and organizational performance in public organization anambra state, nigeria. international journal of business & law research, 8(3), 7988. cross, o. d. (2019). effects of change management on the performance of firms in nigeria. international journal of research in business & social science, 10(4), 525-534. daniel, e. i., okafor, c. s. & emerole g. a. (2019). effect of strategic thinking on organizational performance (a study of mtn nigeria in abia state). journal of school of advanced studies, 3(3), 59-73. david, m. (2015). a positive approach to stress, resistance and organisation. empirical assessment of bulgarian firms. journal of business research, 58(1), 894-901. egbosionu, a. n. (2020). employee perception of the impact of new technology on organizational performance: a case study of ouzo palm kernel oil, mine, enugu, nigeria. asian journal of economics, business and accounting, 5, 64-70. ekechi, f. o., & umar, a. i. (2020). effect of change management on employee's performance in nigerian universities. international institute for science, technology and education, 12(20), 39-48. erdogan, b. (2018). organizational change management for the implementation of collaboration environments. doctoral dissertation, university of loughborough. etikan, i. & bala, k. (2017). sampling and sampling methods. biometrics & biostatistics international journal, 5(6), 215‒217. kifordu a. anthony (2023) 47 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe fadila, d. m. & umar, a. i. (2021). effect of change management on telecom organization's performance in nigeria. iosr journal of research & method in education (iosr-jrme), 11(4), 47-55. hayes, j. (2019). the theory and practice of change management. london: palgrave macmillan. health care system: the importance of leadership and change readiness. health care manage. 33(2), p. 124. ik, m., & azeez, a. a. (2020). organisational green behavioural change: the role of change management. international journal of entrepreneurial knowledge, 8(1), 34-48. judge, w.q. & blocker, c.p. (2018). organizational capacity for change and strategic ambidexterity: flying the plane while rewiring it. european journal of marketing, 42 (9/10), 915-926. jumanne, a. s. & njoroge, j. (2018). organizational change management and employee performance in public sector organizations in kenya: the case of parliamentary service commission. international journal of education and research, 6(6), 317-336. kimhi, s., & oliel, y. (2019). change management and organizational performance in selected manufacturing companies in anambra state, nigeria. the international journal of social sciences and humanities invention, 6(5), 5437-5445. kotter, j. (1995). leading change: why transformation efforts fail. harvard business review, 13(4), 95-108. kumar, a.e. & ananthn, f.a., (2020) change management and organizational commitment. oscotech journal of arts and social sciences (ojass), 3(2), pp. 2-9. lovely, w., onyiyechukwu, o. d. & joseph, j. d. (2020). effects of change management on the productivity of organizations in nigeria. international journal of business & law research, 8(1), 153-158. muchemi, a., & wakonyo, e. n. (2020). change management practices and performance of the national police service in uasin gishu county, kenya. international journal of current aspects, 4(1), 1-21. naoler, a. & tushman, m.l. (2018). beyond the charismatic leader: leadership and organizational change. california management review, 32, 77-97. ndahiro, s.; shukla, j. & oduor, j. (2019). effect of change management on the nigerian construction industry. journal of physical science and innovation, 6(1), 62–69. ofuoku, a. u. & ogisi, d. o. (2020). change management in vegetable farming: the case of farmers in delta state, nigeria. international journal of agricultural technology, 16(6), 1455-1462. oghojafor, b.e.a.; muo, f.i. & aduloju, s.a. (2018). organisational effectiveness: whom and what do we believe? advances in management & applied economics, 2(4), 81-108. kifordu a. anthony (2023) 48 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe oluwaleke, e., akhimie, d., abdulraseed, l. & olanrewaju, o. (2023). change management in fmcgs in lagos. a study of selected fmcgs in lagos state. acta universitatis danubius, 19(5), 114-138. american interdisciplinary journal of business and economics issn: 2837-1909| impact factor : 6.71 volume. 11, number 2; april-june, 2024; published by: scientific and academic development institute (sadi) 8933 willis ave los angeles, california https://sadijournals.org/index.php/aijbe| editorial@sadijournals.org 41 american interdisciplinary journal of business and economics https://sadijournals.org/journals/index.php/sijssh stakeholder pressure, climate finance, and esg reporting: empirical research 1solberg horve mishiwo, 2evans yao vigbedor, 3benjamin coffie alorzuke and 4abraham aborhey solberg.mishiwo@stu.ucc.edu.gh/ evansvig@outlook.com/ benalor@abcoffie.com/ aaborhey@htu.edu.gh 1university of cape coast, ghana, 2xiamen university, china pr, 3a.b. coffie (chartered accountants) and 4ho technical university doi: https://doi.org/10.5281/zenodo.11092609 abstract: it is impossible to overstate the role that climate finance plays in establishing a sustainable business climate in emerging nations like ghana and other african countries. therefore, the goal of this research is to establish how climate finance and stakeholder pressure affect environmental, social, and governance (esg) reporting in publicly traded companies in ghana. the world bank sourced data from 20 publicly traded businesses listed on the ghana stock exchange between 2014 and 2023. the panel var results showed that although there is a short-term correlation between esg reporting and climate finance, stakeholder pressure, and green technology innovation, there is no such long-term relationship in this study. at the same time, the hausman test described a random-effects model that revealed that climate finance and stakeholder pressure have a positive and significant effect on esg reporting. this means that a high level of these factors leads to better esg disclosure among traded companies in ghana. to increase esg reporting and overall business performance, developing countries like ghana must gradually strengthen their climate financing systems. keywords: climate finance, stakeholder pressure, esg reporting. panel var, random-effect model. 1. introduction in contemporary times, nearly all of the largest corporations globally regularly provide sustainability reports that delineate their operational strategies and the ramifications they have on the environment, society, and governance (agyemang et al., 2023a). according to wiredu et al. (2023), a prominent corporation publishes an annual report that provides an overview of its activities’ impact on the economy, society, and environment. the significance of environmental, social, and governance (esg) reporting has increased in nearly all economies because of the escalating global apprehension regarding ecological issues and the consequent imperative to safeguard ecological systems. consequently, numerous firms are striving to be more environmentally aware and responsible. organizations such as the global reporting initiative (gri) are sought after by businesses and governments worldwide to aid them in understanding and effectively communicating their influence on environmental, social, and governance (esg) matters. companies may face pressure from stakeholders to increase their esg data while simultaneously planning strategies to enhance their esg reporting to remain competitive in the global market. furthermore, a conducive climate foster enhanced esg reporting, underscoring the imperative of strengthening climate finance mailto:solberg.mishiwo@stu.ucc.edu.gh/ mailto:evansvig@outlook.com/ mailto:benalor@abcoffie.com/ solberg horve mishiwo, evans yao vigbedor, benjamin coffie alorzuke and abraham aborhey (2024) 42 american interdisciplinary journal of business and economics | https://sadijournals.org/journals/index.php/sijssh to bolster sustainable development in less developed nations. climate financing, which encompasses local, national, or worldwide funding, is provided by public, private, and alternative financial sources to support projects aimed at adapting to and mitigating climate change (unfccc, 2023). despite the critical role played by ghana’s national determined contributions (ndcs) in establishing a framework for climate action, concerns persist regarding the adequacy of resources required to effectively implement these ambitious goals. ghana encounters the further obstacle of maneuvering through a complex domestic financial landscape marked by susceptibility to debt in its endeavors to secure climate financing (world bank, 2020). the acquisition of additional climate funding is of utmost importance for ghana to achieve its climate objectives, in addition to meeting its development needs and establishing a foundation for a sustainable future (world bank, 2022). ghana’s climate finance flows were examined, revealing an average yearly monitoring of usd 830 million in 2019 and 2020. this accounts for a meager 5-9% of the projected usd 9.3– 15.5 billion required investment, highlighting the pressing necessity to augment climate spending to achieve ghana’s nationally determined contributions (unfccc, 2021). countries often underestimate their budgetary needs because of a lack of knowledge and expertise in making accurate estimates, especially regarding adaptation. additionally, there is a lack of data from subnational governments and vulnerable groups. consequently, this gap is likely to widen (cpi, 2022c). through the publication of environmental, social, and governance (esg) reports, a corporation may effectively showcase to the public its commitment to upholding its responsibilities toward its clients, employees, the environment, and society rather than solely pursuing profit. the enhancement of sustainability reporting and the incorporation of sustainability into business strategy and practices yield numerous advantages, including enhanced legitimacy and reputation, increased employee and customer loyalty, decreased expenses, improved business practices, enhanced firm performance and valuation, and the cultivation of competitive advantage (sanchez-planelles et al., 2020; menassa & dagher, 2020). there is an increasing focus among owners and other stakeholders on firms operating in developing economies, with the aim of gaining a deeper understanding of the value they provide and the environmental and societal impacts resulting from their activities. the authors, mensah et al. (2017), have advocated for the implementation of a standardized and transparent reporting framework to improve business performance and attract potential investors. companies are adopting more robust self-regulation and demonstrating greater transparency in their sustainable practices due to the active participation of stakeholders (maama & mkhize, 2020). hence, it is imperative for firms to advance their esg (environmental, social, and governance) reporting, as an increasing number of individuals recognize that the potential risks and challenges impacting a company’s long-term value are significantly more complex and diverse than what can be conveyed solely through financial statements. prior research has mostly concentrated on the requirements of stakeholders, as they are the primary drivers of sustainability (higgins et al., 2020; lulu, 2021). however, none of this research considered the mediating role of technological innovation, which is an essential element of sustainability reporting. the research by ramadini et al. (2020) and krasodomska and zarzycka (2021) also looked at developed economies using secondary data sources and the environmental kuznets curve (ekc) theory. as far as we know, past research has not specifically examined developing economies, especially those in sub-saharan africa (ssa). there is a lack of studies in industrialized economies that have investigated the relationship between stakeholder pressure and ecological reporting. this is surprising considering the belief that a corporation can impact its various stakeholder groups in both beneficial and harmful ways. stakeholder pressures typically influence sustainability reporting, according to prior studies. solberg horve mishiwo, evans yao vigbedor, benjamin coffie alorzuke and abraham aborhey (2024) 43 american interdisciplinary journal of business and economics | https://sadijournals.org/journals/index.php/sijssh however, the effects of certain stakeholder demands have produced inconclusive findings (rudyanto & veronica siregar, 2018). to gain a deeper understanding of the relationship between climate finance, stakeholders’ pressures (sp), and sustainability disclosure (sd), additional studies using secondary data from the world bank are necessary. the existing body of research lacks clarity regarding the influence of sp on sd, thus rendering the findings of this study susceptible to varying interpretations. the existing body of research mostly centers on the significance and transparency of sustainability reports (higgins et al., 2020; lulu, 2021). hence, this paper seeks to fill a gap in research by examining the influence of stakeholder pressure and climate finance on ghana’s esg reporting. this study investigates the impact of stakeholder pressure and climate funding on environmental, social, and governance (esg) reporting inside publicly traded enterprises in ghana. the primary aims of this study are to determine the impact of climate funding and stakeholder pressure on sustainability reporting, considering the role of green technology innovation in a developing country such as ghana. 2. literature review 2.1 theoretical literature review this study is built on stakeholder theory and institutional theory, which are presented in this section. 2.1.1 stakeholder theory the notion of stakeholder theory is commonly employed to explain the motivations behind firms’ inclination to report on environmental, social, and governance (esg) matters. according to stakeholder theory, firms are obligated to consider the interests of all stakeholders, in addition to the owners, who primarily want to maximize profit (freeman, 1984). according to stakeholder theory, attainment of this purpose is unachievable if the needs of other stakeholders are disregarded. dissanayake et al. (2019) claim that companies bear a twofold obligation toward their investors or stakeholders, as well as diverse stakeholders whose actions can exert influence on or be influenced by the organizations’ conduct. corporations proactively participate in and communicate on environmental, social, and governance (esg) issues to demonstrate to stakeholders that their demands are acknowledged. a potential strategy for attaining this goal involves integrating it into annual reports or creating separate sustainability reports (abeysekera, 2022). companies strive to address the issue of information asymmetry by properly disseminating environmental, social, and governance (esg) information. this involves reporting non-financial factors like social and environmental initiatives, along with their corresponding outcomes (alsahali & malagueño, 2022). the use of esg reporting serves as a means to actively include several stakeholder groups that are considered crucial for the ongoing operation of the organization. the use of stakeholder theory necessitates that the organizational manager swiftly attends to the external demands of the global context. stakeholder theory asserts that businesses should conduct themselves in an ethical and fair manner toward the expectations of stakeholders, guided by their understanding of what is morally right. this research builds upon the theoretical framework of legitimacy theory, which also highlights the ethical behavior of businesses (osei et al., 2023). stakeholders are of paramount importance in offering assistance to organizational management regarding the manifestation of the firm’s ideals, as stated by wen et al. (2023). this mindset empowers individuals to distinguish between ethically right and perilous. according to zhou et al. (2022), stakeholders play a vital role in directing enterprises toward the preservation and improvement of quality of life. consequently, it is imperative for businesses to incorporate environmental considerations into their operations and effectively communicate sustainability-related information. according to stakeholder theory, it is advisable for organizations to prioritize the cultivation of positive relationships with all stakeholders (osei et al., 2019). consequently, corporations may feel obligated to adopt and disseminate sustainability reports because of the impact exerted by stakeholders. the sustainability reports of the company function as comprehensive collections of data on the effects of the solberg horve mishiwo, evans yao vigbedor, benjamin coffie alorzuke and abraham aborhey (2024) 44 american interdisciplinary journal of business and economics | https://sadijournals.org/journals/index.php/sijssh company’s operations on the local community and the natural environment. companies express their efforts toward global goals as a strategic approach to efficiently execute their responsibilities and obtain the support and approval of stakeholders. the use of st is commonly observed as a prominent theoretical framework in research related to esg. according to agyemang et al. (2023b), ensuring the sustained existence of a firm necessitates the organization’s capacity to meet the expectations of its employees. the participation of numerous stakeholders is necessary to address the complexity of environmental, social, and governance (esg) concerns and generate effective and sustainable solutions (freudenreich et al., 2020). leaders often encounter the challenge of deciding which interests to prioritize, ignore, support, or please due to conflicting interests. the equilibrium of stakeholder interests is a pivotal factor for organizations. 2.1.2 institutional theory institutional theory offers a comprehensive framework for understanding the rationale behind a firm’s selection of a certain structure or reporting technique. simoni et al. (2020) assert that businesses primarily engaged in activities with significant ecological impacts, like the mining sector, are under more pressure to conduct their operations ethically than businesses with less ecological implications. institutional theory posits that entities in a particular field tend to become more similar to one another because of the forces they encounter. these pressures include the adoption of institutional and social norms and standards to establish legitimacy and maintain access to resources. the concept of isomorphism refers to a form of standardization that encompasses several types, including coercive (regulatory), mimetic (competitive), and normative (market) styles (kılıç et al., 2021). the phenomenon of coercive isomorphism occurs when a corporation experiences external pressures, such as those exerted by shareholders or employees or by national decisions and legislation, that compel the firm to modify its established institutional standards (herold, 2018). a company may adopt mimetic isomorphism if its executives perceive it as a strategic advantage in the market (ḱlıç et al., 2021). an illustration of this phenomenon can be observed in the implementation of corporate social responsibility reporting. organizations globally are progressively adopting the gri standards for sustainable development (sd) as a manifestation of normative isomorphism. this phenomenon pertains to the compulsion of firms to adopt organizational practices that align with shared beliefs, often driven by clients or vendors who demand adherence to ecological and social standards (tran & beddewela, 2020). according to institutional theory, a company’s corporate strategies are greatly affected by its institutional environment, which includes its rules and societal values (posadas et al., 2023). however, this concept bears a resemblance to the approach advocated by legitimacy theory. simoni et al. (2020) posited that to thrive, firms must conform to the social norms, values, and beliefs prevalent in their respective regions. expanding upon this concept, institutional theory posits that the actions, endeavors, and communications of a company might result in stakeholders developing specific expectations. hence, the adoption of sustainable strategies entails adherence to legal regulations, societal norms, and ethical principles to bolster or safeguard a company’s standing among its various stakeholders (alatawi et al., 2023). 2.2 empirical review and hypothesis development 2.2.1 stakeholder pressure and esg reporting the examination of the determinants that impact sustainability reports from enterprises could derive advantages from the theoretical framework established by stakeholder theory. in accordance with stakeholder theory, managers can utilize stakeholders’ expectations, or limitations on output, as a standard for evaluating solberg horve mishiwo, evans yao vigbedor, benjamin coffie alorzuke and abraham aborhey (2024) 45 american interdisciplinary journal of business and economics | https://sadijournals.org/journals/index.php/sijssh environmental performance, particularly when there is a broad agreement regarding the significance of environmental issues (sarkis et al., 2010). in response to increasing issues, efforts have been made to integrate environmental concerns and practices into strategic, tactical, and operational measures. the legitimacy idea posits that enterprises should prioritize their social actions to align with community expectations. hence, a company may be required to elucidate the congruence between its activities and social values, as the community or stakeholders may respond unfavorably, particularly in cases where there are disparities between the company’s values and those of society (alatawi et al., 2023). hence, it is imperative for firms to adjust their strategies in response to societal expectations to maintain their social reputation and foster a relationship founded on trust with stakeholders. according to alatawi et al. (2023), firms can enhance their ability to anticipate social concerns by effectively communicating and sharing information regarding their sustainability challenges through publicly accessible reports. sarkis et al. (2010) examined the application of stakeholder theory in their analysis of the adoption of sustainable measures within the spanish automobile sector. their findings indicated that stakeholders can have diverse impacts depending on the specific scenario being examined. hence, a notable correlation exists between the environmental requirements of different stakeholders and the pressures exerted by distinct groups of stakeholders on sustainable practices. the firm’s decisions are a direct manifestation of the preferences of the dominant shareholder (raub & martinrios, 2019). hence, it is imperative for shareholders to exert efficient supervision over the management of the company to mitigate the occurrences of information concealment and foster a culture of more thorough and transparent reporting. shareholder pressure on sustainability is compelling firms to consider their wider social and environmental effects, which is a positive development. investors are increasingly recognizing the promise of sustainability as a means to foster a more just and fair society, while also enhancing safety and prosperity. consequently, stakeholders are employing their voting power and other types of influence to exert pressure on firms to enhance their environmental, social, and governance (esg) efficacy (cadez et al., 2019; lee et al., 2018). the findings of chithambo et al. (2022) indicate that the environmental performance of manufacturing companies listed on the indonesia stock exchange (ise) is considerably influenced by stakeholder pressure, encompassing environmental, consumer, employee, and shareholder pressures. ramadhini et al. (2020) found that external stakeholders, including creditors and the media, influence social and environmental transparency. furthermore, fernandez-feijoo et al. (2014) revealed that the presence of particular stakeholder groups, such as customers, clients, employees, and the environment, exerts a significant influence on the level of transparency in reporting. the aforementioned literature leads to the formulation of the hypothesis as follows: h1: stakeholder pressure has a positive significant impact on esg reporting 2.2.2 climatic finance and esg reporting the achievement of the paris climate objectives presents a notable and persistent challenge in terms of investment, requiring careful and prompt allocation of resources toward low-carbon and energy-efficient technologies. additionally, it is crucial to align the financial sector with climate objectives (boissinot et al., 2016; jachnik et al., 2019). to meet the existing ndc obligations, it will be imperative to allocate an average of around us$130 billion per year toward the development of low-carbon technology and energy efficiency measures (hence referred to as "low-carbon") from 2016 to 2030. the potential for this quantity to increase twofold or even threefold exists if solberg horve mishiwo, evans yao vigbedor, benjamin coffie alorzuke and abraham aborhey (2024) 46 american interdisciplinary journal of business and economics | https://sadijournals.org/journals/index.php/sijssh the selected trajectories agree with the overarching goal of the paris agreement, which aims to restrict global warming to a level below 2°c (mccollum et al., 2018). it is improbable that the mobilization of these investments will be accomplished exclusively through state finances, thereby requiring the significant participation of private finance (unfccc, 2018).the substantial assets under management of institutional investors, amounting to $84 trillion in oecd countries in 2017 (oecd, 2018), as well as their long-term liabilities, which may correspond to the temporal dimensions of climate change, have garnered commendation from scholars such as gründl et al. (2016), nelson and pierpont (2013), kaminker and stewart (2012), and della et al. (2011). according to the 2016 g20 report, the current representation of low-carbon assets in the portfolios of global institutional investors stands at less than 1%. furthermore, it is worth noting that in 2016, these assets accounted for a mere 0.2% of the overall climate finance flows, as reported by buchner et al. (2017) and oliver et al. (2018). considering carney’s address, the financial stability board argued that a notable aspect of the problem can be attributed to the lack of transparency surrounding asset holdings, drawing a comparison to the believed circumstances that contributed to the 2008 financial crisis. as a result, the board of directors formed the task force on climate-related financial disclosure (tcfd), which seeks to incorporate industry perspectives and recommendations. the main goal of industry and policy initiatives in the domains of climate finance and sustainability reporting is to effectively execute the suggestions put forth by the tcfd on the establishment of transparency throughout the financial system. the proposition of this objective is substantiated by the chronology put forth by chenet (2019b) and recent scholarly works examining the essence and attributes of financial risks associated with climate change, including the unfccc (2018), chenet et al. (2017), and gros et al. (2016). there is a growing recognition among investors of the potential of sustainability in promoting a more equitable and morally upright society, as well as in bolstering safety and prosperity. according to chenet (2019b), the effective utilization of climate finance can foster a conducive atmosphere for firms to enhance their environmental, social, and governance (esg) reporting. therefore, the current study developed the following hypothesis: h2: climate finance has a positive significant impact on esg reporting 2.2.3 green technological innovation and esg reporting institutional theory examines the impact of external factors on green technology. we can use analytical logic to view green innovation as a response to customer expectations and regulatory pressure. according to berrone et al. (2013), the objective is to ensure that firms conform to societal norms, regulatory obligations, and public perception. in accordance with stakeholder theory, it is imperative for businesses to prioritize addressing the needs and anticipations of all stakeholders rather than solely catering to the interests of shareholders who possess financial interests (freeman, 1984). considering this, the company has integrated green innovation strategies into its policy. shareholder pressure on sustainability refers to the increasing trend among shareholders, particularly institutional shareholders, to demand that corporations reveal their environmental, social, and governance (esg) performance and prioritize efforts promoting green technical advancements. according to klç et al. (2021), shareholders are employing their voting power and other types of influence to exert pressure on enterprises, urging them to enhance their green technological innovation. consequently, the influence of shareholders on the adoption of green technology innovation is compelling companies to consider their wider social and environmental consequences, which is a positive development. esposito de falco et al. (2021) conducted an empirical investigation and found that contractual stakeholders significantly influence environmental innovation. jayaraman et al. (2023) found that stakeholders, including employees, suppliers, government regulations, and customers, have a significant influence on an organization’s solberg horve mishiwo, evans yao vigbedor, benjamin coffie alorzuke and abraham aborhey (2024) 47 american interdisciplinary journal of business and economics | https://sadijournals.org/journals/index.php/sijssh sustainability performance, especially in relation to green technological innovation initiatives. this suggests that stakeholders play a crucial role in implementing green innovation and believe that doing so can help reduce environmental impact. further investigation has corroborated the notion that stakeholders have a significant impact on enterprises’ adoption of green innovation (thomas et al., 2022). thus, the study described the following hypothesis: h3: green technological innovation has a positive significant impact on esg reporting 3. methodology the study used panel data obtained from the world bank, namely from 20 publicly traded companies listed on the ghana stock exchange market. the data covered the time frame from 2014 to 2023 and were collected through the ghana-cclimatology | climate change knowledge portal (worldbank.org). consequently, the study yielded a sample size of 200. the firms were chosen on the basis of their stock market performance. the selected time frame was deliberately chosen depending on the accessibility of the data. the analysis of this study employed panel data methods, specifically the summary statistics, panel unit root test, panel var, and hausman test. the hausman test is a robust test that was used to assess endogeneity among the regressors and determine whether to employ a fixed-effects model or a random-effects model for the analysis. panel unit root test it is important to highlight that the estimator may not be adequate in cases where the variables inside a panel exhibit a unit root, which might result in inaccurate conclusions. in this study, the panel unit tests employed were breitung & das (2005) and im-pesaran-shin (2003). these tests were used to test the null hypothesis for all panels that exhibited a unit root. the formulation of the hypothesis for performing the unit test can be expressed as follows: h0: panels contain unit roots vs. ha: panels are stationary. the panel unit root test can be presented mathematically as follows: δyi,t = θ + 𝛾αi, t-1 + ∑βiδyi,t-1 + 𝜔i,t ………………………………(1) where, 𝜃 is a constant, 𝛾 is the coefficient of the process root, 𝛽𝑖 coefficient in time tendency, 𝑛 is the lag order and 𝜔i, t is the disturbance (error) term. panel var the proposed panel var model helps to examine the short-run connection between the variables of interest and it is given by 𝑌𝑖𝑡 = 𝜇𝑖 + 𝐵(𝐿)𝑌𝑖𝑡 + 𝛼𝑖 + 𝛿𝑡 + 휀𝑖𝑡 (2) where 𝑌𝑖𝑡 represents the vector of the endogenous stationary series environmental, social, and governance (esg) reporting, stakeholder pressure (stakeholder), climate finance (climate), and green innovation (green) while 𝜇𝑖 represents the matrix of firm-specific fixed effects. the subscripts i and t refer to firm and time, respectively. 𝐵(𝐿) denotes the matrix polynomial in the lag operator with 𝐵(𝐿) = 𝐵1𝐿1 + 𝐵2𝐿2 + ⋯ + 𝐵𝑝𝐿𝑝, 𝛼𝑖 indicates the vector that determines the specific effects of the firm found in this regression, 𝛿𝑡 represents the dummy variables for the firm’s specific time and 휀𝑖𝑡 denotes the residual vector. the matrix form of the proposed var in equation 2 treated as endogenous can be expressed as follows: ∆(𝐸𝑆𝐺𝑖𝑡) = 𝜇1𝑖 + ∑ 𝛼1𝑗 𝑝 𝑗=1 ∆(𝐸𝑆𝐺𝑖𝑡−𝑗) + ∑ 𝑏1𝑗 𝑝 𝑗=1 ∆(𝑆𝑡𝑎𝑘𝑒ℎ𝑜𝑙𝑑𝑒𝑟𝑖𝑡−𝑗) + ∑ 𝑐1𝑗 𝑝 𝑗=1 ∆(𝐶𝑙𝑖𝑚𝑎𝑡𝑒𝑖𝑡−𝑗) + ∑ 𝑑1𝑗 𝑝 𝑗=1 ∆(𝐺𝑟𝑒𝑒𝑛𝑖𝑡−𝑗) + 𝛼1𝑖 + 𝛿1𝑡 + 휀1𝑖𝑡 (3) solberg horve mishiwo, evans yao vigbedor, benjamin coffie alorzuke and abraham aborhey (2024) 48 american interdisciplinary journal of business and economics | https://sadijournals.org/journals/index.php/sijssh ∆(𝑆𝑡𝑎𝑘𝑒ℎ𝑜𝑙𝑑𝑒𝑟𝑖𝑡) = 𝜇2𝑖 + ∑ 𝛼2𝑗 𝑝 𝑗=1 ∆(𝐸𝑆𝐺𝑖𝑡−𝑗) + ∑ 𝑏2𝑗 𝑝 𝑗=1 ∆(𝑆𝑡𝑎𝑘𝑒ℎ𝑜𝑙𝑑𝑒𝑟𝑖𝑡−𝑗) + ∑ 𝑐2𝑗 𝑝 𝑗=1 ∆(𝐶𝑙𝑖𝑚𝑎𝑡𝑒𝑖𝑡−𝑗) + ∑ 𝑑2𝑗 𝑝 𝑗=1 ∆(𝐺𝑟𝑒𝑒𝑛𝑖𝑡−𝑗) + 𝛼2𝑖 + 𝛿2𝑡 + 휀2𝑖𝑡 (4) ∆(𝐶𝑙𝑖𝑚𝑎𝑡𝑒𝑖𝑡) = 𝜇3𝑖 + ∑ 𝛼3𝑗 𝑝 𝑗=1 ∆(𝐸𝑆𝐺𝑖𝑡−𝑗) + ∑ 𝑏3𝑗 𝑝 𝑗=1 ∆(𝑆𝑡𝑎𝑘𝑒ℎ𝑜𝑙𝑑𝑒𝑟𝑖𝑡−𝑗) + ∑ 𝑐3𝑗 𝑝 𝑗=1 ∆(𝐶𝑙𝑖𝑚𝑎𝑡𝑒𝑖𝑡−𝑗) + ∑ 𝑑3𝑗 𝑝 𝑗=1 ∆(𝐺𝑟𝑒𝑒𝑛𝑖𝑡−𝑗) + 𝛼3𝑖 + 𝛿3𝑡 + 휀3𝑖𝑡 (5) ∆(𝐺𝑟𝑒𝑒𝑛𝑖𝑡) = 𝜇4𝑖 + ∑ 𝛼4𝑗 𝑝 𝑗=1 ∆(𝐸𝑆𝐺𝑖𝑡−𝑗) + ∑ 𝑏4𝑗 𝑝 𝑗=1 ∆(𝑆𝑡𝑎𝑘𝑒ℎ𝑜𝑙𝑑𝑒𝑟𝑖𝑡−𝑗) + ∑ 𝑐4𝑗 𝑝 𝑗=1 ∆(𝐶𝑙𝑖𝑚𝑎𝑡𝑒𝑖𝑡−𝑗) + ∑ 𝑑4𝑗 𝑝 𝑗=1 ∆(𝐺𝑟𝑒𝑒𝑛𝑖𝑡−𝑗) + 𝛼4𝑖 + 𝛿4𝑡 + 휀4𝑖𝑡 (6) hausman test the hausman test, alternatively referred to as the hausman specification test, is employed to detect endogenous regressors within a regression model. these regressors were identified as predictor variables that correlated with the error term. endogenous variables are influenced by other variables present in the system to which they belong. the applicability of ordinary least squares estimators is limited in models with endogenous regressors because of their assumption of uncorrelated error terms and predictor variables. instrumental variable estimators can be a valuable option in this situation. it is imperative to discover the endogeneity of the predictor variables prior to choosing the most suitable regression approach. to determine the more appropriate estimator for a certain regression model, it is necessary to evaluate the statistical significance of the difference between two estimators using the hausman test (zulfikar and stp, 2018). this diagnostic method, known as the hausman test, is frequently employed to detect potential problems in model definition. in panel data analysis, the hausman test is employed to determine the appropriate model choice between fixed effects (fe) and random effects (re) models. according to adebanjo and morufu (2022), the alternative hypothesis posits that the preferred model incorporates fixed effects, in contrast to the null hypothesis, which posits the presence of random effects. the primary objective of the tests was to determine the correlation between the predictors included in the model and the particular mistakes observed. it is postulated by the null hypothesis that there exists no correlation between the predictor variables and the error term, suggesting that the model remains unaffected by endogeneity. the hausman statistic can be computed as follows: 𝐻 = (�̂�𝑅𝐸 − �̂�𝐹𝐸) ′ [𝑉𝑎𝑟(�̂�𝑅𝐸) − 𝑉𝑎𝑟(�̂�𝐹𝐸)] −1 (�̂�𝑅𝐸 − �̂�𝐹𝐸) (7) the hypothesis is therefore stated as follows: h0: select re (p> 0.05) h1: select fe (p <0.05) in panel data analysis, the generalized model involves assessing the relationship between variables while considering individual intercepts. this equation clarifies the complex connections between variables within and between companies, enabling a more comprehensive understanding of the elements that influence esg reporting. the equation may be represented in the following manner: 𝑦𝑖𝑡 = 𝛼𝑖 + 𝛽′𝑋𝑖𝑡 + 휀𝑖𝑡 ; 𝑖 = 1,2, … , 𝑁 𝑎𝑛𝑑 𝑡 = 1,2, … , 𝑇. (8) where n = number of individuals or cross-section and t = the number of periods. solberg horve mishiwo, evans yao vigbedor, benjamin coffie alorzuke and abraham aborhey (2024) 49 american interdisciplinary journal of business and economics | https://sadijournals.org/journals/index.php/sijssh according to chenet (2019b) and chithambo et al. (2022), the panel model can take the following form: 𝐸𝑆𝐺 𝑖𝑡 = 𝛼 + 𝛽1(𝑆𝑡𝑎𝑘𝑒ℎ𝑜𝑙𝑑𝑒𝑟)𝑖𝑡 + 𝛽2(𝐶𝑙𝑖𝑚𝑎𝑡𝑒)𝑖𝑡 + 𝛽3(𝐺𝑟𝑒𝑒𝑛)𝑖𝑡 + 휀𝑖𝑡 (9) the dependent variable in this study is the esg reporting of traded firms in ghana. the main independent variables are stakeholder pressure and climate finance, whereas the control variable is green technological innovation. the random error term, denoted as εit, represents firms, while the ith unit represents time in years, denoted as t. according to chu et al. (2019), green technological innovation (gti) involves the development and application of novel technologies and processes aimed at enhancing environmental sustainability. these technologies conserve resources, mitigate pollution, and foster a more sustainable and ecologically conscious society. the measurement is expressed as a percentage. similarly, esg reporting, stakeholder pressure, and climate finance are quantified as percentages. 4. empirical results and discussion table 1: descriptive statistics n mean std. deviation climate finance 200 33.88 19.335 stakeholder pressure 200 63.45 16.768 green innovation 200 23.07 10.331 esg 200 39.89 14.724 valid n (listwise) 200 source: author’s computation using the eviews software according to the data presented in table 1, the selected firms exhibited an average climate finance of approximately 34% during the review period, with a variability of approximately 19%. additionally, the average stakeholder pressure was found to be approximately 63%, with a variability of approximately 17%. furthermore, the average green technological innovation was observed to be around 23%, with a variability of approximately 10%. finally, the average esg reporting was estimated to be around 40%, with a variability of approximately 15%. table 2: panel unit root test first difference (breitung) im-pesaran-shin differenced variables test statistic p-value test statistic p-value no. of panels esg -4.42 0.0010 -4.28 0.0000 20 stakeholder pressure -5.99 0.0008 -7.06 0.0000 20 climate finance -6.30 0.0000 -8.51 0.0000 20 green innovation -2.29 0.0041 -1.99 0.0235 20 source: author’s computation using the eviews software table 2 presents the results of the panel unit root using the breitung and im-pesaran-shin approaches, indicating that the panel data became stationary after the second difference at the 5% significance level, suggesting that the unit root that might lead to an erroneous conclusion has been eliminated and further panel data analysis can be conducted. https://link.springer.com/article/10.1007/s10584-019-02542-2#ref-cr22 https://www.tandfonline.com/doi/full/10.1080/23311975.2024.2303790 solberg horve mishiwo, evans yao vigbedor, benjamin coffie alorzuke and abraham aborhey (2024) 50 american interdisciplinary journal of business and economics | https://sadijournals.org/journals/index.php/sijssh table 3: panel var coefficient std. error t-statistic prob. esg c (1) 0.714209 0.088707 8.051289 0.0000 c (2) -0.075036 0.046827 -1.602395 0.1095 c (3) -0.012495 0.069924 -0.178697 0.8582 c (4) 0.043396 0.073535 0.590142 0.5553 c (5) 16.65817 4.482543 3.716232 0.0002 stakeholder c (6) 0.073976 0.138386 0.534565 0.5931 c (7) 0.251267 0.073052 3.439570 0.0006 c (8) -0.220099 0.109084 -2.017708 0.0440 c (9) -0.312700 0.114717 -2.725846 0.0066 c (10) 59.26484 6.992878 8.475030 0.0000 climate c (11) -0.031438 0.112999 -0.278212 0.7809 c (12) -0.101958 0.059650 -1.709270 0.0878 c (13) 0.766171 0.089072 8.601684 0.0000 c (14) 0.103759 0.093672 1.107687 0.2684 c (15) 14.86281 5.710019 2.602936 0.0094 green c (16) -0.037657 0.078374 -0.480474 0.6310 c (17) -0.047861 0.041373 -1.156841 0.2477 c (18) -0.015481 0.061779 -0.250586 0.8022 c (19) 0.546963 0.064969 8.418797 0.0000 c (20) 15.84158 3.960385 4.000009 0.0001 source: author’s computation using the eviews software table 3 shows the result of the estimated panel vector autoregressive (var) model, and the outcome reveals that five lags were estimated for each of the five endogenous variables in the model, with esg reporting having the first and fifth lags statistically significant at the 1% level, stakeholder pressure having the second, third, fourth, and fifth lags statistically significant at the 1% and 5% significant levels, respectively, climate finance having the third and fifth lags statistically significant at the 1% level, and green technological innovation having the fourth and fifth lags statistically significant at the 1% level, suggesting that esg reporting has a short-run relationship with climate finance, stakeholder pressure, and green technological innovation. co-integration does not exist among the panel data; hence, the panel var is well suited for the dataset. solberg horve mishiwo, evans yao vigbedor, benjamin coffie alorzuke and abraham aborhey (2024) 51 american interdisciplinary journal of business and economics | https://sadijournals.org/journals/index.php/sijssh table 4: correlated random effects: hausman test test summary chi-sq. statistic chi-sq. d. f. prob. cross-section random 0.379695 3 0.9444 cross-sectional random effect test comparisons: variable fixed random var(diff.) prob. stakeholder pressure 0.052952 0.053500 0.000023 0.9098 climate finance 0.648026 0.646618 0.000019 0.7437 green innovation 0.031045 0.026269 0.000066 0.5551 source: author’s computation using the eviews software table 4 shows that the p-value of the hausman test exceeds the 0.05 significance level, indicating that the panel random-effects model is appropriate for the analysis of panel data. in addition, the hausman test also indicates that the p-values of all the predictor variables, such as stakeholder pressure, climate finance, and green technological innovation, exceed the 0.05 significance level, implying that the model does not suffer from the problem of endogeneity. hence, panel random regression estimators will be adopted for the analysis of this work on the basis of the specification of the hausman test, which aligns with adebanjo et al. (2022). table 5: method: panel egls (cross-section random effects) variable coefficient std. error t-statistic prob. c 13.98612 3.079837 4.541187 0.0000 climate finance 0.646618 0.026129 24.74736 0.0000 stakeholder pressure 0.053500 0.030300 1.765678 0.0490 green innovation 0.026269 0.047978 0.547524 0.5846 effects specification s.d. rho cross-section random 6.675625 0.5565 idiosyncratic random 5.959484 0.4435 weighted statistics r-squared 0.765377 adjusted r-squared 0.761786 s.e. of regression 5.919514 f-statistic 213.1281 prob(f-statistic) 0.000000 solberg horve mishiwo, evans yao vigbedor, benjamin coffie alorzuke and abraham aborhey (2024) 52 american interdisciplinary journal of business and economics | https://sadijournals.org/journals/index.php/sijssh source: author’s computation using the eviews software according to table 5, the fitted panel random-effect regression model (p<0.01) indicates that the model is statistically significant at the 1% level. this suggests that, while considering green technological innovation, there is a significant relationship between stakeholder pressure, climate finance, and esg reporting. additionally, the random-effect regression model demonstrates that the coefficient estimates of climate finance and stakeholder pressure have a significant positive impact on esg reporting (p<0.05). this suggests that higher levels of stakeholder pressure and climate finance in traded firms lead to greater esg reporting, thereby supporting the first and second hypotheses (h1 and h2). this agrees with the findings of ramadhini et al. (2020), who showed that external stakeholders, such as creditors and the media, have an impact on social and environmental transparency, as well as the work of chenet (2019b), which demonstrates that the efficient use of climate finance can foster an atmosphere conducive for firms to enhance their environmental, social, and governance (esg) reporting. moreover, it corroborated the research of fernandez-feijoo et al. (2014), which demonstrated that the existence of specific stakeholder groups, such as clients, consumers, workers, and the environment, has a major impact on the degree of reporting transparency. figure 1 shows the pattern of the coefficient estimates of the fitted random-effects model. figure 1: coefficient plot 5. conclusion and policy implications it is crucial to underscore the significance of climate financing in fostering a sustainable business environment in developing economies such as ghana and other african nations. the primary aim of this research is to examine the influence of stakeholder pressure and climate finance on the practice of environmental, social, and governance (esg) reporting within publicly traded companies in ghana. the findings from the panel var analysis indicate a short-term relationship between esg reporting and climate finance, stakeholder pressure, and green technical innovation. the hausman test revealed that the random-effects model indicates a positive and significant influence of climate finance and stakeholder pressure on esg reporting. this suggests that a high level of climate finance and stakeholder pressure improves esg reporting among traded firms in ghana. therefore, it is solberg horve mishiwo, evans yao vigbedor, benjamin coffie alorzuke and abraham aborhey (2024) 53 american interdisciplinary journal of business and economics | https://sadijournals.org/journals/index.php/sijssh imperative to implement sustainable measures to promote climate finance in poor countries such as ghana, with the aim of improving environmental, social, and governance (esg) reporting and overall company performance. references abeysekera, i. (2022). a framework for sustainability reporting. sustainability accounting, management and policy journal, 13(6), 1–22. adebanjo, s.a., & morufu, a. o. (2022). transparency and global initiatives in the face of natural resource depletion in sub-saharan africa. journal of environmental science and economics, 1(2):13-24. agyemang, a., yusheng, k., kongkuah, m., musah, a., & musah, m. (2023a). assessing the impact of environmental accounting disclosure on corporate performance in china. environmental engineering and management journal, 22(2), 389–397. agyemang, a. o., yusheng, k., twum, a. k., edziah, b. k., & ayamba, e. c. (2023b). environmental accounting and performance: empirical evidence from china. environment, development and sustainability, 1–26.c alatawi, i. a., ntim, c. g., zras, a., & elmagrhi, m. h. (2023). csr, financial and non-financial performance in the tourism sector: a systematic literature review and future research agenda. international review of financial analysis, 89, 102734. alsahali, k. f., & malagueño, r. (2022). an empirical study of sustainability reporting assurance: current trends and new insights. journal of accounting & organizational change, 18(5), 617–642. berrone, p., fosfuri, a., gelabert, l., & gomez‐mejia, l. r. (2013). necessity as the mother of ‘green’inventions: institutional pressures and environmental innovations. strategic management journal, 34(8), 891–909. boissinot, j., huber, d., & lame, g. (2016). finance and climate: the transition to a low carbon and climate resilient economy from a financial sector perspective. oecd working paper. oecd publishing, paris. buchner, b.k., oliver, p., wang, x., carswell, c., meattle, c., & mazza, f. (2017). global landscape of climate finance 2017, climate policy initiative. cadez, s., czerny, a., & letmathe, p. (2019). stakeholder pressures and corporate climate change mitigation strategies. business strategy and the environment, 28(1), 1–14. chithambo, l., tauringana, v., tingbani, i., & achiro, l. (2022). stakeholder pressure and greenhouses gas voluntary disclosures. business strategy and the environment, 31(1), 159–172. chenet, h., hilke, a., & duan, w. (2017). finance sector alignment with international climate goals – reviewing options and obstacles. 2° investing initiative. green-win european h2020 project. chenet, h. (2019b). climate change and financial risk. in “risk management and modeling”, springer (risk, systems and decisions series). https://doi.org/https:/doi.org/10.1108/sampj-08-2021-0316 https://doi.org/https:/doi.org/10.1108/sampj-08-2021-0316 https://doi.org/https:/doi.org/10.30638/eemj.2023.030 https://doi.org/https:/doi.org/10.30638/eemj.2023.030 https://doi.org/https:/doi.org/10.1016/j.irfa.2023.102734 https://doi.org/https:/doi.org/10.1108/jaoc-05-2020-0060 https://doi.org/https:/doi.org/10.1108/jaoc-05-2020-0060 https://doi.org/https:/doi.org/10.1002/smj.2041 https://doi.org/https:/doi.org/10.1002/smj.2041 https://doi.org/https:/doi.org/10.1002/bse.2070 https://doi.org/https:/doi.org/10.1002/bse.2070 https://doi.org/https:/doi.org/10.1016/j.techsoc.2019.101210 https://doi.org/https:/doi.org/10.1016/j.techsoc.2019.101210 solberg horve mishiwo, evans yao vigbedor, benjamin coffie alorzuke and abraham aborhey (2024) 54 american interdisciplinary journal of business and economics | https://sadijournals.org/journals/index.php/sijssh chu, z., wang, l., & lai, f. (2019). customer pressure and green innovations at third party logistics providers in china: the moderation effect of organizational culture. the international journal of logistics management, 30(1), 57–75. cisl (2018). sailing from different harbours: g20 approaches to implementing the recommendations of the task force on climate-related financial disclosures. cisl, cambridge, uk. cpi (2022c). climate finance needs of african countries. climate policy initiative (cpi). retrieved from: https://www.climatepolicyinitiative.org/wp-content/uploads/2022/06/climate-finance-need s-ofafrican-countries-1.pdf della, c.r., stewart, f., & yermo, j. (2011). promoting longer-term investment by institutional investors: selected issues and policies. oecd journal: financial market trends, vol. 2011/1 dissanayake, d., tilt, c., & qian, w. (2019). factors influencing sustainability reporting by sri lankan companies. pacific accounting review, 31(1), 84–109. esposito de falco, s., scandurra, g., & thomas, a. (2021). how stakeholders affect the pursuit of the environmental, social, and governance. evidence from innovative small and medium enterprises. corporate social responsibility and environmental management, 28(5), 1528–1539. fernandez-feijoo, b., romero, s., & ruiz, s. (2014). effect of stakeholders’ pressure on transparency of sustainability reports within the gri framework. journal of business ethics, 122(1), 53–63. freudenreich, b., lüdeke-freund, f., & schaltegger, s. (2020). a stakeholder theory perspective on business models: value creation for sustainability. journal of business ethics, 166(1), 3–18. g20 (2016). g20 green finance synthesis report. g20 green finance study group, 15 july 2016. higgins, c., tang, s., & stubbs, w. (2020). on managing hypocrisy: the transparency of sustainability reports. journal of business research, 114, 395–407. jachnik, r., mirabile, m., & dobrinevski, a. (2019). tracking finance flows towards assessing their consistency with climate objectives: proposed scope, knowns and unknowns. oecd environment working papers, no. 146oecd publishing, paris. jayaraman, k., jayashree, s., & dorasamy, m. (2023). the effects of green innovations in organizations: influence of stakeholders. sustainability, 15(2), 1133. kaminker, c., & stewart, f. (2012). the role of institutional investors in financing clean energy. oecd working papers on finance, insurance and private pensions, 23. kılıç, m., uyar, a., kuzey, c., & karaman, a. s. (2021). does institutional theory explain integrated reporting adoption of fortune 500 companies? journal of applied accounting research, 22(1), 114–137. https://doi.org/https:/doi.org/10.1108/ijlm-11-2017-0294 https://doi.org/https:/doi.org/10.1108/ijlm-11-2017-0294 https://doi.org/https:/doi.org/10.1108/par-10-2017-0085 https://doi.org/https:/doi.org/10.1108/par-10-2017-0085 https://doi.org/https:/doi.org/10.1002/csr.2183 https://doi.org/https:/doi.org/10.1002/csr.2183 https://doi.org/https:/doi.org/10.1007/s10551-013-1748-5 https://doi.org/https:/doi.org/10.1007/s10551-013-1748-5 https://doi.org/https:/doi.org/10.1007/s10551-019-04112-z https://doi.org/https:/doi.org/10.1007/s10551-019-04112-z https://doi.org/https:/doi.org/10.1016/j.jbusres.2019.08.041 https://doi.org/https:/doi.org/10.3390/su15021133 https://doi.org/https:/doi.org/10.3390/su15021133 https://doi.org/https:/doi.org/10.1108/jaar-04-2020-0068 https://doi.org/https:/doi.org/10.1108/jaar-04-2020-0068 solberg horve mishiwo, evans yao vigbedor, benjamin coffie alorzuke and abraham aborhey (2024) 55 american interdisciplinary journal of business and economics | https://sadijournals.org/journals/index.php/sijssh krasodomska, j., & zarzycka, e. (2021). key performance indicators disclosure in the context of the eu directive: when does stakeholder pressure matter? meditari accountancy research, 29(7), 1–30. lee, j. w., kim, y. m., & kim, y. e. (2018). antecedents of adopting corporate environmental responsibility and green practices. journal of business ethics, 148(2), 397–409. lulu, c. l. (2021). stakeholder pressure and the quality of sustainability report: evidence from indonesia. journal of accounting, entrepreneurship and financial technology (jaef), 2(1), 53–72. maama, h., & mkhize, m. (2020). integrated reporting practice in a developing country—ghana: legitimacy or stakeholder oriented? international journal of disclosure and governance, 17(4), 230–244. menassa, e., & dagher, n. (2020). determinants of corporate social responsibility disclosures of uae national banks: a multi-perspective approach. social responsibility journal, 16(5), 631–654. mensah, e., frimpong, k., & maama, h. (2017). environmental reporting practices by listed manufacturing firms: the perspective of an emerging economy. asian journal of economics, business and accounting, 2(3), 1–12. mccollum, dl et al. (2018). energy investment needs for fulfilling the paris agreement and achieving the sustainable development goals. nat energy 3:589–599. osei, a., osei agyemang, a., amoah, j., & sulemana, i. (2023). empirical study on the impact of working capital management on going concern of manufacturing firms in ghana. cogent business & management, 10(2), 2218177. gros, d., d. schoenmaker, d., matikainen, s., langfield, s., lane, p., pagano, m., & suarez, j. (2016). too late, too sudden: transition to a low-carbon economy and systemic risk. european systemic risk board esrb advisory scientific committee. gründl, h., gal, j., & dong, m. (2016). the evolution of insurer portfolio investment strategies for long-term investing. oecd journal: financial market trends, 2016 (1). nelson d., & pierpont, b. (2013). the challenge of institutional investment in renewable energy. climate policy initiative report. oliver p., clark, a., meattle, c., & buchner, b. (2018). global climate finance: an updated view 2018, climate policy initiative. osei, a. a., yusheng, k., caesar, e. a., kissiwaa, a. t., & shaibu, a. (2019). impact of board characteristics on corporate social responsibility disclosure in ghana. international journal of sciences: basic and applied research, 46(1), 104–116. https://doi.org/https:/doi.org/10.1108/medar-05-2020-0876 https://doi.org/https:/doi.org/10.1108/medar-05-2020-0876 https://doi.org/https:/doi.org/10.1007/s10551-016-3024-y https://doi.org/https:/doi.org/10.1007/s10551-016-3024-y https://doi.org/https:/doi.org/10.37715/jaef.v2i1.1864 https://doi.org/https:/doi.org/10.37715/jaef.v2i1.1864 https://doi.org/https:/doi.org/10.1057/s41310-020-00092-z https://doi.org/https:/doi.org/10.1057/s41310-020-00092-z https://doi.org/https:/doi.org/10.1108/srj-09-2017-0191 https://doi.org/https:/doi.org/10.1108/srj-09-2017-0191 https://doi.org/https:/doi.org/10.9734/ajeba/2017/32817 https://doi.org/https:/doi.org/10.9734/ajeba/2017/32817 https://doi.org/https:/doi.org/10.1080/23311975.2023.2218177 https://doi.org/https:/doi.org/10.1080/23311975.2023.2218177 solberg horve mishiwo, evans yao vigbedor, benjamin coffie alorzuke and abraham aborhey (2024) 56 american interdisciplinary journal of business and economics | https://sadijournals.org/journals/index.php/sijssh posadas, s. c., ruiz-blanco, s., fernandez-feijoo, b., & tarquinio, l. (2023). institutional isomorphism under the test of non-financial reporting directive. evidence from italy and spain. meditari accountancy research, 31(7), 26–48. ramadhini, a., adhariani, d., & djakman, c. d. (2020). the effects of external stakeholder pressure on csr disclosure: evidence from indonesia. dlsu business and economics review, 29(2), 29–39. raub, s. p., & martin-rios, c. (2019). “think sustainable, act local”–a stakeholder-filter-model for translating sdgs into sustainability initiatives with local impact. international journal of contemporary hospitality management, ahead-of-print(ahead-of-print), 2428–2447. rudyanto, a., & veronica siregar, s. (2018). the effect of stakeholder pressure and corporate governance on the sustainability report quality. international journal of ethics and systems, 34(2), 233–249. sarkis, j., gonzalez-torre, p., & adenso-diaz, b. (2010). stakeholder pressure and the adoption of environmental practices: the mediating effect of training. journal of operations management, 28(2), 163–176. simoni, l., bini, l., & bellucci, m. (2020). effects of social, environmental, and institutional factors on sustainability report assurance: evidence from european countries. meditari accountancy research, 28(6), 1059–1087. thomas, a., scandurra, g., & carfora, a. (2022). adoption of green innovations by smes: an investigation about the influence of stakeholders. european journal of innovation management, 25(6), 44–63. tran, m., & beddewela, e. (2020). does context matter for sustainability disclosure? institutional factors in southeast asia. business ethics: a european review, 29(2), 282–302. unfccc. (2018). 2018 biennial assessment and overview of climate finance flows. unfccc standing committee on finance, bonn. unfccc (2021). updated nationally determined contribution under the paris agreement (2020 2030) – ghana. united nations framework convention on climate change (unfccc). retrieved from: https://mesti.gov.gh/wp-content/uploads/2021/12/ghanas-updated-nationally-determinedcontributionto-the-unfccc_2021.pdf unfccc (2023). the united nations framework convention on climate change: introduction to climate finance. available online: introduction to climate finance | unfccc wen, k., agyemang, a., alessa, n., sulemana, i., & osei, a. (2023). the moderating role of ownership concentration on financing decisions and firm’s sustainability: evidence from china. sustainability, 15(18), 13385. wiredu, i., osei agyemang, a., & agbadzidah, s. y. (2023). does green accounting influences ecological sustainability? evidence from a developing economy. cogent business & management, 10(2), 2240559. https://doi.org/https:/doi.org/10.1108/medar-02-2022-1606 https://doi.org/https:/doi.org/10.1108/medar-02-2022-1606 https://doi.org/https:/doi.org/10.1108/ijchm-06-2018-0453 https://doi.org/https:/doi.org/10.1108/ijchm-06-2018-0453 https://doi.org/https:/doi.org/10.1108/ijoes-05-2017-0071 https://doi.org/https:/doi.org/10.1108/ijoes-05-2017-0071 https://doi.org/https:/doi.org/10.1016/j.jom.2009.10.001 https://doi.org/https:/doi.org/10.1016/j.jom.2009.10.001 https://doi.org/https:/doi.org/10.1108/medar-03-2019-0462 https://doi.org/https:/doi.org/10.1108/medar-03-2019-0462 https://doi.org/https:/doi.org/10.1108/ejim-07-2020-0292 https://doi.org/https:/doi.org/10.1108/ejim-07-2020-0292 https://doi.org/https:/doi.org/10.1111/beer.12265 https://doi.org/https:/doi.org/10.1111/beer.12265 https://unfccc.int/topics/introduction-to-climate-finance https://doi.org/https:/doi.org/10.3390/su151813385 https://doi.org/https:/doi.org/10.3390/su151813385 https://doi.org/https:/doi.org/10.1080/23311975.2023.2240559 https://doi.org/https:/doi.org/10.1080/23311975.2023.2240559 solberg horve mishiwo, evans yao vigbedor, benjamin coffie alorzuke and abraham aborhey (2024) 57 american interdisciplinary journal of business and economics | https://sadijournals.org/journals/index.php/sijssh world bank (2020). joint world bank-imf debt sustainability analysis. world bank and international monetary fund. retrieved from: https://documents1.worldbank.org/curated/en/707381592860938004/pdf/ghana-joint-wor ld-bankimf-debt-sustainability-analysis.pd world bank (2022). country and climate development report– ghana. world bank group. retrieved from: https://openknowledge.worldbank.org/server/api/core/bitstreams/9c9764c1-076d-5dcc-833 96e4f0de2b610/content zhou, y., agyemang, a. o., adam, i. o., & twum, a. k. (2022). assessing the impact of technological innovation on environmental and financial performance of chinese textile manufacturing companies. international journal of technology, policy and management, 22(4), 369–393. zulfikar, r., & stp, m. m. (2018). estimation model and selection method of panel data regression: an overview of common effect, fixed effect, and random effect model. jema: journal ilmiah bidang akuntansi, 1-10. https://doi.org/https:/doi.org/10.1504/ijtpm.2022.126152 https://doi.org/https:/doi.org/10.1504/ijtpm.2022.126152 american interdisciplinary journal of business and economics issn: 2837-1909| impact factor : 6.71 volume. 11, number 2; april-june, 2024; published by: scientific and academic development institute (sadi) 8933 willis ave los angeles, california https://sadijournals.org/index.php/aijbe| editorial@sadijournals.org 1 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe voluntary disclosure and financial performance of listed consumer goods firms in nigeria 1ezejofor, raymond a, 2ozuomba chidinma nwamaka, 3udochukwu chikaodili n and 4alamene inimotimi thursday 1department of accountancy, nnamdi azikiwe university, awka, 2department of accounting, university of agriculture and environmental sciences, umuagwo, 3department of accountancy, alex ekwueme federal university, ndufu alike ikwo and 4department of accountancy, ebonyi state university, abakiliki email: thaddray4life@yahoo.com; chidinma.ozuomba@uaes.edu.ng; chikankemo@gmail.com; inimotimialamene44@gmail.com doi: https://doi.org/10.5281/zenodo.10912404 abstract: this study determined the effect of voluntary disclosure on financial performance of listed consumer goods firms in nigeria, using environmental protection disclosure and employee welfare as the independent variables, while earnings per share was used as a proxy for financial performance. ex post facto research design was adopted for the study. a sample of 18 consumer goods firms was used and data extracted from the companies audited annual reports and accounts of the firms from 2013 to 2022. based on the data tested, the result shows that environmental protection disclosure; corporate donation and employee welfare will firm size as the control variable was significant. it was recommended among others, that there should be constant environmental disclosure by the firms for mitigating its environmental impact and promoting sustainable practices, this will enable them share with their stakeholders to demonstrate their commitment toward environmental responsibility. keywords: environmental protection disclosure, employee welfare and financial performance introduction the disclosure of information by companies to their stakeholders is a critical aspect of corporate reporting and transparency. this information are annual reports, which is the end product of the accounting process, aimed at producing qualitative and quantitative information on the performance of an organization to enable users make informed decision (elikanah, 2019). it provides information on the incomes and expenses of a company in a fiscal year captured in the statement of comprehensive income and details of assets and liabilities owned shown in the statement of financial position. published annual reports are required to provide various user such as; shareholders, employees, suppliers, creditors, stock brokers, financial analysts, government agencies and management with timely and reliable information used for making effective and efficient decisions (hassan, 2015). the extent and quality of disclosure within these published reports vary from company to company and also from country to country. mailto:thaddray4life@yahoo.com mailto:inimotimialamene44@gmail.com ezejofor, raymond a, ozuomba chidinma nwamaka, udochukwu chikaodili n and alamene inimotimi thursday (2024) 2 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe disclosure of accounting information through the annual reports provides useful and reliable financial and nonfinancial information to various users such as management, shareholders, employees, government, competitors, lenders, creditors, trade unions, financial analysts and potential investors. the voluntary disclosure which is a strategic tool for winning more customers and investors goodwill primarily improves the outlook or perception of the firm (modugu & eboigbe, 2017). in fact, firms that engage in an appreciable voluntary disclosure are perceived to be more accountable than firms that do not. this accountability is mostly with respect to the firm’s environmental responsibility, staff development and welfare which are becoming the bedrock of corporate sustainability in today’s business environment (adegbie, iranola & isiaka, 2019). financial reporting alone is insufficient and cannot fully serve as the basis for investors and other stakeholders to use in assessing the performance of a firm. that is to say, other indices of corporate policies and results must be disclosed so that end users of the annual reports of the firms can wholly appreciate the behavior of the firm towards its employees, the environment, host communities and also to its shareholders (adeyemi, fagboro & udofia, 2020). the financial reporting frame work is designed to cater for the information needs of the shareholders and also other classes of capital providers. in recent times, customers, social activities and environmentalists are beginning to ask questions as regards to how companies’ carryout their activities in the environment while considering the environmental and social impacts of such economic activities. thus, this justifies the growing call for more disclosure of corporate practices and policies, in addition to the disclosure of financial indices of firm’s financial performance (elikanah, 2019). financial performance denotes to the extent to which a firm used available resources to generate earnings. it is a measure of the firm’s ability to generate profits, manage resources and create value for its shareholders. it is an aspect of corporate performance that concentrates on profitability that is the ability to generate more revenue in excess of the costs incurred by the firm (nworie & mba, 2022). it is often cited that a firm that engages in good voluntary disclosure practices have better chances of improving its financial performance for three major reasons. nworie, obi, anaike and uchechukwu-obi (2022) argue that such a disclosure will make investors see the firm in good light. also, voluntary disclosure convinces creditors that the firm is accountable, and so reduces the cost of borrowing. finally, voluntary disclosure while increasing the legitimacy position of the firm makes customers more attracted to patronize the firm, and thereby improving turnover. it is upon these bases that a positive effect is expected to exist between voluntary disclosure and financial performance of consumer goods firm. in the specific context of listed consumer goods firms in nigeria, the importance of voluntary disclosure cannot be overstated. these firms operate in a dynamic and competitive environment, where stakeholders such as investors, customers, employees, and regulators have an increasing need for reliable information. the extent to which consumer goods firms disclose information voluntarily, particularly regarding environmental protection, corporate donations, and employee welfare, can significantly influence stakeholders’ perceptions and decisions. the impact of corporate disclosure on the value of the firm has received diverse attention in existent studies as a result of the numerous economic values of such corporate disclosure on the firm. given the significance of both voluntary disclosure and financial performance, it is imperative to explore the relationship between these two factors within the specific context of listed consumer goods firms in nigeria. this study therefore aims to determine the effect of voluntary disclosure on the financial performance of listed consumer goods firms in nigeria. ezejofor, raymond a, ozuomba chidinma nwamaka, udochukwu chikaodili n and alamene inimotimi thursday (2024) 3 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe voluntary disclosure is designed to be a tool that communicates how the firm has been responsible to the natural environment, social environment and its workforce. such disclosure of financial information is relevant to business stakeholders, as a result of the growing concern that firms should show some level of responsibility in terms of community development, environmental responsibility and staff welfare (nworie, obi, anaike & uchechukwu-obi, 2022). this makes voluntary disclosure of financial information a veritable strategy for upgrading the firm image, increasing trust and confidence of the investors and other stakeholders on the firm (elfaky, 2017). however, the involuntary nature of this type of disclosure have paved way for quite a number of companies to avoid engaging in voluntary disclosure of financial information since there is no rule mandating them to do so. listed consumer goods firms in nigeria face a myriad of challenges in today’s competitive business landscape. as key players in the country’s economy, these firms are expected to navigate market fluctuations, regulatory complexities and changing consumer preferences while maintaining sustainable and profitable operations. in this study, the extent and quality of voluntary disclosure practices become a critical aspect of corporate governance and stakeholder management. the lack of a comprehensive understanding of the impact of voluntary disclosure on financial performance poses a significant problem for consumer goods firm, investors, regulators and policymakers in nigeria. prior studies such as dada and adeniji (2021) which studied the effect of voluntary disclosure on the financial performance of listed oil and gas firms in nigeria using ordinary least square regression as statistical tool, showed that voluntary disclosure and financial performance has a positive and significant effect. because this study covered for the oil and gas firm, there's a need to cover for consumer goods firms in nigeria so as to strike the right balance between transparency and confidentiality, potentially leading to suboptimal strategic decisions. also, investors and stakeholders on the other hand, may find it challenging to assess the true value and sustainability of consumer goods firms in the absence of standardized voluntary disclosure practices. addressing this problem is crucial for fostering informed decision making, improving corporate reporting standards and promoting sustainable growth in the consumer goods sector in nigeria. this study also aim to fill this gap by studying the relationship between voluntary disclosure (using corporate donation disclosure, environmental protection disclosure, employee welfare disclosure as proxies) and financial performance of listed consumer goods firms in nigeria. the main objective of this is to ascertain the effect of voluntary disclosure on financial performance of listed consumer goods firms in nigeria. the research is guided by other specific objectives which include: 1. to determine the effect of environmental protection disclosure on earnings per share of listed consumer goods firms in nigeria. 2. to examine the effect of employee welfare disclosure on earnings per share of listed consumer goods firms in nigeria. review of related literature voluntary disclosure disclosure is defined as the fair presentation of an entity’s financial or non-financial, mandatory or voluntary information that is useful for stakeholders’ decision making (modugu & eboigbe, 2017). disclosure refers to an accurate and timely release of information about the business strategy, financial performance and corporate governance to the general public by a company (lee, 2012). disclosure is defined in accounting literature as ezejofor, raymond a, ozuomba chidinma nwamaka, udochukwu chikaodili n and alamene inimotimi thursday (2024) 4 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe “informing the public by financial statements of the firm” (agca & onder, 2007), or as the communication of economic information, whether financial or nonfinancial, qualitative or otherwise concerning a firm’s financial position and performance” (owusu ansah,1998). gibbins, richardson and waterhouse (1990) defined financial disclosure as “any deliberate release of financial information, whether numerical or qualitative, mandatory or voluntary, via formal or informal channels”. thus, it is the publication of any type of information through the corporate annual reports that are necessary, relevant and material to the various user groups in making their judgements and decisions about a company. for the information to be useful, it must be relevant and faithfully represent that which it purports to represent. in addition, the information is enhanced by the qualities of comparability, verifiability and understandability (modugu & eboigbe, 2017). voluntary disclosure plays a pivotal role in contemporary corporate reporting, enabling companies to share information beyond the legally mandated requirements. voluntary disclosure has its sources in the past from business development when, as a result of the fact that owners have delegated to the managers the leading function of the enterprises, the need for voluntary disclosure appears as a consequence of information asymmetry between the two parties; managers are better informed about the business than its owners. environmental protection disclosure in relation to environmental protection disclosure there is no standard definition and it is left mostly to the discretion of the companies to decide which expenditure or cost should be included under the environmental expenses or costs. for a general understanding of environmental protection disclosure, it can be referred to the voluntary disclosure of a company’s initiatives, policies and actions aimed at mitigating its environmental impact and promoting sustainable practices. it encompasses a range of information that consumer goods firms voluntarily share with their stakeholders to demonstrate their commitment to environmental responsibility. when environmental cost is not adequately allocated, cross-funding occurs between products. in many cases, different products are made by different processes and each process tends to have a different environmental cost (chris & burrit, 2013). protection of environment and the potential involvement of accountant is becoming a common subject of discussion among the accountant all over the world (pramanik, shil & das, 2007). accountants are expected to take a proactive role in environmental protection process with the advent of liberalization. the cost of environmental degradation due to industrial activities should be internalized in corporate account to the extent possible. that is why environmental accounting and reporting is of paramount importance today. according to clarkson, richardson and vasvari (2008), disclosure and transparency are critical elements of a robust corporate governance framework as they provide the basis for informed decision making by shareholders, stockholders and potential investors with respect to capital allocation, corporate transactions and financial performance monitoring. high quality disclosure through its influence on investors and lenders who must assess risks and returns to decide where best to place their money, strengthen the efficiency of capital allocation as well as offer the benefit of reducing the cost of capital. employee welfare disclosure employee welfare can be seen in a comprehensive term the various benefits and facilities offered to employees and the employer. those generous fringe benefits make life worth living for employees. according to armstrong (2008), it refers to items or total packages offered to employees over and above salary, which increase their wealth and wellbeing at some cost to the employer. employee welfare disclosure refers to the ezejofor, raymond a, ozuomba chidinma nwamaka, udochukwu chikaodili n and alamene inimotimi thursday (2024) 5 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe disclosure made by companies regarding the measures and programs they have in place to ensure the wellbeing and welfare of their employees. this benefit encompasses a wide range of employee-centric initiatives including, health and safety measures, employee benefits, work life balance programs and support systems. the very logic behind providing welfare schemes is to create efficient, healthy, loyal and satisfied labor for the organization. any additional compensation or value given to employees apart from regular payment of salaries and wages is a reward for organizational membership. one of the basic functions of management is to determine how employees can be motivated to high productivity by satisfying their needs. this assumption presupposes that every worker has some internal urges which propel him in specific directions towards the realization of his entire life ambition (armstrong, 2008). the direction of those urges or needs differs from one employee to another. however, certain uniform clusters of needs have been very easy to determine and when the needs are being provided, it will help to enhance productivity. satisfied employees are more likely to be productive, creative and committed to achieving the company’s goal. the assumption that nigeria workers are motivated to perform better by increased wages and other salary such as pay leave, fees for health care bonus, pension and gratuity plans and insurance have received some support (armstrong, 2008). consequently, both labor unions and nigeria government, fringe and welfare benefits have become a common supplement to nigeria wages in nigeria establishment. it would be unreasonable to support that people would continue to find satisfaction in cooperation of company affairs, if no reciprocal interest is shown in their individual needs and interest. a content and motivated workforce can positively influence operational efficiency, customer satisfaction and overall business performance which in turn can be reflected in financial indicators such as eps. when there is a favorable and supportive work environment which causes the employee to be friendly to the public while providing a service or selling a product to customers, it can boost customer retention and turnover. when the employee is happy, he provides topnotch services thereby boosting the company image. financial performance financial performance is the evaluation of a company’s ability to generate profits, manage its resources efficiently and achieve its financial objectives. it is an essential aspect of corporate performance evaluation and provides stakeholders with insights into the overall financial strength and stability. according to eshna (2016), financial performance refers to the degree which financial objectives are met, that is assessing a firm’s policies and operations in monetary terms. financial performance is concerned with the financial health of a company and is normally used to compare firms from one industry to the other (musoyaka, 2017). financial performance is measured using financial ratios. according to yegon (2015), the three most important decisions in a firm are: investment, financing and dividend decisions, and they are all related to firm performance. he further explained thus, investment in asset should offer a return; a good principle on financing should balance the equity and debt finances and a firm ought to provide some returns to shareholders as dividend. in evaluating the company’s financial performance, it can be assisted with certain measurement tools, one of which is by using profitability ratio. profitability ratios are ratios used to determine a company’s ability to manage assets and generate revenue. an assessment of company’s profitability can be measured through return on assets (roa). roa are used to measure the effectiveness of a company to generate earnings by utilizing its assets (nworie & mba, 2022). the company’s ability to utilize assets effectively and productively can generate profit which is the result of the capital that has been invested in an asset. hence, financial performance can be ezejofor, raymond a, ozuomba chidinma nwamaka, udochukwu chikaodili n and alamene inimotimi thursday (2024) 6 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe said to be the operating efficiency and performance of the company during a certain period of operation. the level of enterprise operating efficiency is mainly reflected in profitability, asset operation level, debt repayment ability and subsequent development ability. in this study, financial performance is measured using earnings per share which is the portion of a company’s profit that is attributed to each outstanding share of common stock. earnings per share the term earning per share (eps) is generally considered to be most significant variable in defining share price. it also plays very important role to measure the price to earning valuation ratio. eps is a popular financial ratio which is widely used by investors worldwide. it measures potential profit on investment in company's shares (sierpinska & jachna, 2004). it is a solid indicator of a firm’s profitability. eps is a part of a company’s income that is allocated to each outstanding share of common stock, serving as an indicator of the firm’s profitability. the payment of dividend to shareholders depends on the profitability of a firm/company. the more profitability any firm earns, the more chances of healthy dividends are high. but high profitability is not the guarantee to pay a dividend to the shareholders. it totally depends on the policy of the firm and decision of the board, (balaputhiran, 2014). there is the basic and diluted eps. basic eps consists of the company’s net income divided by its outstanding shares. it is the figure most commonly reported in the financial media and is also the simplest definition of eps. diluted eps, on the other hand, will always be equal to or lower than basic eps because it includes a more expansive definition of the company’s shares outstanding. specifically, it incorporates shares that are not currently outstanding but could become outstanding if stock options and other convertible securities were to be exercised. empirical review the study conducted by obiano examined the extent to which environmental protection disclosure, corporate donation disclosure, employee training disclosure and employee welfare disclosure affect the earnings per share of listed consumer goods firm in nigeria. the study employed ex-post facto as the research design. secondary data were extracted from the annual reports and statement of account of the sixteen sampled firms over a tenyear period from 2012 to 2022. the study revealed that voluntary disclosure especially via environmental protection disclosure and employee training disclosure improves the financial statements of listed consumer goods firm in nigeria. the study conducted by aris, yusof, idris, zaidi and anuar (2021), examined the effect of firm characteristics indexed by firms’ size, firms’ type, profitability and achievements towards social responsibility reporting disclosure. this study included total observations of 180 companies which comprises of 60 annual reports for three years starting from year 2014 to 2016. of the data collected from 60 companies annual report in bursa malaysia for three years, the regression results revealed that company’s size, profitability and achievements have significant relationship with sustainability reporting disclosure. overall, the results from this study indicate that firms’ profitability influence the degree of voluntary sustainability reporting disclosure. dada and adeniji (2021) ascertained the effect of voluntary disclosure on the financial performance of listed oil and gas firms in nigeria. the ex-post facto research design was adopted for the study, 12 listed oil and gas firms were used for the research for the period of 2009 to 2018. secondary data was obtained from the annual report of the companies and the ordinary least square was used to test the hypothesis. the dependent variable was proxied by earnings per share and asset turnover. the findings from the study provided relevant empirical evidence by ezejofor, raymond a, ozuomba chidinma nwamaka, udochukwu chikaodili n and alamene inimotimi thursday (2024) 7 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe showing that voluntary disclosure and financial performance have significant positive and negative effects on earnings per share. voluntary disclosure and financial performance have an insignificant positive and negative effect and a significant negative effect on asset turnover. adegboyegun, et al (2020) determined the extent to which voluntary sustainability disclosure affects the performance of corporate organizations in nigeria between 2009 and 2018. ex-post facto research design guided the conduct of the study. the study which considered thirteen banks due to unavailability of data for the intended periods of the remaining five, used profit after tax as the dependent variable and also used integral reporting index as a blend of financial and sustainability reporting, debt to equity ratio and total asset as independent variables. the study employed the classical ordinary least square and panel co-integration techniques for analysis. the findings of the study revealed that while integrated reporting has no significant impact on corporate performance in the short run, it has a significant relationship with firm performance in the long run. with the use of generalized least square (gls) to the test the hypotheses, moruff, ado, salisu and yunusa (2021), examined the nexus between voluntary environmental disclosure and firm attributes in nigeria. secondary data were collected from the published annual reports of 9 listed oil and gas firms quoted on the floor of the nigerian exchange group (nse) as at 2018, for a period of seven years (2012-2018). the result established a positive and significant relationship between financial leverage and voluntary environmental disclosure. adeyemi, fagboro and udofia (2020) investigated the readiness of nigeria to adopt voluntary disclosure (integrated reporting) by evaluating the level of compliance of the annual reports of quoted companies in nigeria to ir framework as developed by the international integrated reporting council (iirc). a total of 90 companies from 170 quoted companies on nigeria stock exchange were selected based on the criteria that the companies had available annual reports for the period 2013 to 2017. the annual reports of the selected 90 quoted companies were content-analyzed using the disclosure index developed by kilic and kuzey (2018) to measure the sustainability disclosure score of each of the sampled companies. t-statistic and anova were used to test the hypotheses of the study. it was found that nigerian listed companies report complies with about 75% of the ir framework requirements. the most compliant companies were in the financial sector followed by the manufacturing, extractive and other sectors. the least disclosed ir content element in all the sectors was performance. companies were not able to articulate the extent which the objectives of the organization were achieved using key performance indicators (kpis) especially the connectivity between financial and non-financial performance disclosures. ofoegbu and asogwa (2020) examined the effect of voluntary social, environmental disclosures, and economic disclosures on the profitability of listed consumer goods manufacturing companies in nigeria. the sample of this study comprised 15 out of 23 consumer goods manufacturing companies in nigeria based on secondary data from 2009 to 2018. the hypotheses were tested with t-test statistics. the results suggested that economic and social performance disclosures have an insignificant positive impact on both earnings per share and return on equity, whereas, environmental disclosures have a strong positive and significant effects only on earnings per share. furthermore, sustainability reporting had a positive and significant impact on the profitability of selected companies. shaibu (2020) studied the nexus between voluntary environmental disclosure and firm attributes of listed cement companies in nigeria was examined. secondary data were extracted from the annual report and accounts of the listed cement companies for the period of 2013-2017. firm age, firm size and leverage were used as a proxy for firm characteristics. in order to measure the extent of environmental disclosure quality, the ezejofor, raymond a, ozuomba chidinma nwamaka, udochukwu chikaodili n and alamene inimotimi thursday (2024) 8 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe annual reports of the firms were analyzed through content analysis using gri as index of disclosure. the sample size of this study comprised of all the cement companies quoted on the nigerian exchange group (nse) as at 31st december, 2017 there are three (3) listed cement companies in nigeria and these companies are; ashaka cement plc, dangote cement plc. the study analyzed the data using descriptive statistics, correlation and multiple regression technique via stata 12.0. findings from the study revealed that firm age, firm size and leverage has significant impact on quality of environmental sustainability. iliemena, amedu and umaigba (2019) determined the value relevance of voluntary sustainability disclosure among manufacturing firms in nigeria. the study adopted a longitudinal research design. the sample comprised of thirty companies randomly selected from the floor of the nigerian exchange group. the study relied on secondary data retrieved from annual reports for the period 2010-2018. the hypotheses were validated using panel data regression technique. the results revealed that economic-sustainability and social sustainability reporting of quoted manufacturing companies were value relevant. based on these, the study recommends among others that companies devote more attention to sustainability reporting. in addition, the regulatory bodies such as the securities and exchange commission (sec) and the nigerian exchange group (nse) should look into making sustainability reporting a necessary requirement to be listed on the stock exchange. duarte-atoche and moreno (2019) determined the effect of voluntary social responsibility disclosure on sustainable performance (sp) in spain. the questionnaire was sent to a sample size of 440 sustainability directors of firms located in spain. a total of 195 usable questionnaires were received, which represents a response rate of 44.32%. the study also submitted the measurement scale to a “reliability analysis”. this showed a cronbach alpha of 0.963 which, being over 0.7, indicates an excellent general reliability. the research model was tested using the technique of partial least squares (pls). the study applied partial least squares, introducing ep, size and membership in sensitive sectors and subjecting them to a multiplicity of external pressures (social, environmental and legislative) as determinants of the sd–sp link. the study found that sustainable disclosure (sd) has a significant relationship with sustainable performance (sp) in spain. elikanah (2019) examined the value relevance of non-financial disclosures in annual reports, with a focus on listed banks in kenya over the entire period from year 2010 to year 2015. the study adopted a descriptive research design. secondary data obtained from the nairobi securities exchange records comprising of corporate action register and handbook, and daily market statistics, and from annual reports released by the studied banks from year 2010 to year 2015 was mainly used in this study. data analysis was carried out using spss version 20 and stata 13. descriptive statistics and inferential statistics were used for analysis. statistical t-test was used to test the significance of independent variables on dependent variable. the results revealed that risk disclosure, corporate social responsibility disclosure, the chairman’s statement and related party disclosure in annual reports had a positive and significant relationship with the market value of the firms which was measured by the annual average market price per share. regression analysis result also revealed that there is a significant positive relationship between corporate governance disclosure and average market price per share for listed banks in kenya. kemei (2019) determined the nexus between voluntary social-environmental responsibilities disclosures and firm attributes of kenyan listed firms. descriptive research design was used and secondary data was collected from 2009 to 2018 annual reports of 45 out of 48 targeted companies listed prior to 2009. the dependent variable is extent of disclosure which was measured on total score from 39 disclosure items each with a rating between ‘0’ to ‘3’ based on absence and the degree of specificity or detail. the disclosure items ezejofor, raymond a, ozuomba chidinma nwamaka, udochukwu chikaodili n and alamene inimotimi thursday (2024) 9 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe were developed and guided by global reporting initiative index. regression model computed with stata version 12 software was used to analyze the significance of the factors on level of social environmental responsibilities disclosures. exploratory, descriptive, diagnostic analysis were performed and the results showed that factors of firm’s size, leverage were positively significant and profitability is negatively significant in influencing the voluntary disclosure of social environmental responsibilities information on financial reports of kenyan listed firms. udeh and ezejiofor (2018) determined the effect of voluntary sustainability cost disclosure on financial performance of nigerian telecommunication firms. ex post fact research design and time series data were adopted. formulated hypotheses were tested using regression analysis with the aid of spss version 20.0. based on this, the study found that sustainability cost accounting has significantly affected return on asset of nigerian telecommunication firms. another finding is that sustainability cost accounting has significantly affected return on equity of nigeria telecommunication firms. consoni and colauto (2016) examined the nexus between voluntary disclosure and ifrs adoption in brazil. the sample comprised 66 companies listed on the bm&f bovespa from 2005 to 2012. they employed panel data regression with random effects to test the hypotheses. the results revealed that ifrs convergence as an exogenous factor, affected positively and significantly voluntary disclosure. edogiawerie and david (2016) investigated the relationship between voluntary disclosure and corporate performance in nigeria. the sample comprised fifty companies listed on the nigeria stock exchange. they employed ordinary least square (ols) regression analysis to test the data. the results showed that there is a significant effect of return on capital employed, profit after tax, earnings per share and dividend per share and the level of voluntary disclosure. achoki, kule, and shukla (2016) investigated the effect of voluntary disclosure on financial performance in rwanda. the study adopted a descriptive research design. the sample comprised 14 commercial banks. they used secondary data from annual reports from 2011 to 2015. they used secondary data from annual reports from 2011 to 2015. they used multiple linear regressions to analyze the data. the result revealed a strong relationship between voluntary disclosure and roe. they specifically found a positive relationship between financial, forward looking and board and social disclosure and roe. odia and imagbe (2015) examined the relations among corporate social and environmental disclosure, social and environmental performance and financial performance in nigeria based on the simultaneous equation approach. the study was based on the survey of management, shareholders and auditors to examine the relationship among the constructs. using the simultaneous equation model regression analysis, the results indicate that “good” social and environmental performance is significantly and positive associated with “good” economic performance, and also with more extensive social and environmental disclosures. however, the negative and significant association between financial performance and social and environmental disclosures indicates that financial performance is not a driver of corporate social and environmental disclosures. studies have also been conducted in nigeria; such as, oluwagbemiga (2014) on voluntary disclosure and financial statement quality; avwokeni (2016) on corporate social disclosure requirement of the united nations; and edogiawerie and david (2016) on the relationship between voluntary disclosure and corporate performance in nigeria. these studies however present mixed findings on the subject or inconclusive results (musyoka, 2017; crawford, lont & scott, 2014; boesso & kumar, 2007). another critique leveled against these studies has been the methodological approaches used. according to musyoka (2017), the studies failed to recognize the data as panel, thereby methods of panel analysis were not undertaken therefore the present study seeks to tackle ezejofor, raymond a, ozuomba chidinma nwamaka, udochukwu chikaodili n and alamene inimotimi thursday (2024) 10 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe this issue employing an appropriate approach of ifrs, which is a preferred phenomenon, as it is less subject to the endogeneity criticism, as adoption is performed at the country level and is beyond the choice of individual firms. methodology ex-post facto research design was employ in this study, since the study sought to establish cause-effect relationship and the researcher has no control over the variables under study. the population for this study consists of the twenty (20) consumer goods manufacturing companies quoted on the floor of nigeria exchange group as at 31st december, 2022. purposive sampling technique was adopted to select the sample size of this study. the sample size of this study consist of eighteen (18) quoted consumer goods manufacturing companies that were continuously listed by nigerian exchange group during the period 1st january 2013 to 2022 and whose financial statements and reports are available and have been consistently submitted to nigerian exchange group for the period of study. source of data this study employed the use of secondary data. information was sourced from nigerian exchange group (ngx) fact books, annual reports and accounts of the sampled companies. these variables include; earnings per share as dependent variable, while environmental protection disclosure, and employee welfare is independent variables. model specification the econometric model of the study was adapted from the studies by ohidoa, omekhodu, and oserogho (2016) as shown below: edit= α + β1fageit + β2fsizeit + β3levit + εἱ where; ed = environmental disclosure fage = firm age fsize = firm size lev= leverage α = constant term β = coefficient term i = no of firms t = time period e = error term the model was functionally expressed as: thus, the researcher modified the model as follows: epsίt = β0 + βievpίt + µίt i epsίt = β0 + βiemwίt + µίt ii where: epsί,t = earnings per share of firm i at time t evpίt = environmental protection disclosure i at time t cpdίt = corporate donation i at time t ezejofor, raymond a, ozuomba chidinma nwamaka, udochukwu chikaodili n and alamene inimotimi thursday (2024) 11 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe emwίt = employee welfare i at time t β0 = intercept coefficient β1 – β2 = coefficients of independent variables µίt = the error term which account for other possible factors that could influence i stands for the ith firm (18 companies) t stands for year t ( 2013-2022) (ten years) method of data analysis the analysis of data for this research based on the data collected from publications of the nigerian exchange group and the annual reports of the quoted companies. both the dependent and independent variables were computed from the data gotten from the nigerian exchange group from 2013 to 2022. descriptive statistics employed to summarily describe the mean, median, standard deviation, kurtosis and skewness of the study variables. inferential statistics will also be utilized with the aid of e-views 9 using:  coefficient of correlation: which is a good measure of relationship between two variables that tell us about the strength of relationship and the direction of the relationship as well?  multiple regressions analysis: regression analysis predicts the value the dependent variable based on the value of the independent variable and explains the impact or effect of changes in the values of the variables. decision rule accept the alternative hypothesis, if the probability value (p-value) of the test is less than 0.05 (5%). otherwise reject. data analysis and results table 1: descriptive statistics eps evp emw mean 2.015057 0.600000 10682619 median 1.986716 1.000000 5457886. maximum 3.179300 1.000000 59037721 minimum 1.512564 0.000000 3752354. std. dev. 0.509256 0.516398 17000553 skewness 1.109363 -0.408248 2.660528 kurtosis 3.740297 1.166667 8.092394 jarque-bera 2.279493 1.678241 22.60255 probability 0.319900 0.432090 0.000012 sum 20.15057 6.000000 1.07e+08 sum sq. dev. 2.334078 2.400000 2.60e+15 observations 10 10 10 source: e-view output, 2024 table.1 shows the mean (average) for each of the variables, their maximum values, minimum values, standard deviation and jarque-bera (jb) statistics (normality test). the results in table.1 provided some insight into the nature of the nigerian banks that were used in this study. it was observed that on the average over the ten (10) years periods (2013-2022), the sampled firms in nigeria were characterized by positive earnings per share (eps) (2.015). also, the large difference between the maximum and minimum value of the environmental protection disclosure (evp) and employee welfare (emw) show that the sampled firms in this study are not dominated by firms with more earnings per share (eps). in this table, the jarque-bera (jb) which test for normality or the existence of outliers or extreme values among the variables shows that most of the variables are normally distributed at 5% level of significance. this means that any variable with outlier are not likely to distort our conclusion and are therefore reliable for drawing ezejofor, raymond a, ozuomba chidinma nwamaka, udochukwu chikaodili n and alamene inimotimi thursday (2024) 12 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe generalization. this also implies that the least square estimate can be used to estimate the pooled regression model. correlation analysis in examining the association among the variables, we employed the pearson correlation coefficient (correlation matrix) and the results are presented in table 2 eps evp emw eps 1 evp 0.62624 1 emw -0.00064 -0.41304 1 source: researcher’s computation (2024) the use of correlation matrix in most regression analysis is to check for multi-colinearity and to explore the association between each explanatory variables (evp, emw and fsz) and the dependent variable (eps). table 2 focused on the correlation between eps and the independent variables evp and emw. finding from the correlation matrix table shows that all our independent variables, (evp= 0.626, and fsz =0.904) were observed to be positively associated with earnings per share (eps) except emw = -0.001) which is negatively associated with dependent variable. in checking for multi-colinearity, we notice that no two explanatory variables were perfectly correlated. this means that there is no problem of multi-colinearity between the explanatory variables. multi-colinearity may result to wrong signs or implausible magnitudes in the estimated model coefficients, and the bias of the standard errors of the coefficients. test of hypotheses hypothesis one ho1: there is no significant effect of environmental protection disclosure on earnings per share of listed consumer goods firms in nigeria. table 3: regression analysis between eps, evp and fsz dependent variable: eps method: least squares date: 01/10/24 time: 22:59 sample: 2013 2022 included observations: 10 variable coefficient std. error t-statistic prob. c 0.560941 0.261824 2.142432 0.0694 evp 0.205760 0.170817 1.204568 0.2675 fsz 3.80e-08 8.29e-09 4.583468 0.0025 r-squared 0.848089 mean dependent var 2.015057 adjusted r-squared 0.804686 s.d. dependent var 0.509256 s.e. of regression 0.225063 akaike info criterion 0.098449 sum squared resid 0.354572 schwarz criterion 0.189225 log likelihood 2.507753 hannan-quinn criter. -0.001131 f-statistic 19.53979 durbin-watson stat 1.680116 prob(f-statistic) 0.001366 ezejofor, raymond a, ozuomba chidinma nwamaka, udochukwu chikaodili n and alamene inimotimi thursday (2024) 13 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe interpretation of regression result in table 3, r-squared and adjusted squared values were (0.85) and (0.80) respectively. the indicates that all the independent variables jointly explain about 80% of the systematic variations in earnings per share (eps) of our samples firms over the ten years periods (2013-2022). table 3 reveals an adjusted r-squared value of 0.80,which represents the coefficient of multiple determinations imply that 80% of the total variation in the dependent variable (eps) of quoted consumer goods firms in nigeria is jointly explained by the explanatory variables (evp and fsz). the r-squared of 80% did not constitute a problem to the study because the f statistics value of 19.53979 with an associated prob.>f = 0.001366 indicates that the model is fit to explain the relationship expressed in the study model. the value of adjusted of 80% also shows that 20% of the variation in the dependent variable is explained by other factors not captured in the study model. this suggests that apart from evp and fsz, there are other factors that mitigate eps of quoted consumer goods firms in nigeria. test of autocorrelation: using durbin-waston (dw) statistics which we obtained from our regression result in table 3, it is observed that dw statistics is 1.680116 and an akika info criterion and schwarz criterion which are 1.434969 and 1.501143 respectively also further confirms that our model is well specified. in addition to the above, the specific findings from each explanatory variable are provided as follows: the results in table 3 illustrated that environmental protection disclosure has a positive but insignificant effect with earnings per share measured with a beta coefficient (β1) and tvalue of 0.205760 and 1.204568 respectively and pvalue of 0.268, while firm size has a positive and significant effect with earnings per share measured with a beta coefficient (β1) and tvalue of 3.800 and 4.583 respectively and pvalue of 0.003. decision since the prob(f-statistic) = 0.001366 of the test and is less than 0.05 (5%), this study upholds that there is a significant effect between environmental protection disclosure and earnings per share of listed consumer goods firms in nigeria at 5% level of significance. thus, null hypothesis is rejected and alternative hypothesis accepted. hypothesis two ho2: there is no significant effect of employee welfare disclosure on earnings per share of listed consumer goods firms in nigeria. ezejofor, raymond a, ozuomba chidinma nwamaka, udochukwu chikaodili n and alamene inimotimi thursday (2024) 14 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe table 3: regression analysis between eps, evp and fsz dependent variable: eps method: least squares date: 01/10/24 time: 23:01 sample: 2013 2022 included observations: 10 variable coefficient std. error t-statistic prob. c 0.355766 0.267822 1.328367 0.2257 emw 6.27e-09 4.37e-09 1.436021 0.1941 fsz 4.55e-08 6.98e-09 6.512451 0.0003 r-squared 0.858334 mean dependent var 2.015057 adjusted r-squared 0.817858 s.d. dependent var 0.509256 s.e. of regression 0.217341 akaike info criterion 0.028625 sum squared resid 0.330659 schwarz criterion 0.119401 log likelihood 2.856875 hannan-quinn criter. -0.070955 f-statistic 21.20602 durbin-watson stat 1.188281 prob(f-statistic) 0.001070 interpretation of regression result in table 4, r-squared and adjusted squared values were (0.86) and (0.82) respectively. the indicates that all the independent variables jointly explain about 82% of the systematic variations in earnings per share (eps) of our samples firms over the ten years periods (2013-2022). table 4 reveals an adjusted r-squared value of 0.82,which represents the coefficient of multiple determinations imply that 82% of the total variation in the dependent variable (eps) of quoted consumer goods firms in nigeria is jointly explained by the explanatory variables (emw and fsz). the r-squared of 82% did not constitute a problem to the study because the f statistics value of 21.20602 with an associated prob.>f = 0.001070 indicates that the model is fit to explain the relationship expressed in the study model. the value of adjusted of 82% also shows that 18% of the variation in the dependent variable is explained by other factors not captured in the study model. this suggests that apart from emw and fsz, there are other factors that mitigate eps of quoted consumer goods firms in nigeria. test of autocorrelation: using durbin-waston (dw) statistics which we obtained from our regression result in table 4, it is observed that dw statistics is 1.188281 and an akika info criterion and schwarz criterion which are 0.028625 and 0.119401 respectively also further confirms that our model is well specified. in addition to the above, the specific findings from each explanatory variable are provided as follows: ezejofor, raymond a, ozuomba chidinma nwamaka, udochukwu chikaodili n and alamene inimotimi thursday (2024) 15 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe the results in table 4, illustrated that corporate donation has a negative but insignificant effect with earnings per share measured with a beta coefficient (β1) and tvalue of 6.270 and 1.436 respectively and pvalue of 0.194, while firm size has a positive and significant effect with earnings per share measured with a beta coefficient (β1) and tvalue of 4.550 and 6.512 respectively and pvalue of 0.000. decision since the prob(f-statistic) = 0.001070 of the test and is less than 0.05 (5%), this study upholds that there is a significant effect between employee welfare and earnings per share of listed consumer goods firms in nigeria at 5% level of significance. thus, null hypothesis is rejected and alternative hypothesis accepted. conclusion and recommendations this study ascertained the effect of voluntary disclosure on financial performance of listed consumer goods firms in nigeria, using environmental protection disclosure and employee welfare as the independent variables, while earnings per share was used as a proxy for financial performance.. ex post facto research design was adopted for the study. a sample of 18 consumer goods firms was used and data extracted from the companies audited annual reports and accounts. from the result, it was established that environmental protection disclosure, corporate donation and employee welfare will firm size as the control variable were significant. this shows the extent to which consumer goods firms disclose information voluntarily, particularly regarding environmental protection, and employee welfare, can significantly influence stakeholders’ perceptions and decisions. therefore, the study concludes that voluntary disclosure has significant effect on financial performance of listed consumer goods firms in nigeria. based on the findings of the study, it was recommended as followings; 1. there should be constant environmental disclosure by the firms for mitigating its environmental impact and promoting sustainable practices. this will enable them share with their stakeholders to demonstrate their commitment toward environmental responsibility. 2. firms should be encouraged in disclosing their donations, as this will demonstrate a genuine concern for societal wellbeing and an alignment with broader ethical values, thereby leading to competitive advantage in the market. references abdallah a.h , (2019). voluntary disclosures in the annual report: benefits and costs, preparers’ views': international journal of research in business studies and management, 6(1). 1-16 . achoki, i., kule, w. j., & shukla, j. (2016). effect of voluntary disclosure on the financial performance of commercial banks in rwanda. a study on selected banks in rwanda. european journal of business and social sciences, 5(06), 167-184. adebayo, m. a., & ezejiofor, r. a. (2021). voluntary environmental disclosure and corporate performance: a study of quoted consumer goods manufacturing firms in nigeria. european journal of business and management research, 6(6), 261–265. https://doi.org/10.24018/ejbmr.2021.6.6.1042 adegbie, f. f., iranola, r. & isiaka, b. (2019). evaluation of integrated reporting and the value of listed https://doi.org/10.24018/ejbmr.2021.6.6.1042 ezejofor, raymond a, ozuomba chidinma nwamaka, udochukwu chikaodili n and alamene inimotimi thursday (2024) 16 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe manufacturing firms in nigeria. european journal of accounting, auditing and finance research, 7(7), 31-59. adegboyegun, a. e., alade, m. e., ben-caleb, e., ademola, a. o., eluyela, d. f., & oladipo, o. a. (2020). integrated reporting and corporate performance in nigeria: evidence from the banking industry. cogent business & management, 7(1), 1-12. adeyemi, s. b., fagboro, g. d. & udofia, i. e. (2020). the integrated reporting (ir) framework implementation in nigerian listed companies. global journal of accounting, 6(1), 1-11. aifuwa, h. o. (2020). sustainability reporting and firm performance in developing climes: a re-view of literature. copernican journal of finance & accounting, 9(1), 9–29. http://dx.doi. org/10.12775/cjfa.2020.001 al amosh, h., & khatib, s. f. a. (2022). theories of corporate disclosure: a literature review. corporate governance and sustainability review, 6(1), 46–59. https://doi.org/10.22495/cgsrv6i1p5 aris, n. m., yusof, s.m., idris, n. i. i., zaidi, n. s., & anuar, r. (2021). analysis of firms’ characteristics affecting the sustainability reporting disclosure in malaysia. international journal of academic research in business and social sciences, 11(14), 1-20. cheynel, e. (2012, april 12). a theory of voluntary disclosure and cost of capital. ssrn.com. https://ssrn.com/abstract=2112174 consoni, s., & colauto, r. d. (2016). voluntary disclosure in the context of convergence with international accounting standards in brazil. revista brasileira de gestao de negocios, 18(62), 658-677. dada, s. o., & adeniji, a. a. (2021). voluntary disclosure and financial performance: analysis of listed oil and gas firms in nigeria. the strategic journal of business & change management, 8 (3), 593 – 605. daniel c.o & mac-ozigbo a. (2020). effect of corporate social responsibility on the financial performance of construction companies in nigeria. international journal of business marketing and management, 5(6), 48-54. de wet, j. (2013, november 21). earnings per share as a measure of financial performance: does it obscure more than it reveals? papers.ssrn.com. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2357968 duarte-atoche, t. & moreno, m. l. (2019) relationship between sustainable disclosure and performance—an extension of ullmann’s model. journal of sustainability, 11(1), 1-33. edogiawerie, o. u., & david, j. o. (2016). financial reporting and voluntary disclosure in nigeria quoted companies. igbinedion university journal of accounting, 1, 42-58. https://doi.org/10.22495/cgsrv6i1p5 https://ssrn.com/abstract=2112174 https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2357968 ezejofor, raymond a, ozuomba chidinma nwamaka, udochukwu chikaodili n and alamene inimotimi thursday (2024) 17 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe elfeky, m. i. (2017). the extent of voluntary disclosure and its determinants in emerging markets: evidence from egypt. the journal of finance and data science, 3(1-4), 45–59. https://doi.org/10.1016/j.jfds.2017.09.005 elikanah, j. (2019). value relevance of non-financial disclosures in annual reports: evidence from listed banks in kenya. unpublished research project submitted to jomo kenyatta university of agriculture and technology. fernando, j. (2022, august 23). earnings per share (eps): what it means and how to calculate it. investopedia. https://www.investopedia.com/terms/e/eps.asp#:~:text=earnings%20per%20share%20(eps)%20is iliemena, r. o., amedu, j. m. & umaigba, f. t. (2019). value relevance of sustainability reporting in nigerian manufacturing companies. journal of global accounting, 6(2), 131-142. jensen, m. c., & meckling, w. h. (1976, july 1). theory of the firm: managerial behavior, agency costs and ownership structure . harvard business school; ssrn; national bureau of economic research (nber); european corporate governance institute (ecgi); harvard university accounting & control unit. http://papers.ssrn.com/abstract=94043 kemei, c. c. (2019). factors influencing social-environmental responsibilities disclosures in financial reports of kenyan listed firms. unpublished research project submitted to kca university. meiryani meiryani, shi ming huang, gatot soepriyanto, jessica, mochammad fahlevi, saniuk, s., & aljuaid, m. (2023). the effect of voluntary disclosure on financial performance: empirical study on manufacturing industry in indonesia. plos one, 18(6), e0285720–e0285720. https://doi.org/10.1371/journal.pone.0285720 modugu, k.p., & eboigbe, s.u. (2017). corporate attributes and corporate disclosure level of listed companies in nigeria: a post-ifrs adoption study. journal of finance and accounting, 5(2), 4452. available at http://pubs.sciepub.com/jfa/5/2/3 moruff, a. s., ado, g., salisu, m. & yunusa, n. (2021). firm-specific attributes and environmental disclosure of listed oil and gas firms in nigeria. global journal of accounting, 7(1), 1-14 musyoka, m. n. (2017). effect of voluntary disclosure on financial performance of firms listed at nairobi securities exchange (unpublished master’s thesis). school of business and public management at kca university. mutiva, j. m., ahmed, a. h., & muiruri-ndirangu, j.m. (2017). the relationship between voluntary disclosure and financial performance of selected companies quoted at the nairobi securities exchange. international journal of managerial studies and research (ijmsr), 3(6), 171-195. https://doi.org/10.1016/j.jfds.2017.09.005 https://www.investopedia.com/terms/e/eps.asp#:~:text=earnings%20per%20share%20(eps)%20is http://papers.ssrn.com/abstract=94043 https://doi.org/10.1371/journal.pone.0285720 ezejofor, raymond a, ozuomba chidinma nwamaka, udochukwu chikaodili n and alamene inimotimi thursday (2024) 18 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe naran, p. m. (2013). the effect of company size and voluntary disclosure on financial performance of commercial banks in kenya (mba thesis, university of nairobi). nworie, g. o. & mba, c. j. (2022). modelling financial performance of food and beverages companies listed on nigerian exchange group: the firm characteristics effect. journal of global accounting, 8(3), 37 52. https://journals.unizik.edu.ng/index.php/joga/article/view/1418/1142 nworie, g., obi, g., anaike, c. & uchechukwu-obi, c. (2022). environmental responsibility as an upshot of firm leverage in industrial goods sector of the nigerian exchange group. international journal of advances in engineering and management, 4(12), 724-732. https://www.researchgate.net/publication/366634756 odia, j. o. & imagbe, v. u. (2015). corporate social and environmental disclosures, corporate social and environmental performance and corporate financial performance in nigeria: a simultaneous equation approach. international journal of management sciences, 5(9), 615627. odum, a.n. & obiano, m.o. (2023). voluntary disclosure and financial performance of listed consumer goods firms in nigeria, journal of global accounting, 9(2), 138 – 179. available:https://journals.unizik.edu.ng/joga ofoegbu, g. n. & asogwa, c. u. (2020). the effect of sustainability reporting on profitability of quoted consumer goods manufacturing firms in nigeria. international journal of innovative research and development, 9(4), 271-283. osisioma, b. c. & emeka-nwokeji, n. a. (2019). sustainability disclosures and market value of firms in emerging economy: evidence from nigeria. journal of accounting, auditing and finance research, 7(3). 1-9. ozurumba b. a. (2016). corporate social responsibility accounting in the financial sector: a study of depositmoney banks in nigeria. journal of social and management sciences, 11(3), 10-22. pappu, k. d. (2020). value relevance of integrated reporting: a study of the bangladesh banking sector. international journal of disclosure and governance, 17(4), 195-207. shaibu, k. (2020). firm characteristics and environmental disclosure quality of listed cement companies in nigeria. african scholar journal of mgt. science and entrepreneurship, 18(7), 105-119. shehata, n. f. (2014). theories and determinants of voluntary disclosure. accounting and finance research, 3(1). https://doi.org/10.5430/afr.v3n1p18 what is earnings per share (eps)? definition of earnings per share (eps), earnings per share (eps) meaning. (n.d.). the economic times. https://www.google.com/amp/s/m.economictimes.com/definition/earningsper-share-eps/amp https://doi.org/10.5430/afr.v3n1p18 https://www.google.com/amp/s/m.economictimes.com/definition/earnings-per-share-eps/amp https://www.google.com/amp/s/m.economictimes.com/definition/earnings-per-share-eps/amp ezejofor, raymond a, ozuomba chidinma nwamaka, udochukwu chikaodili n and alamene inimotimi thursday (2024) 19 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe udeh, & ezejiofor, r.a. (2018). effect of sustainability cost accounting on financial performance of telecommunication firms in nigeria. journal for studies in management and planning, 4(6). yusuf, m., adebayo, p., & yusuf, r. (2018, december). effect of financial performance on voluntary disclosure of listed financial firms in nigeria . international journal of economics, commerce & management. http://ijecm.co.uk/ http://ijecm.co.uk/ american interdisciplinary journal of business and economics issn: 2837-1909| impact factor: 6.72 volume. 10, number 2; april-june, 2023; published by: scientific and academic development institute (sadi) 8933 willis ave los angeles, california https://sadipub.com/journals/index.php/aijbe | editorial@sadipub.com 65 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe investigating the role of state capacity in promoting technological innovation and environmental sustainability in asean states kadir aden university of djibouti abstract: this study examines the relationship between state capacity, technological innovation, and environmental sustainability in two asean member states, vietnam and singapore, from 2000 to 2020. the study focuses on the impact of impartial administration, rule of law, and technological innovation on achieving environmental sustainability. the autoregressive distributed lag model and granger causality analysis were used to analyze the existence and causal effect between the variables. the results indicate a negative association between impartial administration, technological innovation, and environmental sustainability in the long run. however, the granger causality analysis demonstrates a causality effect running from impartial administration and technological innovation to environmental sustainability for singapore. the study highlights the importance of state capacity in promoting innovation in both the public and private sectors to achieve environmental sustainability. keywords: state capacity, technological innovation, environmental sustainability, impartial administration, rule of law, asean member states, autoregressive distributed lag model, granger causality analysis. introduction state capacity is one of the key factors that can influence technological innovation and environmental sustainability. this study examines the relationship between state capacity, technological innovation, and environmental sustainability in two asean member states, vietnam and singapore. the study focuses on examining the impact of impartial administration, rule of law, and technological innovation on achieving environmental sustainability. the study uses the autoregressive distributed lag model and granger causality analysis to examine the existence and causal effect between the variables. the study reveals a negative association between impartial administration, technological innovation, and environmental sustainability in the long run. this indicates that impartial administration and the rule of law are crucial for achieving environmental sustainability. however, the granger causality analysis demonstrates a causality effect running from impartial administration to environmental sustainability and between technological innovation to environmental sustainability for singapore. therefore, singapore's state capacity, including impartial administration and technological innovation, has a positive effect on achieving environmental sustainability. the study concludes by highlighting the importance of state capacity in fostering innovation in both the public and private spheres for achieving environmental sustainability. the findings have significant policy mailto:editorial@sadipub.com kadir aden (2023) 66 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe implications that can inform the design of interventions aimed at promoting green technology and environmental sustainability. review of literatures the role of the state in achieving a healthier sustainable environment is becoming obsolete if not dwindling. and by this, alternative actors, including citizens have emerged as potential stakeholders. albeit, this shrinking of states’ capacity in addressing environmental issues, the government still maintains its sparkle by interfering in the sustainability agenda either directly or through indirect processes, and, depending on this particular practice, it could either assist in improving the environment or deteriorate what was an already fragile ecosystem. similarly, it is important to note that sustainability covers a larger scope, and the fact of an absence specific delineation mechanism provides academicians to implement the latter concept in different environmental fields, from energy, c02 emissions, and waste management, to public health. 2.1. state capacity and environmental sustainability several authors accentuate the negative impact of administrative biases when civil servants stray away from impartiality. welsch (2004) and cole et al. (2006), stress the relationship between the lack of impartiality and environmental pollution. their study reveals how, poor impartiality reduces the efficiency of environmental policies, then, retroactively affects quality deliverance. in fact, better regulatory quality upgrades sustainability within the state, however, ironically, stringent environmental regulation aimed at improving sustainability would hamper the state’s economy by further introducing shadow economics. chen et al. (2018) demonstrate how stricter control of environmental regulations would reduce pollution and ameliorate ecological qualities but at the expense of providing opportunities for shadow economy activities to expand. elgin and mazhar (2013), build a double-sector model between the official economy and the shadow economy, they discover that depending on how severe environmental regulations were implemented, certain shadow economy sectors may eventually end up becoming a major cause of environmental pollution leakage, as a result, impeding state’s sustainability effort. more formally, this excessive execution of eco-friendly policies, without practical reappraisal of its aftermath effect would certainly increment the scale of the shadow economy. certainly, without repercussion motives, these authors are genuinely warning of the negative effect of greater propensity toward sustainability policies when the collective posterior impact hasn’t been fully taken into consideration. in a similar scenario, kuehn (2015) argues that due to the high economic and political stakes involved in many controversies, accusations of bias in administrative sustainability judgments are becoming more frequent recently, and, indeed, appear to be growing. to exemplify this, parties in environmental proceedings allege ethical violations, discrimination in forms of favoritism, prejudging of outcomes, complaining of irregular prosecutorial and judicial functions, and illegal political influence, particularly, in legal cases that require higher impartiality and integrity by the competent organs. interestingly such as scenario transpires in every corner of the globe from high-profile oil conglomerates to c02 emission effect on locals’ well-being. only recently, opponents of a 1,700mile keystone xl oil pipeline have alleged that the environmental decisionmaking process has been sullied by state department cronyism of the pipeline's construction company, further reinforcing the blatant bias and favoritism among civil servants. see (rosenthal and frosch, 2011). while the point (kuehn, 2015) should be treated as a particular case, romano et al. (2021), also applies the lack of impartiality and ineffectiveness in italy by considering waste management performance as a point of illuminating the state’s maladministration. the outcome of the causality framework demonstrates that urban disposal production per capita is higher in municipalities with relatively high amounts of corruption and poor governance. reasonably, the following outcome is justified by the author as the presence of possible, biased activities, while simultaneously pursuing personal interest at the expanse of the conferred mission to them by kadir aden (2023) 67 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe abusing their titles which are mostly defined by their professional positions, thus. ironically, providing irrational immunity. the significance of the link between waste management and unlawful actions and the absence of impartiality has also been emphasized by (gumisiriza and kugonza, 2020; cesi et al., 2019; agovino et al., 2018), according to their theory, corrupt businesses entities, local governments, and oversight agencies frequently collaborate in the context of environmental violations to create illicit networks that jeopardize effective waste disposal and the flow of sustainable management. for instance, these networks, have a significant impact on contractors and subcontracts who handles garbage collection, transportation, and disposal, by exerting substantial control, thus carrying out their well-orchestrated extortion activities, in turn undermining the public health. generally, ineffective waste disposal produces health problem d'alisa et al. (2010) reveals how organized crime is a key contributor to environmental offenses, including the disposal of dangerous waste. therefore, contributing to health issues including asthma, respiratory issues, tumors, and circulatory system abnormalities, notwithstanding, perpetrators continue to pursue their sustainable degradation, given, the low attention provided to environmental infractions. highlighting how ineffective state capacity affects sustainability (fredriksson and svensson, 2003), explores the effect of government stability and absence of corruption on environmental policies by collecting data from 60 countries. they conclude that the degree of corruption may have been what determines the association between political risk and the strictness of environmental regulations. in particular, political stability has a detrimental influence on the effectiveness of environmental legislation when the amount of corruption is low; yet, once the level of corruption is at its peak, political stability has a favorable influence on environmental legislation. additionally, corruption can reduce the effectiveness of environmental regulation, but the impact will vanish with greater political stability. chen et al. (2019) and pang et al. (2019), analyze a way of achieving sustainable development by reducing air pollution. based on their conclusion; car exhaust is one of the major sources of air pollution in china, because of the country's ongoing urbanization and rising living standards, which has led to an increase in the number of families; owning to several fuel-powered vehicles. the authors suggest that pushing electric vehicles over gasoline-powered ones will assist in tackling the problem of urban air pollution. on the other hand, some scholars support maximizing the involvement of the government in the environment by enhancing environmental protection legislation, boosting environmental rules, and tightening environmental inspection procedures in order to reduce air pollution (song et al., 2020). an interesting case about ecological issues can be linked to the famous case of (oposa minors case, 1993). according to the philippines chief justice, the petitioners filed a lawsuit on behalf of future generations. according to the court’s reasoning, intergenerational standing is helpful when environmental harm is longlasting and worsens with time, posing a greater hazard to coming generations than to the current. however, in order for the rights of coming generations to be really convincing, they must be completely incorporated into constitutional and international human rights law. following this verdict, several countries have already set agendas of integrating future-generation values into constitutional environmental rights, see (commonwealth, robinson tp, 1993). another german case has rejected to consider condemning a c02 emission industry. according to the plaintiff’s argument, the c02 emitted by these industries was infringing his fundamental rights. after finding unsubstantiated human rights violations, the court decided to discard the plaintiff’s appeal, however, the court shifted its verdict to proportionality scope, in which, excessive consumption of c02 from the current generation would cause future sustainability damages for the upcoming generation, while simultaneously leaving little quantities of c02 emission to experience (winter, 2022). muhammad and long (2021) highlight the critical role of institutional components like political stability, anticorruption measures, and the rule of law in reducing carbon emissions and enhancing environmental quality. further providing support for muhammad’s institutional variation, salman et al. (2019), contends that kadir aden (2023) 68 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe the strength of a nation has a significant impact on how well the paris agreement and other environmental pollution-related regulations are implemented. on the other hand, industries wouldn't think twice about breaking pollution control regulations to maximize profit if there are defects and weak institutions. welsch (2004) and aden (2022), also argue that robust institutions have the potential to reduce pollution not only at the national level but also at an international level through a mechanism based on a spatial institutional spillover effect. on the other hand, ineffective institutions, which are viewed as the primary cause of the lowincome trap, are the main barriers to further reaching sustainable societies and adopting sophisticated energy structures generated by greener technologies (salman et al., 2019). geller et al. (2006) also look at how 123 different countries' levels of governance affected the quality of their environments. the findings demonstrate that effective policies, judiciary fairness, and accountability favorably impact water quality. on the other hand, judiciary fairness, and bureaucratic efficiency have a positive effect on air quality. however, the six governance indices are adversely affected by forests, and there is no indication that governance indicators have an influence on biodiversity. 2.2 sustainability and innovation an institution must purchase or create a new product, service, or platform that requires technical innovation in order to attain sustainability; yet, specific characteristics of procurement authorities affect such activities. although, public strategies that are innovative and sustainable can be implemented at several levels. and when deeply ingrained and widely accepted these groundbreaking technological tools, achieving sustainability through an innovation-driven agenda becomes further plausible, while, simultaneously, producing potential benefits for society (nijboer et al., 2017). hence, embracing these smart technological innovation policies by governments has a crucial role in fostering the adoption of environmental technologies by business entities, thus boosting sustainability levels and indirectly contributing to the major social problem of climate change through the business-government collaboration mechanism. therefore, in order for economies to achieve a decarbonized and controllable development path that is compatible with competitiveness goals; technological innovation may be crucial, in the context of implementing and disseminating greener manufacturing technology, and lesser dependence on c02 emission. khan et al. (2020b) employ a fully modified ordinary least square (fmols) model, a dynamic ordinary least square (dols), a generalized least square (gls), and chronical cointegration regression (ccr) method to show the relationship between innovation, and private and public partnership energy investment. the results yield that technological innovation (tin) infuses higher energy consumption generated through renewables. the findings also underline the important role of reducing c02 emissions when the state embraces technological tools, subsequently contradicting the general belief of the negative effect of technological advancement on the environment. additionally, the favorable effect of tin on cleaner production is revealed by (alvarez-herranz et al., 2017), the empirical results indicate that spending on technological innovation lowers carbon footprints and enhances the climate's overall health. the authors also point out that while the impact of innovation and technological expenditure varies among nations, these tools might be leveraged to reach salient sustainability. sun et al. (2008) examine the connection between greenhouse gas emissions (ghg) and patent technologies. the researchers conclude that technological progress considerably lowers co2 emissions. additionally, their comparative research indicates that, in contrast to other geographical regions, eastern counties are more effective at implementing innovations and eco-friendly technology. this pivotal finding might suggest, perhaps, comparing the development status between the north and the east; developed nations had already at their peak of progress, although their mission of achieving sustainability could be easier but still growing nations possess the upper hand in transforming their economy to better match sustainability goals, with less, inconvenience vis-à-vis the northern. in a similar case, the effects of advancements in technologies, kadir aden (2023) 69 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe environmental laws, and urbanization on ecological performance were investigated using the generalized method of moments gmm technique by (yasmeen et al., 2020), the findings show that the eastern area had the greatest ranking in terms of ecological effectiveness, preceded by the middle and western regions, correspondingly. on a national scale, the urbanization index has a detrimental effect on ecological effectiveness. while the results in the western and middle areas are inconsequential as they are favorably significant in the eastern region. zhou et al. (2018) reveal that technological progress in green fields might encourage an increase in anticipated production. therefore, developing green technologies is a crucial approach for china to increase its ecological efficiency. nevertheless, these authors contend; at the current time, china’s eco-friendly technological innovations are somehow lacking and indeed at some point need to be addressed. furthermore, china’s technological evolution exhibits a "u"-shaped environment kuznets curve. indicating, that advanced technology before 2010, somewhat decreased ecological efficiency. in a similar context, shahbaz et al. (2016) reveal that technological innovation may lower carbon emissions and assist in addressing the difficulties associated with environmental sustainability by coping with unexpected climate damages while at the same time playing a major key in the betterment of environmental quality. another ground-breaking study conducted by bouzguenda et al (2019), aimed to explore the role of communications and technology on enhancing engagement among citizens toward sustainable cities. the author’s main purpose is to investigate in deep the incorporation of digital citizen participation in sustainable smart cities, the result suggests that emphasizing information and communications technology (ict) will direct to better social sustainability and produce human-based interconnection than a robotic administrated platform which in most cases interferes at delivering acceptable feedbacks. adebayo and kirikkaleli (2021), also analyze the effect of renewable energy, globalization and technological innovation in japan’s environmental sustainability. the wavelet statical tools show an increase in the level of c02 emission when technological innovation has been embraced, further creating discrepancy between the positive impact and the negative scope when technological tools deployed in climate mitigation context. methods in this study, environmental sustainability (our dependent variable) is proxied by adjusted net savings, excluding particulate emission damage, adopting the famous work of (ganda, 2020), whereas, technological innovation is adopted by (rafique et al., 2020). moreover, a period of twenty years was selected starting from 2000 to 2020. the period could have been extended, however, to avoid biases in a format of missing data the study contends to carry on within this interval period. furthermore, the study is built by collecting several variables interlinked with the country’s governments and civil servants. the collected variables are taken from the world bank development except for impartial administration which was taken from the global state of democracy indices. more formally, we are anticipating that greater states’ characteristics improve, to some extent, the level of sustainability, thus, establishing a positive compromise between the host country and the quality of the environment. all the variables and their assessments including their respective sources can be seen in table 1. table 1.variables summary variables description sources adjusted net savings, excluding particulate emission damage adopted as environmental sustainability (ens) world bank kadir aden (2023) 70 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe impartial administration (imp) the government and the public administration more generally should implement official public policies in an impartial manner. scaled to range from 0 (lowest score) to 1 (highest score). the global state democracy indices of regulatory quality (rq) perception of state to formulate sound policies. ranging from -2.5 to 2.5 world bank governance rule of law (rl) quality of law enforcement, trust toward agents for their rule abiding. ranging from -2.5 to 2.5 world bank governance government effectiveness (ge) quality of public and civil services and the credibility of commitment to their formulated world bank governance policies. total patent application (tivn) adopted as a proxy for technological innovation world bank 3.1. econometric model to explore factors enhancing environmental sustainability within singaporean and vietnamese territories the following model is proposed: lnesn = 𝛽1 + 𝛽1imp + 𝛽2rl + 𝛽3rq + 𝛽4ge + 𝛽5lntnvn + 𝜖𝑡 (1) lnens → higher impartiality among public officials improves environmental quality > 0 imp → greater emphasis on rule of law introduces higher sustainability at the national level lnens → embracing favorable policies toward the environment produces salient sustainable > 0 rl → frameworks lnens → an effective bureaucratic system leads to environmental improvement by turning to > 0 rq lnens alternative substantial measures, that in turn, promote sustainability. > 0 ge technological innovation infuses higher sustainability by reducing the level of c02 emissions lnens first, the following techniques have been applied to the collected data in order to obtain the > 0 desired estimates. accordingly, the unit root test was performed on the dataset (variables) to lntinv examine the stationarity series. 𝑦𝑡 = 𝜃𝑦𝑡−1 + 𝜀𝑡 (2) where εt is the error term. assumingly, it is likely certain variables could be stationary at level or becomes stationary at the first difference if such as stationarity explosion can’t be detected, hence the termination of the model is most probable or perhaps seeking other adequate alternatives. in doing so, we used the dickey-fuller test to investigate the variables (dickey and fuller, 1979), i.e. ∆lnenst = 𝛼 + βtime + γlnenst−1 + δ∆lnenst−1 + ⋯ + δp−1∆lnenst−p + εt (3) ∆impt = α + βtime + γimpt−1 + δ∆impt−1 + ⋯ + δp−1∆impt−p + εt ∆rlt = α + βtime + γrlt−1 + δ∆rlt−1 + ⋯ + δp−1∆rlt−p + εt ∆rqt = α + βtime + γrqt−1 + δ∆rqt−1 + ⋯ + δp−1∆rqt−p + εt kadir aden (2023) 71 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe ∆get = α + βtime + γget−1 + δ∆get−1 + ⋯ + δp−1∆get−p + εt ∆lntivnt = α + βtime + γlntivnt−1 + δ∆lntivnt−1 + ⋯ + δp−1∆lntivnt−p + εt where ‘α’ is the constant, ‘β’ can be interpreted as the time trend coefficient, and ‘p’ displays the lag process. adopting the approach proposed by (pesaran et al., 2001) for our ardl model, in which their theories was based on employing different lag operators within the ardl model to avoid simultaneity issue, while simultaneously carrying on with a mixed unit root intermingled variables l (0) i(1). 𝑃 𝐼 𝐿 (4) in(ens)𝑡 = 𝛽0 + ∑ 𝜙1𝑖 δ in(ens)𝑡−𝑖 + ∑ 𝛽1𝑖 δ (imp)𝑡−𝑖 + ∑ 𝛽2𝑖 δ (rl)𝑡−𝑖 𝑖=1 𝑖=1 𝑖=1 𝑄 𝐺 𝑇 + ∑ 𝛽3𝑖 δ (rq)𝑡−𝑖 + ∑ 𝛽4𝑖 δ (ge)𝑡−𝑖 + ∑ 𝛽5𝑖 δ in(tivn)𝑡−𝑖 + 𝜀𝑡 𝑖=1 𝑖=1 𝑖=1 where β _0 is the constant, β_1 to β_5 are the coefficients of variables. δ shows the first difference, and ε is the white noise. after the short-run verification, the long-run cointegration was verified using wald fstatistics. the test assumes a null hypothesis denotes non-integration. accordingly, by looking at the f statistics we can conclude if the model is worth for a long-run estimation. in this agenda, we only kept assuming the existence of long-run relations between the variables hence proceeding with an error correction. 𝑃 𝐼 𝐿 𝑄 (5) in(ens)𝑡 = 𝛽0 + ∑ 𝜙1𝑖 δ in(ens)𝑡−𝑖 + ∑ 𝛽1𝑖 δ (imp)𝑡−𝑖 + ∑ 𝛽2𝑖 δ (rl)𝑡−𝑖 + ∑ 𝛽3𝑖 δ (rq)𝑡−𝑖 𝑖=1 𝑖=1 𝑖=1 𝑖=1 𝐺 𝑇 + ∑ 𝛽4𝑖 δ (ge)𝑡−𝑖 + ∑ 𝛽5𝑖 δ in(tivn)𝑡−𝑖 + 𝜆𝐸𝐶𝑇𝑡−1 + 𝜀𝑡 𝑖=1 𝑖=1 where the ℷ ect is the error correction term. the granger causality was lastly performed to examine the existence of causal effect between the candidate factors. hence, the f-test and the p value were used to assess if the factors are significantly affecting each other. nevertheless, this depends on the causality direction, whether it is a one-way causality, a bidirectional relation, or a neutral relationship in spite of the strong association. therefore, we take into account the following effect-relationship: 2 2 2 2 2 2 ens𝑡 = 𝑐1 + ∑ 𝛽1 ens 𝑡−𝑖 + ∑ 𝛽2 imp 𝑡−𝑖 + ∑ 𝛽3 rl 𝑡−𝑖 + ∑ 𝛽4 rq 𝑡−𝑖 + ∑ 𝛽5 ge𝑡−𝑖 + ∑ 𝛽6 tivn 𝑡−𝑖 + 𝜀 𝑖=1 𝑖=1 𝑖=1 𝑖=1 𝑖=1 𝑖=1 2 2 2 2 2 2 impt = 𝑐1 + ∑ 𝛽1 imp 𝑡−𝑖 + ∑ 𝛽2 ens 𝑡−𝑖 + ∑ 𝛽3 rl 𝑡−𝑖 + ∑ 𝛽4 rq 𝑡−𝑖 + ∑ 𝛽5 ge𝑡−𝑖 + ∑ 𝛽6 tivn 𝑡−𝑖 + 𝜀 𝑖=1 𝑖=1 𝑖=1 𝑖=1 𝑖=1 𝑖=1 2 2 2 2 2 2 rlt = 𝑐1 + ∑ 𝛽1 rl 𝑡−𝑖 + ∑𝛽2 imp 𝑡−𝑖 + ∑ 𝛽3 ens 𝑡−𝑖 + ∑ 𝛽4 rq 𝑡−𝑖 + ∑ 𝛽5 ge𝑡−𝑖 + ∑ 𝛽6 tivn 𝑡−𝑖 + 𝜀 𝑖=1 𝑖=1 𝑖=1 𝑖=1 𝑖=1 𝑖=1 2 2 2 2 2 2 (6) rqt = 𝑐1 + ∑ 𝛽1 rq 𝑡−𝑖 + ∑ 𝛽2 rl 𝑡−𝑖 + ∑ 𝛽3 imp 𝑡−𝑖 + ∑ 𝛽4 ens 𝑡−𝑖 + ∑ 𝛽5 ge𝑡−𝑖 + ∑ 𝛽6 tivn 𝑡−𝑖 + 𝜀 𝑖=1 𝑖=1 𝑖=1 𝑖=1 𝑖=1 𝑖=1 kadir aden (2023) 72 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe 2 2 2 2 2 2 get = 𝑐1 + ∑ 𝛽1 ge 𝑡−𝑖 + ∑ 𝛽2 rq 𝑡−𝑖 + ∑ 𝛽3 rl 𝑡−𝑖 + ∑ 𝛽4 imp 𝑡−𝑖 + ∑ 𝛽5 ens𝑡−𝑖 + ∑ 𝛽6 tivn 𝑡−𝑖 + 𝜀 𝑖=1 𝑖=1 𝑖=1 𝑖=1 𝑖=1 𝑖=1 2 2 2 2 2 2 tivnt = 𝑐1 + ∑ 𝛽1 tivn 𝑡−𝑖 + ∑ 𝛽2 ge 𝑡−𝑖 + ∑ 𝛽3 rq 𝑡−𝑖 + ∑ 𝛽4 rl 𝑡−𝑖 + ∑ 𝛽5 imp𝑡−𝑖 + ∑𝛽6 ens 𝑡−𝑖 + 𝜀 𝑖=1 𝑖=1 𝑖=1 𝑖=1 𝑖=1 𝑖=1 results the augmented dickey-fuller test (adf) is used for this study, it is worth noting that adf determines the presence of stochastic stationery in the dataset and it is the most renowned unit root test used by most studies (morshed & hossain, 2022; pula & elshani, 2018; wen & dai, 2020). interestingly, vietnam has a mixture of stationary series at level i(0) and at 1st level; i (1). the rule of law (rl), regulatory quality (rq), technological innovation (tivn) and environmental sustainability (ens) are stationary at level. meanwhile, impartial administration (imp)and government effectiveness (ge) became stationary at 1st level, table no. 2. on the other hand, singapore’s variables are stationary at the first difference, although bureaucratic effectiveness (ge), technological innovation, and regulatory quality (rq) are stationary at level. overall, these combinations of series provide strong convincing arguments for the parameters to proceed with an ardl approach. the correlation matrix tables display a positive association between environmental quality, rule of law, regulatory quality, and government effectiveness within the socialist vietnamese context with a value of 0.52, 0.72, and 0.077, respectively table no. 3 on the other hand, impartial administration and innovation displays a negative sign. comparing this correlation with singapore, effective bureaucratic systems appear to have the strongest association with environmental quality, whereas the aforementioned factor seems to be the lowest for vietnam. the outcome of this result transpires that regimes attributive characteristics seldom play a key role in enhancing environmental quality, owing to the fact of both regimes’ non-democratic standing point. table 3. correlation results vietnam ens imp rl rq ge tivn the result also indicates a unique cointegration among the selected variables. accordingly, environmental sustainability is normalized and the remained variables can be treated as a long-run forcing for the explanation of environmental quality. it can be seen from the f-statistics table no 4, all the variables are cointegrated and fail under the upper bound. likewise, we estimate the model’s diagnostic. the diagnostic results can be found in table no 5. table 4. bound test estimates singapore ens imp rl rq ge tivn tivn 0.7915 0.7904 0.4627 0.7352 0.0171 1 kadir aden (2023) 73 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe rq 0.5274 1 ge 0.1267 rl 1 source author’s calculations vietnam singapore test statistics value test statistics value f statistics 5.867 is f statistics 6.678 significance level (critical) significance i (0) bound i (1) bound i (0) bound i (1) bound 10 2.26 3.35 2.26 3.35 source-author’s calculations further, we estimated the diagnostic of the model, all the residual shows no autocorrelation, and they are regularly distributed. moreover, the model projects no issues of heteroskedasticity, while the outcome of the ramsey test demonstrates that the current model does not have any misspecification errors, hence, the ardl bounds test produces unbiased and consistent estimates. finally, the stability of the parameters was tested, as a result, it can be drawn from the cusum and cusumq graphs that all the statistics are in the critical bounds, meaning the coefficients of the model are stable, observe table no. 5 and figure 2,3. table 5. diagnostic estimates of both models test (pvalue) results vietnam durbin-watson d-statistic 3.3504 no autocorrelation jarque-bera test 0.5343 estimated residuals normal are white's test 0.3918 the model is homoskedastic breusch-pagan / cook-weisberg 0.8244 ramsey reset test 0.6123 the model has no misspecification ens 1 imp 0.5411 1 rl 0.5271 0.0159 1 rq 0.322 0.4014 0.0201 1 ge 0.6936 0.1241 0.0081 0.4776 1 tivn 0.1977 0.4739 0.3212 0.7918 0.5792 1 ens imp 0.7274 0.3868 0.0776 0.2037 0.1619 1 1 0.2186 1 0.1825 0.4879 kadir aden (2023) 74 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe breusch-godfrey serial lm test: correlation 0.2097 no serial correlation exits test (pvalue) results singapore durbin-watson d-statistic 3.3594 no autocorrelation jarque-bera test 0.7318 estimated residuals are normal white's test 0.3799 the model is homoskedastic breusch-pagan / cook-weisberg 0.9896 ramsey reset test breusch-godfrey serial correlation lm test: 0.1182 the model has no misspecification 0.8816 no serial correlation exits source-author’s calculations figure 1. cusum and cusum square for vietnam figure 2. cusum and cusum square for singapore the ardl estimation for both countries can be seen in table no. 6, table no. 7, the shortrun and long run estimations appear to differ for both countries, for instance, impartial administration (imp) at the national level shows a positive association in the short-run for both countries, 0.076 p < 0.01 and 0.012 p < 0.05 respectively. nevertheless, this perfectly corresponding association lasts only in the short run for vietnam. this sudden transformation could have been expected, considering vietnam’s late economic openness and other social aspects of life restrictions (compared with singapore, vietnam adopted a state market-oriented, only, recently, which explains the country’s rapid development and further attraction of foreign markets). in kadir aden (2023) 75 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe addition, further administration (private or public) interferences in the public environment could undermine the mutual partnership between the administration and the government. alternatively, a different explanation could be provided from an ineffective facet, in which, administrative bodies’ engagement toward a more sustainable environment has been impeded, perhaps, by external factors (corruption, unfavorable environmental policies, lack of collective participation, favoring economic profits over environmental issues), and reasonably, the latter seems more plausible. noticeably, an effective bureaucratic system increases environmental quality in the short run for both countries 0.076 p < 0.01, 0.007 p < 0.05. which translates; an increase of 1% in effectiveness among public officials boosts sustainability at 95% in the vietnamese context, meanwhile it increases by 53% for singapore. these findings are supported by the long-run estimates 0.250 p < 0.1 for singapore, although a negative elasticity can be discerned for vietnam -0.17 p < 0.01 (observe both countries coefficient). recalling, vietnam’s emphasis on strong restrictions toward fundamental rights and macroeconomic factors, which in the worst case, embodied as an ineffective government, in the sense of failing to produce a collective engagement toward the environment. compared with vietnam, all the variables are significant for singapore. table 6. ardl estimates for vietnam; dependent variable environmental sustainability vietnam optimal lags: (2,2,2,2,1,2) short run relationship coef. std.err. t p>t [95%conf. interval] ∆(imp) t 7.44753 2.214104 3.31 0.076* -2.078991 16.97405 ∆(imp) t-1 -0.0013352 3.71 0.066* -2.091765 28.27225 ∆(rl)t-1 0.0828228 -0.02 0.989 -0.357693 0.3550227 kadir aden (2023) 76 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe ∆(rq) t -0.02 ∆(rq) t-1 long run estimates * p<0.01, ** p<0.05, ***p<0.1 note that in the ardl lags, the first lag (2) is for the dependent variable (ens) source: author’s findings additionally, the long-run estimation reveals several prominent findings, according to sin gapore’s results; as technological innovation, and greater favorable regulation refined, the quality of the national environment improves alongside those variables. on the other side, if the rule of law (rl) improves (vietnam) public values improves simultaneously table no. 6, then, the tendency of creating a sustainable environment led by governmental efforts based on a greater adherence to the rule of law will increase public officials’ credibility of value creation, on the other hand, a deteriorating rule of law (notice the negative value for singapore) table no. 7; affects both the environment and citizens, by bearing the responsibility of a fractured system. another explanation might be, perhaps, stricter protection of the environment through national laws would reduce foreign companies’ attraction, subsequently, affect the host country’s foreign direct inflows (fdi), therefore tighter laws could impede singapore’s environmental sustainability in the long run, through an unprecedented macroeconomic dimension. similarly, the positive threshold of achieving greater sustainability in the national territory, led by governmental incentives is uncommon in the vietnamese context according to its negative (-0.17) value. table 7. ardl estimates for singapore, dependent variable environmental sustainability ∆ ln(invin)t 0.1690391 0.2196779 0.77 0.522 ∆ ln(invin) t 1 0.6895188 0.3234377 2.13 0.167 2.081159 0.7021211 ecm (− 1) 4.991728 1.811627 2.76 0.110 12.78653 2.803073 0.989 0.2490529 0.1211267 2.06 0.176 0.2721131 0.7702189 kadir aden (2023) 77 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe singapore * p<0.01, ** p<0.05, ***p<0.1 note that in the ardl lags, the first lag (2) is for the dependent variable (ens) source: author’s findings similarly, technological innovation (tivn) displays a negative value for vietnam (-0.060), therefore, a decrease in innovation, indeed, impacts negatively environmental quality, table no. 6. this can be explained in a more formal way, considering the fact of vietnam’s growing economy in comparison with singapore, hence, according to this process of a so-called economic boom period, we, therefore, assume, because of the country’s still technological immaturity and its slow advancement process toward higher innovative measures, will, in turn, have a long-run negative relationship, unless, vietnam attained a threshold where the county matches sustainability agenda with their innovative measures. within the granger causality estimates table no. 8, we aimed to explore if indeed either of the selected factors considerably affects each other. table 8 shows a bidirectional causality between impartial administration and optimal lags: (2,2,2,2,2,2) short run relationship coef. std.err. t [ 95 % conf. interval] ecm (− 1) 1.775159 . 0342853 51.78 0.012 2.210795 1.339524 long run estimates kadir aden (2023) 78 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe a sustainable environment. thus, in order to reach a sustainable environment, taking into account administration impartiality by eradicating administrative biases within the environmental context is perhaps a prerequisite step. meanwhile, singapore fails to project such as effect. explaining the country’s already low corruption among public officials, interestingly the following noteworthy effect can be perceived in developed and advanced societies in which factors such as state’s characteristics becomes unworthy as time elapses, particularly, in providing an explanation for the socio-economic or environmental issues. one reason for such a case, is probably the country in question has already reached a certain threshold of development, subsequently, scarcely, contributing to the overall aimed sector. on the other hand, the effect of regulatory quality on enhancing environmental performance transcends the singular impact and produces twoway causality for singapore table no. 8, where the formulation of friendlier environmental policies spillovers the states for higher environmental improvement, meanwhile the bidirectional effect of environmental sustainability on governmental regulatory can be viewed for vietnam, implying the promotion of sustainable environment generates long-standing sustainability by implementing favorable roots in legislators formulation, but only this is possible if the state has achieved certain environmental performance. similarly, both effective bureaucratic systems and technological innovation affect the environment in the singaporean context. putting the spotlight on the necessary requirement of reevaluating the government’s efficiency in addressing environmental issues, while allocating innovative incentives toward the national environment would facilitate their sustainability mission. table 8. granger causality estimates for both vietnam and singapore vietnam granger causality test variables effect variables f-statistics p value decision imp → ens 6.178 0.036 bidirectional ens → imp 7.984 0.018 causality rl → ens 6.248 0.040 unidirectional ens → rl 0.471 0.799 non-causality rq → ens 2.856 0.244 non-causality ens → rq 8.996 0.004 unidirectional ge → ens 9.096 0.003 unidirectional ens → ge 2.093 0.351 non-causality tivn → ens 0.205 0.871 non-causality ens → tivn 9.135 0.001 unidirectional singapore gra nger causali ty test kadir aden (2023) 79 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe variables effect variables f-statistics p value decision imp → ens 3.272 0.195 non-causality ens → imp 2.288 0.318 non-causality rl → ens 4.901 0.051 unidirectional ens → rl 3.544 0.132 non-causality rq → ens 7.919 0.007 bidirectional ens → rq 9.105 0.001 causality ge → ens 7.211 0.010 unidirectional ens → ge 2.936 0.233 non-causality tivn → ens 9.180 0.000 unidirectional ens → tivn 1.935 0.388 non-causality source-author’s findings 2. discussion and summary the current paper explores the relationship between state capacity variables and environmental sustainability in the singaporean and the vietnamese context. in doing so, we employ an ardl approach to catch the longrun & short-run association. the finding shows a positive association between impartial administration and environmental sustainability for both countries, nevertheless, this considerable impartiality among public & private administrations remains at this rate only in the short run for vietnam, whereas starting to shift to insignificance in the long run. many interpretations and conclusions can be drawn from this point. first, this estimation can be explained by the state’s level of corruption, in which, vietnam has a certain fair share of corruption in public institutions (according to the international transparency index, vietnam scores 32%); yet, corruption might not have a direct effect on sustainability, although such an effect can impede civil servants’ abilities to deliver the appropriate measures that could have addressed environmental issues. second from a legal spectrum; courts-for-example, are similarly, affiliated to the administration’s scope, and have a decent portion of opinion on the environment. albeit their independent standing ground, courts, especially tribunals dealing with environmental issues have become too political. refereeing to the famous argument of (breyer, 2021) in which, jurists are not different from politicians and their allegedly impartial judicial belief is a mere disguise of their higher political affiliation, which, transpires, as time elapses, alongside their verdicts in a more form of a conservative or liberal conviction. the accuracy of this reasoning lies on the ground, for instance a person's condition is more likely to affect the subjective choice, particularly, when administrative workers perceive available details of the interested person, hence, this undefined social status interferes in their professional judgments, as a result, reinforcing their unspoken biases. furthermore, claimed economic victims through environmental deterioration, are typically identifiable individuals who lose their employment in the process, and, this human predisposition has prejudiced public policy and environmental law rather than appearing as ecological and environmental perseveration regulations. however, in a country such as vietnam, the case of matching public administration impartiality with environmental agenda in terms of establishing a compromise between two variables might take longer. in other words, the long-run relationship would not be able to manifest in a presence of high corruption and poor impartiality (fredriksson and svensson, 2003). although the situation, is justifiable when looking at the state’s income position, compared with singapore, vietnam is a middle-income country and this could have driven kadir aden (2023) 80 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe the aforementioned poor performance (treisman, 2000). interestingly, the granger causality validates our assumption of a future effect of impartial administration in further directing to a more sustainable environment. therefore, it is possible to raise the degree of voluntary adherence to environmental legislation by improving the perception of justice in the rulemaking process. furthermore, both rules of law and regulatory quality improve environmental performance, and the granger causality provides further validation for our results. the following results are in line with (khan et al., 2020a; ali et al., 2019). certainly, favorable regulations toward the environment counter negative impacts that are coming from the economy which further stimulates higher environmental deterioration. although, greater emphasis on stricter regulation might retroactively harm the pace of economic growth unless a certain threshold of economic strength has been achieved, in which the government is able to coincide environmental agendas with macroeconomic factors. on one side, further tightening environmental legislation such as imposing high c02 taxation, and emphasizing only renewable energy consummation, would reduce potential investors and fdi inflows, such a scenario is possible for singapore. additionally, it is thought that nations that support the rule of law and embraces positive sustainable regulations will incentivize their citizens to create groups with a shared objective of addressing environmental sustainability. this is likely for singapore, but as a rapidly developing country, it would be hard for vietnam to reach an impressive environmental performance, while maintaining its economic flows, assumingly, later, after reaching a satisfactory economic development it might eventually become difficult for the state to formulate healthier environmental measures, due to the plausibility of an already ecological depletion. the variable government effectiveness brings to light the famous assumption that a nation's institutional factors greatly influence its economic performance, and nations with higher-quality institutions are better able to control environmental damage. singapore shows a positive relationship both in the short run and the long run. providing us, that, regardless, of the country’s regimes whether the country in question leans toward democracy or authoritarian, the effectiveness of bureaucratic is indeed an internal structure embodied within the heart of the civil servants, thus, transforming the general stereotypical trend that constitutes comparative study between democratic and non-democratic countries, as a mere, ineffective metric, when the case involves environmental protection. at the same time, the negative relationship that appears in the vietnamese context can provide us with a larger explanation of an ineffective government albeit the country’s recent economic growth. on the other hand, investing in technological innovation displayed a negative interconnection with environmental sustainability in the long run. many authors have shown that technological innovation could not transpire the general trend of sustainable development, through a mechanism led by technological progress (adebayo, kirikkaleli, 2021), unless the concept has been applied with a fundamental goal of sustainability attainment (jaffe et al., 2005). on one side, the granger causality reveals a causality effect between technological innovation and sustainability, providing us with an alternative threshold of believing, that technological progress improves environmental sustainability, however, this is validated for the singaporean context, whereas, a causality running for sustainability to the technological sector had been detected for vietnam. this implies, that emphasizing on improving sustainability would have a direct effect on technological innovation, which, in turn, could stimulate the market to propose certain technological products in order to accommodate the high sustainability demand. overall, technology and nature are interdependent within, whilst, technology is formed to provide means, equipment, and machinery for safeguarding the environment and conserving its resources from climatic changes and damage, in retrospect, the environment offers raw materials required to produce technology. overall, matching administration bodies with environmental sustainability will offer higher opportunities for the asean countries to achieve rapid sustainability. although some asian states would transit faster toward more environmentally sustainable kadir aden (2023) 81 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe societies, others, due to their economic boom and immature technological innovation, the question of prioritizing the environment would be unlikely to be on the table. finally, the current study has certain limitation; to begin with, we merely focused on two association of southeast asian nations (asean) namely singapore and vietnam, therefore the generalization of this findings toward other asean states should be avoided, with that in mind, upcoming researches could consider incorporating other countries within the regional framework in their studies. additionally, it will also be an enrichment if future authors could compare eastern asian states with asean countries, considering how some potential countries such as south korea have been growing in the past thirty years at an unprecedented rate; in the context of adopting advanced technological innovation with sustainability deliverance, while competing with china, japan and singapore. it will also be interesting if future studies could examine sustainability from an infrastructure threshold. it is also worth noting, the current study only uses ardl and granger test, therefore future scholars could employ a var model with impulse responses and variance decomposition and other models to further analyze future shock while providing robustness for future effect predictions. funding: this research received no external funding. data availability statement: data availability is not tied to this article as all the data are available online and can be accessed through the mentioned sources in the study. conflicts of interest: the authors declare no conflict of interest. references adebayo, t. s., & kirikkaleli, d. (2021). impact of renewable energy consumption, globalization, and technological innovation on environmental degradation in japan: application of wavelet tools. environment, development and sustainability, 23(11), 1605716082, https://doi.org/10.1007/s10668021-01322-2. aden, k. (2022). how can governmental incentives inspire youth to be more engaged in environmental protection? public governance, administration and finances law review, 7(2), 109, https://doi.org/10.53116/pgaflr.2022.2.5. agovino, m., garofalo, a., & mariani, a. (2018). institutional quality effects on separate waste collection: some evidence from italian provinces. journal of environmental planning and management, 61(9), 1487-1510, https://doi.org/10.1080/09640568.2017.1353958. ali, h. s., zeqiraj, v., lin, w. l., law, s. h., yusop, z., bare, u. a. a., & chin, l. (2019). does quality institutions promote environmental quality? environmental science and pollution research, 26(11), 10446-10456, https://doi.org/10.1007/s11356-01904670-9. alvarez-herranz, a., balsalobre-lorente, d., shahbaz, m., & cantos, j. m. (2017). energy innovation and renewable energy consumption in the correction of air pollution levels. energy policy, 105, 386-397. https://doi.org/10.1016/j.enpol.2017.03.009. bouzguenda, i., alalouch, c., & fava, n. (2019). towards smart sustainable cities: a review of the role digital citizen participation could play in advancing social sustainability. sustainable cities and society, 50, 101627, https://doi.org/10.1016/j.scs.2019.101627. cesi, b., d’amato, a., & zoli, m. (2019). corruption in environmental policy: the case of waste. economia politica, 36(1), 65-78, https://doi.org/10.1007/s40888-017-0087-x. chen, h., hao, y., li, j., & song, x. (2018). the impact of environmental regulation, shadow economy, and corruption on environmental quality: theory and empirical evidence from china. journal of cleaner production, 195: 200-214, https://doi.org/10.1016/j.jclepro.2018.05.206. chen, r., yin, p., meng, x., wang, l., liu, c., niu, y., ... & zhou, m. (2019). associations between coarse particulate matter air pollution and cause-specific mortality: a nationwide analysis in 272 chinese cities. environmental health perspectives, 127(01), 017008, https://doi.org/10.1289/ehp2711. kadir aden (2023) 82 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe cole, m. a., elliott, r. j., & fredriksson, p. g. (2006). endogenous pollution havens: does fdi influence environmental regulations? scandinavian journal of economics, 108(1): 157-178, https://doi.org/10.1111/j.1467-9442.2006.00439.x. commonwealth, robinson tp. v. (1993). 147 a.3d 536, 637 pa. 239. https://www.conseilconstitutionnel.fr/en/decision/2020/2019823qpc.htm. d'alisa, g., burgalassi, d., healy, h., & walter, m. (2010). conflict in campania: waste emergency or crisis of democracy. ecological economics, 70(2), 239-249, https://doi.org/10.1016/j.ecolecon.2010.06.021. dickey, d. a., & fuller, w. a. (1979). distribution of the estimators for autoregressive time series with a unit root. journal of the american statistical association, 74(366a), 427-431 https://doi.org/10.1080/01621459.1979.10482531 dincă, g., bărbuță, m., negri, c., dincă, d., & model, l. s. (2022). the impact of governance quality and educational level on environmental performance. frontiers in environmental science, 10, 950683, https://doi.org/10.3389/fenvs.2022.950683. earth.org. (2020). the biggest environmental problems of 2020. https://earth.org/the-biggestenvironmentalproblems-of-ourlifetime/, accessed 12 sep 2022. elgin, c., & mazhar, u. (2013). environmental regulation, pollution and the informal economy. sbp res. bull, 9, 62-81. fredriksson, p. g., & svensson, j. (2003). political instability, corruption and policy formation: the case of environmental policy. journal of public economics, 87(7-8), 1383-1405, https://doi.org/10.1016/s0047-2727(02)00036-1. ganda, f. (2020). the influence of corruption on environmental sustainability in the developing economies of southern africa. heliyon, 6(7), e04387,https://doi.org/10.1016/j.heliyon.2020.e04387. geller, h., harrington, p., rosenfeld, a. h., tanishima, s., & unander, f. (2006). polices for increasing energy efficiency: thirty years of experience in oecd countries. energy policy, 34(5), 556-573, https://doi.org/10.1016/j.enpol.2005.11.010. gumisiriza, p., & kugonza, s. (2020). corruption and solid waste management in mbarara municipality, uganda. journal of environmental and public health, https://doi.org/10.1155/2020/4754780. jaffe, a. b., newell, r. g., & stavins, r. n. (2005). a tale of two market failures: technology and environmental policy. ecological economics, 54(2-3), 164-174, https://doi.org/10.1016/j.ecolecon.2004.12.027. khan, s. a. r., zhang, y., kumar, a., zavadskas, e., & streimikiene, d. (2020a). measuring the impact of renewable energy, public health expenditure, logistics, and environmental performance on sustainable economic growth. sustainable development, 28(4), 833-843, https://doi.org/10.1002/sd.2034. khan, z., ali, m., kirikkaleli, d., wahab, s., & jiao, z. (2020b). the impact of technological innovation and public‐private partnership investment on sustainable environment in china: consumption‐based carbon emissions analysis. sustainable development, 28(5), 1317-1330. https://doi.org/10.1002/sd.2086. kuehn, r. r. (2015). bias in environmental agency decision making. envtl, l : 45, 957, https://www.jstor.org/stable/43799778. morshed, n., & hossain, m. r. (2022). causality analysis of the determinants of fdi in bangladesh: fresh evidence from var, vecm and granger causality approach. sn business & economics, 2(7), 64. https://doi.org/10.1007/s43546-022-00247-w 26. muhammad, s., & long, x. (2021). rule of law and co2 emissions: a comparative analysis across 65 belt and road initiative (bri) countries. journal of cleaner production,, 279, 123539, https://doi.org/10.1016/j.jclepro.2020.123539. kadir aden (2023) 83 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe nijboer, k., senden, s., & telgen, j. (2017). cross-country learning in public procurement: an exploratory study. journal of public procurement, 17(4), 449-482, https://doi.org/10.1108/jopp-17-04-2017b001. oposa minors case. (1993). 224 s.c.r.a. 792 (s.c., july 30, 1993). pang, r., zheng, d., shi, m., & zhang, x. (2019). pollute first, control later? exploring the economic threshold of effective environmental regulation in china's context. journal of environmental management, 24: 109275, https://doi.org/10.1016/j.jenvman.2019.109275. pesaran, m. h., shin, y., & smith, r. j. (2001). bounds testing approaches to the analysis of level relationships. journal of applied econometrics, 16(3), 289-326,https://doi.org/10.1002/jae.616. pula, l., & elshani, a. (2018). the relationship between public expenditure and economic growth in kosovo: findings from a johansen co-integrated test and a granger causality test. ekonomika, 97(1), 47-62. https://doi.org/10.15388/ekon.2018.1.11778 rafique, m. z., li, y., larik, a. r., & monaheng, m. p. (2020). the effects of fdi, technological innovation, and financial development on co2 emissions: evidence from the brics countries. environmental science and pollution research, 27(19), 23899-23913, https://doi.org/10.1007/s11356-020-08715-2. romano, g., masserini, l., & lombardi, g. v. (2021). environmental performance of waste management: impacts of corruption and public maladministration in italy. journal of cleaner production, 288: 125521, https://doi.org/10.1016/j.jclepro.2020.125521. rosenthal, e., & frosch, d. (2011). pipeline review is faced with question of conflict. new york times, 7,https://www.nytimes.com/2011/10/08/science/earth/08pipeline.html, (accessed on 14.09.2021). salman, m., long, x., dauda, l., & mensah, c. n. (2019). the impact of institutional quality on economic growth and carbon emissions: evidence from indonesia, south korea and thailand. journal of cleaner production, 241, 118331, https://doi.org/10.1016/j.jclepro.2019.118331. shahbaz, m., loganathan, n., muzaffar, a. t., ahmed, k., & jabran, m. a. (2016). how urbanization affects co2 emissions in malaysia? the application of stirpat model. renewable and sustainable energy reviews, 57, 83-93,https://doi.org/10.1016/j.rser.2015.12.096. song, m., zhu, s., wang, j., & zhao, j. (2020). share green growth: regional evaluation of green output performance in china. international journal of production economics, 219, 152-163. stephen breyer. (2021). the authority of the court and the peril of politics. harvard university press. sun, y., lu, y., wang, t., ma, h., & he, g. (2008). pattern of patent-based environmental technology innovation in china. technological forecasting and social change. technological forecasting and social change, 75(7), 1032-1042. treisman, d. (2000). the causes of corruption: a cross-national study. journal of public economics, 76(3), 399-457, https://doi.org/10.1016/s0047-2727(99)00092-4. welsch, h. (2004). corruption, growth, and the environment: a cross-country analysis. environment and development economics, 9(5), 663-693, https://doi.org/10.1017/s1355770x04001500. wen, h., & dai, j. (2020). trade openness, environmental regulation, and human capital in china: based on ardl cointegration and granger causality analysis. environmental science and pollution research, 27, 1789-1799. https://doi.org/10.1007/s11356019-06808-1 winter, g. (2022). the intergenerational effect of fundamental rights: a contribution of the german federal constitutional court to climate protection. journal of environmental law, 34(1), 209-221, https://doi.org/10.1093/jel/eqab035. yasmeen, h., tan, q., zameer, h., tan, j., & nawaz, k. (2020). exploring the impact of technological innovation, environmental regulations and urbanization on ecological efficiency of china in the context of cop21. journal of environmental management, 274, 111210, https://doi.org/10.1016/j.jenvman.2020.111210. kadir aden (2023) 84 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe zhou, y., tian, g., & cai, d. . (2018). spatial effects of environmental regulation on regional ecological efficiency. ekoloji, 28(107), 3605-3616 american interdisciplinary journal of business and economics issn: 2837-1909| impact factor : 6.71 volume. 11, number 2; april-june, 2024; published by: scientific and academic development institute (sadi) 8933 willis ave los angeles, california https://sadijournals.org/index.php/aijbe| editorial@sadijournals.org 92 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe dynamics of monetary policy, financial development, and income inequality in nigeria: empirical perspective olaniran, o. d (ph. d) and prof. olomola, p. a. ulster business school, magee, ulster university, uk dean, faculty of social sciences, obafemi awolowo university, nigeria olaniran-o@ulster.ac.uk/ polomola@oauife.edu.ng doi: https://doi.org/10.5281/zenodo.12607378 abstract: this study empirically investigated the nexus between monetary policy, financial development and income inequality in nigeria. annual time series data on monetary policy, financial development indicators and income inequality were sourced from the central bank of nigeria (cbn) statistical bulletin and the standardized world income inequality database (swiid). the vector autoregression model (var) model was employed as the analytical technique and the variance decomposition result revealed that monetary policy is more sensitive to shocks from the financial sector while the financial sector and income inequality are mostly driven by shocks emanating from each other. the impulse response result revealed that income inequality is positively driven by changes in monetary policy and financial development while the response of monetary policy to financial development is sensitive to the financial development indicator employed. the study recommends that to curtail income inequality, monetary and financial sector stability must be prioritized by the monetary authorities in nigeria. keywords: financial development, income inequality, vector autoregression, variance decomposition, impulse response 1.0 introduction studies over time in the extant literature have examined the linkage between monetary policy and financial development (see albanesi, 2007; billi & vredin, 2014; ekpeno, godwin & chuku, 2017; furceri, loungani and zdzienicka, 2017), monetary policy dynamics and income inequality (auclert, 2019; coibon, kueng & silvia, 2012; nakajima, 2015; bivens, 2015; cloyne, ferreira & surico, 2016; mumtaz & theophilopoulou, 2016; furceri, loungani & zdzienicka, 2017; davytan, 2017; aye, clance & gupta, 2019), as well as financial development and income inequality (greenwood & jovanovic, 1990; banerjee & newmann, 1993; galor & zeira, 1993; beck, kunt & levine, 2007; law & tan, 2009; jauch & watzka, 2012; fowowe & abidoye, 2013; shahbaz, loganathan, tiwari & sherafatian-jahromi, 2015; tita & aziakpono, 2016; younsi & bechtini, 2018; brei, ferri & gambacorta, 2018; baiardi & morana, 2018). however, the empirical link between monetary policy, mailto:olaniran-o@ulster.ac.uk/ mailto:polomola@oauife.edu.ng olaniran, o. d (ph. d) and prof. olomola, p. a. (2024) 93 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe financial development, and income inequality in developed and developing countries remains a gray area that is largely unexplored. the motivation for this stems from the fact that monetary policy actions of the central bank have far-reaching effect on financial development, which in turn influences income inequality in the economy. for instance, an expansionary monetary policy is expected to increase the quantity of money in the economy through the reduction of interest rates (bauer & eric, 2022; coibon et al. 2012; nakajima, 2015; mumtaz & theophilopoulou, 2016). this action boosts household’s access to loans and increases their level of wealth. it will also increase the level of investment in the stock market by households that are financial market participants, thereby enhancing financial development (billi & vredin, 2014; furceri, loungani and zdzienicka, 2017). however, this process can also exert inflationary pressure (general price increase) on the economy, which eventually widens income inequality because of the fall in the value of money. this makes poor households poorer because they hold a large proportion of their income in cash and are mostly non-participants in the financial market (younsi & bechtini, 2018; brei, ferri & gambacorta, 2018) on the other hand, rich households hold a small portion of their income as cash and are mostly active participants in the financial market. this makes them less susceptible to inflationary shocks while also benefitting from the yields of their investment in the stock market, thus making them richer. the foregoing implies that monetary policy, financial development, and income inequality are interwoven, because they are connected to each other (frost & stralen, 2018). the implication of this is that shocks to any of these three variables can influence the performance of the other variables in developing countries (nigeria, in this case). as pointed out earlier, the adoption of an expansionary monetary policy enhances financial sector performance but raises income inequality; however, financial development plays a key role in the conduct of monetary policy and overall economic performance (billi & vredin, 2014). the question to ask here is whether policymakers should abandon financial development to lessen inequality through monetary policy or pursue financial development at the expense of widening inequality in the economy. this paper is a departure from previous studies in two ways. first, we examine the dynamic relationship among monetary policy, financial development, and income inequality in nigeria within the framework of a dynamic time series var model; no known study has previously done this. second, we adopt different measures of financial development and the monetary policy rate as a measure of monetary policy in nigeria to obtain a more robust and reliable estimation of our model. the rest of the paper is structured as follows: section two contains the literature review, section three contains the methodology, section four presents the results and discussion while section five concludes the paper. 2.0 literature review a review of some studies on the link between monetary policy, financial development, and income inequality is discussed as follows: saiki and frost (2014) in japan examined the distributional effects of unconventional monetary policy shocks on inequality between 2008 and 2014. with specific reference to the income composition channel, the vector autoregression analysis (var) technique was employed, and the result showed that expansionary monetary policy shocks increase income inequality in japan during the study period. denk and cournède (2015) investigated the financial development income inequality linkage for oecd nations between 1974 and 2011 using a panel fixed effect (fe) regression estimation technique. the results revealed that financial development has driven higher income inequality. greater loan availability and stock markets contribute olaniran, o. d (ph. d) and prof. olomola, p. a. (2024) 94 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe to unequal distribution of income. also, the study found evidence of reverse causality from greater income inequality to household borrowing in oecd nations during the study period. bahmani-oskoe and zhang (2015) studied financial development income inequality link in 17 emerging countries using an error correction modeling technique. the findings of the study revealed that in the short run, financial development has a stabilizing influence on income inequality in ten countries and an unequalizing effect in five countries during the study period. however, in the long run, the study found an equalizing effect in three countries: denmark, kenya, and turkey. batabyal and chowdhury (2015) empirically examined the financial development income inequality linkage in thirty (30) commonwealth countries between 1995 and 2008, while also considering the role of corruption in these countries. the study adopted the ordinary least squares (ols) and the instrumental variable (iv) regression models to analyze the data collected. the results showed that financial development positively influences income inequality at increased levels of corruption in all countries. however, the effect is significantly higher for low and middle-income countries than for high-income countries. sehrawat and giri (2016), between 1986 and 2012, probed financial development and rural urban income inequality in six south asian association for regional cooperation (saarc) countries, while considering the role of economic growth. employing panel fully modified ordinary least square (fmols) regression analysis, a long run connection was established among the variables of interest. the main findings of the study revealed that improvements in the financial system and economic growth heighten rural urban income inequality during the study period. anthanasius and meshach (2016) empirically studied financial development and inequality for africa between 1985 and 2007, by adopting a balanced panel 15 african nations. the study adopted the augmented mean group (amg) estimator to determine the optimal levels of financial development and inequality. the findings revealed that an asymmetric link exists between financial development and inequality in the sampled african countries, and the relationship changes from an inverted u-shape to a u-shape based on the indicator of financial development adopted. babu, bhaskaran and venakatesh (2016) examined inequality and long-run growth in 29 emerging economies between 1980 and 2010 using the system generalized method of moments (sgmm). it was revealed that by adjusting for transfers, inequality exerts an injurious impact on output eventually. furthermore, the study found no ambiguity among re-distribution and output. areosa and areosa (2016) examined the transmission channels of income inequality in brazil. this study investigated optimum monetary policy while putting inequality into consideration by employing a dsge model without a financial system, price inflexibility, and unskilled agents. the result showed that contractionary monetary shocks raise inequality and lower output gap and inflation. with regards to the monetary policy objectives of stabilizing inequality, including inequality stabilization, the outcome revealed that welfare declines as unskilled agents increase and monetary policy becomes ineffective when skilled agents are scarce. azleen and mansur (2017) empirically studied the link between financial development and inequality in malaysia from 1970 to 2007. this study employed autoregressive distributed lag (ardl) bound testing and the error correction mechanism (ecm) to test the long-run relationship in the variables. in addition, the variance decomposition (vd) affirmed granger causation in the variables. the results showed that long-term connection exists among the variables and financial development insignificantly influence inequality in the sample period. olaniran, o. d (ph. d) and prof. olomola, p. a. (2024) 95 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe younsi & bechtini (2018) examined output, financial development and income inequality in brazil, russia, india, china and south africa (brics) between 1995 and 2015. by constructing an index for financial development using principal component analysis (pca) and employing fixed effects estimation, the study found a significant and positive link between gdp per capita growth and income inequality, but the nonlinear coefficient revealed an inverse but significant impact on inequality. however, the financial development proxy seems to be statistically significant and positively influenced inequality in the countries. samarina and nguyen (2019) examined the distributional influence of monetary policy on income inequality in the euro area between 1994 and 2014. the study explored the earnings heterogeneity and income composition distributive channels of monetary policy channels using panel vector autoregression and local projection. the main finding of the study revealed that expansionary monetary policy shocks reduce income inequality in the euro area during the study period. hoeberger, priftis and vogel (2019) investigated the link between the distributional impact of conventional monetary policy and income inequality in the euro area between 1999 and 2017. earnings heterogeneity and income composition channels were explored in the case of an open-economy dynamic stochastic general equilibrium (dsge) model during the study period. the results showed that expansionary monetary policy shocks reduce income inequality, whereas contractional monetary policy raises income inequality in the observed area. 3.0 methodology to determine the dynamic relationship among monetary policy, financial development, and income inequality in nigeria, the vector autoregression technique is adopted. thus, the vector (zt) of endogenous variables included in the reduced-form var is expressed as follows: ( , , )t t t tz mp fd inq= (1) where mpt is monetary policy, fd is financial development, and inqt is income inequality which is measured by the gini coefficient. in this model, all variables are assumed to be endogenous, affecting each other contemporaneously and with lags. the impulse response and variance decomposition analysis of the var model will be interpreted to achieve this objective. in vector form, the equation is generally specified as: 1 2 3 1..........t t i t i t i p t p tz k z z z z    − − − −= + + + + + + (2) on the basis of equation (3.14), we re-specify equation (3.13) as follows: 0 2 1 1 1 p q r t i t i i t i i t i t i i i mp mp fd inq    − − − = = =  = +  +  +  +   0 3 1 1 1 q p r t i t i i t i i t i t i i i fd fd mp inq    − − − = = =  = +  +  +  +   0 4 1 1 1 p qr t i t i i t i i t i t i i i inq inq mp fd    − − − = = =  = +  +  +  +   (3) data for this study were sourced from the central bank of nigeria (cbn) statistical bulletin and the standardized world income inequality database (swiid). quarterly time series data will be used for this study. 4.0 results and discussion 4.1 analysis of the unit root test testing for the existence of unit roots is a principal concern in the study of time series models. the presence of a unit root implies that the time series under investigation is non-stationary, whereas the absence of unit roots olaniran, o. d (ph. d) and prof. olomola, p. a. (2024) 96 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe indicates that the stochastic process is stationary (iyoha and ekanem, 2002). the results of the adf and pp tests are shown in table 1. the decision rule adopted here is that if the absolute value of the adf statistics or that of the pp statistics is less than the 5% critical value, then the tested variable is non-stationary. on the other hand, if the absolute value of the adf test or that of the pp test is greater than the 5% critical value, then it is judged that the tested variable is stationary. based on the result of the unit root test presented in table 1, both the augmented dickey fuller and phillip peron tests indicate that income inequality, monetary policy, and financial development are stationary in their level form i.e. i(0) though monetary policy and financial development became stationary at level after being differenced once. thus, the outcome supports the use of the vector autoregression framework in examining the dynamic relationship among monetary policy, financial development, and income inequality in nigeria during study period. table 1: unit root test variables test level t.stat p-value decision gini adf -5.2825 0.0002*** i(0) pp -2.9147 0.0342*** i(0) d(mp) adf -5.7086 0.0003*** i(0) pp -3.8706 0.016*** i(0) d(fd) adf -11.62 0.0002*** i(0) pp -11.619 0.0001*** i(0) source: author’s computation 4.2 lag length selection criteria after verifying the unit root properties of the variables, it is imperative to select the optimal lag length for the series. the optimal number of lags was identified using the akaike information criterion (aic) and schwartzbayesian criterion (sbc). table 2 shows that the akaike information criterion and schwartz-bayesian criterion (as well as other techniques in the table) indicate that the optimal lag length for the model is one. specifically, this study follows the akaike information criterion, which is employed because it is adjudged to be quite superior in its forecasting prowess in a regression model, both for in-sample and out-sample analysis (gujarati and porter, 2009). olaniran, o. d (ph. d) and prof. olomola, p. a. (2024) 97 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe table 2: lag length criteria lag logl lr fpe aic sc hq 0 -2301.763 na 7.98e+08 37.52460 37.66178 37.58032 1 -2149.424 287.3380 1.20e+08* 35.63292* 36.59317* 36.02297* 2 -2132.75 29.82377 1.66e+08 35.94716 37.73049 36.67154 3 -2116.741 27.07177 2.31e+08 36.27222 38.87863 37.33094 4 -2078.808 60.44663 2.29e+08 36.24078 39.67027 37.63383 5 -2058.303 30.67408 3.04e+08 36.49273 40.74530 38.22012 6 -2042.113 22.64021 4.40e+08 36.81484 41.89049 38.87656 7 -2024.775 22.55312 6.39e+08 37.11829 43.01702 39.51434 8 -1966.587 70.01432* 4.90e+08 36.75752 43.47933 39.48790 source: author’s computation note: * indicates the lag order selected by the criterion; lr, fpe, aic, sbc, and hq indicate sequential modified lr test statistic, final prediction error, akaike information criterion, schwartz bayesian information criterion and, hannan-quinn, respectively. 4.3 forecast error variance decomposition results variance decomposition measures the percentage change in the dependent variable induced by shocks to the explanatory variables in the model. the variance decomposition results are presented in tables 3, 4, and 5. (i) variance decomposition of the monetary policy table 3 reveals that in the first period, financial development indicators accounted for about 9.35% of the variations in monetary policy, whereas income inequality did not contribute to the variations in monetary policy in this period. in the second period, income inequality accounted for only 0.25% of the variations in monetary policy, whereas financial development accounted for approximately 12.5%. the contributions of financial development and income inequality increased further in the third and fourth periods as they accounted for approximately 14.5% and 0.34% of the variations in monetary policy, respectively. this trend continued in the fifth, sixth, and seventh periods as financial development and income inequality accounted for an average of approximately 10% and 0.36% of the variations in monetary policy during these periods respectively. in the eighth, ninth and tenth periods, income inequality was responsible for 0.37%, 0.40% and 0.44% of the variations in monetary policy, while financial development accounted for an average of 11% of the variations in monetary policy during these periods. the implication of the foregoing is that financial development accounted for a much larger share of the variations in monetary policy whereas income inequality accounted for only a small portion of the variations in monetary policy during the study period. thus, in the short run (first, second and third period), middle periods (fifth, sixth and seventh periods) and the long run (eighth, ninth and tenth periods), the contributions of financial development to the variations in monetary policy are more pronounced than that of olaniran, o. d (ph. d) and prof. olomola, p. a. (2024) 98 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe income inequality in nigeria. we can then say that monetary policy responded more to shocks from financial development than to income inequality shocks during the study period. this finding is in tandem with economic theory, which stipulates a direct relationship between financial development and monetary policy, indicating that variations in monetary policy in the economy are always traceable to the performance of the financial sector. in addition, empirical literature has argued that a stable financial sector is an important requisite for the effectiveness of monetary policy in the economy (albanesi, 2007; ghoussoub & reed, 2016). this finding supports the results of mbutor and uba (2013), akinsola and odhiambo (2017) and ekpeno, godwin and chuku (2017) table 3: forecast error variance decomposition of the monetary policy source: author’s computation note: financial development indicators – m2/gdp, cps/gdp, mktcap/gdp, debtstock/gdp, svt/gdp, finlib, monetary policy – intr, income inequality gini (ii) variance decomposition of financial development indicators the financial development indicators employed are broad money supply to gdp ratio (m2/gdp), credit to the private sector to gdp ratio (cps/gdp), stock market capitalization to gdp ratio (mktcap/gdp), debt stock to gdp ratio (debtstock/gdp), stock value traded to gdp ratio (svt/gdp), and financial liberalization (finlib). table 4 shows that monetary policy and income inequality did not account for the variations in m2/gdp in the first period. in the second, third, and fourth periods, monetary policy and income inequality accounted for an average of 0.58% and 0.28% of the variations in m2/gdp, respectively. the contributions of monetary policy and income inequality to the variations in m2/gdp rose in the fifth, sixth, and seventh periods to an average of approximately 0.66% and 1%, respectively. in the last three periods, their contribution to period s.e. m2/gdp cps/gdp mktcap/ gdp debtstock/ gdp svt/gdp finlib intr gini 1 11.70639 6.573067 1.930964 0.396516 0.215274 0.113808 0.001054 90.76932 0.0000 00 2 11.93757 8.912592 2.312237 0.515035 0.208926 0.282000 0.217114 87.30105 0.2510 49 3 12.12615 8.639032 3.268517 0.530446 0.675671 1.647580 0.217795 84.67998 0.3409 79 4 12.24333 8.503906 3.474516 1.008579 1.081580 2.267418 0.227171 83.09745 0.3393 78 5 12.33925 8.461387 3.504488 1.708080 1.448786 2.432919 0.240835 81.86479 0.3387 19 6 12.41188 8.416821 3.464538 2.332620 1.787924 2.439959 0.254119 80.95577 0.3482 46 7 12.46781 8.406752 3.461415 2.731058 2.091897 2.418875 0.262820 80.26639 0.3607 91 8 12.51078 8.416883 3.512320 2.903011 2.371307 2.402828 0.268551 79.74556 0.3795 39 9 12.54395 8.435925 3.592884 2.937329 2.622728 2.390205 0.273645 79.34233 0.4049 58 10 12.57111 8.456714 3.670648 2.925859 2.839159 2.381264 0.279225 79.01007 0.4370 61 olaniran, o. d (ph. d) and prof. olomola, p. a. (2024) 99 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe variations in m2/gdp rose to 0.86% and 1.23%, respectively. this implies that monetary policy shocks contributed more to variations in m2/gdp in the short run whereas income inequality shocks contributed more in the medium and long run. in the case of cps/gdp in the first period (table 5), monetary policy and income inequality did not account for any of its variations in the first period, but their contributions on average were 0.48% and 0.55% in the second, third and fourth periods, respectively. by the fifth, sixth, and seventh periods, the contributions of monetary policy and income inequality to variations in cps/gdp rose to approximately 0.74% and 2.50%, respectively and it further rose to an average of 1.1% and 3.8% in the last three periods. for mktcap/gdp (table 6), monetary policy and income inequality did not account for the variations in mktcap/gdp in the first period. in the second, third and fourth periods, monetary policy and income inequality accounted for an average of 0.22% and 0.007% of the variations in mktcap/gdp respectively. the contributions of monetary policy and income inequality to the variations in mktcap/gdp rose in the fifth, sixth, and seventh periods to an average of approximately 0.12% and 0.14%, respectively. in the last three periods, their contribution to variations in monetary policy rose to 0.09% and 0.33%, respectively. in the case of debtstock/gdp in the first period (table 7), monetary policy and income inequality did not account for the variations in debtstock/gdp in the first period, but their average contributions were 0.14% and 0.31% in the second, third, and fourth periods respectively. by the fifth, sixth and seventh periods, the contributions of monetary policy and income inequality to variations in debtstock/gdp rose to approximately 0.32% and 1.2%, respectively and it further rose to an average of 0.64% and 1.51% in the last three periods. furthermore, variations in svt/gdp were not explained by monetary policy and income inequality in the first period (table 8). in the second, third, and fourth periods, monetary policy and income inequality accounted for an average of 0.22% and 0.05% of the variations in svt/gdp, respectively. the contributions of monetary policy and income inequality to the variations in svt/gdp rose in the fifth, sixth, and seventh periods to an average of approximately 0.20% and 0.06%, respectively. in the last three periods, their contribution to variations in monetary policy rose to 0.15% and 0.06%, respectively. finally, in the case of finlib in the first period (table 9), monetary policy and income inequality did not account for its variations in the first period, but their contributions increased to an average of 0.06% and 4.75% in the second, third, and fourth periods, respectively. by the fifth, sixth, and seventh periods, the contributions of monetary policy and income inequality to variations in finlib rose to about 0.44% and 19.3%, respectively and it further rose to an average of 0.90% and 30.92% in the last three periods, indicating that income inequality shocks exerted a greater influence on financial liberalization, both in the short and long run. thus, it is generally observed that for all financial development indicators except the value of stocks traded to gdp ratio, income inequality accounted for the largest share of their variations, while the influence of monetary policy on financial development indicators was quite low. this supports the a priori theoretical link of a positive relationship between financial development and income inequality because financial development indicators responded majorly to shocks from income inequality in nigeria. one possible explanation for this is that the rich contribute more to the activities of the financial sector, while the poor contribute less in nigeria, thereby weakening the efficiency of the financial sector in nigeria, unlike in developed countries where all classes of people are financial market participants (since income inequality is quite low in these countries). this means that shocks to income inequality in the short and long run had a greater influence on financial development in nigeria, olaniran, o. d (ph. d) and prof. olomola, p. a. (2024) 100 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe during the study period, and this supports the findings of shahbaz et al., (2015), as well as younsi & bechtini (2018), while it is contrary to the findings of tita & aziakpono (2016) and azleen & mansur (2017). table 5.4: variance decomposition of m2/gdp period m2/gdp mpr gini 1 100 0.000000 0.000000 2 95.81592 0.005627 0.044103 3 82.96106 0.574819 0.253912 4 70.34288 0.574625 0.5605 5 60.86288 0.600802 0.809971 6 54.35102 0.66225 1.018999 7 50.01313 0.727478 1.162322 8 47.08606 0.796283 1.234192 9 45.07546 0.856707 1.240498 10 43.66243 0.900466 1.198009 source: author’s computation financial development indicator: m2/gdp table 5: variance decomposition of the cps/gdp period cps/gdp mpr gini 1 9.67169 0.000000 0.000000 2 11.11484 0.018616 0.040647 3 7.429666 0.461025 0.459717 4 6.349322 0.529792 1.165325 5 7.495412 0.628815 1.868307 6 9.514507 0.745888 2.524256 7 11.62662 0.865938 3.084353 8 13.50887 0.991034 3.528628 9 15.05483 1.106992 3.844011 10 16.26597 1.203232 4.026082 source: author’s computation, financial development indicator: cps/gdp table 6: variance decomposition of the mktcap/gdp period mktcap/gdp mpr gini 1 42.23311 0.000000 0.000000 2 51.77386 0.304504 0.010337 3 52.95246 0.196173 0.007346 4 50.21857 0.163339 0.00638 5 46.82295 0.13921 0.005063 6 43.60321 0.119383 0.00794 7 40.84426 0.106377 0.031288 8 38.56604 0.098695 0.106615 9 36.68883 0.093856 0.277754 10 35.10485 0.089733 0.594424 source: author’s computation, financial development indicator: mktcap/gdp olaniran, o. d (ph. d) and prof. olomola, p. a. (2024) 101 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe table 7: variance decomposition of debtstock/gdp period debtstock/gdp mpr gini 1 5.513758 0.000000 0.000000 2 4.017457 0.010823 0.041636 3 2.846959 0.134176 0.26536 4 2.202038 0.142451 0.622067 5 1.837484 0.210087 0.938951 6 1.657798 0.311662 1.200792 7 1.601869 0.421611 1.385616 8 1.629813 0.536975 1.493761 9 1.716105 0.643447 1.531431 10 1.839502 0.730258 1.511799 source: author’s computation, financial development indicator: debtstock/gdp table 8: variance decomposition of the svt/gdp period svt/gdp mpr gini 1 29.98924 0.000000 0.000000 2 27.72148 0.083491 0.057536 3 22.04641 0.330853 0.047113 4 20.47555 0.264666 0.041835 5 21.67119 0.225076 0.043653 6 23.18695 0.191476 0.054886 7 24.14697 0.166016 0.064008 8 24.52491 0.150942 0.06393 9 24.50127 0.145577 0.059169 10 24.24266 0.145684 0.06918 source: author’s computation, financial development indicator: svt/gdp table 9: variance decomposition of the finlib period finlib mpr gini 1 98.73069 0.000000 0.000000 2 96.85375 0.02639 0.96 5952 3 91.9537 0.03108 4.239097 4 85.03506 0.122435 9.039542 5 77.31427 0.270571 14.34966 6 69.68853 0.444402 19.4604 7 62.6614 0.615312 24.01349 8 56.42739 0.76929 27.893 9 51.00646 0.901598 31.11567 10 46.33854 1.011672 33.75326 source: author’s computation, financial development indicator: finlib olaniran, o. d (ph. d) and prof. olomola, p. a. (2024) 102 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe (iii) variance decomposition of income inequality table 10 reveals that in the first period, monetary policy and financial development indicators accounted for 0.53% and 4.47% of the variations in income inequality in nigeria, respectively. in the second period, monetary policy accounted for only 1.19% of the variations in income inequality whereas financial development indicators accounted for approximately 7.5% of the variations. the contributions of monetary policy and financial development increased further in the third period as they accounted for approximately 1.77% and 10.5% of the variations in income inequality, respectively. this trend continued until the fifth, sixth and seventh periods as monetary policy accounted for 2.12%, 2.31% and 2.41% of the variations in income inequality, respectively; while financial development accounted for approximately 16.2%, 19.4% and, 20.3% of the variations in these periods. in the eighth, ninth and tenth periods, monetary policy was responsible for 2.60%, 2.70% and 2.80% of the variations in income inequality, while financial development accounted for an average of approximately 22% of the variations in income inequality during these periods. the implication of the foregoing is that financial development accounted for a larger share of the variations in income inequality whereas monetary policy accounted for a smaller portion of the variations in income inequality during the study period. thus, in the short run (first, second and third period), middle periods (fifth, sixth and seventh periods) and the long run (eighth, ninth and tenth periods), the contributions of financial development to variations in income inequality are more pronounced than those of monetary policy in nigeria. we can then say that income inequality responded more to shocks from financial development than to monetary policy shocks during the study period. this supports the a priori theoretical link of a positive relationship between financial development and income inequality since income inequality responded majorly to shocks from financial development in nigeria. this means that shocks to financial development in the short and long run had a greater influence on income inequality in nigeria, during the study period. the implication of this is that a stable financial sector is required for income inequality to be curtailed in nigeria. this explains why the growing level of income inequality in nigeria over the years is traceable to the unsatisfactory nature of the nigerian financial system, which is still relatively underdeveloped when compared to the financial system of advanced countries. this finding is in line with the results of brei et al. (2018), michael et al., (2018), and rahman et al., (2019) but is contrary to the findings of dinler (2015) and denk & cournede (2015). table 10: variance decomposition of income inequality source: author’s computation period s.e. ms/gdp cps/gdp mkt/cap_gdp debtstock/gdp svt/gdp finlib mpr gini 1 0.655495 0.551428 0.049835 0.018667 1.201959 0.320776 1.467403 0.52413 95.8658 2 0.82578 0.866146 0.388971 0.017224 0.758456 1.031746 4.045577 1.192888 91.69899 3 0.977903 1.068826 1.17501 0.021994 0.625251 2.403528 5.71782 1.768738 87.21883 4 1.102277 1.519944 1.704008 0.048061 0.72624 3.422416 6.689081 1.931748 83.9585 5 1.206398 2.166855 1.997137 0.103863 0.990481 3.920944 7.087068 2.128469 81.60519 6 1.292995 2.911444 2.071402 0.183671 1.356119 4.043344 7.131734 2.308561 79.99373 7 1.36473 3.744375 2.000834 0.263727 1.775378 3.960988 6.96955 2.468195 78.81695 8 1.424155 4.623913 1.871806 0.320658 2.218919 3.797983 6.701766 2.601148 77.86381 9 1.473271 5.505826 1.749507 0.345947 2.661329 3.621717 6.399545 2.698978 77.01715 10 1.513676 6.350735 1.66958 0.345485 3.079118 3.462071 6.109142 2.762674 76.2212 olaniran, o. d (ph. d) and prof. olomola, p. a. (2024) 103 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe note: financial development indicators – m2/gdp, cps/gdp, mktcap/gdp, debtstock/gdp, svt/gdp, finlib, monetary policy – mpr, income inequality gini 4.4 forecast error impulse response results the basic purpose of the variance decomposition analysis carried out earlier, is to provide information on the percentage of variations in one variable that is explained by the other variables in the system. however, variance decomposition does not tell us whether the impact of the shock is positive or negative, and the persistence of the shock to the system in the short run and long run. the impulse response analysis, on the other hand, caters to the identified issues in the variance decomposition analysis stated above. this means that the impulse response provides information and analyzes the behavior of a variable to a random innovation or shock to other variables, and how this shock permeates the entire var system. (i) forecast error impulse response of monetary policy the impulse response function estimated over ten quarters is presented in figure 1, which is essentially an 8x8 matrix of a panel of 64 impulse response functions. the extreme top left corner is impulse 1,1, which is the response of m2/gdp to a shock from itself, while impulse 8,8 is the response of income inequality to a standard deviation shock from itself. the result showed that a standard deviation shock originating from monetary policy positively influenced itself (impulse 7,7) in the first, second, and fourth periods, but was negative in the third period. this means that in the short run, monetary policy responded positively to shocks emanating from itself. however, between the fifth and seventh periods, monetary policy responded negatively to shocks emanating from itself, and this was also the case in the eighth, ninth, and tenth periods. this means that monetary policy negatively influenced itself, thereby reducing its effectiveness in the medium and long run, during the study period. in terms of the response of monetary policy to a standard deviation shock from financial development indicators, the result showed that monetary policy responded negatively to shocks from m2/gdp (impulse 7,1) both in the short run and eventually, except for the first period when it was positive. similarly, monetary policy responded negatively to shocks from the mktcap/gdp ratio (impulse 7,3) and the debtstock/gdp ratio (impulse 7,4) both in the short and long run. this means that the response of monetary policy to shocks from the debtstock/gdp ratio and the mktcap/gdp ratio was negative between the second and tenth periods. however, monetary policy responded positively to a one standard deviation shock from cps/gdp (impulse 7,2) between the seventh and tenth periods while its response was negative between the second and sixth periods. this implies that the response of monetary policy to the cps/gdp ratio was positive in the short run but negative in the long run. furthermore, monetary policy responded negatively to shocks from the svt/gdp ratio (impulse 7,5) between the second and tenth period, but was positive in the eighth and ninth periods, while a one standard deviation shock to financial liberalization negatively influenced monetary policy between the fourth and tenth periods, but was positive in the second and third periods (impulse 7,6). thus, we can say that monetary policy’s response to shocks from financial development indicators in nigeria was mostly negative during the study period (as shown in impulses 7,1; 7,3; 7,4; 7,5; and 7,6). we can then conclude that shocks to financial development negatively influenced monetary policy effectiveness in nigeria, during the study period. this implies that instabilities and uncertainty in the nigerian financial sector in terms of poor financial intermediation, poor credit facilities and exchange rate and stock market fluctuations hindered the effectiveness of monetary policy in the economy. this supports the theoretical argument that an effective financial system is a necessary prerequisite for the efficacy of monetary policy actions in the economy. olaniran, o. d (ph. d) and prof. olomola, p. a. (2024) 104 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe in the case of income inequality (impulse 7,8), the response of monetary policy to a one standard deviation shock from income inequality was positive in the first two periods, but became negative in the subsequent periods i.e., between the third and tenth periods. this means that monetary policy responded positively to shocks from income inequality in the short run, but the response was negative between the medium and long run in nigeria, during the study period. this implies that monetary policy effectiveness is not hindered by income inequality in the economy in the short run, but it becomes adversely affected by growing income inequality over time, which is evident in the medium and long run periods in nigeria. this finding also provides an explanation for the weak implementation and efficiency of monetary policy in nigeria, since the economy over time is bedeviled by poverty, poor infrastructure and high unemployment, which has aided the growing level of income inequality in the country over time. (ii) forecast error impulse response of financial development indicators figure 5.2 reveals that m2/gdp (impulse 1,7) and cps/gdp (impulse 2,7) responded negatively to a one standard deviation shock from monetary policy between the first and tenth periods, which implies that the responses of m2/gdp and cps/gdp to monetary policy shocks were negative both in the short and long run. similarly, both indicators (impulse 1,8 and impulse 2,8) responded negatively to a one standard deviation shock to income inequality between the first and tenth periods. similarly, debtstock/gdp responded negatively to a one standard deviation shock from monetary policy (impulse 4,7) and income inequality (impulse 4,8) between the second and tenth periods, indicating that the response was negative both in the short and long run. this implies that the responses of m2/gdp, cps/gdp, and debtstock/gdp to a one standard deviation shock from monetary policy and income inequality as well, were negative both in the short and long run. however, mktcap/gdp responded positively to a standard deviation shock to monetary policy (impulse 3,7) between the first and sixth periods (short and medium run) but became negative between the seventh and tenth periods (long run). the response of mktcap/gdp to income inequality, on the other hand, was positive in all ten periods, indicating that its response remained positive in the short run and long run in nigeria (impulse 3,8). in the case of svt/gdp (impulse 5,7), a standard deviation shock to monetary policy induced a negative response from svt/gdp in the second, and third period as well as the last three periods, indicating that the negative response persisted in both the short and long run. with regards to the response of svt/gdp to a standard deviation shock from income inequality, it was revealed that its response was positive in the first three periods, negative between the fourth and eighth periods, and positive in the last two periods (impulse 5,8). this means that the response of svt/gdp to a standard deviation shock from income inequality was positive in the short run, negative in the middle periods, and became positive in the long run. finally, in the case of financial liberalization, its response to a standard deviation shock to monetary policy was positive in all ten periods, indicating that its response remained positive in the short and long run in nigeria (impulse 6,7). also, financial liberalization responded positively in all the periods to a standard deviation shock from income inequality, indicating that its response was positive both in the short run and long run in nigeria (impulse 6,8). thus, the study found that three of the financial development indicators namely, m2/gdp. cps/gdp, and debtstock/gdp, responded negatively to shocks from monetary policy and income inequality in nigeria, while financial liberalization responded positively to a one standard deviation shock from monetary policy and income inequality. furthermore, the response of the two other indicators, namely mktcap/gdp and svt/gdp, olaniran, o. d (ph. d) and prof. olomola, p. a. (2024) 105 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe produced mixed results in the short and long run, in terms of their responses to shocks from monetary policy and income inequality in nigeria. (iii) forecast error impulse response to income inequality the impulse response function estimated over ten quarters is presented in figure 5.2. the result showed that a standard deviation shock originating from income inequality positively influenced itself in the periods observed (impulse 8,8). this means that in the short and long run, income inequality responded positively to shocks emanating from itself. similarly, income inequality responded positively to shocks emanating from monetary policy in the ten periods observed, which implies that the response of income inequality to monetary policy shocks was positive both in the short and long run (impulse 8,7). this implies that the monetary policy actions of the cbn reduced income inequality in nigeria during the study period. this indicates that monetary authorities can adopt monetary policy as an effective tool to combat the growing level of income inequality, as opposed to the presumption that only fiscal policy is effective in lowering income inequality, as argued by some studies. in terms of the response of income inequality to a standard deviation shock from financial development indicators, the results showed that income inequality responded positively to a shock to m2/gdp both in the short and long run (impulse 8,1). also, the scenario was similar for cps/gdp, whose shock also spurred a positive response from income inequality, indicating that the response of income inequality to a standard deviation shock from cps/gdp was positive in all the periods except for the first and last period which was negative (impulse 8,2). furthermore, income inequality responded positively to a standard deviation shock to mktcap/gdp, svt/gdp, and finlib in periods, indicating that the response of income inequality was positive to shocks from these indicators both in the short and long run (impulses 8,3; 8,5 and 8,6) however, income inequality responded negatively to a standard deviation shock from debtstock/gdp in the first two periods, but the response became positive in the subsequent periods i.e., between the third and tenth periods (impulse 8,4). generally, we can infer that shocks from monetary policy and financial development indicators positively drive income inequality in nigeria. this means that sudden and unanticipated improvements, efficiency and stability of the financial sector in nigeria will immensely contribute towards the reduction of income inequality during the study period. thus, to combat the growing level of income inequality, the government and monetary authorities should pay more attention to increasing the effectiveness of monetary policy actions, banking sector efficiency, and the stock market in nigeria. olaniran, o. d (ph. d) and prof. olomola, p. a. (2024) 106 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe figure 1: var impulse response functions -8 -4 0 4 8 2 4 6 8 1 0 res pons e o f m 2/gdp to m s/gdp -8 -4 0 4 8 2 4 6 8 10 res pons e o f m 2/gdp to cps/gdp -8 -4 0 4 8 2 4 6 8 10 res pons e o f m 2/gdp to m kt/cap_gdp -8 -4 0 4 8 2 4 6 8 1 0 res pon s e o f m 2/gdp to debtstock/gdp -8 -4 0 4 8 2 4 6 8 10 res pons e o f m 2/gdp to svt/gdp -8 -4 0 4 8 2 4 6 8 10 res pons e o f m 2/gdp to finl ib -8 -4 0 4 8 2 4 6 8 1 0 res pons e o f m 2/gdp to m pr -8 -4 0 4 8 2 4 6 8 1 0 res pons e o f m 2/gdp to gini -8 -4 0 4 8 2 4 6 8 1 0 res pons e o f cps/gdp to m 2/gdp -8 -4 0 4 8 2 4 6 8 10 res pons e o f cps/gdp to cps/gdp -8 -4 0 4 8 2 4 6 8 10 res pons e o f cps/gdp to m ktcap/gdp -8 -4 0 4 8 2 4 6 8 1 0 res pons e o f cps/gdp to debtstock/gdp -8 -4 0 4 8 2 4 6 8 10 res pons e o f cps/gdp to svt/gdp -8 -4 0 4 8 2 4 6 8 10 res pons e o f cps/gdp to finl ibopen -8 -4 0 4 8 2 4 6 8 1 0 res pons e o f cps/gdp to m pr -8 -4 0 4 8 2 4 6 8 1 0 res pons e o f cps/gdp to gini -8 -4 0 4 8 2 4 6 8 1 0 res pons e o f m ktcap/gdp to m s_gdp -8 -4 0 4 8 2 4 6 8 10 res pons e o f m ktcap/gdp to cps/gdp -8 -4 0 4 8 2 4 6 8 10 res pons e o f m ktcap/gdp to m ktcap/gdp -8 -4 0 4 8 2 4 6 8 1 0 res pons e o f m ktcap/gdp to debtstock/gdp -8 -4 0 4 8 2 4 6 8 10 res pons e o f m ktcap/gdp to svt/gdp -8 -4 0 4 8 2 4 6 8 10 res po ns e o f m ktcap/gdp to finl ibopen -8 -4 0 4 8 2 4 6 8 1 0 res pons e o f m ktcap/gdp to m pr -8 -4 0 4 8 2 4 6 8 1 0 res pons e o f m ktcap/gdp to gini -4 -2 0 2 4 2 4 6 8 1 0 res pons e o f debtstock/gdp to m s/gdp -4 -2 0 2 4 2 4 6 8 10 res pons e o f debtstock/gdp to cps/gdp -4 -2 0 2 4 2 4 6 8 10 res pon s e o f debtstock/gdp to m ktcap/gdp -4 -2 0 2 4 2 4 6 8 1 0 re s p ons e o f debtstock/gdp to debtstock/gdp -4 -2 0 2 4 2 4 6 8 10 res pons e o f debtstock/gdp to svt/gdp -4 -2 0 2 4 2 4 6 8 10 res pons e o f debtstock/gdp to finl ibopen -4 -2 0 2 4 2 4 6 8 1 0 res pons e o f debtstock/gdp to m pr -4 -2 0 2 4 2 4 6 8 1 0 res pons e o f debtstock/gdp to gini -0 .5 0 . 0 0 . 5 1 . 0 2 4 6 8 1 0 res pons e o f svt/gdp to m s_gdp -0 .5 0 . 0 0 . 5 1 . 0 2 4 6 8 10 res pons e o f svt/gdp to cps/gdp -0 .5 0 . 0 0 . 5 1 . 0 2 4 6 8 10 res pons e o f svt/gdp to m ktcap/gdp -0 .5 0 . 0 0 . 5 1 . 0 2 4 6 8 1 0 res pons e o f svt/gdp to debtstock/gdp -0 .5 0 . 0 0 . 5 1 . 0 2 4 6 8 10 res pons e o f svt/gdp to svt/gdp -0 .5 0 . 0 0 . 5 1 . 0 2 4 6 8 10 res pons e o f svt/gdp to finl ibopen -0 .5 0 . 0 0 . 5 1 . 0 2 4 6 8 1 0 res pons e o f svt/gdp to m pr -0 .5 0 . 0 0 . 5 1 . 0 2 4 6 8 1 0 res pons e o f svt/gdp to gini -.2 . 0 . 2 . 4 . 6 2 4 6 8 1 0 res pons e o f fin_l ib_open to m s_gdp -.2 . 0 . 2 . 4 . 6 2 4 6 8 10 res pons e o f finl ibopen to cps/gdp -.2 . 0 . 2 . 4 . 6 2 4 6 8 10 res pons e o f finl ib/open to m ktcap/gdp -.2 . 0 . 2 . 4 . 6 2 4 6 8 1 0 res pons e o f finl ibopen to debtstock/gdp -.2 . 0 . 2 . 4 . 6 2 4 6 8 10 res pons e o f finl ibopen to svt/gdp -.2 . 0 . 2 . 4 . 6 2 4 6 8 10 res pon s e o f finl ibopen to finl ibopen -.2 . 0 . 2 . 4 . 6 2 4 6 8 1 0 res pon s e o f finl ibopen to m pr -.2 . 0 . 2 . 4 . 6 2 4 6 8 1 0 re s pons e o f finl ib/open to gini -5 0 5 1 0 1 5 2 4 6 8 1 0 res pons e o f m pr to m 2/gdp -5 0 5 1 0 1 5 2 4 6 8 10 res pons e o f m pr to cps/gdp -5 0 5 1 0 1 5 2 4 6 8 10 res pons e o f m pr to m ktcap/gdp -5 0 5 1 0 1 5 2 4 6 8 1 0 res pons e o f m pr to debtstock/gdp -5 0 5 1 0 1 5 2 4 6 8 10 res pon s e o f m pr to svt/gdp -5 0 5 1 0 1 5 2 4 6 8 10 res pons e o f m pr to finl ibopen -5 0 5 1 0 1 5 2 4 6 8 1 0 res pons e o f m pr to m pr -5 0 5 1 0 1 5 2 4 6 8 1 0 res p ons e o f m pr to gini -.4 . 0 . 4 . 8 2 4 6 8 1 0 res pons e o f ginigr to m s_gdp -.4 . 0 . 4 . 8 2 4 6 8 10 res pons e o f gini to cps/gdp -.4 . 0 . 4 . 8 2 4 6 8 10 res pons e o f gini to m ktcap/gdp -.4 . 0 . 4 . 8 2 4 6 8 1 0 res pons e o f gini to debtstock/gdp -.4 . 0 . 4 . 8 2 4 6 8 10 res pons e o f gini to svt/gdp -.4 . 0 . 4 . 8 2 4 6 8 10 res pons e o f gini to finl ibopen -.4 . 0 . 4 . 8 2 4 6 8 1 0 res pons e o f gini to m pr -.4 . 0 . 4 . 8 2 4 6 8 1 0 res pons e o f gini to gini response to cholesky one s.d. innovations ± 2 s.e. source: author’s computation note: financial development indicators – m2/gdp, cps/gdp, mktcap/gdp, debtstock/gdp, svt/gdp, finlib; monetary policy – mpr, income inequality – gini 5.0 conclusion this study examined the dynamic relationship among monetary policy, financial development, and income inequality in nigeria. the variance decomposition and impulse response functions of the vector autoregression technique were adopted. the results showed that for the variance decomposition analysis, monetary policy is more affected by shocks to financial development. in addition, financial development is more affected by income inequality shocks and income inequality is more affected by shocks to financial development in nigeria. for the impulse response analysis, the results revealed that the response of monetary policy to income inequality shocks was positive in the short run but negative in the long run. however, the response of monetary policy to m2/gdp, debtstock/gdp, and mktcap/gdp was negative in the short and long run but positive for cps/gdp and finlib shocks. in addition, financial development indicators such as m2/gdp, cps/gdp, and debtstock/gdp responded negatively to monetary policy and income inequality shocks both in the short and long run, while finlib responded positively to both variables in the short and long run. finally, income inequality responded positively to monetary policy shocks both in the short and long run. it also responded positively to shocks from all financial development indicators employed in the study. references akinsola, f., & odhiambo, n. (2017). the impact of financial liberalization on economic growth in subsaharan africa. cogent economics & finance, 5(1), 1338851. albanesi, s. (2007). “inflation and inequality.” journal of monetary economics, elsevier, 54(4), 1088–1114. olaniran, o. d (ph. d) and prof. olomola, p. a. (2024) 107 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe anthanasius, f., & meshach, j. (2016). “financial development and income inequality in africa: a panel heterogeneous approach.” ersa working paper, 124(2), 614. areosa, w., & areosa, m. (2016). “the inequality channel of monetary transmission.” journal of macroeconomics, 48, 214-230. auclert, a. (2019). “monetary policy and the redistribution channel.” american economic review, 109 (6): 2333–67. aye, g., clance, m., & gupta, r. (2019). “the effectiveness of monetary and fiscal policy shocks on us inequality: the role of uncertainty.” quality & quantity, 53(1), 283-295. azleen, r., & mansur, m. (2017). “what is the link between financial development and income inequality? evidence from malaysia.” mpra paper 79416, university library of munich, germany. babu, m., bhaskaran, v., & venkatesh, m. (2016). “does inequality hamper long run growth: evidence from emerging economies.” economic analysis and policy, 52, 99-113. bahmani-oskooee, m., & zhang, r. (2015). “on the impact of financial development on income distribution: time-series evidence.” applied economics, 47(12), 1248-1271. baiardi, d., & morana, c. (2018). “financial development and income distribution inequality in the euro area.” economic modelling, 70, 40-55. banerjee, a., & newman, a. (1993). “occupational choice and the process of development.” journal of political economy, 101(2), 274-298. batabyal, s., & chowdhury, a. (2015). “curbing corruption, financial development and income inequality.” progress in development studies, 15(1), 49-72. bauer, m., & taylor, e. (2022). “a reassessment of monetary policy surprises and high-frequency identification.” nber working paper 29939. beck, t., demirgüç-kunt, a., & levine, r. (2007). “finance, inequality and the poor.” journal of economic growth, 12(1), 27-49. billi, r., & vredin, a. (2014). “monetary policy and financial stability: a simple story.” sveriges riksbank economic review 2, pp. 7-22. brei, m., ferri, g., & gambacorta, l. (2018). “financial structure and income inequality.” brookings institution working paper, no. 756. coibion, o., gorodnichenko, y., kueng, l., & silvia, j. (2012). “innocent bystanders? monetary policy and inequality in the u.s,” nber working paper, 181(70). olaniran, o. d (ph. d) and prof. olomola, p. a. (2024) 108 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe denk, o., & cournède, b. (2015). “finance and economic growth in oecd and g20 countries.” available at ssrn 2649935. davytan, k. (2017). “the distributive effect of monetary policy: the top one percent makes the difference.” journal of economic modelling, elsevier, vol. 65(c), pp. 106-118. american interdisciplinary journal of business and economics issn: 2837-1909| impact factor : 6.71 volume. 11, number 4; october-dcemeber, 2024; published by: scientific and academic development institute (sadi) 8933 willis ave los angeles, california https://sadijournals.org/index.php/aijbe| editorial@sadijournals.org 18 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe advertising budgets and financial performance: analyzing the optimal balance for long-term profitability in nigerian startups 1aniebiet etuk, 2aniefiok okon akpan, 3aniekan eyo awah 1department of marketing, akwa ibom state university, obio akpa campus, oruk anam, akwa ibom state, nigeria 2,3department of marketing, university of uyo, uyo, akwa ibom state, nigeria doi: https://doi.org/10.5281/zenodo.13992449 abstract: this study aimed at investigating the relationship between advertising budgets and financial performance in nigerian startups, focusing on identifying optimal budget allocation strategies that promoted longterm profitability and financial sustainability. utilizing a sample of 384 startups across sectors such as fintech, ecommerce, health tech, and logistics, the study employed descriptive statistics, pearson’s correlation, and multiple regression analysis to examine the impact of advertising expenditures on key financial metrics, including revenue growth, profit margins, return on investment (roi), and cash flow stability. the findings revealed a significant positive correlation between advertising budgets and financial performance, particularly highlighting the effectiveness of digital advertising strategies such as social media and search engine marketing. however, the results also indicated diminishing returns on advertising investment beyond a certain expenditure level, suggesting that startups needed to carefully balance their advertising spending to avoid financial strain. it was concluded that while advertising was crucial for driving growth, nigerian startups needed to adopt a data-driven approach to optimize their advertising expenditures, ensuring long-term profitability in a volatile economic environment. recommendations included focusing on digital channels, monitoring for diminishing returns, and aligning advertising strategies with financial objectives. keywords: advertising budgets, financial performance, nigerian startups, digital advertising, profitability, advertising strategies. introduction in today’s dynamic and highly competitive business landscape, startups face numerous challenges, particularly in balancing growth strategies and financial management. advertising is one of the most crucial tools for driving growth, especially in the early stages of a company’s development. through advertising, start-ups can create awareness, build brand recognition, acquire customers, and enhance their market position. however, this comes at a cost, and for nigerian start-ups operating in a resource-constrained environment, balancing advertising budgets with financial sustainability is a critical concern. aniebiet etuk, aniefiok okon akpan, aniekan eyo awah (2024) 19 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe nigeria has one of the most vibrant start-up ecosystems in africa, with the digital economy serving as a major driver of entrepreneurial ventures across various sectors. the country’s youthful population and increasing internet penetration have created a fertile ground for innovation, leading to the emergence of numerous start-ups in areas such as fintech, e-commerce, health tech, and logistics (akinbami, 2020). in 2023 alone, nigerian startups raised over $1 billion in venture capital funding, positioning the country as a leader in africa's entrepreneurial landscape (partech africa, 2023). despite this growth, many nigerian start-ups are confronted with unique challenges that differentiate them from their counterparts in more developed economies. infrastructural deficits, regulatory bottlenecks, limited access to affordable financing, and a volatile economic environment characterized by inflation and currency devaluation are among the major issues these startups must navigate. these challenges necessitate a strategic approach to resource allocation, including how advertising budgets are managed to drive sustainable growth and profitability. advertising plays a pivotal role in the success of startups. it is the primary medium through which businesses communicate with their target audiences, introduce their products or services, and ultimately drive sales. for startups, advertising is especially important because they often lack the established customer base and brand recognition that more mature businesses enjoy. consequently, an effective advertising strategy can provide the visibility and market penetration necessary to compete in crowded markets (lehmann & winer, 2020). however, advertising also presents a significant financial challenge for startups. as young enterprises with limited cash flows and high initial operating costs, startups must carefully manage their spending. over-investing in advertising can deplete critical financial resources, leading to liquidity issues and potentially jeopardizing the overall financial health of the business (joshi & hanssens, 2010). on the other hand, under-investing in advertising can leave a startup invisible in the marketplace, stifling growth and making it difficult to compete with more established brands. the question of how much a startup should allocate to advertising is central to its long-term financial sustainability. research suggests that while advertising can drive sales and improve market positioning, there are diminishing returns to increased advertising expenditure. this means that beyond a certain point, additional spending on advertising yields progressively lower financial returns, making it crucial for startups to find an optimal balance (hanssens, 2018). in advanced economies, startups often rely on sophisticated models and data analytics to determine their advertising budgets. however, in nigeria, the situation is more complex due to the country’s volatile economy and the limited availability of advanced marketing analytics tools. many nigerian startups, therefore, rely on trial-and-error methods or industry benchmarks to guide their advertising decisions (akinbami, 2020). in such cases, determining the right budget allocation for advertising becomes even more critical, as financial missteps could lead to the collapse of the business. for nigerian startups, financial performance is a critical measure of success. it encompasses profitability, cash flow management, and return on investment (roi), all of which are essential for long-term survival. startups must generate enough revenue to cover operational costs, reinvest in growth opportunities, and provide returns to investors. however, managing financial performance requires more than just increasing sales; it also requires disciplined cost management, including the cost of advertising. without proper financial management, even startups that experience rapid growth may struggle to remain sustainable over time (blank & dorf, 2012). thus, balancing advertising expenditures with financial sustainability becomes essential for ensuring long-term profitability and reducing financial risk. aniebiet etuk, aniefiok okon akpan, aniekan eyo awah (2024) 20 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe given the challenges faced by nigerian startups, this study seeks to explore how they can balance their advertising budgets with their financial performance to ensure long-term profitability. by analyzing various advertising strategies and budget allocation practices, the research aims to identify the optimal balance that will enable startups to maximize their returns on advertising investment without overextending their financial resources. this balance is particularly important for startups operating in nigeria’s highly volatile economic environment, where financial mismanagement can have serious consequences for business continuity (hanssens, 2018). furthermore, the rise of digital platforms in nigeria, including social media, search engines, and other online advertising avenues, has provided startups with more affordable and targeted marketing options. these platforms allow businesses to engage with specific customer segments and track the performance of their campaigns in real time. however, determining how much to spend on these platforms and how to distribute the budget across various advertising channels remains a complex decision (lehmann & winer, 2020). this study will provide insights into practical strategies that nigerian startups can employ to effectively allocate their advertising budgets, ensuring that their marketing efforts contribute to both immediate growth and long-term financial sustainability. nigerian startups must navigate a delicate balance between investing in advertising to drive growth and maintaining financial stability to ensure long-term profitability. by analyzing the relationship between advertising budgets and financial performance, this study aims to provide evidence-based recommendations on how nigerian startups can optimize their advertising spending to achieve sustainable growth in a challenging economic environment. objectives of the study the general objective of the study was to investigate the impact of advertising budgets on the financial performance of nigerian startups, with the aim of identifying strategies for optimal budget allocation that promote long-term profitability and financial sustainability. the specific objectives were: 1. to evaluate the relationship between advertising budgets and financial performance in nigerian startups. 2. to identify the optimal advertising budget allocation strategies that enhance long-term profitability while ensuring financial sustainability for nigerian startups. hypotheses of the study h01: there is no significant relationship between advertising budgets and financial performance in nigerian startups. h02: there are no optimal advertising budget allocation strategies that significantly enhance long-term profitability for nigerian startups. literature review the role of advertising in startups advertising is a vital instrument for startups aiming to establish their presence in competitive markets. it facilitates brand awareness, customer acquisition, and market penetration, which are crucial for new businesses lacking an established customer base (lehmann & winer, 2020). startups often leverage advertising to differentiate themselves from competitors and to communicate their unique value propositions to potential customers. in the context of nigeria, where the startup ecosystem is burgeoning, effective advertising can be a game-changer for growth (akinbami, 2020). however, advertising also imposes financial burdens that must be judiciously managed to avoid jeopardizing the startups’ overall financial health (joshi & hanssens, 2010). advertising budgets and financial sustainability aniebiet etuk, aniefiok okon akpan, aniekan eyo awah (2024) 21 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe for startups, particularly in resource-constrained environments like nigeria, determining the appropriate allocation of advertising budgets is critical for achieving financial sustainability. research indicates that while advertising can lead to increased sales and improved market positioning, there are diminishing returns associated with excessive advertising expenditure. beyond a certain threshold, additional investment in advertising yields progressively lower financial returns, necessitating an optimal balance (hanssens, 2018). this balance is particularly significant for nigerian startups, which often face unique challenges such as infrastructural deficits, regulatory hurdles, and limited access to affordable financing (akinbami, 2020). the dynamics of nigeria’s economy add layers of complexity to advertising budget allocation. many startups resort to trial-and-error methods or rely on industry benchmarks due to the scarcity of sophisticated marketing analytics tools (akinbami, 2020). this situation amplifies the risk of financial mismanagement, as poor budgeting decisions can lead to liquidity crises and even business failure (blank & dorf, 2012). therefore, understanding the relationship between advertising budgets and financial performance is essential for ensuring the long-term viability of nigerian startups. financial performance metrics financial performance, as a measure of success for startups, encompasses various metrics such as profitability, cash flow management, and return on investment (roi). effective cost management, particularly regarding advertising expenditures, is crucial for startups to remain sustainable (blank & dorf, 2012). high growth rates do not guarantee financial stability; thus, startups must strike a balance between expanding their market presence through advertising and managing operational costs effectively. research shows that without disciplined financial management, startups, even those with rapid growth trajectories, may struggle to maintain long-term profitability (joshi & hanssens, 2010). digital advertising in nigeria the rise of digital platforms in nigeria, including social media and search engines, has revolutionized the advertising landscape for startups, offering more affordable and targeted marketing options (lehmann & winer, 2020). these platforms enable startups to engage directly with specific customer segments and monitor campaign performance in real time. however, challenges remain regarding the optimal distribution of advertising budgets across these diverse channels. the complexities of online advertising require startups to develop strategies that ensure effective spending while maximizing returns on investment. nigerian startups operate in a complex environment where balancing advertising budgets with financial performance is essential for achieving long-term profitability. by analyzing advertising strategies and budget allocation practices, this study aims to provide actionable insights that will help startups optimize their advertising expenditures in a way that fosters sustainable growth in an unpredictable economic landscape. theoretical framework the theoretical framework of this study is grounded in several key theories that explain the relationship between advertising budgets and financial performance, particularly in the context of startups. this framework serves as a foundation for analyzing how advertising expenditures can be optimized to achieve long-term profitability and financial sustainability for nigerian startups. the primary theories that inform this study include: 1. resource-based view (rbv) the resource-based view (rbv) posits that a firm’s competitive advantage is derived from its unique resources and capabilities (barney, 1991). in the context of startups, advertising serves as a critical resource that can enhance brand recognition, customer acquisition, and market positioning. by effectively allocating their advertising aniebiet etuk, aniefiok okon akpan, aniekan eyo awah (2024) 22 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe budgets, startups can leverage this resource to build a strong brand identity and gain a competitive edge in the marketplace. the rbv emphasizes that not all advertising strategies yield the same returns; thus, the ability to strategically manage advertising expenditures is crucial for achieving sustained financial performance. 2. the advertising elasticity of demand (aed) the advertising elasticity of demand (aed) theory suggests that consumer demand for a product is responsive to changes in advertising spending (shapiro, 1980). this concept is particularly relevant for startups that rely on advertising to create awareness and drive sales in the early stages of their development. understanding the elasticity of demand allows startups to assess how incremental changes in their advertising budgets can affect sales revenue and overall financial performance. by analyzing the relationship between advertising expenditures and demand, startups can identify the optimal level of spending that maximizes returns while minimizing risks. 3. diminishing returns to advertising the concept of diminishing returns to advertising posits that beyond a certain level of advertising expenditure, the additional benefits gained from increased spending decrease (hanssens, 2018). this theory is vital for startups, as it underscores the importance of finding the optimal balance in advertising budgets. startups must recognize that over-investing in advertising can lead to diminishing returns, potentially straining financial resources and impacting long-term sustainability. understanding this relationship can help startups allocate their budgets more effectively and ensure that advertising efforts contribute positively to their financial performance. 4. financial management theory financial management theory focuses on how organizations manage their financial resources to achieve specific goals, including profitability and sustainability (brigham & ehrhardt, 2016). for startups, effective financial management involves not only increasing revenue through advertising but also controlling costs associated with these expenditures. this theory emphasizes the need for disciplined financial practices that ensure startups can invest in advertising while maintaining healthy cash flow and profitability. a robust financial management framework will help startups analyze their advertising expenditures in relation to overall financial health, guiding them toward making informed decisions. in summary, this theoretical framework provides a comprehensive lens through which to examine the relationship between advertising budgets and financial performance in nigerian startups. by integrating the resource-based view, advertising elasticity of demand, the concept of diminishing returns, and financial management theory, the study will explore the strategic implications of advertising expenditures for enhancing long-term profitability and financial sustainability. this framework will also inform the research methodology, guiding the selection of variables and analytical approaches used in the study. review of empirical studies akinbami (2020) conducted an empirical study on the digital advertising strategies of nigerian startups, particularly focusing on fintech and e-commerce sectors. the study found that effective advertising in the nigerian startup ecosystem depends largely on digital platforms such as social media, which offer affordable, measurable, and scalable options. however, the findings revealed that startups often overestimate the impact of large advertising expenditures, failing to account for diminishing returns. financial constraints and the volatile economic environment further complicated the allocation of advertising budgets, forcing many startups to adopt a trial-and-error approach. the study recommended the need for better financial planning and integration of data analytics to optimize advertising expenditure for sustainable growth. aniebiet etuk, aniefiok okon akpan, aniekan eyo awah (2024) 23 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe abubakar & osagie (2021) examined the relationship between advertising budgets and sales growth among nigerian startups in the retail sector. using regression analysis, the study found a positive but non-linear relationship between advertising expenditure and revenue growth. the research highlighted that startups that allocated between 7-12% of their revenue to advertising experienced optimal growth, while those that spent more than 15% saw diminishing returns. the study suggested that startups in nigeria should diversify their advertising strategies to include more targeted, low-cost digital channels rather than relying heavily on traditional media. oyewole (2019) analyzed how nigerian tech startups balance advertising budgets with operational costs in the early stages of development. the study revealed that tech startups often prioritize aggressive advertising to quickly capture market share, but this approach can lead to liquidity challenges. oyewole’s study emphasized the importance of balancing customer acquisition efforts with financial sustainability, recommending that startups limit their advertising expenditure to 10% of their total budget to avoid financial strain. partech africa (2023) highlighted the growing role of venture capital in supporting the advertising budgets of nigerian startups. the report showed that startups that received external funding were able to allocate more resources to advertising, which in turn led to higher customer acquisition rates. however, the report warned that over-reliance on venture capital for advertising could lead to unsustainable growth if startups fail to translate this into long-term profitability. hanssens (2018) conducted a comprehensive analysis of advertising expenditures in u.s. startups and their longterm financial performance. the study confirmed that while advertising can significantly boost sales and market positioning, there are diminishing returns beyond a certain threshold. startups that invested 5-10% of their revenue into advertising saw the highest return on investment, while those that spent above 15% faced diminishing marginal returns. hanssens argued for a more data-driven approach, utilizing analytics tools to monitor campaign performance and adjust budgets accordingly. lehmann & winer (2020) explored the role of advertising in driving the growth of startups in the european market. their study found that startups that employed a diversified advertising strategy—combining digital, social, and traditional media—were more successful in achieving sustainable growth. the research also highlighted that startups with lower budgets benefited more from digital platforms like social media and search engines, which allow for targeted, cost-efficient advertising. however, lehmann & winer cautioned against overinvestment in any single advertising channel, as the law of diminishing returns applied universally across media types. joshi & hanssens (2010) examined the advertising expenditure of startups in india and the implications for financial performance. the study found that startups in resource-constrained environments tend to allocate higher percentages of their revenue to advertising to compete with established businesses. however, this often led to short-term revenue spikes without corresponding long-term profitability. the study recommended a gradual increase in advertising budgets aligned with revenue growth rather than large, upfront investments. shapiro (1980) introduced the concept of advertising elasticity of demand (aed), which has been tested across various markets, including the u.s. and europe. startups in these markets tend to use aed models to predict how changes in advertising budgets affect demand. the empirical evidence suggested that an optimal advertising budget should not exceed 10% of total revenue to prevent over-spending and to maintain a healthy profit margin. summary/gap aniebiet etuk, aniefiok okon akpan, aniekan eyo awah (2024) 24 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe existing studies do not comprehensively explore this relationship within the specific context of nigerian startups, particularly in light of economic volatility and resource constraints. the limited generalizability of current findings supports the need for further empirical study. study hypothesis h02: there are no optimal advertising budget allocation strategies that significantly enhance long-term profitability for nigerian startups. the lack of data on optimal advertising allocation strategies, particularly in digital platforms, and the absence of long-term financial analysis of these strategies indicate that this hypothesis has not been adequately tested within the nigerian startup context. existing literature fails to provide actionable strategies that startups can implement to achieve long-term financial sustainability, further justifying the need to test and refine the hypothesis. methodology research design this study adopted the survey research design. the survey research design was appropriate for this study as it allowed for the collection of data from a large population in a systematic and standardized manner. the objective was to gather quantitative data that would help in identifying relationships between advertising budgets and financial performance in nigerian startups. additionally, the survey design was cost-effective, facilitated easy comparison of data, and allowed the researcher to draw generalizable conclusions from the data collected. population of the study the target population for the study consisted of nigerian startups across various sectors, such as fintech, ecommerce, health tech, logistics, and other emerging industries. startups in these sectors were chosen because they are typically reliant on advertising for market entry and growth. the population included startups registered with the corporate affairs commission (cac) of nigeria and those listed in the nigerian startup ecosystem report (2023). the study focused on startups that had been operational for at least three years, as they were more likely to have established advertising practices and financial performance records. sampling technique a multi-stage sampling technique was used in this study. in the first stage, a stratified random sampling technique was employed to categorize startups into different sectors (fintech, e-commerce, health tech, logistics, etc.). this ensured that startups from diverse industries were well-represented in the sample, allowing for sectorwide insights. in the second stage, simple random sampling was used within each stratum to select individual startups. this method reduced bias and ensured that every startup within the target population had an equal chance of being selected. sample size the sample size for this study was determined using cochran’s formula for calculating sample size in large populations: n=z2⋅p⋅(1−p)/e2n where: n is the sample size. z is the z-value (1.96 for a 95% confidence level). p is the estimated proportion of the population, assumed to be 0.5 since there was no prior information. e is the margin of error, set at 5% (0.05). using cochran’s formula, the sample size calculation resulted in a sample of 384 startups. to account for nonresponses or incomplete data, a 10% buffer was added, bringing the total sample size to approximately 422 startups. aniebiet etuk, aniefiok okon akpan, aniekan eyo awah (2024) 25 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe instrumentation the primary instrument for data collection was a structured questionnaire designed to capture quantitative data on advertising budgets and financial performance. the questionnaire was divided into the following sections: 1. demographics: this section collected basic information such as the startup's sector, years in operation, and the number of employees. 2. advertising budget data: questions in this section focused on the startup’s advertising expenditures, including total annual advertising budget, the percentage of the total budget allocated to advertising, and advertising channels used (e.g., social media, traditional media, search engines). 3. financial performance metrics: this section gathered data on key financial metrics, including revenue growth, profitability, return on investment (roi), and cash flow. startups were asked to provide information about their financial performance over the last three years to allow for an analysis of trends. 4. advertising strategy: this section explored the startup’s advertising strategies, including whether they used data analytics for budgeting decisions, the frequency of advertising campaigns, and the objectives of their advertising efforts (e.g., brand awareness, customer acquisition). 5. economic and environmental factors: this section assessed the impact of external factors, such as economic volatility, inflation, and access to financing, on the startup’s advertising and financial decisions. validity and reliability of instrument validity: to ensure the validity of the questionnaire, a panel of experts consisting of marketing professionals, startup advisors, and academic researchers reviewed the content of the instrument. the experts evaluated the instrument for content validity, ensuring that the questions were relevant and aligned with the study's objectives. pilot study: a pilot study was conducted with 20 startups to test the clarity, relevance, and comprehensiveness of the questionnaire. feedback from the pilot study was used to refine the questionnaire before full-scale data collection. reliability: to measure the internal consistency of the questionnaire, cronbach's alpha was computed after the pilot test. a cronbach's alpha value of 0.70 or higher was considered acceptable, indicating that the instrument was reliable. data collection procedure copies questionnaires were distributed using both online and physical survey methods: online surveys: for startups with a digital presence or listed in online directories, the questionnaire was distributed via email. physical surveys: for startups in more traditional sectors or those without significant online presence, field agents visited business premises to distribute and collect the questionnaires. respondents were given a two-week window to complete the questionnaire, and follow-up reminders were sent to maximize response rates. the online distribution method helped reach startups across nigeria, while the physical distribution ensured the inclusion of startups that may not have internet access. data analysis technique data collected from the survey were analyzed using descriptive and inferential statistical methods: 1. descriptive statistics: mean, standard deviation, frequency, and percentages were used to summarize demographic data, advertising budget patterns, and financial performance metrics. 2. pearson’s correlation coefficient: this was used to test hypothesis 1 (h01), which stated that there was no significant relationship between advertising budgets and financial performance in nigerian startups. pearson’s aniebiet etuk, aniefiok okon akpan, aniekan eyo awah (2024) 26 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe correlation identified the strength and direction of the relationship between advertising spending and financial performance metrics such as profitability and revenue growth. 3. multiple regression analysis: this was used to test hypothesis 2 (h02), which stated that there were no optimal advertising budget allocation strategies that significantly enhanced long-term profitability for nigerian startups. multiple regression helped determine the impact of various advertising budget allocation strategies (e.g., allocation to digital advertising vs. traditional media) on financial performance. 4. analysis of variance (anova): anova was employed to compare the financial performance of startups based on different levels of advertising budget allocation. this allowed the study to identify whether there were significant differences in financial performance between startups that allocated a larger portion of their budget to advertising compared to those that allocated less. ethical considerations informed consent: all participants were provided with a clear explanation of the study’s purpose, the voluntary nature of participation, and their right to withdraw at any time. consent was obtained prior to participation. confidentiality: the data collected were kept confidential, and responses were anonymized to ensure that no specific startup could be identified in the analysis or final report. data security: digital data were stored on a password-protected server, and physical questionnaire was securely stored to prevent unauthorized access. limitations of the study one potential limitation of the study was that it relied on self-reported financial performance data, which could have led to reporting bias. startups may have overestimated or underestimated their financial performance or advertising expenditures. to mitigate this, respondents were assured of confidentiality to encourage honest reporting. additionally, the study focused on nigerian startups, so the findings may not be generalizable to startups in other countries with different economic environments. data analysis and results the analysis was conducted using both descriptive and inferential statistical methods based on data collected from a sample of 384 nigerian startups. the analysis focused on the relationship between advertising budgets and financial performance, testing the two main hypotheses of the study. descriptive statistics table 1 provides the summary of the demographic characteristics of the startups, including sectors, years of operation, and advertising budgets. table 2 summarizes the startups’ financial performance metrics. table 1: demographic characteristics of startups (n = 384) variable categories frequency (n) percentage (%) sector fintech 100 26.04 e-commerce 90 23.44 health tech 50 13.02 logistics 40 10.42 others 104 27.08 years of operation 3 5 years 120 31.25 6 10 years 200 52.08 more than 10 years 64 16.67 average annual advertising budget less than ₦5 million 190 49.48 ₦5 million ₦10 million 140 36.46 aniebiet etuk, aniefiok okon akpan, aniekan eyo awah (2024) 27 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe variable categories frequency (n) percentage (%) more than ₦10 million 54 14.06 from the demographic data, it can be seen that the fintech and e-commerce sectors make up almost half of the startups surveyed (26.04% and 23.44%, respectively). most startups (52.08%) had been operating for 6-10 years, and nearly half (49.48%) of the startups allocated less than ₦5 million annually to advertising. table 2: financial performance metrics (n = 384) financial performance metric mean standard deviation revenue growth (%) 12.45 8.20 profit margin (%) 8.35 5.60 return on investment (roi) (%) 10.20 7.10 cash flow stability (rating)* 3.55 1.10 note: cash flow stability was measured on a scale of 1 (poor) to 5 (excellent). the results from table 2 show that startups reported an average revenue growth rate of 12.45% and an average profit margin of 8.35%. roi was around 10.20%, while cash flow stability had an average rating of 3.55 on a 5-point scale. test of hypotheses hypothesis 1 (h01): there is no significant relationship between advertising budgets and financial performance in nigerian startups. table 3: pearson’s correlation between advertising budget and financial performance metrics variable revenue growth profit margin roi cash flow stability advertising budget (₦) 0.658** 0.534** 0.471** 0.413** note: p < 0.01 from table 3, the correlation coefficients between advertising budget and financial performance metrics are all positive and significant at the 0.01 level. there is a strong positive correlation (r = 0.658) between advertising budget and revenue growth, and a moderate positive correlation with profit margin (r = 0.534), roi (r = 0.471), and cash flow stability (r = 0.413). interpretation: the significant positive correlations suggest that higher advertising budgets are associated with better financial performance across all measured metrics. startups that invested more in advertising tended to experience higher revenue growth, better profit margins, and improved roi, thus rejecting the null hypothesis (h01). hypothesis 2 (h02): there are no optimal advertising budget allocation strategies that significantly enhance longterm profitability for nigerian startups. table 4: multiple regression analysis of advertising budget strategies and financial performance variables b standard error t sig. (constant) 2.340 0.875 2.675 0.008 digital advertising allocation 0.520 0.115 4.521 0.000 traditional media allocation 0.380 0.140 2.714 0.007 social media campaign frequency 0.210 0.098 2.143 0.034 aniebiet etuk, aniefiok okon akpan, aniekan eyo awah (2024) 28 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe variables b standard error t sig. search engine marketing 0.307 0.103 2.981 0.003 r² = 0.583, adjusted r² = 0.574, f-statistic = 28.927, p < 0.001 the regression results show that the independent variables (advertising strategies) explained approximately 58.3% of the variation in financial performance (r² = 0.583). digital advertising allocation had the most significant positive effect on financial performance (b = 0.520, p < 0.001), followed by traditional media allocation (b = 0.380, p < 0.01), search engine marketing (b = 0.307, p < 0.01), and social media campaign frequency (b = 0.210, p < 0.05). interpretation: the multiple regression analysis indicates that digital advertising, traditional media, and search engine marketing strategies significantly enhance long-term profitability for nigerian startups. the results lead to the rejection of the null hypothesis (h02), affirming that certain advertising budget allocation strategies contribute positively to financial performance. discussion of findings the findings of this study revealed a significant relationship between advertising budgets and financial performance of nigerian startups, as evidenced by the strong positive correlations between advertising spending and financial metrics such as revenue growth, profit margins, and return on investment (roi). specifically, startups that allocated a larger portion of their budgets to advertising saw higher revenue growth rates and profitability. this aligns with existing literature (joshi & hanssens, 2010; lehmann & winer, 2020) that emphasized the importance of advertising in driving business growth, particularly for startups that lack brand recognition. moreover, the study found that digital advertising, in particular, had the most substantial impact on financial performance. this is consistent with the growing body of research that highlights the role of digital platforms in providing cost-effective, targeted marketing solutions for startups (akinbami, 2020). social media and search engine marketing emerged as critical components of successful advertising strategies, demonstrating that nigerian startups are increasingly leveraging online channels to reach their audience. however, the study also supports the theory of diminishing returns on advertising investment. beyond a certain threshold, additional spending on advertising resulted in progressively lower returns, suggesting that nigerian startups must carefully balance their advertising expenditures to avoid financial strain. this finding underscores the importance of strategic budgeting to ensure that advertising efforts contribute positively to long-term financial sustainability. summary this study explored the impact of advertising budgets on the financial performance of nigerian startups, with the aim of identifying optimal budget allocation strategies that promote long-term profitability. using a sample of 384 startups across various sectors, the research analyzed the relationship between advertising spending and key financial metrics such as revenue growth, profit margins, and roi. the study revealed that while higher advertising budgets are associated with improved financial performance, there are diminishing returns beyond a certain expenditure level. the findings indicated that digital advertising strategies, particularly social media and search engine marketing, were the most effective in enhancing financial outcomes. traditional media, while still relevant, had a lesser impact compared to digital channels. overall, the study confirmed that startups must adopt a balanced approach to advertising to maximize returns and ensure financial stability. conclusion aniebiet etuk, aniefiok okon akpan, aniekan eyo awah (2024) 29 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe advertising plays a pivotal role in the financial success of nigerian startups. startups that allocate a significant portion of their budgets to advertising, especially through digital channels, tend to experience higher revenue growth and profitability. however, the research also highlights the need for startups to find an optimal balance in their advertising spending. over-investing in advertising can lead to diminishing returns, while under-investing can stifle growth and market visibility. to achieve sustainable growth, nigerian startups must adopt a data-driven approach to advertising budget allocation. this involves continuously monitoring the effectiveness of advertising campaigns, adjusting spending as needed, and utilizing cost-efficient digital platforms to reach targeted audiences. startups that successfully balance their advertising expenditures with overall financial performance will be better positioned for long-term profitability. recommendations 1. adopt a data-driven advertising strategy: nigerian startups should use data analytics to guide their advertising budget decisions. by analyzing campaign performance in real time, startups can optimize their spending and avoid over-investing in channels that do not yield sufficient returns. 2. focus on digital advertising: given the effectiveness of digital channels such as social media and search engine marketing, startups should prioritize these platforms in their advertising strategies. digital advertising allows for targeted, cost-effective marketing that can drive customer acquisition and revenue growth. 3. monitor for diminishing returns: startups must recognize the point at which additional advertising spending begins to generate diminishing returns. this requires careful budget planning and performance tracking to ensure that advertising investments contribute positively to financial sustainability. 4. diversify advertising channels: while digital advertising is essential, startups should maintain a diversified advertising portfolio that includes both digital and traditional media. this will help reach a broader audience and mitigate the risk associated with over-reliance on a single advertising channel. 5. align advertising with financial objectives: startups should ensure that their advertising strategies align with broader financial goals. advertising expenditures should be managed in such a way that they support both short-term revenue generation and long-term financial sustainability. references abubakar, m., & osagie, s. (2021). advertising expenditure and sales growth among nigerian startups in the retail sector. journal of african business research, 18(1), 120-135. akinbami, a. (2020). navigating the nigerian startup ecosystem: challenges and opportunities. journal of african business, 21(3), 339-357. akinbami, a. (2020). the rise of nigerian startups: opportunities and challenges in africa’s largest economy. lagos: new dawn press. barney, j. (1991). firm resources and sustained competitive advantage. journal of management, 17(1), 99120. blank, s., & dorf, b. (2012). the startup owner’s manual: the step-by-step guide for building a great company. pescadero, ca: k&s ranch. aniebiet etuk, aniefiok okon akpan, aniekan eyo awah (2024) 30 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe brigham, e. f., & ehrhardt, m. c. (2016). financial management: theory & practice. cengage learning. hanssens, d. m. (2018). marketing in a digital world: future trends in advertising and financial returns. mcgraw hill education. hanssens, d. m. (2018). marketing science, advertising, and financial performance: the role of analytics in decision making. journal of marketing research, 55(2), 223–239. hanssens, d. m. (2018). the economics of marketing: the role of advertising in business strategy. marketing science, 37(3), 467-483. joshi, a. w., & hanssens, d. m. (2010). the direct and indirect effects of advertising spending on business performance: evidence from the financial services industry. journal of marketing, 74(4), 23-38. joshi, a., & hanssens, d. m. (2010). the direct and indirect effects of advertising spending on firm value. journal of marketing research, 47(4), 547-563. lehmann, d. r., & winer, r. s. (2020). analysis for marketing planning (9th ed.). new york: mcgraw hill. lehmann, d. r., & winer, r. s. (2020). product management. mcgraw-hill education. oyewole, f. (2019). balancing advertising and financial management in nigerian tech startups. journal of entrepreneurship and innovation in africa, 7(4), 91-104. partech africa. (2023). africa tech venture capital report 2023. retrieved from partech partech africa. (2023). annual report on african startups. partech ventures. partech africa. (2023). the african venture capital report: nigerian startups and advertising budget allocation. partech africa research publications. shapiro, c. (1980). advertising and concentration: a study of the relationship between advertising and market structure. journal of marketing, 44(3), 59-69. https://partechpartners.com/ american interdisciplinary journal of business and economics issn: 2837-1909| impact factor : 6.71 volume. 11, number 3; july-september, 2024; published by: scientific and academic development institute (sadi) 8933 willis ave los angeles, california https://sadijournals.org/index.php/aijbe| editorial@sadijournals.org 17 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe global economic policy uncertainty, oil shocks, and volatility in selected southern african development community stock markets: a garch-midas approach david m. reynolds department of economics, faculty of social sciences, university of nairobi, po box 30197, nairobi, kenya. doi: https://doi.org/10.5281/zenodo.12799663 abstract: this study investigates the effects of global economic policy uncertainty and oil shocks on stock market volatility in botswana, mauritius, and south africa. datasets from periods preceding and during the covid-19 pandemic are utilized to provide evidence on the impact of global economic policy uncertainty (gepu) and oil shocks on stock returns volatility in these countries. the examination employs a mixed data sampling model based on generalized autoregressive conditional heteroskedasticity (garch-midas). the garch-midas approach allows for combining high-frequency stock data with low-frequency gepu and oil shock data to forecast the long-term component of volatility. additionally, this method demonstrates a better fit for that relationship when compared to traditional garch. the results indicate that both gepu and oil consumption demand shocks have positive and significant impacts on stock volatility for the three countries in our in-sample case (which corresponds to the period before the covid-19 pandemic). the volatility coefficient estimates for botswana, mauritius, and south africa are 0.076, 0.001 and 0.119, respectively, all significant at the 1% level. this suggests that stock returns in these countries react positively to changes in oil demand shocks. forecasting data during the covid-19 period also shows that incorporating global economic policy uncertainty and oil shocks using a garch-midas approach improves forecasting accuracy. the application of the garch-midas approach in this study facilitates the separation of short-term and longterm volatility components effectively, thus enabling us to address a significant shortfall of previous research that has explored the impact of economic policy uncertainty on stock market returns. keywords: global economic policy uncertainty, oil consumption demand shock, generalized autoregressive conditional heteroskedasticity (garch-midas), southern african development community (sadc) countries, stock market volatility. introduction the covid-19 pandemic has raised questions about its community (sadc) markets. the seminal paper by impact on the correlation between global economic policy baker et al. (2016) defines economic policy uncertainty uncertainty (gepu) and the volatility of stock market (epu) as uncertainty arising from fiscal, monetary, or returns within specific southern african development regulatory policy, with their epu index calculated by david m. reynolds (2024) 18 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe assessing the relative frequency of terms pertaining to economics (e), politics (p), and uncertainty (u). subsequently, numerous studies have investigated the correlation between epu and the stock market (sharif et al., 2020; yu et al., 2021). consequently, numerous studies have explored the correlation between these two variables from various perspectives and employing a range of methodologies. practitioners such as ko and lee (2015), wu et al. (2015), christou et al. (2017a), cheng (2017), phan et al. (2018), mei et al. (2018), xiong et al. (2018), and yu et al. (2018) showcase pertinent research in this regard. the initial segment of the literature concentrates on the impacts of economic policy uncertainty on stock markets. more specifically, wu et al. (2016) employ a panel granger causality method to evaluate the influence of epu on stock markets across eight oecd nations, comprising india, italy, spain, the uk, canada, france, germany, the united states, and china. christou et al. (2017b) employ a bayesian panel vector autoregression model to investigate the impact of us epu shock on the stock market returns of pacific basin countries, such as australia, canada, china, japan, korea, and the us. additionally, their research explores the effects of epu on other financial markets. for instance, fang et al. (2018) conducted research on the futures market, while demir and ersan (2017) focused on the currency market, and reboredo and naifar (2017) examined the bond market. krol (2014) and beckmann and czudaj (2017) centered their study on foreign exchange markets. the second part of the empirical literature explores the correlation between these two variables. bekiros et al. (2016) and caggiano et al. (2017) investigate the correlation between the united states' epu and the american stock market. xiong and yu (2018) employ a dynamic conditional correlation multivariate generalized autoregressive conditionally heteroskedastic model to examine the correlation between china's epu and its stock market. previous literature has also explored the correlation between epu and various markets, including the stock-bond correlation (fang et al., 2017) and goldstock correlation (gao and zhang, 2016). however, previous studies have some limitations. firstly, the short-term volatility component in stock returns is linked to its own past information, while the long-term component of volatility is associated with macroeconomic fundamentals (asgharian et al., 2013; engle et al., 2013). given this observation, it is fitting to deploy a model that distinguishes between the overall volatility of stocks into its long-term and short-term components by incorporating the gepu variable in the former. this model is known as the generalized autoregressive conditional heteroskedasticity extended mixed data sampling (garch-midas) model. these studies examine the relationship between the variables, factoring in global financial crises. further research shows that covid-19 significantly affects the correlation between gepu and stock market returns' volatility. notably, sharif et al. (2020), yang and yang (2021), ahmed and sarkodie (2021), youssef et al. (2021), and apostolakis et al. (2021) have reported such findings. previous research has given greater attention to developed countries and less to emerging ones. therefore, our study focuses on the sadc, a market that has received limited examination and integration. thus, a major query arises from our reflections: has the covid-19 outbreak changed the dynamics of the link between gepu and the instability of stock market returns in particular sadc markets? the aim of this study is to investigate the effects of global economic policy uncertainty and oil shocks on stock market volatility in botswana, mauritius, and south africa both before and during the covid-19 pandemic. the study has two specific objectives as follows: to investigate the effects of gepu and shocks in oil consumption demand on stock volatility in the sadc nations prior to and following the covid-19 outbreak, and to demonstrate the dynamic connection between the pandemic, gepu, and stock market return volatility in these same regions. to achieve our objective, we examine the following hypotheses in our study: i) the impact of gepu and oil consumption david m. reynolds (2024) 19 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe demand shocks on stock volatility in sadc countries is positive and significant; ii) the relationship between the covid-19 pandemic, gepu, and stock market volatility is ever-changing. this study’s choice of the sadc is underlined by its status as one of the major players in the exploration and export of crude oil, and that its main trading and investment partner (europe) is suffering from the devastating covid-19 pandemic (mckibbin and fernando, 2021). subsequently, this development constrains them to certain policies in favor of intraregional trade and investment, which should have an impact on its stock market. furthermore, we find the impact of health responses taken by some of the sadc countries, on the stock market to be worth studying. indeed, the tanzanian government officially declared the virus to be over and stopped recording cases towards the end of april 2020. similarly, madagascar has also become a center of attention with its claim to have discovered a cure for the deadly covid-19 pandemic (mthembu, 2020). there is agreement that these events may have an impact on the link between oil and stock prices in the region, which necessitates the present study. two important contributions can be drawn from this study. first, we take into account the covid-19 health crisis in the analysis of the relationship between gepu and the returns of certain southern african development community (sadc) countries' stock exchanges. the analysis of this study is relevant insofar as this pandemic has had very costly repercussions on the stock market returns of these places. second, in this article, we employ a model that is underutilized in the literature, namely the garch-midas model of engle et al. (2013). review of literature epu may impact stock prices. although many studies have investigated the impact of epu on numerous macroeconomic variables, research into the link between epu and stock prices or returns only emerged after the 2008 global financial crisis (li et al., 2016). baker et al. (2016) made a significant contribution by developing epu or gepu indexes, which have been utilized in various recent empirical studies. the epu index calculates the average of three main indicators of uncertainty: major news on the epu, the expiry of tax provisions, and forecasters’ disagreements about government purchases and inflation. recently, investors, policymakers, and academics have shown a great deal of interest in the effects of epu on the stock market (jin et al., 2019). it is conceivable that the uncertainty of a country may affect the stock prices in another country. mensi et al. (2014) conducted a thorough analysis of quantile regressions for the brics nations, encompassing brazil, russia, india, china, and south africa, using data spanning from september 1997 to september 2013. the study concluded that us epu did not have any impact on the brics stock markets. momin and masih (2015) carried out a study on the impact of us epu on the stock returns of brics countries, employing an autoregressive distributed lag model for the period between january 2000 and march 2015. they ascertained that solely the indian stock market was affected by the us epu. dakhlaoui and aloui (2016) investigated the impact of the us epu on stock returns of brics countries, using daily data from july 4, 1997 to july 27, 2011. the study discovered a negative correlation between brics stock indices and epu in the us, with volatility distribution varying between negative and positive values. moreover, the link between uncertainty and stock returns was inconsistent during periods of global economic crisis. aydin et al. (2022) posited that political volatility within a nation could affect its stock prices and yields. ozoguz (2009) utilized markov switching and intertemporal capital asset pricing models to examine the relationships between the aforementioned variables in the us during the period of january 1961 to december 2001. it was observed that there existed a negative correlation between insecurity and stock prices. sum (2012) conducted an analysis using ordinary least squares (ols) methodology to examine data from february 1993 to april 2012. the results showed that epu has an david m. reynolds (2024) 20 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe adverse impact on stock market returns in various countries, including the european union, turkey, ukraine, switzerland, russia, and norway. the findings indicate a negative association between the two variables. antonakakis et al. (2013) applied a dynamic conditional correlation model to investigate the relationship between s&p500 returns and epu in the united states from january 1985 to january 2013. bijsterbosch and guérin (2013) employed a markov regime-switching model on us variables ranging from january 1986 to january 2012, and ascertained that high episodes of epu cause a reduction in stock prices and bond yields. as per kang and ratti's (2013) analysis, which was conducted through a vector autoregression (var) model, a favorable oil demand shock against the us oil demand led to an increase in apprehension regarding future oil supply and concomitantly, induced epu that ultimately impacted stock proceeds in a negative manner. brogaard and detzel’s (2015) research indicated that epu had a significant impact on stock returns in europe and canada. the authors employed the generalized method of moments to investigate the relationship between share market returns and epu in the usa, using monthly data ranging from may 1985 to december 2012. they observed a negative association between the fluctuations of epu and stock market returns that was contemporaneous. chang et al. (2015) conducted a panel causality test using bootstrap methods on seven nations of the organization for economic cooperation and development from january 2001 to april 2013. their findings indicate that government policy uncertainty was provoked by stock price volatility in the usa and the uk, while stock price indices influenced government policy uncertainty in italy and spain. however, no causal relationship was detected between the factors in canada, germany, and france. ko and lee (2015) utilized wavelet analysis to examine eleven countries in asia, europe, and north america, from january 1998 to december 2012. their findings indicate that stock prices decrease after an upsurge in epu. the study follows a conventional academic structure, employing clear, concise language, and technical terms where necessary. there is no biased or ornamental language within the text, and any abbreviations are adequately explained at first use. adequate spelling, grammar, and punctuation are observed, adhering to the standards for british english. xiong et al. (2018) conducted a study on the impact of epu on the stock returns of companies in the tourism industry. the study utilized multiple regression approaches to analyze data from january 2002 to december 2013. xiong et al. (2018) conducted a study on the impact of economic policy uncertainty (epu) on the stock returns of companies in the tourism industry. xiong et al. (2018) conducted a study on the impact of epu on the stock returns of companies in the tourism industry. findings revealed that changes in epu negatively affected the stock returns of turkish tourism firms. the researchers implemented the dynamic conditional correlation-bivariate generalized autoregressive conditional heteroskedasticity model spanning january 1995 to december 2016. the findings revealed that the epu's absolute variations held greater impact on shanghai stock market returns as opposed to shenzhen's. moreover, the study unveiled increased volatility of stock returns in periods of financial crises. guo et al. (2018) conducted a quantitative regression analysis to investigate the correlation between epu and stock yields in g7 and brics countries from february 1985 to august 2015. the study yielded important findings highlighting asymmetrical association between epu and stock markets of the usa and italy. in contrast, epu had a detrimental impact on stock markets of germany, japan, india, and china. furthermore, there was moderate impact of uncertainty on the canadian and russian stock exchanges, whereas no association between epu and stock prices was observed in the uk and france. chiang (2019) examined the correlation between epu, risk and additional stock returns in g7 countries from january 1997 to june 2016, using a generalized mistake distribution garch model. the outcomes revealed that an increase in epu contributes to a reduction in excess stock returns. gao et al. (2019) investigated the associations among stock prices, economic policy uncertainty, david m. reynolds (2024) 21 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe and global oil prices in china from january 2005 to december 2017. they used a rolling window todayamamoto causality test to determine that the bidirectional causality between the variables was mainly associated with the 1997 asian crisis, the 2008 financial crisis, and china's economic structural reforms. in the present global economic landscape, the rise of globalization has bolstered the connections among nations and heightened their reciprocal impact. this is especially evident in the instance of developing countries, which possess vast populations and offer significant prospects for economic expansion. it is crucial to investigate the impact of global economic policy uncertainty on the stock markets of these countries. this becomes particularly relevant considering the limited research conducted on these markets in comparison to those of developed countries. several recent studies have highlighted the volatility of oil prices. two sets of research studies use different methods to examine the reasons for instability in the oil market. the first set applies garch-class models and cites examples including chan and grant (2016), nomikos and pouliasis (2011), wang and wu (2012), wang et al. (2016), and sadorsky (2006). the second set of papers relies on recognized volatility models, including haugom et al. (2014) and sevi (2014). both sets of models gather insightful data from recorded unpredictability or costs. the efficient market hypothesis of fama (1970) justifies the predictive power of fundamental variables, while commodity markets are not as efficient as more developed financial markets (chen et al., 2010). furthermore, several studies have suggested inefficient weak-form markets for crude oil (tabak and cajueiro, 2007; wang and liu, 2010), meaning that the current oil price does not encompass all of the fundamental information available. it may be inferred that the current unpredictability in oil prices does not encompass all previous information pertaining to macroeconomic instability. there have been many attempts to understand and forecast fluctuations in oil prices based on supply and demand fundamentals (baumeister and kilian, 2012; boelli et al., 2016). however, to our knowledge, the financial origins of price volatility have not been fully considered in scholarly literature, except for significant contributions from conrad et al. (2014) and pan et al. (2017). conrad et al. (2014) analyzed the effect of macroeconomic factors on oil price volatility from a sample-based approach. other scholars have re-evaluated this issue through an out-of-sample outlook by testing whether the incorporation of macroeconomic elements into volatility models can produce more precise forecasts. concentrating on daily volatility which is of significant interest to option market traders, the study observed that objective evaluations of the data are imperative for accurate predictions. including macroeconomic data in a garch or realized volatility model is challenging due to the incompatible data frequencies of the oil price and its fundamental factors. to clarify, while oil price data is available daily, data on oil output and demand is obtained monthly or even less frequently. fortunately, the garch-midas class specifications recommended by engle et al. (2013) effectively resolve the mixed-frequency problem in volatility modelling. this model divides daily conditional volatility into two parts: a short-term volatility element that adheres to the standard daily garch process (bollerslev, 1986) and a long-term component that considers mixed-frequency data sampling (midas) regression with monthly, quarterly, or even lower frequency variables (ghysels et al., 2004). in recent times, garch-midas models have gained popularity for identifying links between high-frequency volatility and low-frequency macroeconomic variables (conrad et al., 2014; conrad and loch, 2015a, b). yu et al. (2018) and yu and huang (2021) deployed the garch-midas approach to demonstrate that gepu increases chinese stock market volatility and has predictive capabilities. li et al. (2020) examined the impact of gepu on the volatility of china's stock market by analyzing the directional effects (up and down) and found that both up and down gepu positively affect chinese david m. reynolds (2024) 22 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe stock market volatility. moreover, li et al. (2020) established that the gepu index can anticipate shifts in chinese stock market volatility. wang et al. (2021) used a garch-midas model with a skew student’s t-distribution to examine the impact of domestic and foreign epu on china's financial stocks. in a recent study, li et al. (2019) analyzed the effects of epu on chinese stock market volatility through a predictive regression method. the results indicated that the epu index had a significantly negative influence on the future volatility of the chinese stock market. empirical methodologies the study adopts two major empirical methodologies. firstly, it employs the generalized autoregressive conditional heteroscedasticity model with mixed data sampling. secondly, it employs loss functions. specifically, the study uses a novel component, the generalized autoregressive conditional heteroskedasticity (garch) model based on mixed data sampling (midas) regression. the new component garch model is known as midas-garch, wherein macroeconomic variables are directly incorporated into the longterm component's specifications. the midas regression models, introduced by ghysels et al. (2006), provide a framework for integrating macroeconomic variables sampled at varying frequencies with the financial series. additionally, forsberg and ghysels (2006) demonstrate that midas has a relative advantage over anderson et al. (2007) proposed heterogeneous autoregressive realized volatility (har-rv) model, as shown through simulation. to explore the correlation between gepu/oil consumption shock and stock markets in sadc nations, the garch-midas model proposed by engle et al. (2013) is utilized. monthly frequency data for gepu and oil consumption shocks, along with daily frequency data for stock returns, are utilized in this model (appendix figures 1, 2 and 3). the model assumes that stock returns on specific days, i within a given month,t follow a specific equation process. i =1,...,nt (1) where r i,t is the logarithmic return on a specific day i within a given montht . the total volatility of daily returns can be defined as ( i 2 ,t i gi,t ) which is the sum of two components: t is the long-term component that is believed to reveal the source of stock market volatility, and the short-term component that accounts for short-lived daily fluctuations (engle et al., 2013; yu et al., 2021). the value of n t represents the number of trading days in the montht , and i−1,t represents the information set available up (i−1)th to the given day of the periodt . the conditional variance g i,t of the short-term component follows a daily garch (1, 1) process (bollerslev, 1986): (ri−1 , t )2 gi,t =(1 )+ g i−1,t (2) t low-frequency variables, such as realized volatility or macro variables, can describe the long-term component t . two different specifications for the long-term component without changes in the short-term equation exist. the first specification examines the effect of realized volatility on the long-term component of the total volatility. , , , i t t i t i t r g = + david m. reynolds (2024) 23 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe smoothed realized volatility is defined as the variable in the spirit of midas regression. the following t is the specification for the midas filtering. drama 89 k t =m rv k (w1)rvt−k (3) k−1 monthly smoothed realized volatility is denoted by n t (rvt ri 2 , t ) with a fixed span of time representing the number i=1 of periods k used to smooth the realized volatility. the second specification involves directly inserting macroeconomic variables into the long-term component. k t =m rv k (w1)rvt−k gepu k (w1)geput−k k=1 k=1 (4) the log difference of gepu t−k denotes the level of change rate of monthly global economic policy uncertainty. equation 4, as used by yu et al. (2021), captures information explained by both the realized volatility and economic policy uncertainty and is compared to a basic model in which the long-term component does not involve gepu information. the weightage method utilized in both equations 3 and 4 is explained using a beta lag polynomial as: k (w1) = k (k / k)w1−1 (5) ( j / k)w1−1 j=1 where the coefficients in equation 5 equate to 1, we examine how gepu affects stock volatility. we utilize the estimated daily total variance i 2 ,t as a measure of the total variance's accuracy. the realized total volatility is denoted ri 2 ,t as the variable. the garch midas-rv+gepu model, developed using equations 1, 2, 4, and 5, is assessed against the conventional garch-midas-rv model that is constructed by equations 1, 2, 3, and 5, to determine its predictive capability. comparison is also made with a simplistic garch (1, 1) model (bollerslev, 1986), shown. rt t (6) where t t z t , , and the conditional variance process, t 2 , has the form: t 2 =k t 2 −1 t 2 −1 (7) david m. reynolds (2024) 24 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe secondly, in order to assess the predictability of volatility in a particular model, we utilize various loss functions that compare the estimated predicted variance to the realized volatility. the six loss functions employed in this study are presented in the following equations. 1 t 2 2)2 (8) the data three stock markets in sadc countries, namely, botswana, mauritius and south africa were considered. the countries were selected based on data availability. the authors use daily data from the http://www.investing.com/ database for the period from 01/05/2008 to 24/04/2022. their data are divided into two periods. the first period (before covid-19 pandemic) goes from 01/05/2008 to 04/03/2020, the second period (during covid-19) goes from 05/03/2020 to 24/04/2022. they opt for the monthly gepu index computed by baker et al. (2016), which is deemed a reputable proxy for real-world economic policy uncertainty. it can be obtained from their website (http://www.policyuncertainty.com/). additionally, we incorporate the monthly oil consumption shock, available on baumeister and hamilton's (2019) website. the analysis encompasses gepu and oil consumption shocks that occurred from may 2008 to april 2022, including the financial crisis around june 2009, the european sovereign debt crises, us-china trade tensions, brexit, and the new context of covid-19 as a global pandemic. the study utilized a total of 3,258 observations. results and discussion table 1 displays the descriptive statistics for three data series of stock indices and the gepu index. the sample size for each selected sadc stock market's stock index series is 3258, while the gepu index and oil consumption each have 168 observations. the stock index has a daily data frequency, whereas the gepu index has a monthly frequency. table 2 presents the descriptive statistics for the stock returns of the sadc markets examined, along with the logarithms of the gepu change rate and oil consumption. the table includes 3257 stock return observations for each country, 167 gepu observations and 93 oil consumption observations. tables 1 and 2 indicate that the kurtosis values of both the stock index and return series are positive. however, the south africa stock index series and logarithm of oil consumption exhibit negative skewness, while the remaining stock index and return series for all sadc stock markets have positive skewness. statistical properties of the variables in our study are presented in table 3. based on the results from the augmented dickey-fuller (adf), phillips-perron (pp), and vratio (vr) tests, all statistics significantly reject the null hypothesis of a unit root at the 1% level. this confirms that all of our series are stationary. additionally, the jarque-bera (jb) test of all stock returns, gepu, and oil consumption indicates that all of their distributions deviate significantly from normality at the 1% level. furthermore, the autoregressive conditional heteroscedasticity (arch) test statistics for each individual stock return exceeded 100 according to engle's (1982) analysis, with critical values of the arch test at the 1% level of 6.6635. this implies noteworthy heteroskedastic effects. notably, the descriptive statistics obtained over the study period take precedence for both in-sample (before covid-19) and out-of-sample (during covid-19) data. furthermore, the estimated parameters of the impact that gepu and oil consumption demand shock (ocds) have on stock market volatility in three sadc countries are presented. tables 4 and 5 display the findings from the garch and garch-midas models, which include the entire sample (01/05/2008 to 24/04/2022) divided 1 ˆ ( t t i mse t = = − 2 2 2 1 1 ˆ ( ) t t t i rmse t = − = (9 ) http://www.investing.com/ http://www.investing.com/ david m. reynolds (2024) 25 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe into subsamples. the study consists of two datasets: insample data (01/05/2008 to 04/03/2020), representing the pre-covid-19 period, and out-of-sample data (05/03/2020 to 24/04/2022), representing the duringcovid-19 period. the garch (1, 1) model parameters are significant at the 1% level in all cases, except for in south africa, where they are significant at the 5% level, and for k, which is non-significant in botswana. these findings suggest that the garch (1, 1) model is a good fit for the daily data. the garch-midas model, , , rv , and mshows positive and significant coefficients, confirming its suitability for the mixed data sampling model. the importance lies in examining the statistical significance of the coefficient rv to understand if ocds or gepu impact the long-term volatility of sadc countries. additionally, the sum of arch and garch terms and is less than one( 1) , inferring that ocds does not have a permanent effect on stock market returns. the empirical results from table 5 for the garch-midas-rv+ocds model demonstrate significant coefficients rv for botswana, mauritius, and south africa at 1%, indicating a positive response in stock returns to changes in oil consumption demand shocks. the estimated coefficients for botswana, mauritius, and south africa were 0.076, 0.001, and 0.119, respectively. this contradicts the findings of salisu and gupta (2021), who reported a negative response for south africa. the impact of gepu on stock market returns is not permanent. in the garch-midas-rv+gepu model, the estimated coefficients for botswana, mauritius, and south africa are 0.056, 4.052e-04, and 0.033, respectively. these outcomes indicate that gepu has a significant and positive effect on sadc stock markets for the insample data. this conclusion aligns with the findings of yu et al. (2021). the same positive impact of ocds and gepu on stock markets is obtained for all three countries in the full sample (table 6). the estimated coefficient rv , which is realized volatilities, is 0.117 for botswana, 0.170 for mauritius, and 0.119 for south africa in for ocds. for gepu case, rv is 0.016, 0.099, and 0.014 for the levels of significance are represented by ***, **, and *, respectively, indicating 1, 5, and 10%. garch-midas refers to generalized autoregressive conditional heteroskedasticity extended mixed data sampling, while gepu refers to global economic policy uncertainty. midas-rv+gepu models shows that the latter has superior fitness for the given countries. this is owing to the smaller aic and bic, and larger log table 7. in-sample evaluation results for the garch and garch-midas models. variable garch garch-midas aic bic log-l aic bic log-l oil consump tion demand shoc k botswana -1.057 -1.044 1461.079 -23207.7 -23172.2 11609.9 mauritius 2.594 2.607 -3563.671 -23024 -22988.5 11518 south africa 1.358 1.371 -1862.799 -17745.3 gepu -17709.8 8878.67 botswana -21337.2 -21301.7 10674.6 mauritius -22525.4 -22490 11268.7 south africa -17364.1 -17328.7 8688.06 aic, bic, and log-l values are used to compare fitness of the two models. aic is the akaike information criteria, bic is the bayesian information criteria, and log-l is the optimal log-likelihood function. garchmidas =generalized autoregressive conditional heteroskedasticity extended mixed data sampling. david m. reynolds (2024) 26 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe table 8. results of out-of-sample volatility forecast validation. mse rmse model botswana garch 4.248e-05 6.517e-03 garch-midas 306.600e-12# 1.751e-05# mauritius garch 0.018” 1.341e-01 garch-midas 0.761 8.726e-01# south africa garch 8.843e-02 2.973e-01 garch-midas 7.322e-09# 8.557e-05# # denotes that the garch-midas model outperforms the garch model and ”denotes that the garch model outperforms the garch-midas model. garch-midas=generalized autoregressive conditional heteroskedasticity extended mixed data sampling. l than those of the traditional garch (1,1) model. involving ocds and/or gepu in the garch-midas-rv model leads to improved fitness compared to the garch (1,1) model. in conclusion, garch-midasrv+gepu are recommended for better model fitness. the out-ofsample projection pertains to the period from 05/03/2020 to 24/04/2022, which coincides with the covid-19 era. to assess the out-of-sample forecast capability of a volatility model, the loss function is utilised. it pertains to the anticipation of ocds as well as gepu variables concerning stock volatility in botswana, mauritius, and south africa. table 8 displays the mean square error (mse) and root mean square error (rmse), providing insight into the effectiveness of two models in predicting the daily total volatility of stock in particular countries. the garchmidas-rv+ocds model outperforms the garch model for sadc countries when considering both mse and rmse conclusion and policy implications the response of stock market volatility in botswana, mauritius, and south africa to gepu and oil consumption demand shocks (ocds) was examined by using the garch-midas approach. our dataset comprises subsamples from 01/05/2008 to 24/04/2022, with the first being the in-sample data (01/05/2008 to 04/03/2020) corresponding to the pre-covid-19 period and the second being the out-of-sample data (05/03/2020 to 24/04/2022) corresponding to the during-covid-19 period. our study presents evidence of the effects of gepu and oil shocks on stock market volatility in three sadc nations, utilizing empirical analysis within the sample and prediction outside it. during the in-sample analysis, the findings indicate that the garch (1, 1) model is a good fit for daily data, displaying significant parameters for all targeted sadc countries with the exception of one. the garchmidas model also demonstrates a good data fit, with a positive and significant coefficient for either ocds or gepu on the countries' long-term volatility. these results suggest that both ocds and gepu have a noteworthy david m. reynolds (2024) 27 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe and positive influence on the sadc stock market in the insample data. the models' fitness performance is evaluated using optimum log-likelihood function, aic, and bic. the models garch-midas-rv+ocds and garch-midas-rv+gepu outperform the traditional garch (1, 1) model. the results of out-of-sample prediction indicate the garch-midas-rv+ocds model showing better performance than the garch model for sadc countries when mse and rmse are used. furthermore, the influence of ocds and gepu on stock market returns appears to be transient rather than enduring, indicating that these factors do not have a lasting effect. given these results, it is advisable that policymakers in the chosen sadc nations focus on the effects of oil consumption and global economic policy uncertainty and their possible influence on stock market instability. as the sadc countries are net importers of oil and have a fragile economic context post covid-19, global economic policy uncertainty shocks have significant effects: i) an increase in risk premium leads to more volatility and correlation in stock markets, especially in weaker economic conditions; ii) generally, lesser developed countries' stock returns experience negative effects; iii) crude oil price volatility is also impacted negatively, and is directly linked to major events, with varying impacts depending on the type of event. this suggests that measures to stabilize oil prices and promote economic stability and transparency could help in reducing stock market volatility. moreover, policymaker could consider implementing policies to encourage investment diversification to reduce the impact of global shocks on the domestic stock market. policies that promote the development of financial markets, including stock markets, could also increase resilience to external shocks and contribute to overall economic growth. furthermore, given the better fitness performance of the garch-midas-rv+ocds and garch-midas rv+gepu models compared to the traditional garch (1, 1) model, policymakers could consider using these models in their forecasting and risk management processes. finally, the study highlights the importance of considering the impact of external factors on domestic stock market volatility and the need for policymakers to implement policies that promote economic stability and financial market development. conflict of interests the author has not declared any conflict of interests. references ahmed my, sarkodie sa (2021). covid-19 pandemic and economic policy uncertainty regimes affect commodity market volatility. resources policy 74:102303. anderson t, bollerslev t, diebold f (2007). roughing it up: including jump component in the measurement, modeling and forecasting of return volatility. the review of economics and statistics 89:701-720. antonakakis n, chatziantoniou i, filis g (2013). dynamic comovements of stock market returns, implied volatility and policy uncertainty economics letters 120(1):87-92. apostolakis gn, floros c, gkillas k, wohar m (2021). political uncertainty, covid-19 pandemic and stock market volatility transmission. journal of international financial markets, institutions and money 74:101383. david m. reynolds (2024) 28 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe asgharian h, hou aj, javed f (2013). the importance of the macroeconomic variables in forecasting stock return variance: a garch midas approach. journal of forecasting 32(7):600-612. aydin m, pata uk, inal v (2022). economic policy uncertainty and stock prices in bric countries: evidence from asymmetric frequency domain causality approach. applied economic analysis 30(89):114129. baker sr, bloom n, davis sj (2016). measuring economic policy uncertainty the quarterly journal of economics 131(4):1593-1636. baumeister c, hamilton jd (2019). structural interpretation of vector autoregressions with incomplete identification: revisiting the role of oil supply and demand shocks. american economic review 109(5):1873-1910. baumeister c, kilian l (2012). real-time forecasts of the real price of oil journal of business and economic statistics 30(2):326-336. https://www.bankofcanada.ca/wp-content/uploads/2011/08/wp201116.pdf beckmann j, czudaj r (2017). exchange rate expectations and economic policy uncertainty. european journal of political economy 47:148-162. bekiros s, gupta r, kyei c (2016). on economic uncertainty, stock market predictability and nonlinear spillover effects. the north american journal of economics and finance 36:184-191. bijsterbosch m, guérin p (2013). characterizing very high uncertainty episodes. economics letters 121(2):239243. boffelli s, skintzi vd, urga g (2016). high-and low-frequency correlations in european government bond spreads and their macroeconomic drivers. journal of financial econometrics 15(1):62105. bollerslev t (1986). generalized autoregressive conditional heteroskedasticity. journal of econometrics, pp. 307-327. brogaard j, detzel a (2015) the asset-pricing implications of government economic policy uncertainty. management science 61(1):3-18. caggiano g, castelnuovo e, figueres jm (2017). economic policy uncertainty and unemployment in the united states: a nonlinear approach. economics letters 151:31-34. chan jc, grant al (2016). modeling energy price dynamics: garch versus stochastic volatility. energy economics 54:182-189. chang t, chen wy, gupta r, nguyen dk (2015). are stock prices related to the political uncertainty index in oecd countries? evidence from the bootstrap panel causality test. economic systems 39(2):288-300. david m. reynolds (2024) 29 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe chen yc, rogoff ks, rossi b (2010). can exchange rates forecast commodity prices? the quarterly journal of economics 125(3):11451194. cheng chj (2017). effects of foreign and domestic economic policy uncertainty shocks on south korea. journal of asian economics 51:1-11. chiang tc (2019). economic policy uncertainty, risk and stock returns: evidence from g7 stock markets. finance research letters 29:4149. christou c, cunado j, gupta r, hassapis c (2017a). economic policy uncertainty and stock market returns in pacific rim countries: evidence based on a bayesian panel var model. journal of multinational financial management 40:92-102. christou c, gupta r, hassapis c (2017b). does economic policy uncertainty forecast real housing returns in a panel of oecd countries? a bayesian approach. the quarterly review of economics and finance 65:5060. conrad c, loch k (2015a). anticipating long term stock market volatility. journal of applied econometrics 30(7):1090-1114. conrad c, loch k (2015b). the variance risk premium and fundamental uncertainty economics letters 132:5660. conrad c, loch k, rittler d (2014). on the macroeconomic determinants of long-term volatilities and correlations in us stock and crude oil markets. journal of empirical finance 29:26-40. dakhlaoui i, aloui c (2016). the interactive relationship between the us economic policy uncertainty and bric stock markets. international economics 146:141-157. demir e, ersan o (2017). economic policy uncertainty and cash holdings: evidence from bric countries. emerging markets review 33:189-200. demir e, ersan o (2017). economic policy uncertainty and cash holdings: evidence from bric countries. emerging markets review 33:189-200. engle rf, ghysels e, sohn b (2013). stock market volatility and macroeconomic fundamentals. review of economics and statistics 95(3):776-797. fama ef (1970). efficient capital market: a review of theory and empirical work. the journal of finance 25(2):383-417. fang l, chen b, yu h, qian y (2018). the importance of global economic policy uncertainty in predicting gold futures market volatility: a garch midas approach. journal of futures markets 38(3):413-422. david m. reynolds (2024) 30 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe fang l, yu h, li l (2017). the effect of economic policy uncertainty on the long-term correlation between us stock and bond markets. economic modelling 66:139-145. forsberg l, ghysels e (2006). why do absolute returns predict volatility so well? journal of financial econometrics 6:31-67. gao r, zhang b (2016). how does economic policy uncertainty drive gold–stock correlations? evidence from the uk. applied economics 48(33):3081-3087. gao x, ren y, li x (2019) the interdependence of global oil price, china's stock price and economic policy uncertainty. australian economic papers 58(4):398-415. ghysels e, sinko a, valkanov r (2006). midas regression: further results and new directions. econometric reviews 26:53-90. ghysels e, santa-clara p, valkanov r (2004). the midas touch: mixed data sampling regression models, cirano working papers. https://econpapers.repec.org/repec:cir:cirwor:2004s-20 guo p, zhu h, you w (2018). asymmetric dependence between economic policy uncertainty and stock market returns in g7 and bric: a quantile regression approach. finance research letters 25:251-258. haugom e, langeland h, molnár p, westgaard s (2014). forecasting volatility of the us oil market. journal of banking and finance 47:114. jin x, chen z, yang x (2019). economic policy uncertainty and stock price crash risk. accounting and finance 58(5):1291-1318. kang w, ratti ra (2013). oil shocks, policy uncertainty and stock market return. journal of international financial markets, institutions and money 26:305-318 ko jh, lee cm (2015). international economic policy uncertainty and stock prices: wavelet approach. economics letters 134:118-122. krol r (2014). economic policy uncertainty and exchange rate volatility international finance 17(2):241-256. https://econpapers.repec.org/repec:bla:intfin:v:17:y:2014:i:2:p:241-256 li t, ma f, zhang x, zhang y (2020). economic policy uncertainty and the chinese stock market volatility: novel evidence. economic modelling 87:24-33. li xl, balcilar m, gupta r, chang t (2016). the causal relationship between economic policy uncertainty and stock returns in china and india: evidence from a bootstrap rolling window approach. emerging markets finance and trade 52(3):674-689. david m. reynolds (2024) 31 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe li y, ma f, zhang y, xiao z (2019). economic policy uncertainty and the chinese stock market volatility: new evidence. applied economics 51(49):5398-5410. mckibbin w, fernando r (2021). the global macroeconomic impacts of covid-19: seven scenarios. asian economic papers 20(2):1-30. mei d, zeng q, zhang y, hou w (2018). does us economic policy uncertainty matter for european stock markets volatility? physica a: statistical mechanics and its applications 512:215-221. mensi w, hammoudeh s, reboredo jc, nguyen dk (2014). do global factors impact brics stock markets? a quantile regression approach. emerging markets review 19:1-17. momin e, masih m (2015). do us policy uncertainty, leveraging costs and global risk aversion impact emerging market equities? an application of bounds testing approach to the brics available at: https://mpra.ub.unimuenchen.de/65834/1/mpra_paper_65834.pdf/ (accessed 10 february 2020). mthembu p (2020). the impact of covid-19 in the sadc region: building resilience for future pandemics. https://www.southsouthgalaxy.org/news/article-the-impact-of-covid-19-in-the-sadcregion-building-resilience-for-future-pandemics/ nomikos nk, pouliasis pk (2011). forecasting petroleum futures markets volatility: the role of regimes and market condition. energy economics 33(2):321-337. ozoguz a (2009). good times or bad times? investors' uncertainty and stock returns. the review of financial studies 22(11):4377-4422. pan z, wang y, wu c, yin l (2017). oil price volatility and macroeconomic fundamentals: a regime switching garch-midas model. journal of empirical finance 43:130-142. phan dhb, sharma ss, tran vt (2018). can economic policy uncertainty predict stock returns? global evidence. journal of international financial markets, institutions and money 55:134-150. reboredo jc, naifar n (2017). do islamic bond (sukuk) prices reflect financial and policy uncertainty? a quantile regression approach. emerging markets finance and trade 53(7):1535-1546. sadorsky p (2006). modelling and forecasting petroleum futures volatility. energy energy economics 28:467488. salisu a, gupta r (2021). oil shocks and stock market volatility of the brics: a garch-midas approach. global finance journal, elsevier 48(c). sevi b (2014) forecasting the volatility of crude oil futures using intraday data. european journal of operational research 235(3):643659. https://mpra.ub.uni-muenchen.de/65834/1/mpra_paper_65834.pdf/ https://mpra.ub.uni-muenchen.de/65834/1/mpra_paper_65834.pdf/ https://www.southsouthgalaxy.org/news/article-thedavid m. reynolds (2024) 32 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe sharif a, aloui c, yarovaya l (2020). covid-19 pandemic, oil prices, stock market, geopolitical risk and policy uncertainty nexus in the us economy: fresh evidence from the wavelet-based approach. international review of financial analysis 70:101496. sum v (2012). economic policy uncertainty and stock market performance: evidence from the european union, croatia, norway, russia, switzerland, turkey and ukraine. journal of money, investment and banking 25:99-104. tabak bm, cajueiro do (2007). are the crude oil markets becoming weakly efficient over time? a test for timevarying long-range dependence in prices and volatility. energy economics 29(1):28-36. wang x, luo y, wang z, xu y, wu c (2021). the impact of economic policy uncertainty on volatility of china’s financial stocks: an empirical analysis. finance research letters 39:101650. wang y, liu l (2010). is wti crude oil market becoming weakly efficient over time? new evidence from multiscale analysis based on detrended fluctuation analysis. energy economics 32(5):987-992. wang y, wu c (2012). forecasting energy market volatility using garch models: can multivariate models beat univariate models? energy economics 34(6):2167-2181. wang y, wu c, yang l (2016). forecasting crude oil market volatility: a markov switching multifractal volatility approach. international journal of forecasting 32(1):1-9. wu tp, liu sb, hsueh sj (2016). the causal relationship between economic policy uncertainty and stock market: a panel data analysis. international economic journal 30(1):109-122. wu c, che h, chan ty, lu x (2015). the economic value of online reviews, marketing science 34(5):739754. xiong x, bian y, shen d (2018). the time-varying correlation between policy uncertainty and stock returns: evidence from china. physica a: statistical mechanics and its applications 499:413-419. yang j, yang c (2021). economic policy uncertainty, covid-19 lockdown, and firm-level volatility: evidence from china. pacific-basin finance journal 68:101597. youssef m, mokni k, ajmi an (2021). dynamic connectedness between stock markets in the presence of the covid-19 pandemic: does economic policy uncertainty matter? financial innovation 7(1):1-27. yu h, fang l, sun w (2018). forecasting performance of global economic policy uncertainty for volatility of chinese stock market. physica a: statistical mechanics and its applications 505:931-940. yu x, huang y (2021). the impact of economic policy uncertainty on stock volatility: evidence from garch– midas approach. physica a: statistical mechanics and its applications 570:125794. david m. reynolds (2024) 33 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe yu x, huang y, xiao k (2021). global economic policy uncertainty and stock volatility: evidence from emerging economies. journal of applied economics 24(1):416-440. appendix figures mauritius figure 2 . garch midas rv+gepu garch midas rv + oil consumption shock . david m. reynolds (2024) 34 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe botswana figure 3. garch midas rv+gepu garch midas rv + oil consumptio n shock. american interdisciplinary journal of business and economics issn: 2837-1909| impact factor : 6.71 volume. 11, number 1; january-march, 2024; published by: scientific and academic development institute (sadi) 8933 willis ave los angeles, california https://sadijournals.org/index.php/aijbe| editorial@sadijournals.org 1 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe e-service quality and customer loyalty in online shopping in nigeria aniefiok okon akpan and aniebiet etuk department of marketing, akwa ibom state university, obio akpa campus doi: https://doi.org/10.5281/zenodo.10814519 abstract: businesses grow and become successful when loyal customers are available to repeatedly patronize them. however, getting loyal customers in the online market is more difficult than in the traditional market. many online firms do not know how to make their online presence attractive enough to meet the needs of their customers to retain them. therefore, this study investigated the nigerian online market to understand how customer loyalty can be achieved through e-service quality. thus, the objective of this study was to examine the effect of e-service quality on customer loyalty in the nigerian online market. the survey research design was adopted for the study, and a questionnaire was used to collect data. purposive and snowball techniques were used in selecting the respondents. three hundred and eighty four online shoppers in nigeria participated in the study. however, responses from 376 respondents were valid for analysis. data analysis was performed using descriptive and inferential statistics. specifically, the hypotheses were tested using regression. findings revealed that each of the three dimensions of e-service quality (fulfillment, responsiveness and security) considered in the study had a significant effect on customer loyalty. it was concluded that focusing on these dimensions of e-service quality can enhance customer loyalty. therefore, it was recommended that online retailers in nigeria should strongly consider these dimensions of e-service quality in their bid to gain customer loyalty. keywords: e-service quality, customer loyalty, online shopping, fulfillment, responsiveness, online security introduction 1.1 background to the study internet technology has made it possible for goods and services to be sold and bought online. this has made life easy for everyone. today, at the comfort of your home or office, you can place an order for almost anything you want online and it will be delivered to you. the online market saves time and offers convenience to customers (rita, oliveira & farisa,2019). many customers now buy most of the things they consume on a daily basis from online shops, and so they are gradually and steadily moving away from the traditional market (nagaraj & singh, 2017). the global online market is growing every day. as internet access and adoption increase around the world, with the global pool of internet users exceeding five billion, the number of people who buy online is always increasing. according to (statista, 2023), global retail online sales in 2022 exceeded six trillion usd, and this figure will attain greater heights in the coming years. in nigeria, the online market is growing rapidly. the digital landscape of the country is flourishing. the country has a robust internet economy, which is one of the largest in africa. the country is blessed with a large population and internetfriendly young people who spend most of their time online. the availability of affordable smartphones coupled with accessible mobile internet has broadened the country’s online market. according to aniefiok okon akpan and aniebiet etuk (2024) 2 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe statista (2022), internet penetration in nigeria is about seventy percent (70%), while the population that shop online is 76.7 million. the growth in the online market, however, goes with increased competition. this is because competitors can easily enter the online market because of low entry barriers that characterize the online business environment (wang, cavusoglu & deng,2016), coupled with low switching costs, which empower customers to freely move from one online shop to another. thus, for online firms to survive and be sustainable, they should strategically position themselves to offer a pleasurable experience to the customer. in both physical and online shopping, the experience of the customer influences their behavior in relation to future shopping. according to chang and wang (2011), such behavior includes repurchase intention, word of mouth, and the intention to revisit the store, which are the pillars of customer loyalty. the main challenge in online shopping is to achieve customer loyalty. a key strategy to gain the loyalty of customers and thrive in the highly competitive online environment is that which focuses on service quality (rita et al., 2019). according to sadaf and rahela (2019), service quality describes a service that satisfies customers’ needs and fulfills their expectations. an online firm must deliver superior service experience to its customers to win their loyalty ( gournaris, dimitriadis & stathakopoulos, 2010). according to brady and robertson (2001), customer loyalty in online shopping is strongly related to the quality of service offered. the higher the quality of service, the more loyal a customer will be. thus, understanding how e-service quality affects the loyalty of online shoppers in nigeria will help nigerian online retailers formulate suitable strategies that will deliver the highest quality of service to their customers in order to increase their repeat purchases and loyalty. this will no doubt increase the profitability of these firms and consequently enhance the growth of the relatively young nigerian online market. therefore, this study aims to examine the effect of e-service quality on customer loyalty in the nigerian online market, with a focus on online shopping. it is pertinent to note that the literature contains diverse measures (dimensions) of e-service quality. however, a recent study by ighmereho, ojo, omoyele, and olabode (2022) identified seven most important dimensions of eservice quality that can be applied to any e-service setting. they are security, ease of use, fulfillment, reliability, responsiveness, website appearance, and personalization. this study considered three of these dimensions and selected them at random. 1.2 statement of the problem businesses grow and become successful when loyal customers are available to repeatedly patronize them. based on this, business people usually strive to acquire customers who are loyal to their firms. however, acquiring loyal customers in the online market is a relatively difficult task compared to that in the traditional market. this is because e-commerce has made it very easy for customers to click through many online shops to compare market offerings. this action enhances the switching behavior of customers, as customers can easily locate and move to where they can get better offers. this situation has led to the failure of many online businesses, especially as many online firms do not know how to make their online presence attractive enough to meet the needs of their customers in order to retain them. following the challenge of gaining customer loyalty in the online environment, many studies have been carried out in different countries to see how loyalty can be enhanced in the online market. many of these studies (pradnyadewi & giantari, 2022; hakam, hidayati & supriyanto,2022; purnamasari,2022; wirapraja, aribowo, &setyoadi,2021; alchalidy, lubis & utami,2020; wali & copara,2012) found that e-service quality is the most valuable determinant of online customer loyalty and business success. according to puriwat and tripopsakul (2017), for an online business to gain the loyalty of customers, quality of service is a “must”. therefore, it is important for every online market to examine the connection between e-service quality and customer loyalty in their respective domains. this will help them understand the dimensions of e-service quality that are peculiar to their environment. however, in nigeria, nothing much has been done in that direction. aniefiok okon akpan and aniebiet etuk (2024) 3 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe specifically, we could not find any study on the effect of e-service quality on customer loyalty with respect to online shopping in nigeria. there is a need for studies to be conducted in this area, especially now that the cashless policy of the central bank of nigeria (cbn) coupled with the recent naira crunch has pushed many retail businesses to adopt online channels for their operations. it is against this background that this study examined the effect of key dimensions of e-service quality, such as fulfillment, responsiveness, and security, on customer loyalty in online shopping in nigeria. 1.3 objectives of the study the general objective of this study was to examine the effect of e-service quality on customer loyalty with respect to online shopping in nigeria. the specific objectives were to:  examine the effect of fulfillment on customer loyalty in online shopping in nigeria  examine the effect of responsiveness on customer loyalty in online shopping in nigeria  examine the effect of security on customer loyalty in online shopping in nigeria 1.4 research questions the following research questions were raised: 1. how does fulfillment affect customer loyalty in nigeria? 2. what effect does responsiveness have on customer loyalty in online shopping in nigeria? 3. to what extent does security affect customer loyalty in online shopping in nigeria? 1.5 hypotheses of the study the following null hypotheses were developed to guide the study: h01: fulfillment has no significant effect on customer loyalty in online in nigeria h02: responsiveness has no significant effect on customer loyalty in online shopping in nigeria h03: security has no significant effect on customer loyalty in online shopping in nigeria literature review 2.1 conceptual review the aim of this section of the review is to explain the important concepts surrounding the study. 2.1.1 online shopping online shopping, also known as electronic shopping or internet shopping, belongs to the general family called ecommerce. it is a form of electronic commerce that involves buying goods and services directly from sellers over the internet. initially, companies used the internet as an advertising medium to provide information about their products. however, following the development of interactive web pages and secure transactions, the platform evolved to become a full-blown market, where products are sold and bought (botha, bothma & geldenhuys, 2008). when buying online, the customer must first access the vendor’s website or online store, where they can choose the items they want and schedule delivery. payment for the products can be done upon delivery or online using a credit or debit card (market business news, n,d.) . online shopping has been around for a while and is becoming increasingly popular. this popularity is a result of the advantages it provides to both online buyers and businesses, including the freedom to shop whenever they want and the chance to save money on trip expenses. in addition, less visits to the store are required, more selections are available, overhead costs are reduced, and the market area is increased, among other benefits (gabriel, ogbugwe, & ahiauzu, 2016) the market for internet purchases is constantly growing. global internet sales in 2021 were estimated to be usd 5.2 trillion. forecasts indicate that the amount will increase by 56% over the next few years, reaching usd 8.1 trillion in 2026 (statista, 2022b). amazon, ebay, rakuten, shopee, aliexpress, etsy, walmart, mercado libre, wildberries, and ozon are just a few of the leading international online retailers behind this expansion (webretailer, 2022).). aniefiok okon akpan and aniebiet etuk (2024) 4 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe 2.1.2 concept of service quality service occupies a significant portion of every economy and is crucial to human existence (ejigu, 2016). one of the main issues in the management of service is service quality. according to sadaf & rahela (2019), service quality is defined as a service that meets customers’ wants and expectations. it can also be seen as the subjective contrast between what clients expect from a service in terms of quality and what they actually get. therefore, it is a type of mindset that results from contrasting expectations with actual performance. zeithaml, parasuraman, and malhotra (2000) found that customers’ pre-service expectations influence how well services are perceived by them. thus, according to jayaraman, shanker, and hor (2010), customers rate the quality of a service as low or high, depending on whether it meets or exceeds their expectations. existing research examines two aspects of service quality: traditional and e-service quality. conventional or traditional service quality refers to the standard of all non-technology-based client contacts and experiences with businesses (zeithaml et al.,2000). because services differ from physical products in many ways, determining how to measure service quality in this context proved difficult for service providers (sadaf & rahela, 2019). services are intangible and cannot be inventoried. also, there is no ownership change. furthermore, manufacturing, distribution, and consumption occur at the same time. most crucially, however, customers participate in the production process. thus, customers directly judge the quality of the service as they receive it. researchers have tried to pinpoint the aspects of a service that are crucial to quality assessments. grönroos (1984), for instance, based his measurement of service quality dimensions on functional and technical excellence. however, a study by parasuraman, zeithaml, and berry (1985) came up with ten dimensions that formed the foundation for customer assessments of service quality. they are tangibles, access, courtesy, communication, credibility, security, responsiveness, competence, understanding/knowing the consumer, and reliability. to create and improve service quality dimensions and quantify consumers’ overall assessments of a company’s service quality, parasuraman et al. (1988) performed empirical investigations in many industrial sectors. based on scale improvement, the original 10 factors were reduced to five: tangibles, reliability, responsiveness, assurance, and empathy. these five dimensions are collectively known as servqual. following this, other researchers developed diverse measures of service quality such as servperf (service performance) by cronin andtaylor (1992), rsqs (retail service quality scale) by dabholkar, thorpe, and rentz (1996), and pcp (pivotal, core, peripheral) scale by philip and hazlett (1997), among others. despite the availability of these various measures of service quality, servqual by parasuraman et al. (1988) remains the most used measure of conventional service quality. however, the five servqual dimensions have been found to be inadequate for assessing the quality of services provided via the internet and other digital platforms (barrutia & gilsanz,2009; parameswaran & rasheedal, 2018). this is due to the extent to which e-service delivery procedures vary from traditional service delivery procedures. 2.1.3 e-service quality the development of the internet and its use in commerce gave rise to the idea of "e-service". e-service quality was created as a result of this progress, and several definitions have been provided by various writers. e-service quality was described by zeithaml et al. (2000) as the degree to which a website makes it easy to shop, buy, and get services. according to parasuraman et al. (2005), "e-service quality involves all phases of a customer’s interactions with a website". zeithaml et al. (2002) evaluated the gap model of service quality to better understand e-services. they proposed the gap model of e-service quality, which is an improvement on the previously published and well-liked gap model of service quality. this adjustment was required because e-services are provided to clients via technology, and it was vital to consider how people and technology interact. many academics have concentrated on conceptualizing, assessing, and examining the effects of e-service quality in the online marketplace. they assessed e-service quality using different dimensions based on the specific characteristics of the provided service (alsudairi,2012; hongxiu, yong & reima,2009; santos,2003 zeithaml, et al.,2000). however, this study focuses on three dimensions: security, fulfillment, and responsiveness. aniefiok okon akpan and aniebiet etuk (2024) 5 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe security security, according to narteh (2013), involves protecting customers’ personal information and safeguarding them from fraud and financial loss. e-channels can be accessed from any country in the world, and different countries have different security concerns. accordingly, lee and lin (2005) believed that online channels should offer secure online transactions to make users feel at ease. according to zhengwei and jinkun (2012), security occupies a distinct position in electronic transactions due to the prevalence of internet fraud. following customers’ view that internet payment channels are insecure and susceptible to interception, risk perception is frequently high for online transactions, which reduces customers’ level of trust. this can deter them from conducting online information searches and financial transactions. agbonifoh, ogwo, nnolim, and nkamnebe (2007) assert that customers who use the internet prefer informational and transactional securities. informational security refers to protection from damage brought on by unauthorized users who use consumers’ data illegally. transactional security relates to the protection of online business transactions. security is a crucial dimension of e-service quality (paulo et al., 2019; akinmayowa & ogbeide, 2014; wolfinbarger & gilly, 2003) fulfillment according to ojasalo (2010), fulfillment refers to how well an e-channel lives up to customers’ expectations in terms of how the site delivers on its promises regarding order fulfillment and item availability. the emphasis is on the needs of the customers in relation to why they are using the e-channel and what they are receiving, and it shows the outcome performance of service delivery. according to ahmed, romeika, kauliene, streimikis, and dapkus (2020), fulfillment looks at how website promises are carried out. for customers to receive the exact item they requested, a product must be accurately shown and described, and it must be delivered within the allotted time limit. according to several authors (paulo et al., 2019; narteh, 2015; sakhaei, afshari and esmaili., 2014), fulfillment is a factor that defines the overall quality of an e-service. responsiveness this refers to how quickly problems and returns are handled through the site (tan et al., 2018). according to muhammad et al. (2014), it is related to how customer support or care services react to assist customers when they experience issues with a service. it is the company’s capacity to respond to client complaints resulting from failed transactions. it also includes the extent to which the company takes steps to recover service when the echannel fails to meet expectations. furthermore, it entails paying close attention to and responding quickly to customer requests, inquiries, complaints, and concerns as well as repaying clients when they suffer financial losses. e-channel users anticipate prompt responses to their demands. therefore, the perception of the quality of an e-service depends on its capacity to address client inquiries, worries, and disappointment. according to tan et al. (2018), al-hawary and al-smeran (2017), and narteh (2015), responsiveness is a crucial component of the quality of an e-service. 2.1.4 customer loyalty according to godwin, udo, and bagchi (2010), customer loyalty is the behavior that expresses the connection between the customer and the business in relation to making repeated or frequent purchases and praising the business to others is considered a measure of loyalty. understanding a customer’s level of loyalty is advantageous for both the business and the customer. according to rabinovich & bailey (2004), loyal customers are willing to purchase from businesses that provide the best value relative to their rivals. over time, loyal customers will typically purchase more goods and be less demanding of the business. if there are few mistakes, loyal customers will likely ignorethem; they will not mind if product prices go up and will spread positive word of mouth about the business and its offerings. consequently, loyal customers constitute the foundation for the long-term success and growth of the business customer loyalty is a natural outcome of providing high-quality service (zeithaml.2000). it significantly affects a company’s market share and profit margins (rabinovich & bailey. 2004). customer loyalty is the behavior that follows a transaction and is linked to the perception of the quality received, the service experienced and the level aniefiok okon akpan and aniebiet etuk (2024) 6 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe of satisfaction derived (godwin et al. 2010; chang et al. 2009). numerous studies have examined the impact of service quality on specific behavioral intentions, such as consumer willingness to recommend the business, willingness to pay a higher price to the business, and repurchase intentions (rabinovich & bailey, 2004; sigala, 2009).summarily, it is important to further examine e-service determinants that influence customer loyalty. 2.2 theoretical framework the theoretical foundation of this study encompasses the following models: webqual, etailq, and e-s-qual. webqual (loiacono, watson & goodhue, 2002) loiacono, watson, and goodhue (2002) introduced webqual, a quality measure for websites. a detailed analysis of the literature and discussions with web designers and users served as the foundation for the development of the model. two subsequent samples were used to improve the instrument, and a third confirmatory sample was used to assess the final instrument’s validity. webqual has 12 dimensions grouped under four categories of website quality: usefulness (informational fit-to-task, interactivity, trust, response time), ease of use (ease of understanding, intuitive operations), entertainment (visual appeal, innovativeness, emotional appeal), and complimentary relationship (consistent image, on-line completeness and relative advantage) the unavailability of a comprehensive tool focused on the consumer’s assessment of the quality of a website in the context of forecasting the behavior of repeat usage of the site motivated the authors to embark on the study. this study filled the vacuum by using the theory of reasoned action (tra) and the technology acceptance model (tam) to create the webqual instrument the development of the instrument provided two new insights. first, researchers and practitioners were given a proven, trustworthy way to gage the caliber of a website. second, by illuminating the factors that contribute to usefulness and ease of use, this study deepened our understanding of tam. consequently, it offers a foundation for improving tam such that it has greater diagnostic ability. the results of this study present a valid and trustworthy tool for assessing the quality of websites. to better understand the factors that influence success in the electronic market, researchers should be able to use webqual to assist a variety of management information systems and marketing studies (loiacono, watson & goodhue, 2002). etailq (wolfinbarger & gilly, 2003) this model, etailq (e-retail quality), was developed in 2003 by mary wolfinbarger and mary gilly in an attempt to explain the dimensions of service in electronic retailing that are important to online shoppers. the study created an etailq measure that considers the characteristics that help customers have an enjoyable, top-notch online purchasing experience. the study instrument was developed and improved using a multi-method, iterative process with the aim of creating a condensed and reliable scale that could be used to assess a variety of e-commerce experiences (wolfinbarger & gilly, 2003).the authors started by examining the growing body of research in marketing and information systems that focuses on the online shopping experience, in their quest to comprehend and analyze the perceived quality of online purchasing experiences. in both product and service situations, quality is related to customer happiness, retention, and loyalty. quality is therefore anticipated to play a role in determining the success of online retailers. the authors defined the elements of the e-retail experience and created a valid and reliable scale for measuring e-retail quality using data from online and offline focus groups, a sorting task, and an online survey of a consumer panel. according to the investigation, four aspects of a website—website design, fulfillment and reliability, privacy and security and customer service—are highly predictive of customer evaluations of quality, customer satisfaction and loyalty. e-s-qual (parasuraman, zeithaml, & malhotra, 2005) parasuraman et al. (2005) conceptualized, developed, refined, and tested the e-s-qual model, a multi-item scale for evaluating the service quality provided by websites that customers use for online shopping. the authors used the theoretical basis of the means-end framework, with their knowledge of the literature, to create the model. during the early stage of scale development, they noticed that a significant percentage of respondents did not aniefiok okon akpan and aniebiet etuk (2024) 7 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe submit ratings on a portion of the initial pool of items. the questions they could not rate were all about nonroutine or recovery service contacts, with which many respondents evidently had no experience. to handle service issues and queries, they developed a subscale of e-s-qual called e-recs-qual in later stages of scale creation and refinement. this subscale was only relevant to users who had irregular interactions with the sites. the main e-s-qual is a 22-item scale with four dimensions: efficiency, fulfillment, system availability, and privacy. e-recs-qual is a three-dimensional, 11-item scale that is salient to the fraction of the customer base with experience using recovery services. the three dimensions are contact, responsiveness, and compensation. es-qual (and e-recs-qual) are only intended to evaluate the level of service provided by websites. 2.3 review of empirical studies rita, oliveira, and farisa (2019) examined the impact of e-service quality and customer satisfaction on the behavior of online customers in the indonesian online market. building on prior research on e-service quality in online purchasing, this study aimed to create new knowledge to better understand the most crucial aspects of eservice quality that affect customer happiness, customer trust, and consumer behavior. this study focused on four e-service quality model dimensions that are better at forecasting consumer behavior. this study examined the effects of both customer trust and customer satisfaction on consumer actions, including intention to repurchase, word-of-mouth marketing, and website revisit. the authors anticipated that the outcome will increase the understanding of various country cultures in relation to various e-service quality features. structural equation modeling was used to test the model of the study, and data were generated from a survey of 355 online consumers in indonesia. the analytical findings demonstrated that the entire quality of an e-service is influenced by three dimensions: website design, security/privacy, and fulfillment. however, the total quality of e-services was not considerably influenced by customer service. customer behavior and overall e-service quality were highly correlated. the authors recommend that when creating online stores, managers should carefully analyze the characteristics of high-quality e-services. companies should have a great website design with sufficient information, appealing visuals, simple payment options, easy-to-read text, offers of discounts and/or promotions, and quick loading speed to deliver higher service quality. beyond that, businesses must guarantee timely delivery and protect the privacy and security of client data. managers should prioritize website fulfillment security and privacy. to produce appealing websites, managers might employ the services of a website designer. managers must ensure that the product is delivered in good condition and on schedule because fulfillment has the greatest impact on total service quality. it would be a good idea to form alliances with various delivery courier firms and allow customers to select the one they prefer. to avoid damaging consumer satisfaction and trust, managers should make agreements with delivery providers regarding who is accountable for damage if products are damaged during delivery. managers should include it in their marketing plan because customer satisfaction and trust have a significant impact on consumer behavior. on their websites, online stores typically have feedback sections. by allowing customers to "share feedback with friends," a business can encourage word of mouth (wom). customers can leave feedback on the online store website after receiving the purchased goods. customers might use wom to spread the word about their positive experiences. small incentives, such as special discounts on the next purchase, may motivate customers to tell others about their positive shopping experiences, which can inspire more people to visit an online retailer’s store. to ensure that the measurement performs equally well across all product segments and/or industries, they recommended that future research should consider these factors. future studies might also employ various approaches, including focus groups and interviews. a similar study was conducted in indonesia by fitriani, hasbi, prada, wijaksana, and kartawinata (2022) to investigate the effect of electronic service quality and customer satisfaction on customer loyalty . slovin’s formular was used. following the research’s context, problem formulation, and theory, this study employed quantitative methods, which are positivist-based research techniques used to evaluate particular populations or aniefiok okon akpan and aniebiet etuk (2024) 8 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe samples and to test established hypotheses. all indonesians who have used or are now using the zalora application and who have encountered difficulties while transacting on zalora comprised the study population. a nonprobability sampling method, specifically purposive sampling, was used in this investigation to obtain primary data from 165 respondents. the partial least square variant of the structural equation modeling was used for analysis. this study found that service quality has a significant impact on e-customer satisfaction levels. the correlation indicates that when the quality of e-services increases, e-customer satisfaction also increases. the study also revealed that e-customer satisfaction impacts how loyal e-customers are. positive correlations indicate that when satisfaction increases, e-customer loyalty also increases. the results also showed that e-service quality has an indirect influence on customer loyalty through customer satisfaction. based on these outcomes, the authors recommended that crucial attention should be paid to the level of e-service quality that the zalora application possesses. in addition, attention should be given to how much the zalora application has contributed to e-customer happiness. purnamasari (2022) was another study aimed at determining how service quality, customer satisfaction, and customer trust affect customer loyalty in the indonesian online retail environment. the study was motivated by the fact that it is more difficult to build consumer loyalty in an online business environment than in an offline one. this study used parasuraman, zeithaml, and malhotra’s (2005) e-service quality scale, which includes four dimensions: efficacy, system availabilityfulfillment and privacy. the questionnaire was used together with a convenience sampling technique to collect primary data from 480 online shoppers in bandung who had completed at least one transaction online in the previous two months. the partial least squares technique of structural equation modeling was used to analyze the data gathered. the outcomes showed that e-service quality directly influences e-trust, e-satisfaction, and e-loyalty in a favorable and significant manner. the biggest one is, however, the connection between e-service quality and e-trust. it follows that the most important factor in establishing client trust in electronic services is e-service quality. the study also revealed that the relationship between online service quality and customer loyalty is strongly and favorably mediated by both e-trust and e-satisfaction. based on the results, every online retail company was advised to identify some techniques that can result in the highest service quality, satisfied customers, and consumer evidence regarding building customer loyalty. sukendia, hariantob, wansagac, and gunadid (2021) examined the relationships among e-service quality, customer experience, engagement, and loyalty in b2c e-commerce in indonesia. this study presented a theoretical framework for examining four key e-service quality factors—website design, fulfillment/reliability, customer service, and security/privacy—that affect customer loyalty. the likert scale was used, with responses ranging from "strongly agree" to "strongly disagree". 32 indicator questions made up the questionnaire that was employed, and 17 of them measured the aspects of e-service quality (web design, fulfillment/reliability, customer service, and security/privacy). five indicators were used to assess the website design. three indicators were used to gage fulfillment and dependability. four indicators served as a gage of security and privacy. five indicators were used to gage customer service indicators. the customer experience variable was assessed using five indicators. this study used five indicators to gage the scope of the customer engagement variable. the factor of client loyalty was also measured using five indicators. an online poll was conducted to gather data, and links to the questionnaire were sent via social media platforms such as facebook, instagram, and whatsapp. in this study, a quantitative technique and purposive sample methods were used, and the respondents were 426 consumers who had recently used b2c e-commerce. although these respondents participated in the poll, only 205 were determined to be valid. non-compliance with the requirements of the questionnaire caused ineligible respondents. the questionnaire was divided into three sections. in the first portion, respondents were asked filter questions. in the second section, respondents who had made purchases on b2c e-commerce websites in the previous six months were questioned about their profiles, the b2c e-commerce sites they shop from most often, how frequently they made purchases, and the typical amount they spent. in the last section, the respondents were asked to offer answers in relation to the constructs. aniefiok okon akpan and aniebiet etuk (2024) 9 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe smartpls analysis was used to test the hypotheses. the reason for using the pls approach was its ability to perform a causal-predictive analysis to understand complicated interactions. this study found that to foster customer loyalty, e-service quality must be linked to customer experience. in addition, customer engagement and experiences were greatly impacted by the quality of e-service. in this study, security or privacy was the e-service attribute that stood out the most. based on the results, the study advised that b2c e-commerce companies deliver a level of e-service that is at par with customers’ expectations. b2c ecommerce platforms are required to develop websites with good features, an appealing appearance, quick and easy access to search operations, and, most importantly, the ability to deliver information that is easily comprehended by customers. behjati, nahich, and othaman (2012) investigated the relationship between e-service quality, e-satisfaction, and loyalty in malaysia. this study, which was based on the technology acceptance model, aimed to present the data in a descriptive manner by identifying any existing relationships between the variables. primary data were gathered through a survey-based questionnaire that was mailed to the participants. the study sought respondents who used internet websites and were between the ages of 16 and 45. a total of 250 replies were collected, of which 202 were chosen for analysis. the survey results showed that in successful and fiercely competitive online organizations the relationship between e-service quality, e-satisfaction and e-loyalty is becoming more significant and influential. the results indicated that nine independent variables—trustworthiness, reliability, ease of use, security, personalization, responsiveness, accessibility/convenience, esthetic, and utilitarian—that affect consumer loyalty and satisfaction. according to the statistical findings, responsiveness was the most crucial component among the nine independent factors when addressing the relationship between consumers’ levels of satisfaction and loyalty. the next two variables were reliability and trustworthines. in comparison to the other 8 factors, esthetic appeal appeared to be the least crucial. josua, alwie, and hendriani (2016) conducted a study on the e-transport sector in pekanbaru, indonesia, to examine the effect of e-service quality and price on the satisfaction and loyalty of customers. one of the key questions that gave direction to the study was “how does consumer loyalty to the online travel agency traveloka for airplane ticket services depend on the quality of the e-service?”. the users of traveloka’s online air ticket search services in pekanbaru comprised the study population. primary data were collected from 200 customers of the company using a non-probability sampling technique. the consideration was based on several variables, including how simple it is to collect samples for questionnaires, how modestly funded the research is, and how much time and effort may be saved. an exploratory factor analysis was performed on the components used in this study, and the results were used to help uncover some of the dimensions that go into the operationalization of theories and indicators related to the quality of e-services. to determine which factors—efficiency, reliabilityfulfillment privacy, responsiveness, remuneration and contacts— affect customer loyalty. structural equation modeling (sem) was used to test the research model. the findings demonstrated that e-service quality directly and significantly influences consumer loyalty. e-service quality has a stronger direct impact on a client’s loyalty than it does on loyalty through customer satisfaction. the findings of the test and hypothesis testing demonstrate that the quality of an e-service has a direct impact on customer loyalty. these findings suggest that improving the characteristics of e-service quality can have a direct impact on client loyalty. the study recommended that customers who have used traveloka for business should be asked whether they are happy with the level of service and the rates received. if there are any unhappy customers, they should be approached immediately and asked about their problems so that the proper remedy may be given immediately. this is because poor service reduces customer satisfaction, which in turn alters the mindset of the devoted clients. hakam, hidayati, and supriyanto (2022) studied the online shopping segment of e-commerce to determine the effect of electronic service quality and trust on customer loyalty, using customer satisfaction as an intervening aniefiok okon akpan and aniebiet etuk (2024) 10 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe variable. the population comprised users of an online store called shopee who had made purchases there in recent times. using a purposive sampling strategy, sampling was performed for this investigation. the questionnaire was used as the instrument for data collection. smart partial least squares analysis was carried out to test the research model and hypotheses. the findings of this study indicate that e-service quality and e-trust have a considerable impact on consumer satisfaction, whereas e-service quality has no impact on consumer loyalty. consumer satisfaction also impacts e-trust and loyalty. the effect of e-service quality and e-trust on customer loyalty cannot be mediated by consumer satisfaction. wisaksana (2020) examined online shop (tokopedia) users in malang. the goal was to determine how consumers’ loyalty to online retailers is impacted by the perceived and actual quality of e-services. a questionnaire with a five-point likert scale was employed to obtain data from the respondents. 100 users of tokopedia’s online store participated in the survey that was conducted online. this study employed regression analysis to test the hypotheses. the findings of this study’s service quality and perceived quality analyses have a significant effect on customer loyalty. a study by rahman, fadrula, yurizala, marlynaa, and momin (2022) was undertaken for the purpose of improving customer loyalty as well as satisfaction through e-service quality and e-commerce innovation. partial least squares structural equation modeling (pls-sem) was used in the analysis. the structural equation modeling (sem) approach combines regression or path analysis with factor analysis. e-commerce innovation, e-service quality, customer satisfaction, and customer loyalty were the four constructs used in this study. a questionnaire with many statement items was used to obtain data to measure each construct. seven criteria (efficiency, reliabilityfulfillment privacy, responsiveness, compensation, and contact) were used to gage the quality of eservices. overall contentment, fulfillment or confirmation of expectations, and complaints were used to gauge customer satisfaction. four factors were employed to measure customer loyalty: readiness to repurchase, willingness to make purchases outside of the company’s product range, willingness to suggest goods or services to others, and consumers’ resistance to rivals’ offerings. a non-probability sampling technique was used. specifically, the study used a convenience/accidental sampling technique. the authors distributed copies of the questionnaire in partnership with roving couriers that deliver goods to customers of online retailers, and they were able to gather 400 copies of questionnaire that were fully and accurately filled out and suitable for use. findings demonstrated that in the context of an online store, consumer satisfaction and loyalty are predicated on the quality of the e-service provided. the findings of this study support the idea that measuring service quality in the e-commerce sector requires the use of e-service quality indicators rather than traditional service quality measures. another significant finding of this study was that client satisfaction is a prerequisite for client loyalty. based on the outcomes, the authors recommended that managers and other players in the online shopping industry should improve the performance and quality of their websites and applications by continuing to innovate. these factors determine whether or not customers will continue to search on their websites or applications both now and in the future. it was also recommended that managers of online stores should make clear information available to customers on their website, including clear product information, clear price information, clear shipping information, clear seller information, and other information. nagaraj and singh (2017) investigated the role of customer satisfaction as a mediating variable in the relationship between e-service quality and customer loyalty in the indian online market. the e-s-qual scale (22-item) was adopted without alteration to examine how online shoppers assess the quality of e-services. the targeted respondents, made up of numerous groups from various industries including students, businesspeople, and academicians dispersed around the nation, received the survey questionnaire by email. there were 402 total responses, 34 of which were rejected because they were not complete. 368 people made up the final sample size deemed suitable for the study. regression analysis was performed on the hypotheses. the results showed a significant positive relationship between e-service quality, customer satisfaction, and customer loyalty. aniefiok okon akpan and aniebiet etuk (2024) 11 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe with respect to the study’s primary goal, which was to determine whether customer satisfaction mediates between the service quality offered by online shopping websites and the loyalty that customers demonstrate when making purchases there, it was confirmed that customer satisfaction played the mediating role. since customer satisfaction has a mediating influence on service quality and loyalty, service quality is crucial in achieving customer loyalty and satisfaction is crucial in mediating this relationship. since e-service quality was found to directly affect customer service, which in turn results in customer loyalty, the study recommended that indian managers place a high value on service quality. therefore, online marketers should concentrate their efforts on improving service quality, as this increases client loyalty. it is more crucial to improve website quality in terms of efficiency and system availability because service quality leads to higher client satisfaction. furthermore, since extremely satisfied customers show a good relationship with the buyers, refer others to the buyers, and maintain their loyalty over time, marketers need to focus on increasing the aspects that affect consumer satisfaction in addition to boosting the quality of their services. another study on the indian online market (minimol,2018) examined customer loyalty toward online supermarkets as predicted by e-service quality and perceived value. the author proposed and tested a conceptual model to explain the relationship between the characteristics of e-service quality, customer perceived value, and loyalty to online super markets. the study’s research design was descriptive . a structured questionnaire was employed in the field survey. online shoppers in india served as the data source. from the results of the study, the four elements of equality—fulfillment, system accessibility, efficiency, and privacy— positively and significantly affect perceived value. additionally, it revealed that customer loyalty was positively influenced by perceived value. the study’s findings demonstrated the importance of e-service quality and perceived value in online shopping. thus, it was recommended that the four pillars of electronic service quality should be prioritized when creating the websites of online supermarkets, since they can increase customer loyalty to the retailer. 2.4 conceptual model based on these hypotheses, the following conceptual model was constructed: customer loyalty: dependent variable e-service quality: an independent variable fig. 1: research model of e-service quality and customer loyalty source: researchers’ construct, 2024 methodology 3.1 research design this study adopted the survey research design to examine the effect of e-service quality on customer loyalty in the nigerian online market. fulfillment responsiveness security e-service quality customer loyalty aniefiok okon akpan and aniebiet etuk (2024) 12 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe 3.2 population and sample size the population of the study comprisef people who shopped from any online store in niger, such as jumia, konga, etc. in the last one year. since this population is infinite, the sample size was determined using the cochran (1963) formula for an infinite population, as shown below: no =z2pq /e2 where: no = sample size z = selected critical value of the desired confidence level p = estimated proportion of an attribute present in the population q = 1-p e = desired level of precision assume p=0.5(maximum variability), and we desire 95% confidence level and ±5% precision, then z= 1.96. the sample size is calculated as no =z2pq /e2 (1.96)2 (0.5)(0.5) / (0.05)2 (3.8416)(0.25) / (0.0025) 384.16 no = 384 3.3 sampling technique since the population was not known, non-probability sampling methods were used. specifically, purposive and snowball techniques were adopted to reach members of the population to obtain data. 3.4 research instrument a structured questionnaire was used to collect data. the questionnaire was divided into two sections: a and b. section a contained the personal data of the respondents, while section b contained 5-point likert scale items used in testing the research hypotheses. 3.5 method of data analysis data were analyzed using descriptive and inferential statistics. thus, frequency count and simple percentages were used to analyze the personal data of the respondents, while regression analysis was performed on the hypotheses. data analysis, results, and discussion 4.1 data analysis and results table 1: personal information of the respondents variable frequency percentage gender: male female 202 174 53.7 46.3 total 376 100 age: 20 years and below 21 to 30 years 31 to 40 years 41 years and above 32 178 125 41 8.51 47.34 33.25 10.90 total 376 100 regularity of shopping: daily weekly monthly a few times a year 12 17 95 252 3.19 4.52 25.27 67.02 total 376 100 aniefiok okon akpan and aniebiet etuk (2024) 13 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe table 1 shows that out of the 376 respondents whose responses were considered in this study, 174 (46.3%) were female and 202 (53.7%) were male. in terms of age, 32(8.51%) of them were 20 years and below, 178 (47.34%) were between 21 and 30 years, 125 (33.25%) were between 31 and 40 years, while 41(10.90%) of them were 41 years and above. with respect to their shopping frequency, 12 (3.19%) shopped daily, 17 (4.52%) shopped weekly, 95 (25.27%) shopped monthly, and 252 (67.02%) shopped a few times a year. test of hypothesis one h01: fulfillment has no significant effect on customer loyalty with respect to online shopping. table 2: model summary of hypothesis one anovaa model sum of squares df mean square f sig. 1 regression 207.116 1 207.116 1260.336 .000b residual 58.503 375 .164 total 265.619 376 a. dependent variable: customer loyalty b. predictors: (constant), fulfillment coefficientsa model unstandardized coefficients standardized coefficients t sig. b std. error beta 1 (constant) .370 .090 4.125 .000 fulfillment .887 .025 .883 35.501 .000 a. dependent variable: customer loyalty table 2 with an r value of 0.883 indicates a strong relationship between the dependent and independent variables. the r-square value of 0.780 implies that approximately 78.0% of the variation in customer loyalty was explained by fulfillment. the f-calculated value of 1260.336 and p-value of 0.000 imply that the model was adequate. that is, the independent variable could explain the dependent variable very well. the constant value of 0.370 indicates that maintain the independent variable (fulfillment) constant, customer loyalty will remain at 0.370. the coefficient of fulfillment was 0.887, which means that a unit change in fulfillment will lead to a 0.887-unit change model summary model r r square adjusted r square std. error in the estimate 1 .883a .780 .779 .40538 a. predictors: (constant), fulfillment aniefiok okon akpan and aniebiet etuk (2024) 14 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe in customer loyalty. a p-value of 0.000 indicates that the influence of fulfillment on customer loyalty was statistically significant test of hypothesis two h02: responsiveness has no significant effect on customer loyalty with respect to online shopping. table 3: model summary for hypotheses two model summary model r r square adjusted r square std. error in the estimate 1 .889a .790 .790 .39553 a. predictors: (constant), responsiveness anovaa model sum of squares df mean square f sig. 1 regression 209.926 1 209.926 1341.879 .000b residual 55.693 375 .156 total 265.619 376 a. dependent variable: customer loyalty b. predictors: (constant), responsiveness table 3 with an r value of 0.889 indicates a strong relationship between the dependent and independent variables. the r-square value of 0.790 implies that approximately 79.0% of the variation in customer loyalty was explained by responsiveness. the f-calculated value of 1341.879 and p-value of 0.000 imply that the model was adequate. that is, the independent variable could explain the dependent variable very well. the constant value of 0.161 indicates that keeping the independent variable (responsiveness) constant, customer loyalty will remain at 0.161. the coefficient of responsiveness was 0.963, which means that a unit change in responsiveness will lead to a 0.963-unit change in customer loyalty. a p-value of 0.000 indicates that the influence of responsiveness on customer loyalty was statistically significant. test of hypothesis three h03: security has no significant effect on customer loyalty with respect to online shopping. table 4: model summary for hypothesis three coefficientsa model unstandardized coefficients standardized coefficients t sig. b std. error beta 1 (constant) .161 .092 1.738 .083 responsiveness .963 .026 .889 36.632 .000 a. dependent variable: customer loyalty aniefiok okon akpan and aniebiet etuk (2024) 15 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe model summary model r r square adjusted r square std. error in the estimate 1 .884a .781 .780 .40444 a. predictors: (constant), security/privacy anovaa model sum of squares df mean square f sig. 1 regression 207.387 1 207.387 1267.839 .000b residual 58.233 375 .164 total 265.619 376 a. dependent variable: customer loyalty b. predictors: (constant), security/privacy coefficientsa model unstandardized coefficients standardize d coefficient s t sig. b std. error beta 1 (constant) .412 .088 4.665 .000 security/privacy .891 .025 .884 35.607 .000 a. dependent variable: customer loyalty table 4 with an r value of 0.884 indicates a strong relationship between the dependent and independent variables. the r-square value of 0.781 implies that approximately 78.1% of the variation in customer loyalty was explained by security/privacy. the f-calculated value of 1267.839 and p-value of 0.000 imply that the model was adequate. that is, the independent variable could explain the dependent variable very well. the constant value of 0.412 indicates that keeping the independent variable (security) constant, customer loyalty will remain at 0.412. the coefficient of security/privacy was 0.891, which means that a unit change in security/privacy will lead to a 0.891aniefiok okon akpan and aniebiet etuk (2024) 16 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe unit change in customer loyalty. a p-value of 0.000 indicates that the influence of security on customer loyalty was statistically significant. 4.2 discussion of the findings the study revealed that e-service quality has a significant effect on customer loyalty in the nigerian online shopping environment. the regression result indicated that the provision of fulfillment in delivering online retailing can enhance customer loyalty in the nigerian online market. the results also showed that responsiveness in service delivery by online retailers in nigeria can significantly and positively influence customers to be loyal to such retailers. furthermore, the results established that security as a dimension of e-service quality is crucial in driving the loyalty of online shoppers in nigeria. these results are in agreement with rita, oliveira, and farisa (2019), who examined the effect of e-service quality and customer satisfaction on online consumer behavior such as intention to repurchase, word-of-mouth, and website revisit. they found that e-service quality can significantly influence such behavior, which defines loyalty. these results are also consistent with the findings of other similar studies such as fitriani et al. (2022), purnamasri (2022), sukendia et al. (2021) , and rahman et al. (2022), among others. the implication of the results is that for online retailers in nigeria to gain the loyalty of online shoppers, they need to offer the right quality of service, with a focus on fulfillment, responsiveness, and security. summary, conclusion, and recommendations 5.1 summary the objective of this study was to examine the effect of e-service quality on customer loyalty with respect to online shopping in nigeria. the research instrument was a structured questionnaire. purposive and snowball sampling techniques were used to reach the respondents and collect data. the hypotheses developed were tested using simple regression. the dimensions of e-service quality considered were fulfillment, responsiveness, and security. hypothesis one stated that fulfillment has no significant effect on customer loyalty in nigerian online shopping. the results showed that fulfillment has a significant effect on customer loyalty in nigeria. hypothesis two stated that responsiveness has no significant effect on customer loyalty in nigerian online shopping. the findings contradicted this hypothesis by showing that responsiveness significantly affects customer loyalty in the nigerian online shopping space. hypothesis three, which stated that security has no significant effect on customer loyalty, was rejected because the results showed that security significantly affects customer loyalty in online shopping in nigeria. 5.2 conclusion this study examined the effect of e-service quality on customer loyalty in the nigerian online market. based on the results, it was concluded that  fulfillment has a significant effect on customer loyalty in nigerian online shopping  responsiveness significantly affects customer loyalty in nigerian online shopping.  security has a significant influence on customer loyalty in online shopping in nigeria. o focusing on these dimensions of e-service quality can enhance customer loyalty in the nigerian online retail market. 5.3 recommendations on the basis of the findings, the following recommendations were made:  online retailers in nigeria should strongly consider the fulfillment dimension of e-service quality in their bid to gain customer loyalty. this agrees with minimol (2018), who recommended that fulfillment should be prioritized when creating the websites of online supermarkets because it can increase customer loyalty to the retailer. aniefiok okon akpan and aniebiet etuk (2024) 17 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe  online retailers in nigeria should strive to be responsive to their customers. customer complaints should be addressed as quickly as possible. according to muhammad et al. (2014), customer support or care services should be prompt in attending to customers when they encounter problems in service.  nigerian online retailers should try as much as possible to protect their customers’ personal information and safeguard them from fraud and financial loss. this supports lee and lin (2005), who also recommended that online channels should offer secure online transactions to make users feel at ease. security is a critical issue in e-commerce that should be seriously considered. references agbonifoh, b. a, ogwo, o. e., nnolim, d. a. & nkamnebe, a. d. (2007). marketing in nigeria: concepts, principles and decisions, aba: afritowers limited. ahmed, r. r., romeika, g., kauliene, r., streimikis, j. & dapkus, r. (2020). es-qual model and customer satisfaction in online banking: evidence from multivariate analysis techniques. oeconomia copernicana, 11(1), 55–89. akpan, a.o., ezenyilimba, e. and mbah, c.c. (2019). age and online consumer behaviour in nigeria. economics and social services academic journal, 1(5). akpan, a. o., mbah, c. c. and ezenyilimba, e. (2019). service quality dimensions and customer loyalty in the nigeria telecommunication industry. contemporary marketing research journal, 6(1). akpan, a. o., promise, c.o. and mbah, c.c.(2019). analysis of the effect of gender on online shopping in nigeria. international journal of research in management, 3(8). alchalidy,w., lubis, p.h. & utami,s. (2020). the effect of electronic service on customer loyalty through customer satisfaction of go-jek application users in banda aceh. international journal of scientific and management research, 3(1),63-69 al-hawari, m., hartley, n. & ward, t. (2005). measuring banks' automated service quality: a confirmatory factor analysis approach. marketing bulletin, 16(1), 1-19. alsudairi, m. a. t. (2012). e-service quality strategy: achieving customer satisfaction in online banking. journal of theoretical and applied information technology, 38(1), 6-24.asian social science; 14 (3) barrutia, j. m. & gilsanz, a. (2009). e-service quality: overview and research agenda. international journal of quality and service sciences, 1(1), 29-50. behjati, s., nahich, m., & othaman, s. n.(2012). interrelation between e-service quality and e-satisfaction and loyalty. european journal of business and management, 4(9), 75-85. botha, j., bothma, c., & geldenhuys, p. (2008). managing e-commerce in business. cape town: juta and company ltd. businessday (2023). how e-commerce increases shift in consumer behavior. retrieved from https://businessday.ng/news/article/how-e-commerce-increases-shift-in-consumer-behaviour/ https://doi.org/10.24136/oc.2020.003 https://doi.org/10.24136/oc.2020.003 https://doi.org/10.24136/oc.2020.003 https://doi.org/10.1108/17566690910945859 https://doi.org/10.1108/17566690910945859 aniefiok okon akpan and aniebiet etuk (2024) 18 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe chang, h. & wang, h. (2011). the moderating effect of customer perceived value on online shopping behavior. online inf. rev. 35 (3), 333-359. cochran, w.g. (1963). sampling techniques (2nd ed.). new york: john willey and sons,inc cox, j. & dale, b. g. (2001). service quality and e-commerce: an exploratory analysis. managing service quality, 11(2), 121-131. cronin, j. j. & taylor, s. a. (1992). measuring service quality: a reexamination and extension. journal of marketing, 56(3), 55-68. dabholkar, p. a., thorpe, d. i. & rentz, j. o. (1996). a measure of service quality for retail stores: scale development and validation. journal of the academy of marketing science, 24(1), 3-16. ecommercedb (2022). e-commerce market in nigeria. retrieved from https://ecommercedb.com/markets/ng/all ejigu, s. n. (2016). e-banking service quality and its impact on customer satisfaction in state owned banks in east gojjam zone; ethiopia. global journal of management and business research, 16(18), 24-35. etuk, a., awah, a. e., & akpan, a. o. (2024). physical ambience and customer behavior in selected microfinance banks in uyo metropolis, akwa ibom state. top american journal of marketing and management, 9(1),124 etuk, a., akpan, a. o., & awah,a.e. (2023). electronic banking and marketing performance of deposit money banks in uyo, akwa ibom state. american interdisciplinary journal of business and economics (aijbe), 10(3), 23-42. https;//doi.org/10.5281/zenodo.8346738 etuk, a., akpan, a.o. and awah, a.e. (2022). factors influencing adoption of mobile apps among young people in nigeria. a study of university of uyo students. european journal of business and management, 14(3), 65-73. etuk, a., anyadighibe, j. a., amadi, c. and james, e. e. (2022). service quality delivery and consumers’ choice of fast-food outlets. international research journal of management, it & social sciences. issn: 2395-7492 https://doi.org/10.21744/irjmis.v9n2.2038. etuk a., anyadighibe, j.a., james, e.e., & ulo a.i. (2022), marketing mix and subscribers' satisfaction in the telecommunications industry. journal of advanced research and multidisciplinary studies 2(1), 29-41. doi: 10.52589/jarmsdpu9yw9n. etuk, a., awah, a.e. & akpan, a.o. (2022). e-marketing and savings mobilization drive of selected microfinance banks in uyo metropolis, akwa ibom state. international journal of business, marketing and management, 7(3) etuk, a. & emenyi e. o. (2022). advertising and profitability: evidence from selected https://doi.org/10.1108/09604520110387257 https://doi.org/10.1108/09604520110387257 https://doi.org/10.1177%2f002224299205600304 https://doi.org/10.1177%2f002224299205600304 https://doi.org/10.1177%2f009207039602400101 https://doi.org/10.1177%2f009207039602400101 https://doi.org/10.21744/irjmis.v9n2.2038 aniefiok okon akpan and aniebiet etuk (2024) 19 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe smes in uyo. british journal of marketing studies vol. 10, issue 2, pp.1-12, 2022 print issn: 2053-4043(print), online issn: 2053-4051(online) 1 @ecrtd-uk https://www.eajournals.org/ etuk, a., eze, j. f. & nnabuko, j. (2014). an evaluation of e-word-of-mouth communication on brand equity in cross river state, nigeria. international journal of development and sustainability issn: 2186-8662. etuk, a., joseph a.a., james, e, e. & mbaka, r. (2021), service quality and passengers’ loyalty of public transportation companies. british journal of management and marketing studies 4(4), 82-98. doi: 10.52589/bjmmslrq7javx. ezenyilimba, e. & akpan, a. o. (2019). income and buying behavior of online shoppers in nigeria. advance journal of economics and marketing research, 4(3). fitriani, a. n., hasbi, i., pradana, m., wijaksana, t., & kartawinata, b. r. (2022). gabriel, j., ogbuigwe, t., & ahiauzu, l. (2016). online shopping systems in nigeria: evolution, trend and prospects. asian research journal of arts and social sciences, 1(4), 1-7. godwin j.. udo g.j & bagchi, k.k. & kirs, p.j. (2010). an assessment of customers’ eservice qualityperception, satisfaction and intention . international journal of information management,3(6) gournaris,s., dimitriadis, s., & stathakpoulos,v. (2010). an examination of the effects of service quality and satisfaction on customer behavioral intentions in e-shopping. journal of service marketing, 24 (2), 142156 hakam, a., hidayati, n., & supriyanto, d. (2022). the effect of e-service quality and e-trust on customer loyalty through consumer satisfaction as intervening variable ( case study on shopee users in malang regency). budapest international research and critics institute-journal, 5(2), 12678-12687 hakam1, a. hidayati, n. & supriyanto, d. (2022). the effect of e-service quality and e-trust on consumer loyalty through consumer satisfaction as intervening variables (case study on shopee users in malang regency). budapest international research and critics institute-journal, 5(2),12678-12687 hongxiu, l., yong, l. & reima, s. (2009). measurement of e-service quality: an empirical study on online travel service. a paper presented at the 17th european conference on information systems, 1-13. ighomereho, o.s. ojo, a. a, omoyele, o. s., & olabode, o.s. (2022). from service quality to e-service quality: measurement. dimensions and model. journal of management information and decision sciences. 25(1). 1-15. improving the satisfaction and loyalty of online shopping customers based on e-commerce innovation and eservice quality. international journal of business, 24(1), 56-81 jayaraman, m., shankar c. & hor, w. m. (2010). service quality delivery and its impact on customer satisfaction in the banking sector in malaysia. international journal of innovation, management and technology, 1(4), 398-404. aniefiok okon akpan and aniebiet etuk (2024) 20 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe josua, f., alwie, a.f. & hendriani. s. (2016). the effect of e-service quality and price on customer satisfaction and loyalty of traveloka in pekanbaru. retrieved from researchgate.com loiacono, e. t., watson, r. t., & goodhue.d.l .( 2002). webqual™: a measure of web site quality. in ama winter conference. austin, tx. market business news(n.d.). online shopping – definition and meaning. retrieved from https://marketbusinessnews.com/financial-glossary/online-shopping-definition-meaning/amp/ mbah, c.c., odike, m., and akpan, a.o. (2019). effect of education on online shopping behaviour in nigeria. advance journal of economics and marketing research, 4(4). minimol, m. c. (2018). e-service quality and perceived value as predictors of customer loyalty towards online supermarkets muhammad, y. s., aslam, s., afgan, n. & abbasi, a. m. (2014). performance evaluation of automated teller machine (atm) with fuzzy topsis using sample survey results. international journal of business and social science, 5(13), 216-231. nagaraj, s. & singh, s. (2017). investigating the mediating role of customer e-satisfaction on e-service quality and e-loyalty: an empirical evidence of indian online shopping. international journal of economic research, 14(15). nagaraj, s. & singh. s. (2017). investigating the mediating role of customer satisfaction on e-service quality and e-loyalty: an empirical evidence of indian online shopping. international journal of economic research, 14 (15), 621-633 narteh, b. (2015). perceived service quality and satisfaction of self-service technology: the case of automated teller machines. international journal of quality & reliability management, 32(4), 361-380. ojasalo, j. (2010). e-service quality: a conceptual model. international journal of arts and sciences, 3(7), 127143. parasuraman, a., zeithaml, v. & berry, l. l. (1988). servqual: a multiple-item scale for measuring consumer perceptions of service quality. journal of retailing, 64(1), 12-40. parasuraman, a., zeithaml, v. a. & malhotra, a. (2005). e-s-qual: a multiple-item scale for assessing electronic quality. journal of service research parasuraman, a., zeithaml, v., & berry, l. l. (1985). a conceptual model of service quality and its implications for future research. journal of marketing, 49 (4), 41-50 paulo, r., tiago, o. & almira, f. (2019). the impact of e-service quality and customer satisfaction on customer behaviour in online shopping. heliyon, 5(10), 1-14. philip, g. & hazlett, s. a. (1997). the measurement of service quality: a new pcp attributes model. international journal of quality & reliability management, 14(3), 260-286. https://marketbusinessnews.com/financial-glossary/online-shopping-definition-meaning/amp/ https://doi.org/10.1108/ijqrm-08-2012-0113 https://doi.org/10.1108/ijqrm-08-2012-0113 https://doi.org/10.1016/j.heliyon.2019.e02690 https://doi.org/10.1016/j.heliyon.2019.e02690 https://doi.org/10.1108/02656719710165482 https://doi.org/10.1108/02656719710165482 aniefiok okon akpan and aniebiet etuk (2024) 21 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe poon, w. c. & lee, c. k. (2012). e-service quality: an empirical investigation. journal of asia-pacific business, 13(3), 229-262. puriwat, w. & tripopsakul, s. (2017).the impact of e-service quality on customer satisfaction and loyalty in mobile banking usage: case study of thailand.polish journal of management studies, 15 (2), 183-193. purnamasari, d. (2022). the roles of e-service quality, e-trust, and e-satisfaction on online retail loyalty. 9th industrial research workshop and national seminar. rabinovich , e & bailey ,p. j. (2004). physical distribution service quality in internet retailing: service pricing, transaction attributes, and firm attributes. 21(6) . journal of operations management rahman, s., fadrula, f. yurizala, y., marlynaa, r., & mominb, m. (2022). rita, p. oliveira, t. & farisa, a. (2019). the impact of e-service quality and customer satisfaction on customer behavior in online shopping.elservier ltd. 1-14 sadaf, f. & rahela, f. (2019). service quality to e-service quality: a paradigm shift. proceedings of the international conference on industrial engineering and operations management, bangkok, thailand, march 5-7, 1656-1666. sakhaei, s. f., afshari, a. j. & esmaili, e. (2014). the impact of service quality on customer satisfaction in internet banking. journal of mathematics and computer science, 9(1), 33-40. santos, j. (2003). e-service quality: a model of virtual service quality dimensions. management service quality, 13(3), 233-246. sigala, m. (2009) . e-service quality and web 2.0: expanding quality models to include customer participation and inter-customer support. service industries journal,29(10) statista (2022). e-commerce in nigeriastatistics & facts. retrieved from statista.com statista (2022b). global retail e-commerce sales 2014-2026. retrieved from statista.com statista (2023). e-commerce world-wide statistics & facts. retrieved from statista,com statista (2023b). e-commerce retail as share of total retail in selected african countries from 2020 to 2021. retrieved from https://www.statista.com/statistics/1176023/e-commerce-retail-as-share-of-total-retail-inafrica/ sukendia, j., hariantob, n., wansagac, s., & gunadid, w. (2021). taherikia, f., & shamsi, b. (2014). evaluation and ranking of the factors influencing the quality of e-banking service. kuwait chapter of the arabian journal of business and management review, 3(11), 165. tan, s. s., abdul, r., zahir, o., lee, h. s., arif, j., parameswaran, s. & rasheedul, h. (2018). modelling consumer perceptions of internet retail service quality through structured equation analysis. herald namsca, 1, 1139-1148. https://doi.org/10.1080/10599231.2012.690682 https://doi.org/10.1080/10599231.2012.690682 https://doi.org/10.1108/09604520310476490 https://doi.org/10.1108/09604520310476490 aniefiok okon akpan and aniebiet etuk (2024) 22 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe the effect of e-service quality, e-service satisfaction, on e-service loyalty of indonesian e-commerce using sem-pls methodology. proceedings of the 7th north american international conference on industrial engineering and operations management, orlando, florida, usa. the impact of e-service quality on customer engagement, customer experience and customer loyalty in b2c e-commerce. turkish journal of computer and mathematics education, 12(3), 3170-3184 wali, a.f. & copara, b. (2012). e-service quality experience and customer loyalty: an emphasis of the nigeria airline operations. european journal of business and social sciences,1 (9), 118-125 wang, s., cavusoglu, h., & deng, z. (2016). early mover advantage in e-commerce platforms with low entry barriers: the role of customer relationship management capabilities. information and management, 53(2), 197-206 webretailer (2023). the world’s top online marketplaces 2023. retrieved from https://www.webretailer.com/marketplaces-world-wide/online-marketplaces/ wirapraja, a., aribowo, h., & setyoadi, e. t. (2021). the influence of e-service quality, and customer satisfaction on go-send customer loyalty in surabaya. indonesian journal of information systems, 3 (2), 128-137 wisaksana, a. r. (2020). the influence of e-service quality and perceived quality on consumer loyalty of online shop tokopedia users in malang city. retrieved from researchgate.com wolfinbarger, m, & gilly, m. c. (2003). etailq: dimensionalizing, measuring and predicting etail quality. journal of retailing,79(3),183-198 yahoo finance (2023). nigeria b2c ecommerce market report. retrieved from https://finance.yahoo.com/news/nigeria-b2c-ecommercemarketreport100000248.html#:~:text=the%20country's%20b2c%20ecommerce%20gross,over%2010 0%20kpis%20in%20nigeria. yazeed, a. m., yazidu, u. & ibrahim, y. (2014). automated teller machine (atm) operation features and usage in ghana: implications for managerial decisions. journal of business administration and education, 5(2), 137-157. zeithaml, v. a., parasuraman, a. & malhotra, a. (2000). a conceptual framework for understanding e-service quality: implication for future research and managerial practice. marketing science institution, report no. 00-115. https://finance.yahoo.com/news/nigeria-b2c-ecommerce-marketreport100000248.html#:~:text=the%20country's%20b2c%20ecommerce%20gross,over%20100%20kpis%20in%20nigeria https://finance.yahoo.com/news/nigeria-b2c-ecommerce-marketreport100000248.html#:~:text=the%20country's%20b2c%20ecommerce%20gross,over%20100%20kpis%20in%20nigeria https://finance.yahoo.com/news/nigeria-b2c-ecommerce-marketreport100000248.html#:~:text=the%20country's%20b2c%20ecommerce%20gross,over%20100%20kpis%20in%20nigeria american interdisciplinary journal of business and economics issn: 2837-1909| impact factor : 6.71 volume. 11, number 2; april-june, 2024; published by: scientific and academic development institute (sadi) 8933 willis ave los angeles, california https://sadijournals.org/index.php/aijbe| editorial@sadijournals.org 20 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe an evaluation of the relationship between emotional intelligence and performance of retail stores in south east, nigeria chime, angela isioma department of business administration, faculty of management sciences, enugu state university of science and technology doi: https://doi.org/10.5281/zenodo.10998938 abstract: the study evaluated the relationship between emotional intelligence and performance of retail stores in south east nigeria. the specific objectives include to: evaluate the degree of relationship between selfmanagement and efficiency and assess the degree of relationship between social awareness and sales turnover of retail stores in south east nigeria. a survey design was adopted for the study. the population of study was 1,460 staff. the sample size of 314 was determined and used in the study. instrument used for data collection was the questionnaire. out of the three hundred and fourteen (314) copies of the questionnaire distributed, two hundred and seventy-eight (278) copies were returned while thirty-six (36) copies of the questionnaire were not returned. pearson correlation coefficient, (r) was used to test the hypotheses, determine the nature, and strength of the research variables. the findings revealed that: there is significant positive relationship between self-management and efficiency of retail stores in south east nigeria, r(95, n = 278) = .406 <.820, p. < .05. and that there is significant positive relationship between social awareness and sales turnover of retail stores in south east nigeria, r(95, n = 278) = .402 <.879, p. < .05. the study concluded that self-management and social awareness has significant positive relationship with efficiency and sales turnover of retail stores in south east nigeria. the study recommended among others that there is need for staff and management of retail stores to regulate their emotions and ensure that the emotions of others do not affect the performance of the organization. keywords: relationship, emotional, intelligence, performance, retail, stores. introduction 1.1 background of the study emotional intelligence (ei) is a critical factor in the success of individuals and organizations across various industries, including the retail sector. in the context of retail stores, the relationship between emotional intelligence and performance is a topic of significant interest and research. emotional intelligence refers to the ability to recognize, understand, and manage one’s own emotions as well as those of others. it encompasses skills such as empathy, self-awareness, self-regulation, and social skills, all of which are essential in customer interactions and team dynamics within a retail environment (goleman, 2005). american interdisciplinary journal of business and economics issn: 2837-1909| impact factor : 6.71 volume. 11, number 2; april-june, 2024; published by: scientific and academic development institute (sadi) 8933 willis ave los angeles, california https://sadijournals.org/index.php/aijbe| editorial@sadijournals.org 21 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe the term was later popularized by dan goleman in his influential 1995 book, "emotional intelligence," wherein emotional intelligence was delineated as a crucial facet of social intelligence. this multifaceted construct involves the capacity to monitor, discriminate, and utilize emotional cues to inform one's thoughts and actions, thereby facilitating effective communication, decision-making, and relationship management within organizational settings (salovey & mayer, 1990). in the contemporary landscape characterized by rapid economic evolution and escalating competition, organizational success hinges on the ability to harness the diverse talents and competencies of employees. companies, cognizant of this reality, increasingly prioritize not only academic aptitude but also emotional intelligence in their recruitment and training endeavors. the recognition of emotional intelligence as a key determinant of performance underscores its significance as a strategic asset for navigating the complexities of the modern business environment (goleman, 1998). the retail sector, in particular, stands as a microcosm of these organizational imperatives. as frontline ambassadors of brands, retail store employees are tasked with interfacing directly with customers, resolving queries, and fostering positive interactions. in this context, the ability to effectively manage emotions, both one's own and those of customers, assumes paramount importance in driving customer satisfaction, loyalty, and ultimately, organizational success. a comprehensive evaluation of the relationship between emotional intelligence and the performance of retail stores is thus imperative to elucidate the mechanisms through which emotional intelligence impacts key performance indicators within this sector. this study seeks to delve into the nuanced interplay between emotional intelligence and various facets of retail store performance, ranging from customer satisfaction and sales figures to employee engagement and turnover rates. at its core, emotional intelligence encompasses several interrelated components, each bearing relevance to the retail context. self-awareness, the foundational pillar of emotional intelligence, enables individuals to recognize and understand their own emotions, thereby enhancing their ability to navigate interpersonal interactions and customer service scenarios (spector & goh, 2018). similarly, self-motivation fuels the drive for excellence and achievement, propelling employees to deliver exceptional service and drive sales through their intrinsic motivation (mind tools ltd, 2019). moreover, self-management equips retail store employees with the requisite self-control and adaptability to effectively manage time, workflow, and communication channels amidst the fast-paced and dynamic retail environment (zhu, bonk, & doo, 2020). lastly, social awareness fosters empathy and cultural competence, enabling employees to better understand and cater to the diverse needs and preferences of customers from varying backgrounds (borman & motowidlo, 2019). by empirically examining the relationship between these dimensions of emotional intelligence and key performance metrics, this study aims to furnish actionable insights for retail store managers and practitioners. insights garnered from this research endeavor hold the potential to inform targeted interventions and training american interdisciplinary journal of business and economics issn: 2837-1909| impact factor : 6.71 volume. 11, number 2; april-june, 2024; published by: scientific and academic development institute (sadi) 8933 willis ave los angeles, california https://sadijournals.org/index.php/aijbe| editorial@sadijournals.org 22 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe programs aimed at bolstering emotional intelligence competencies among retail store employees, thereby enhancing overall organizational performance and competitiveness. 1.2 statement of the problem every profit-driven organization prioritizes enhancing its performance. consequently, companies invest significant effort into recruiting and retaining employees who demonstrate a willingness to exceed their job descriptions, thus fostering effective organizational growth. emotional intelligence stands out as a pivotal factor determining an organization's capacity to achieve its objectives, as contemporary job demands necessitate emotional adeptness for operational success. within the realm of retail chain stores, the work environment is characterized by high levels of stress and tedium. employees frequently encounter stressors that lead to physical, mental, and emotional exhaustion, ultimately impacting their performance. prolonged hours and interactions with difficult customers can quickly escalate into frustrating experiences. therefore, the manner in which employees manage their emotions while engaging with customers or colleagues significantly influences organizational performance, surpassing the mere provision of resources or comfort. historically, studies have examined the relationship between emotional intelligence and organizational performance. while some assert that emotional intelligence positively influences organizational performance, others argue that its impact is negligible. hence, the need to evaluate the relationship between emotional intelligence and performance of retail stores in south east nigeria. 1.3 objectives of the study the broad objective of the study is to evaluate the relationship between emotional intelligence and performance of retail stores in south east nigeria. the specific objectives include to: i. evaluate the degree of relationship between self-management and efficiency of retail stores in south east nigeria. ii. assess the degree of relationship between social awareness and sales turnover of retail stores in south east nigeria 1.4 research questions in line with the specific objectives of the study, the following research questions are put forward. i. what is the degree of relationship between self-management and efficiency of retail stores in south east nigeria? ii. what is the degree of relationship between social awareness and sales turnover of retail stores in south east nigeria? 1.5 statement of hypotheses based on the objectives of the study and research questions, the following null hypotheses are formulated to guide the study. american interdisciplinary journal of business and economics issn: 2837-1909| impact factor : 6.71 volume. 11, number 2; april-june, 2024; published by: scientific and academic development institute (sadi) 8933 willis ave los angeles, california https://sadijournals.org/index.php/aijbe| editorial@sadijournals.org 23 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe ho1: there is no significant relationship between self-management and efficiency of retail stores in south east nigeria. ho2: there is no significant relationship between social awareness and sales turnover of retail stores in south east nigeria. 1.6 scope of the study this study focused on the evaluation of the relationship between emotional intelligence and performance of retail stores in south east nigeria. the content scope included the proxies of both the independent and dependent variables. the proxies of the independent variables were self-management and social awareness, while the dependent variables were efficiency and sales turnover. the geographic scope of the study was roban stores enugu, shoprite onitsha, price-less stores owerri, everyday supermarket, abakaliki and abia shopping mall umuahia. the study made use of cross-sectional data from 2018-2023. the time scope was chosen because empirical data reviewed fell within the time frame. the study analyzed the staff of the selected retail stores and how their emotional intelligence affected the performance of their organisations. review of related literature 2.1 conceptual review 2.1.1 emotional intelligence (ei) emotional intelligence (ei) encompasses the capacity to recognize, understand, and regulate one's own emotions while also perceiving, interpreting, and responding effectively to the emotions of others. it involves a repertoire of skills facilitating adept navigation of social interactions, relationship-building, decision-making, and resilience in facing challenges. according to dhani and sharma (2016), ei entails the ability to discern and manage emotions within oneself and others to facilitate sound decision-making. fernández-abascal and martín-díaz (2015) characterize it as the aptitude to perceive, control, and evaluate emotions. nourizade and mohseni (2014) define emotional intelligence as the capability to perceive, utilize, comprehend, and regulate emotions, highlighting its association with cognitive processes like attention, decision-making, and memory. lynn and lynn (2019) note the acknowledgment of various types of intelligence since howard gardner's publication of "frames of mind: the theory of multiple intelligences" in 1983, with emotional intelligence being one of them. they describe it as the cognitive ability to manage interactions with others and oneself, emphasizing its role in enhancing effectiveness. mckenna and webb (2018) elaborate further, defining ei as the capacity to recognize, discern, and understand both personal and others' emotions, employing them to foster an optimal organizational climate conducive to problem-solving, understanding diverse perspectives, and prioritizing needs for effectiveness. in a workplace context, emotional intelligence is crucial for effective communication, empathy, and decisionmaking. lynn and lynn (2019) propose a model comprising five areas: self-awareness and control, empathy, american interdisciplinary journal of business and economics issn: 2837-1909| impact factor : 6.71 volume. 11, number 2; april-june, 2024; published by: scientific and academic development institute (sadi) 8933 willis ave los angeles, california https://sadijournals.org/index.php/aijbe| editorial@sadijournals.org 24 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe social expertise, personal influence, and mastery of purpose and vision. these areas encompass competencies related to internal self-awareness and external social interactions. empathy, as described by belzung (2014), involves the ability to mentally simulate another's subjectivity and empathize with their experiences. this trait is vital in situations where colleagues require support due to personal challenges, illustrating the practical application of emotional intelligence in fostering a supportive workplace culture. in essence, emotional intelligence enables individuals to manage their emotions effectively, understand the emotions of others, and employ this understanding to enhance interactions and decision-making. it plays a pivotal role in fostering positive workplace dynamics and facilitating productivity and innovation. 2.1.2 components of emotional intelligence a. self-management self-management entails acquiring the self-discipline and mastery necessary to take charge of one's work responsibilities, encompassing tasks such as time management, workflow organization, and effective communication. these skills are integral for enhancing productivity and overall workplace performance. examples of key self-management skills include problem-solving, stress management, clear communication, time management, memory enhancement, and regular exercise. self-management involves employees autonomously overseeing and regulating their behavior and decisionmaking processes. it entails making decisions that may not be immediately gratifying but contribute to long-term success (farouk, mohamed, & saeed, 2023). self-management strategies aid in workplace organization, foster self-motivation, and promote behaviors conducive to task accomplishment (manz & sims, 1980). these strategies typically encompass self-awareness, goal-setting, self-cueing, self-reward, and self-discipline (neck & houghton, 2006). self-awareness involves individuals recognizing the reasons behind their behaviors, which may prompt adjustments to improve task performance. goal-setting entails establishing challenging yet attainable objectives, contributing to enhanced performance (locke and latham, 1991). self-cueing involves using reminders to maintain focus on task priorities, enabling employees to modify their behavior to enhance productivity. subsequently, self-reward and self-discipline serve as motivational tools to facilitate behavioral change and ensure task completion. b. social awareness social awareness refers to the ability to empathize with and understand individuals from diverse backgrounds and cultures, while comprehending social and ethical norms for behavior and acknowledging available community resources and support systems. this capacity includes feeling compassion for others and identifying ways to help. enhanced social awareness enables employees to navigate relationships more effectively by adopting different perspectives, valuing diversity, recognizing others' emotions, demonstrating empathy and respect, and interpreting common body language and facial expressions (garner, 2013). american interdisciplinary journal of business and economics issn: 2837-1909| impact factor : 6.71 volume. 11, number 2; april-june, 2024; published by: scientific and academic development institute (sadi) 8933 willis ave los angeles, california https://sadijournals.org/index.php/aijbe| editorial@sadijournals.org 25 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe utilizing techniques like role-playing or "walking a mile in someone else's shoes" aids in understanding varying perspectives and life experiences, involving actions such as seeking alternative viewpoints, identifying strengths in others, practicing empathy and compassion, showing concern for others' feelings, expressing gratitude, understanding diverse social norms, recognizing situational demands, and acknowledging the influence of organizational systems on behavior. social awareness encompasses a range of skills and competencies, including empathy, respect, kindness, cooperation, motivation, self-regulation, emotional and social-emotional awareness, active listening, and the ability to read verbal and nonverbal cues, particularly for negative emotions like anger and fear. it also involves assessing the trustworthiness of others and leveraging these skills to achieve set objectives. as described by goleman (1998), social awareness involves sensing, understanding, and responding to others' emotions while navigating social networks. garner (2013) emphasizes the importance of understanding others' feelings without experiencing them personally, highlighting individuals' ability to perceive and respond to others' emotions within social contexts. social awareness extends to understanding and being compassionate towards others' feelings, views, opinions, and challenges, as well as comprehending social circumstances that influence behavior and performance. a socially aware leader can anticipate office dynamics and their organizational implications, drawing on components such as primal empathy, service orientation, and organizational awareness (goleman, 2001). additionally, goleman (2006) introduces social cognition and attunement as further components enhancing organizational performance, underscoring the significance of these factors in fostering a supportive and empathetic workplace culture. 2.1.3 organizational performance an organization is a consciously coordinated social entity comprising individuals working together towards common objectives over a sustained period. examples of such entities include schools, hospitals, churches, manufacturing and service firms, retail stores, police departments, military units, volunteer organizations, startups, as well as local, provincial, and federal government agencies (robbins, 2015). understanding organizational theories and concepts of organizational performance is crucial to gaining insight into the nature of an organization. the concept of organizational performance is subject to various definitions due to its inherently subjective nature. consequently, there is a lack of consensus in the literature regarding the criteria for measuring organizational performance (bolman & deal, 2003; declerk, 2008; scott & davis, 2015). according to nnadi (2019), citing jones and george (2006), organizational performance can be defined as the evaluation of how effectively and efficiently managers utilize resources to meet customer needs and achieve organizational objectives. organizational theory has yielded numerous models exploring organizational performance, reflecting the diversity of perspectives on the subject. however, due to the subjective nature of its definition, there remains a lack of consensus regarding the standards for measuring organizational performance american interdisciplinary journal of business and economics issn: 2837-1909| impact factor : 6.71 volume. 11, number 2; april-june, 2024; published by: scientific and academic development institute (sadi) 8933 willis ave los angeles, california https://sadijournals.org/index.php/aijbe| editorial@sadijournals.org 26 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe (bolman & deal, 2003; declerk, 2008; scott & davis, 2015). three main approaches to defining organizational performance include the goal approach, system resource approach, and social system approach: goal approach: this perspective posits that organizations are formed with specific purposes determined by shareholders. organizational performance is measured by the extent to which the organization fulfills these objectives and sustains itself in the market (griffin, 2003). goal achievement is a central criterion for assessing organizational performance, with effectiveness determined by the organization's ability to achieve its goals (chung & lo, 2007; ho, 2008). researchers such as etzioni (1960), chandler (1962), thompson (1967), and cherrington (1989) emphasize the importance of organizational effectiveness in achieving long-term growth and survival. system resource approach: this approach focuses on the relationship between the organization and its environment. it emphasizes the organization's ability to leverage environmental resources to acquire valuable and scarce resources that enhance its operations (cutler et al., 2003). scholars like lorsch (1970) argue that organizational performance is contingent upon efficient alignment between the organization and its environment, as well as its stakeholders. adam (1994) highlights the significance of employee performance in achieving highquality organizational performance, emphasizing the importance of continuous learning and adaptation to meet customer demands. social system approach: this approach defines organizational performance as the organization's ability to achieve its goals without depleting its resources or exerting undue strain on its employees (georgopoulos, 1957). lupton (1977) emphasizes productivity, satisfaction, and motivation levels among organizational members as key indicators of organizational performance, while minimizing turnover rates, costs, and labor unrest. this perspective underscores the importance of organizational effectiveness, relevance, and efficiency as key dimensions of organizational performance. 2.1.4 components of performance a. efficiency ile (2010), drawing from ejiofor (1987), notes that the term "efficiency" can encompass various contexts, including the relationship between input and output, efforts and results, expenditure and income, actual performance and standard performance, as well as between actual and maximum possible results. cansiz et al. (2019), citing goetz (1968), define efficiency as the maximization of the ratio of output to input. however, anderson (2018), drawing from farmer and richman (1965), asserts that measuring management efficiency presents significant challenges. these challenges include: the problem of uncertainty: management decisions and practices inherently involve future-oriented considerations, making it challenging to predict outcomes accurately. the problem of defining goals: without clearly defined objectives, it becomes difficult to measure outputs accurately, as there is no clear benchmark for comparison. american interdisciplinary journal of business and economics issn: 2837-1909| impact factor : 6.71 volume. 11, number 2; april-june, 2024; published by: scientific and academic development institute (sadi) 8933 willis ave los angeles, california https://sadijournals.org/index.php/aijbe| editorial@sadijournals.org 27 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe the problem of subsystem optimization: evaluating the enterprise as a whole over time requires conceptual abilities and measuring techniques that are often lacking. this makes it challenging to assess the efficiency of the organization as a system. the problem of resource mobility: inputs such as labor and capital cannot always be easily reallocated from less profitable opportunities to more lucrative ones, posing a challenge to optimizing resource allocation. in summary, while efficiency is conceptually clear as the maximization of output relative to input, measuring management efficiency poses various practical challenges, including uncertainty, goal definition, subsystem optimization, and resource mobility. these challenges underscore the complexity of assessing and improving organizational efficiency. b. sales turnover sales turnover refers to the total amount of revenue generated by a company from the sale of its products or services within a specific period. this metric provides insight into the financial performance of a business, representing the income generated from its core operational activities, excluding non-operating revenue sources such as investments (cambridge business dictionary, 2019). typically measured on a monthly, quarterly, or annual basis, sales turnover reflects the value of goods and services delivered to customers during the specified period. it encompasses both invoice and cash payments, as well as other revenues, constituting the company's total revenue stream (cambridge business dictionary, 2019). often referred to as sales or net sales, sales turnover excludes value-added tax (vat) and may be expressed in monetary terms or total units of stock or products sold, usually converted into the company's accounting currency. sales turnover, when deducted from direct costs, yields gross profit, which must cover all operating expenses before any net profit can be realized. it's important to note that the figure reported for sales turnover in the profit and loss account may not represent the actual cash received by the company, as some revenue may still be outstanding from debtors (cambridge business dictionary, 2019). however, sales turnover is strictly limited to revenue generated from operational activities and does not include income from financial or other non-operational activities, such as interest income or gains from asset sales. the amount of sales turnover recognized by a business can vary depending on whether it adopts the accrual basis or cash basis of accounting. under the accrual basis, revenue is recognized when goods are shipped or services are provided, whereas under the cash basis, revenue is recognized only when cash is received from customers, potentially delaying revenue recognition (cambridge business dictionary, 2019). while businesses may be tempted to forecast sales turnover based on historical sales data, it's important to exercise caution as revenue projections may be subject to unforeseen factors such as competitive pressures or changes in economic conditions. consequently, relying solely on historical sales data for revenue projections may not accurately reflect future revenue potential (cambridge business dictionary, 2019). american interdisciplinary journal of business and economics issn: 2837-1909| impact factor : 6.71 volume. 11, number 2; april-june, 2024; published by: scientific and academic development institute (sadi) 8933 willis ave los angeles, california https://sadijournals.org/index.php/aijbe| editorial@sadijournals.org 28 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe 2.2 theoretical framework goleman’s emotional intelligence performance theory this model was proposed by daniel goleman in 1995 when he wrote the landmark book ‘emotional intelligence’ goldman (1995) defined emotional intelligence as "abilities of being able to motivate oneself and survive in the face of frustrations; to control impulse and delay gratification; to manage one's moods and keep distress from swamping the ability to think; to empathize and to hope" (goleman, 1995). based on this, goleman then categorized emotional intelligence into four different capabilities that include: social skills, self – awareness, social awareness and self – management. self-awareness is the capacity to understand and recognize one's emotions by using instinctual feelings to direct choices. self-management includes regulating one's thoughts and desires and helps people to respond to changing conditions. social skill involves managing relationships with customers to move them in the desired direction of patronage and retention and social awareness deals with considering customers’ feelings, especially when making decisions about product/service packaging and customer-focused strategy implementation. the impact of emotional intelligence on the performance of business has been directly and indirectly explained in the context of this theory. business performance in the retail store sector is driven by emotional intelligence. in this regard, marketing creativity is said to be impacted by managers’ emotional intelligence. invariably, emotional intelligence equips managers with sufficient marketing creativity that forms one of the basic drivers of customers’ service quality perceptions. 2.3 empirical review anifowose, oparanma, and nwaeke, (2020), conducted a study on self-management and organizational effectiveness of deposit money banks in port harcourt, rivers state, nigeria. the study adopted a crosssectional survey in its investigation of the variables. primary data was generated through selfadministered questionnaire. the population comprised of 62 staff of 10 selected banks in port harcourt. the reliability of the instrument was achieved by the use of the cronbach alpha coefficient with all the items scoring above 0.70. the hypotheses were tested using the spearman’s rank order correlation coefficient with the aid of statistical package for social sciences. the tests were carried out at a 95% confidence interval and a 0.05 level of significance. the study found that there is a significant relationship between self-management and organizational effectiveness of deposit money banks in port harcourt. olusegun, asikhia, and akpa, (2022), conducted a study on self-management and employee research output in selected private universities in ogun state, nigeria. the population was 1464 full-time academic staff of selected six private universities in ogun state, nigeria. multi-stage sampling, stratified sampling and simple random sampling techniques were adapted to obtain a response from all the cadres of the academic staff. the sample size of 308 was determined using raosoft calculator. a structured and adapted questionnaire went through validity and reliability tests with cronbach alpha ranges between 0.728 and 0.954. the inferential statistics employed pearson moment correlation coefficient to test the hypothesis of the study. the study revealed that selfamerican interdisciplinary journal of business and economics issn: 2837-1909| impact factor : 6.71 volume. 11, number 2; april-june, 2024; published by: scientific and academic development institute (sadi) 8933 willis ave los angeles, california https://sadijournals.org/index.php/aijbe| editorial@sadijournals.org 29 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe management had significant relationship with employee research output (r (296) = 0.803, p < 0.05). this study concluded that self-management affects employee research output in selected private universities in ogun state, nigeria. adoyi, odinakachukwu, ikechukwu and patience, (2022), conducted a study on the influence of social media on market performance of smes in nigeria. the survey method was utilized. the survey involved four hundred (400) samples from a population of 6,327,963 registered smes in south east nigeria. a five-point likert scale questionnaire ranging from strongly agreed (5) to strongly disagreed (1) was used as a data collection instrument. the cronbach alpha method, provided by statistical packages for social sciences (spss), was used to test the reliability of the instrument. the reliability was found to be high, (0.76) showing that there is consistency in the items of the survey. the data was analyzed using descriptive statistics (tables, percentages, and means) and inferential statistics (spearman rank order correlation). the study found that there was a significant and positive relationship between the use of facebook and brand awareness, instagram and brand loyalty, youtube and sales performance, linkedin and customer satisfaction, and google+ and brand awareness of smes in south east nigeria. nnaemeka, mbah, and ozoko, (2018), conducted a study on social environment and growth of small and medium enterprises in southeast nigeria. the study evaluates the social environment and growth of small and medium enterprises in south east, nigeria. survey research design was adopted in the study. the population of 7061 owners of registered small and medium enterprises (smes) in the five south eastern states of nigeria was used for the study. the population was sampled down to 347 using freund and williams's statistical formula for determining sample size. the test of hypotheses was done using the pearson correlation coefficient for hypotheses one and students t-test distribution for hypotheses two and three. the result of the study showed that family size has no significant positive relationship on family-owned smes in south east, nigeria r(n= 347) =.155, p<.05), predominant age group has significant positive relationship on the number of employee in smes in south east nigeria t(n = 347) = 15.320, p <.05, and igbo customer 'igbaodibo' has significant positive relationship on volume of sales in smes in south east nigeria t(n = 347) = 18.600, p <.05. okeke, (2018), conducted a study on determinant of customers’ choice of retail outlet in southeast, nigeria. the study examined the determinant of customers’ choice of retail outlet in south-east, nigeria. survey research design was adopted. the population of study was made up of all customers of the entire retail outlet in southeast of nigeria (unknown). purposive sampling technique as a non-probability sampling was used to obtain a sample size five hundred and seven (507) customers of the retail outlet. questionnaire was employed as the main instrument of data collection. descriptive statistics and multiple regression analysis were employed in analyzing the data. the study found that product quality had significant positive influence on customer choice of retail outlet. ambience had a significant influence on customer choice of retail. price had significant positive influence on customer choice of retail outlet. american interdisciplinary journal of business and economics issn: 2837-1909| impact factor : 6.71 volume. 11, number 2; april-june, 2024; published by: scientific and academic development institute (sadi) 8933 willis ave los angeles, california https://sadijournals.org/index.php/aijbe| editorial@sadijournals.org 30 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe methodology the study made use of descriptive survey research design. the geographical location of the study is roban stores enugu, shoprite onitsha, anambra state, abia shopping mall, umuahia, abia state, price-less store owerri, imo state and everyday supermarket, abakaliki, ebonyi enugu, all in south-east nigeria. the south-eastern nigeria is one of six geo-political zones in nigeria. a total of five (5) retail stores with a total number of 1,460 staff strength were selected from the five states in the south east geographical zone in nigeria. the yardstick for selecting the population is because the organizations selected are among the prominent ones in each of the states. from the total population, a sample of 314 sample size was determine with the use of yamane taro’s formula. data for the study were collected by the use of the questionnaire. the researcher distributed copies of questionnaire to the respondents. the instruments were structured using the five-point likert system. the researcher used the expert (face) validity, where the questionnaire was presented to the supervisor who is an expert in the field of management and two other experts in retail chain business to confirm that the instrument measures what it is supposed to measure. to ensure reliability of the instrument, a test-retest method of reliability was applied. the test retest was carried out using fifteen (15) copies of the questionnaire prepared and administered to the staff (respondents) of other retail stores outside the study. the instrument was tested using cronbach alpha coefficient testing tool. the method of data analysis consists of descriptive statistics such as percentages, frequency tables and mean were used. the hypothesis was tested by utilizing pearson correlation coefficient model and conclusions were made accordingly. the hypothesis was tested at 0.05 level of significance and statistical package for special science (spss) was utilized to aid in data analysis. data presentation and analyses 4.1 distribution and returned questionnaire three hundred and fourteen (314) copies of the questionnaire were distributed to the respondents and two hundred and seventy-eight (278) copies were returned representing eighty-nine (89%) percent, while thirty-six (36) copies of the questionnaire were not returned representing eleven percent (11 %). this shows a high rate of the respondents. american interdisciplinary journal of business and economics issn: 2837-1909| impact factor : 6.71 volume. 11, number 2; april-june, 2024; published by: scientific and academic development institute (sadi) 8933 willis ave los angeles, california https://sadijournals.org/index.php/aijbe| editorial@sadijournals.org 31 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe 4.2 data presentation 4.2.1 the degree of relationship between self-management and efficiency of retail stores in south east nigeria. 4.2.1 responses on the degree of relationship between self-management and efficiency of retail stores in south east nigeria. 5 sa 4 a 3 n 2 da 1 sd ∑fx x sd decision 1 selfmanagement enables the control of impulse and manage the emotions in healthy ways with increase in efficiency of the organization 455 91 32.7 516 129 46.4 45 15 5.4 42 21 7.6 22 22 7.9 1080 278 100% 3.88 1.178 agree 2 staying composed and poised even in stressful situations through self-management in that way, prioritize the task in the organization. 555 111 39.9 468 117 42.1 45 15 5.4 20 10 3.6 25 25 9.0 1113 278 100% 4.00 1.188 agree 3 the self-management facilitates thorough following on plans and goals in the organization 440 88 31.7 348 87 32.0 141 47 16.9 58 29 10.4 25 25 9.0 1012 278 100% 3.67 1.268 agree 4 to be proactive and adapt to changing circumstances in the organization is due to selfmanagement 650 130 46.8 188 47 16.9 159 53 19.1 26 13 4.7 35 35 12.6 1058 278 100% 3.81 1.396 agree 5 maintaining good mental health was as result of selfmanagement thereby increasing the work energy 695 139 50.0 184 46 16.5 165 55 19.8 24 12 4.3 26 26 9.4 1094 278 100% 3.94 1.309 agree total grand mean and standard deviation 3.86 1.2678 source: field survey, 2023 table 4.2.1, 220 respondents out of 278 representing 79.1 percent agreed that selfmanagement enables the control of impulse and manage the emotions in healthy ways with increase in -efficiency of the organization with mean score 3.88 and standard deviation of 1.178. staying composed and poised even in stressful situations through self-management in that way, prioritize the task in the organization 228 respondents representing 82.0 percent agreed with mean score of 4.00 and standard deviation of 1.188. the self-management facilitates thorough following on plans and goals in the organization 175 respondents representing 63.7 percent agreed with mean score of 3.67 and standard deviation of 1.268. to be proactive and adapt to changing circumstances in the american interdisciplinary journal of business and economics issn: 2837-1909| impact factor : 6.71 volume. 11, number 2; april-june, 2024; published by: scientific and academic development institute (sadi) 8933 willis ave los angeles, california https://sadijournals.org/index.php/aijbe| editorial@sadijournals.org 32 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe organization is due to self-management 177 respondents representing 63.7 percent agreed with mean score of 3.81 and 1.396. maintaining good mental health was as result of self-management thereby increasing the work energy 185 respondents representing 66.5 percent agreed with a mean score of 3.94 and standard deviation 1.309. 4.2.2 the degree of relationship between social awareness and sales turnover of retail stores in south east nigeria table 4.2.2: responses on the degree of relationship between social awareness and sales turnover of retail stores in south east nigeria 5 sa 4 a 3 n 2 da 1 sd ∑fx x sd decision 1 looking outward increases volume of sales in the organization 415 83 29.9 180 45 16.2 285 95 34.2 38 19 6.8 36 36 12.9 954 278 100% 3.43 1.328 agree 2 the level customer loyalty was promoted by social interaction of the organization. 400 80 28.8 372 93 33.5 147 49 17.6 60 30 10.8 26 26 9.4 1005 278 100% 3.62 1.263 agree 3 proper managing of conflict increased margin of sales 530 106 38.1 244 61 21.9 174 58 20.9 20 10 3.6 43 43 15.5 1011 278 100% 3.64 1.415 agree 4 the social attraction of the organization promoted good relationship with customers 600 120 43.2 232 58 20.9 189 63 22.7 16 8 2.9 29 29 10.4 1066 278 100% 3.83 1.300 agree 5 social awareness positively affects the development of social behavior 290 58 20.9 232 58 20.9 321 107 38.5 36 18 6.5 37 37 13.3 916 278 100% 3.29 1.249 agree total grand mean and standard deviation 3.562 1.311 source: field survey, 2023 table 4.2.2, 128 respondents out of 278 representing 46.1 percent agreed that looking outward increases volume of sales in the organisation with mean score 3.43 and standard deviation of 1.328. the level customer loyalty was promoted by social interaction of the organization 173 respondents representing 62.3 percent agreed with mean score of 3.62 and standard deviation of 1.263. proper managing of conflict increased margin of sales 167 respondents representing 60.0 percent agreed with mean score of 3.64 and standard deviation of 1.415. the social attraction of the organization promoted good relationship with customers 178 respondents representing 64.1 percent agreed with mean score of 3.83 and 1.300. social awareness positively affects the development of social behavior 116 respondents representing 41.8 percent agreed with a mean score of 3.29 and standard deviation 1.249. american interdisciplinary journal of business and economics issn: 2837-1909| impact factor : 6.71 volume. 11, number 2; april-june, 2024; published by: scientific and academic development institute (sadi) 8933 willis ave los angeles, california https://sadijournals.org/index.php/aijbe| editorial@sadijournals.org 33 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe 4.3 test of hypotheses 4.3.1 hypothesis three: there is no significant relationship between self-management and efficiency of retail stores in south east nigeria correlations selfmanagement enables the control of impulse and manage the emotions in healthy ways with increase in efficiency of the organization staying composed and poised even in stressful situations through selfmanagement in that way, prioritize the task in the organization. the selfmanagement facilitates thorough following on plans and goals in the organization to be proactive and adapt to changing circumstances in the organization is due to selfmanagement maintaining good mental health was as result of selfmanagement thereby increasing the work energy self management enables the control of impulse and manage the emotions in healthy ways with increase in efficiency of the organization pearson correlation 1 .622** .820** .406** .545** sig. (2tailed) .000 .000 .000 .000 n 278 278 278 278 278 staying composed and poised even in stressful situations through selfmanagement in that way, prioritize the task in the organization. pearson correlation .622** 1 .607** .704** .740** sig. (2tailed) .000 .000 .000 .000 n 278 278 278 278 278 the selfmanagement facilitates thorough pearson correlation .820** .607** 1 .506** .681** sig. (2tailed) .000 .000 .000 .000 american interdisciplinary journal of business and economics issn: 2837-1909| impact factor : 6.71 volume. 11, number 2; april-june, 2024; published by: scientific and academic development institute (sadi) 8933 willis ave los angeles, california https://sadijournals.org/index.php/aijbe| editorial@sadijournals.org 34 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe following on plans and goals in the organization n 278 278 278 278 278 to be proactive and adapt to changing circumstances in the organization is due to selfmanagement pearson correlation .406** .704** .506** 1 .811** sig. (2tailed) .000 .000 .000 .000 n 278 278 278 278 278 maintaining good mental health was as result of selfmanagement thereby increasing the work energy pearson correlation .545** .740** .681** .811** 1 sig. (2tailed) .000 .000 .000 .000 n 278 278 278 278 278 **. correlation is significant at the 0.01 level (2-tailed). table 4.3.1. showed the pearson correlation matrix on self-management and efficiency showing the correlation coefficients, significant values and the number of cases. the correlation coefficient shows .406 <.820. this value indicates that correlation is significant at 0.05 level (2 tailed) and implies that there was significant positive relationship between self-management and efficiency of retail stores in south east nigeria (r= .406 <.820). the computed correlations coefficient is greater than the table value of r = .000 with at alpha level for a two-tailed test (r= .406 <.820, p<.05). decision rule the decision rule is to accept the null hypothesis if the computed r is less than the tabulated r otherwise reject the null hypothesis. decision since the computed (r = .406 <.820) is greater than the table value of .000, we reject the null hypothesis. therefore, we concluded that there was significant positive relationship between self-management and efficiency of retail stores in south east nigeria as reported in the probability value of (r= .406 <.820, p<.05). american interdisciplinary journal of business and economics issn: 2837-1909| impact factor : 6.71 volume. 11, number 2; april-june, 2024; published by: scientific and academic development institute (sadi) 8933 willis ave los angeles, california https://sadijournals.org/index.php/aijbe| editorial@sadijournals.org 35 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe 4.3.2 hypothesis one: there is no significant relationship between social awareness and sales turnover of retail stores in south east nigeria correlations looking outward increases volume of sales in the organisation the level customer loyalty was promoted by social interaction of the organization. proper managing of conflict increased margin of sales the social attraction of the organization promoted good relationship with customers social awareness positively affects the development of social behavior looking outward increases volume of sales in the organization pearson correlation 1 .698** .484** .640** .879** sig. (2-tailed) .000 .000 .000 .000 n 278 278 278 278 278 the level customer loyalty was promoted by social interaction of the organization. pearson correlation .698** 1 .402** .632** .745** sig. (2-tailed) .000 .000 .000 .000 n 278 278 278 278 278 proper managing of conflict increseased margin of sales pearson correlation .484** .402** 1 .742** .412** sig. (2-tailed) .000 .000 .000 .000 n 278 278 278 278 278 the social attraction of the organization promoted good relationship with customers pearson correlation .640** .632** .742** 1 .706** sig. (2-tailed) .000 .000 .000 .000 n 278 278 278 278 278 american interdisciplinary journal of business and economics issn: 2837-1909| impact factor : 6.71 volume. 11, number 2; april-june, 2024; published by: scientific and academic development institute (sadi) 8933 willis ave los angeles, california https://sadijournals.org/index.php/aijbe| editorial@sadijournals.org 36 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe social awareness positively affects the development of social behavior pearson correlation .879** .745** .412** .706** 1 sig. (2-tailed) .000 .000 .000 .000 n 278 278 278 278 278 **. correlation is significant at the 0.01 level (2-tailed). table 4.3.2. showed the pearson correlation matrix on social awareness and sales turnover showing the correlation coefficients, significant values and the number of cases. the correlation coefficient shows .402 <.879. this value indicates that correlation is significant at 0.05 level (2 tailed) and implies that there was significant positive relationship between social awareness and sales turnover of retail stores in south east nigeria, (r= .402 <.879). the computed correlations coefficient is greater than the table value of r = .000 with at alpha level for a two-tailed test (r= .402 <.879, p<.05). decision rule the decision rule is to accept the null hypothesis if the computed r is less than the tabulated r otherwise reject the null hypothesis. decision since the computed (r =.402 <.879) is greater than the table value of .000, we reject the null hypothesis. therefore, we concluded that there was significant positive relationship between social awareness and sales turnover of retail stores in south east nigeria as reported in the probability value of (r=.402 <.879, p<.05). 5.1 summary of findings in this study, emotional intelligence and performance of retail stores was examined. the major findings of the study are as follows: i. there was significant positive relationship between self-management and efficiency of retail stores in south east nigeria, r(95, n = 278) = .406 <.820, p. < .05 ii. there was significant positive relationship between social awareness and sales turnover of retail stores in south east nigeria, r(95, n = 278) = .402 <.879, p. < .05 5.2 conclusion this study evaluated the relationship between emotional intelligence and performance of retail stores in south east, nigeria. the study made use of 314 respondents selected using random sampling techniques. the conclusion reached in the study is as follows: firstly, emotional intelligence has significant positive relationship with performance of retail stores in south east, nigeria. secondly, the components of emotional intelligence which are self-management and social awareness all have significant positive relationship with the components of organizational performance namely: efficiency and sales turnover of retail stores in south east nigeria american interdisciplinary journal of business and economics issn: 2837-1909| impact factor : 6.71 volume. 11, number 2; april-june, 2024; published by: scientific and academic development institute (sadi) 8933 willis ave los angeles, california https://sadijournals.org/index.php/aijbe| editorial@sadijournals.org 37 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe 5.3 recommendations from the findings, it was clearly showed that emotional intelligence is very important in the performance of retail stores in south east, nigeria. therefore, this study gives the following suggestions; i. there is need for staff and management of retail stores to regulate their emotions and ensure that the emotions of others do not affect the performance of the organization. ii. retail stores should encourage socialization to build positive relationship among the staff and with customers to increase patronage. references abraham, c (2019). the relationship between emotional intelligence and work attitudes, behavior and outcomes: an examination among senior managers, journal of managerial psychology, 788 813 adam, e. e. (1994). alternative quality improvement practices and organization performance. journal of operations management, 27–44. adoyi, j., odinakachukwu, j.n., ikechukwu u.j. and patience, d. (2022), the influence of social media on market performance of smes in nigeria. neuroquantology 157-177 alam, sk. mahmudul, employee turnover in mfis: reasons & remedies (december 31, 2015). availableatssrn: https://ssrn.com/abstract=2710258or http://dx.doi.org/10.2139/ ssrn.2710258 anifowose, a.i., oparanma, a.o. and nwaeke, i.l. (2020), self-management and organizational effectiveness of deposit money banks in port harcourt, rivers state, nigeria.global scientific journals, 8(2): 23209186 bolman, l. g., & deal, t. e. (2003). reframing organizations: artistry, choice, and leadership. john wiley & sons. borman, w. c. &motowidlo, s j (2020). task performance and contextual performance: the meaning for personnel selection research. human performance, 10(2), 199-109. cutler, n. s., graves-deal, r., lafleur, b. j., & gao, z., boman, b. m., whitehead, r. h., et al. (2003). stromal production of prostacyclin confers an antiapoptotic effect to colonic epithelial cells. cancer research, 63(8), 1748–1751. davis, t. (2021) emotion: definition, theories, & examples. https://ssrn.com/abstract=2710258 https://dx.doi.org/10.2139/ssrn.2710258 american interdisciplinary journal of business and economics issn: 2837-1909| impact factor : 6.71 volume. 11, number 2; april-june, 2024; published by: scientific and academic development institute (sadi) 8933 willis ave los angeles, california https://sadijournals.org/index.php/aijbe| editorial@sadijournals.org 38 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe declerk, c. c. (2008). the relationship between retail store manager leadership styles and employee generational cohort, performance, and satisfaction.university of phoenix. didier, n. (2002). manager les performances [managing performance] (insep cons). etzioni, a. (1960). two approaches to organizational analysis: a critique and a suggestion. administrative science quarterly, 257–278. eze, f. o & okechukwu, e.u (2022). handbook of research methodology: a step by step guide for researchers, enugu, rhycekerex publisher. farouk kamel, h., mohamed eid, n., & saeed ahmed, e. (2023). effect of self-management education program for first line nurse managers on their critical thinking dispositions. journal of nursing science beha university, 4(2), 367-384. garner, p. (2013). social and emotional aspects of learning journal george j.m. (2000), “emotions and leadership: the role of emotional intelligence”, human relations, goleman, d. (1995). emotional intelligence: why it can matter more than iq. new york, bantam books. goleman, d. (1998), working with emotional intelligence, bloomsbury publishing, london. goleman, d., 2013. harvard business review. [online] available at: https://hbr.org/2013/12/the-focused-leader [accessed 30 december 2017]. griffin, k. (2003). economic globalization and institutions of global governance. development and change, 34(5) (789–807). harrison, j. s. and r. e. f. (1999). stakeholders, social responsibility, and performance: empirical evidence and theoretical perspectives. the academy of management journal, 42(5), 479–485. ile, norbert m. (2010). comparative and international management, enugu, bencelia ventures. latham, g. p., & locke, e. a. (1991). self-regulation through goal setting. organizational behavior and human decision processes, 50, 212-247. https://doi.org/10.1016/0749-5978(91)90021-k https://doi.org/10.1016/0749-5978(91)90021-k american interdisciplinary journal of business and economics issn: 2837-1909| impact factor : 6.71 volume. 11, number 2; april-june, 2024; published by: scientific and academic development institute (sadi) 8933 willis ave los angeles, california https://sadijournals.org/index.php/aijbe| editorial@sadijournals.org 39 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe lorsch, j. w. (1970). introduction to the structural design of organizations. in organizational structure and design (pp. 1–16). lupton, t. (1977). organizational behavior and performance. macmillan. lynn, a., & lynn, j. (2019). the emotional intelligence activity kit: 50 easy and effective exercises for building eq. amacom. neck, c.p and. houghton, j.p (2006) “two decades of self-leadership theory and research: past developments, present trends, and future possibilities,” journal of managerial psychology, 270-295. http://dx.doi.org/10.1108/02683940610663097.cambridge. nnadi, c.s.o. (2019), organizational design, structure and performance. enugu, cheston agency press ltd. nnaemeka, o.i., mbah, p.c. and ozoko, e.e. (2018), social environment and growth of small and medium enterprises in southeast nigeria. journal of advance management research, 6(07): 2393-9664 okeke, l.n. (2018), determinant of customers’ choice of retail outlet in southeast, nigeria. international journal of business & law research 8(1): 2360-8986. olusegun, a.o.a., asikhia, o. u. and akpa, v. o. (2022), self-management and employee research output in selected private universities in ogun state, nigeria. journal of human resource management, 5(4):180196 rajendran. d, l.a. downey and c. stough (2017). assessing emotional intelligence in the indian workplace: a preliminary reliability study. electronic journal of applied psychology, 3(2), 55 –59 rana, m.r.i. and ha-brookshire, j.e. (2023), an empirical study on supply chain agility and disruption mitigation performance of u.s. fashion retailers: knowledge management capability perspective. journal of fashion marketing and management, https://doi.org/10.1108/jfmm-10-2022-0205 robbins, s. (2015). organizational behavior at work. mcgraw hill book company, new york., chapter 1. salovey, p., & mayer, j. (1990). emotional intelligence. imagination, cognition, and personality, 9(3), 185-211. scott, w. r., & davis, g. f. (2015). organizations and organizing: rational, natural and open systems perspectives. routledge. http://dx.doi.org/10.1108/02683940610663097 american interdisciplinary journal of business and economics issn: 2837-1909| impact factor : 6.71 volume. 11, number 2; april-june, 2024; published by: scientific and academic development institute (sadi) 8933 willis ave los angeles, california https://sadijournals.org/index.php/aijbe| editorial@sadijournals.org 40 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe sebastian, n.o., adam, b.s.m. and lwesya, f. (2022), managerial skills for micro, small and medium-sized enterprises (msmes). management dynamics in the knowledge economy, 10 (4/38), s. 343 – 359. spector, p.e., & goh, a. (2018). the role of emotions in the occupational stress process, in p. l. perrewe& d.c. ganster (eds.) exploring theoretical mechanisms and perspectives. new york: american interdisciplinary journal of business and economics issn: 2837-1909| impact factor : 4.6 volume. 9, number 1; january-march, 2022; published by: scientific and academic development institute (sadi) 8933 willis ave los angeles, california https://sadipub.com/journals/index.php/aijbe 29 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe examining terrorism's threat to national security in nigeria through borders porosity moses olusegun department of political science and international relations, university of abuja, nigeria abstract: this paper examines the issues of porous borders, terrorism, and national security in nigeria. the country's poorly manned borders have contributed to the dynamics of national insecurity occasioned by terrorism, with terrorism posing a threat to the safety of all nigerians. the paper relied mainly on secondary data, and the rational choice theory provided the framework of analysis. findings revealed that the infiltration of unregistered men, weapons, and money into the country has aided the threats posed by terrorism to nigerian national security. the paper recommends that nigeria collaborates with her neighbors and adopts technologies in manning her borders and fighting terrorism to guarantee her security as a country. keywords: border porosity, terrorism, national security, nigeria, international relations introduction: terrorism poses a threat to the safety and security of all nigerians. porous borders characteristic of nigerian borders have made them entry and exit points for smugglers of contraband goods who carry out their activities with little or no reservations. this paper seeks to examine the issues of porous borders, terrorism, and national security in nigeria. the poorly manned borders have contributed to the dynamics of national insecurity occasioned by terrorism. this paper relies mainly on secondary data, and the rational choice theory provided the framework of analysis. findings reveal that the infiltration of unregistered men, weapons, and money into the country has aided the threats posed by terrorism on nigerian national security. nigeria must collaborate with her neighbors and adopt technologies in manning her borders and fighting terrorism to guarantee her security as a country. the paper is divided into five sections: introduction, literature review, theoretical framework, empirical analysis, and conclusion/recommendations. this paper concludes that sustainable border control and effective counter-terrorism efforts require coordinated international cooperation as well as the adoption of appropriate technology. the paper also highlights the need for internal reforms, such as reducing corruption and improving national identification programs through census to reduce illegal immigration and the invasion of foreign terrorists. as a terrible phenomenon, terrorism has become a nut difficult to be easily cracked in the international system. as a form of violence, terrorism is as old as man. the early stages of the study on domestic and international terrorism reveal that ‘terrorism’ have always been employed to protect or achieve certain interests (political or parochial), by individuals, groups and state and state authorities (ikaade, 2010). the international dimensions to terrorism became very noticeable after the second world war. this coincided with the rapid independence of the colonized territories which was aided by some forces that later threatened the national security of some of these emerged states (ikaade, 2010). if the benefits of the independence victory are not flowing to them in the manners they so wished, terrorizing the state becomes an alternative. despite the various measures put in place by the governments of nigeria to ensure the security of the country by moses olusegun (2022) 30 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe fighting terrorism and guarding the borders, the country ranks high in the comity of nations with lingering security challenges. to this end, this paper examines the issues of porous border, terrorism and national security in nigeria with focus on the fourth republic. methodology this paper is an ex post facto research design. this will help in making replicable and valid inferences by interpreting textual materials and systematically evaluating them. in line with this, there was thematic selection and a focus on qualitative data to address the objectives of the paper. content analysis was the method of data analysis while the using this method of analysis, meaningful data were extracted and based on logical chains of evidence, inferences will be drawn upon and conclusions made. literature review terrorism terrorism has undergone various changes, resulting in many interpretations, interpretations and insights. there are many variations on what terrorism is all about. trying to define this term is therefore a difficult task, given the fact that no definition is universally accepted among scholars, analysts and governments. it is a story of different lashes in different people as each person’s ideas are explained naturally. etymologically, words; fear, intimidation, intimidation, terrorism and deterrence are derived from the latin verbs ‘terrere’ meaning trembling or trembling, and ‘deterrere’ meaning terror (wilkinson, 1986). in its most basic sense, the word refers to a state of intense fear or death. ironically, yesterday’s hero may be today’s terrorist and vice versa, as marighela (1999) points out, ‘one terrorist is one’s liberator’. one important problem in defining terrorism is that the world is given a constantly changing imagery without a clear definition of what terrorism means. the act of terrorism by provinces and non-state actors has long existed. but the climax came on september 11, 2001, when four passenger planes were hijacked and attacked at the world trade center and the pentagon in the us, killing at least 5,000 people. for the shocking, extremely dangerous acts of terrorism in spain, england, the middle east, turkey, north africa, south east asia (wilcox, 2004) its weapons are murder, mass murder, carjacking, bombings, kidnappings and intimidation. such actions according to them can be carried out by the provinces and the private sector. although various definitions of rebellion are widespread, there are basic elements. such factors include the use of violence, instant fear and perpetual terror, aimed at non-military or civilian citizens, and are a form of protest or political discourse. but, no matter how we look at it, terrorism is always an illegal means of resolving conflicts and committing crimes rather than political crimes. the act of terrorism by provinces and non-state actors has been around for a long time in human history. but it came to a head, a catastrophe that swept across the country since september 11, 2001, when passenger planes were hijacked and attacked at the world trade center and the pentagon in the united states of america, killing nearly 5,000 people. terrorists try not only to instill terror but also to undermine confidence in the government and the political leadership of the country to which they are directed. in the view of this paper is a terrorist attack aimed at a group against the citizens and government of a particular region for economic, political and / or ideological purposes. the next concept that will be clarified is national security. national security the concept of national security incorporates different meanings such as the absence of national threats; accident; accident; uncertainty; lack of protection, and lack of security. the concept of “national security” is often misunderstood (wolfers, 1962) and consequently misunderstood (carey, 2000). it is therefore a strange thing, a “fall”, and therefore a relationship with relatives, rather than a “thing” aimed at rather than being seen and handled. however, national security is a requirement to maintain state survival through economics, diplomacy, speculation and political power. the concept was greatly developed in the united states of america after world war ii. initially focused on military might; it now incorporates a variety of factors, all of which affect non-military or economic security of the nation and the values ??supported by the national community. moses olusegun (2022) 31 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe national security has been defined as the ability of the national government to, among other things, maintain the integrity of the national body and the environment; to maintain its international relations in accordance with sound principles; maintain its identity, institutions, and external management; and controlling its boundaries. the ability of provinces and communities to maintain their individual ownership and operational integrity is also an important aspect of national security. the primary purpose of national security is to uphold national standards, which include national survival, sustainability, environmental integrity and economic progress (abidde, 2014). therefore, in order to have national security, a nation needs economic security, energy security, environmental protection, etc. security threats include not only common enemies like other provinces but also non-state players such as violent nationalists. players, drug associations, international companies and non-governmental organizations; some authorities include natural disasters and incidents that cause significant environmental damage in this category. steps taken to ensure national security include: using diplomacy to bring together partners and severance of threats; consolidating economic power to facilitate or enforce cooperation; to keep the armed forces active; implementing public safety measures and emergency preparedness measures (including anti-terrorism legislation); to ensure the sustainability and redundancy of critical infrastructure; use intelligence services to detect and defeat or avoid threats and espionage, and to protect classified information; uses counterintelligence agencies or secret police to protect the nation from internal threats in general, braithwaite, (1988: 9) quoting the encyclopedia of social sciences describes national security as “the ability of a nation to protect its internal values ??from external threats”. also, lipmann describes it as “a nation that has security where it does not have to give up its legitimate interests to avoid war, and is able, if at all possible, to keep it at war”. morgenthau (1948) states that national security and national interests are related; where the former is seen as powerful and therefore is a political context. imobigbe (1981) refers to it as the protection and survival of the state. the risk of looking at national security in this small way according to nweke (1988: 1-2) is triple; but we will worry about the first two: first the tendency to balance “protection” with “security” and to impose undue responsibilities on the military as if only the armed forces were the security guards of the country. these tendencies create in the minds of the military to be the only ones where security, stability and progress can be achieved. second, national security has been used by state officials as a political rhetoric or motto to unite citizens in the face of internal or external threats from ruling governments and to strengthen their domestic influence and political base (adebayo, 1986). dyke (1966), concludes that there is no doubt that national security includes state sovereignty, non-violation of the territories of its territories, and the right to self-defense and collective resistance to internal and external threats. but the state is protected only when the group under which it is organized feels that they belong to the same independent political community; enjoy equal political freedom, human rights, economic opportunities, and the state itself is able to ensure independence in its development and foreign policy. freedman’s (1998: 53) view is that if anything causes anxiety or threatens quality of life in some way, it is labeled “safety problem”. the concept of economic security therefore promotes a controversial policy approach, while “environmental security” has often been more effective in confusing than clarifying by promoting the pursuit of opponents. national security according to held & mcgrew (1998: 226) provides a traditional definition of national security. he describes national security as “the acquisition, deployment and use of the military to achieve the country’s goals”. romm (1993) defines it as a lack of risk or danger in upholding values, principles and the absence of fear that those values ??will be attacked now or in the future. thus, national security is the preservation of a nation’s values ??in relation to protecting its territory from human and non-human threats and guidelines in fulfilling its national interests in the international system. it is safe to consider national security as the strength and power of the world to ensure the security of everything in its place. border and border porosity moses olusegun (2022) 32 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe the concept of state border supports the planning, and indeed the condition that it is possible, both domestic and international legal and political systems (vaughan-williams, 2009). internally, it is central to the general notion of the limits of monarchy and internal authority, which is reflected in max weber’s definition of the paradigmatic state of the state as a (successful) human society that claims to be the exclusive use of official power in a particular area. in the international arena, it enshrines the principle of local integrity, enshrined in article 2, article 4 of the united nations (un) charter which, from the end of world war ii, serves as the basis for such principles as: the rule of law and equality of all provinces before international law. ; protection from the promotion of tribalism in some provinces; and autonomy and conservation of the environment (vaughan-williams, 2009). traditionally, borders have been international borders between regions of a country. this boundary may be natural (sea, mountains, rivers, etc.), or otherwise, but in any case it is always a function, or the result of compliance, conquest and peace treaties. in o‘dowd (2003: 24), borders ? areas of economic and political opportunities in nations and provinces as well as dozens of other interested parties and agencies, both legal and informal. the border serves two basic purposes protection from external and internal threats and territorial demolition (newman and paasi, 1998). according to zartman (2010), borders cross the country but pass through people. on the maps they appear as fine lines with one side, and the bottom has many dimensions. boundaries are boundaries in depth, the area around the line, the place where the state meets the community, and where no one has ever felt at home (simon, 1997). in human terms, it is impossible to understand boundaries, and indeed the close relationships between regions and communities contained in them without understanding what it is like to live with them (zartman, 2010). a border signifies the sharp edges of a territory in which the spheres of influence of its occupants are defined. furthermore, borders are the razors edge which hang suspended the modern issues of war or peace, of life or death to nations (curzon, 1906:132). this binary view of borders was underscored by star and most in their joint study of the border factor in international relations, when they asserted but “shared international boundaries are like coins with one side issuing with “risks” and the other with “opportunities” in international interaction (star and most, 1976). according to gross, international interaction between adjacent states is a continuum with conflict at one end and co-operation at the other. this continuum would be stimulated in either direction depending on the extent which the border in question is “open or close” (gross, 1973). theoretical framework this paper is found within the theory of rational choice that fits better with research compared to the world theory of failure. the theory of rational selection assumes that the player chooses an alternative that he or she believes to bring about a social outcome that enhances his or her choice under the assumptions (sato, 2013). according to marsh (2011), the basic premise of this theory is related to the demands of criminals who may be criminals in their crimes. this is due to certain processes for making different decisions for each person (ability) and real-time flexibility (available time). theory clearly states that certain crimes are chosen by criminals and committed for a number of reasons. the subject of the theorist argument is, “at the heart of criminal behavior are the ideas of choice and decision making” (marsh, 2011: 142). various options are always available to people in a particular situation and are often left to the individual to make his or her own choice. the actor chooses an alternative that he believes brings the effect of social media that extends his help (payment) under imaginary limits (sato, 2013). from a theorist’s point of view, five key factors are included in the individual’s choice: obstacles, alternatives, social outcomes, help and belief. all of these factors are key to the individual choices in society. with regard to crime, criminals often choose to get involved in criminal activities and to avoid involvement in crime. an important aspect of rational choice theory is the idea that people will measure the happiness that can be had by committing a crime against the pain that may result from punishment, and acting accordingly. this is known as hedonistic calculus (boyd, 2017). so the theory of rational elections means that criminals such as terrorists and illegal immigrants act responsibly, systematically, and make sound decisions about whether to commit a moses olusegun (2022) 33 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe crime or not. opponents of choice also recognize that the threat of punishment or the promise of reward may motivate people to act as punishment or reward itself (scott, 2000). the coherence of this view in this paper comes from the fact that both those who undermine national security such as terrorists and illegal immigrants and the government and its various envoys who are supposed to ensure the security of the nigerian state believe they stand. this is the wisdom of their decisions at the individual and group level. the top authority needs to make decisions that will protect borders and protect the country from internal and external invaders. porous borders, terrorism and nigerian national security: findings discussed nigeria shares land borders with cameroun, chad, niger and benin republic and also shares maritime boundaries with equatorial guinea, ghana, cameroun and sao tome and principe. out of the thirty-six states, fifteen share international land boundaries with african countries. ironically, the borders of nigeria are not adequately protected by the border security forces. the traffickers of all sorts live across the border and are familiar with the routes beyond the connected security agents which is the only one holding the border, according to respondents at the nigeria customs office. it is not surprising that migration can be achieved as the flow of people and goods into the country is very small and uninterrupted. the ecowas migration policy allows people to move quickly and indirectly to neighboring countries with protection for ninety days. with this, nigeria has been the major recipient of illegal immigrants even beyond the west african region. border porosity has also strengthened illicit trade relations such as human trafficking, drug trafficking, and much more. the nigerian respondents argued that their proposal was due to the existence of the west african border. some of those who have been affected across the nigerian borders with the intention of crossing into niger, chad, benin republic, cameroun and do not have the necessary travel documents. the tightening of nigerian borders appears to be promoting further human trafficking measures, as well as a lack of adequate protection and identification structures. nigeria has not been using or does not have a functioning government presence as the largest country in west africa. high levels of poverty in neighboring countries also exacerbate this. nigeria is now a hotbed of human trafficking, where traffickers benefit from the lack of effective border surveillance, security, and detection systems. visas are obtained through fraudulent or fraudulent means, usually in connection with immigration agents. in addition, traffickers, a few secret rental sites, had shortcomings in border protection and insufficient means of detection in ghana and nigeria. children are also taken from rural communities to urban areas where rural insecurity and inequality occur. the location of traffickers depends on their intent to smuggle. it is important to remember. however, italy is the preferred reference from nigeria to many women victims. no doubt that there are internal elements that have threatened the peace and security of nigeria. however, terrorist activities such as those being orchestrated by boko haram since 2009 have been linked to forces beyond the shores of nigeria. nigeria is the origin, transit and destination of arms trafficking which means nigeria produces, imports and exports small arms majorly through her ill-manned borders. most of the studies had concentrated on importation of small arms or cross-border trafficking or smuggling of arms downplaying the local manufacture and supply of small arms mostly through the poorly guarded borders. with the persistence of insurgency in the country, thousands of weapons such as rocket propel grenades (rpgs), rocket launchers, anti-aircraft missiles, and ak 47 rifles have been intercepted by security operatives in various locations in around the nigeria. it is widely believed that these weapons found their way to nigeria from turkey, iran, libya and mali among others. the insurgent’s access to rocket propel grenades (rpgs), and other high caliber arms is has remained a serious concern within the security architecture of the country. rocket propel grenades (rpgs), are explosive projectile weapons used by insurgents to attack or destroy targets from long distances, while rocket launchers are devices that are used to propel missiles or explosives from long ranges. some of the launchers can go as far as 900m. possession of these high caliber weapons not only confers on boko haram deadly firepower, but also enables fighters to hit targets from long distance. in the opinion expressed by nte (2011), more than 1,135 companies, in more than 98 countries in one way or the other in the production of small arms, ammunition and/or components. at least 60 of them are involved in legal export of small arms. in the last 40 years, the number of countries producing small arms had doubled, moses olusegun (2022) 34 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe and the majority of these small arms producing companies are located in western europe. it is surprising to note that with the various security operatives around the border area with around 119 check points mounted by the nigerian customs, immigration, ndlea and the police, the rate of border crime have not reduced. the issue smuggling has been a major issue facing security operatives across the border areas in nigeria and west africa as a whole. west africa is under attack from international criminal networks that are using the sub-region as a key global hub for the distribution, wholesale, and increasing production of illicit drugs (brown, 2013). the porosity of the border area tends to make it difficult for security operatives to control the movement of people and goods. the land, water and air borders are not well manned and it was discovered that, illegal routes are connecting nigeria with her francophone neighbours which the government are not aware of. smuggling takes various form and ranges from smuggling of food items to cars, drugs, terrorists, weapons among others. the border areas have been closed on different occasions by the nigerian government to curb the activities of terrorists and other national security saboteurs. aside terrorism and terrorists activities, threats to national security that have links to the porosity of our national borders include drug trafficking, human trafficking, advanced free-fraud, prostitution, kidnapping and hostage taking, etc. suffice to say here that it is not only dissident groups that take advantage of the porosity of national borders to terrorize the country, the state is also involved in manipulating the loopholes on the borderlands for personal advantages. for instance the introduction of drugs trafficking in west africa has been traced to nigeria. as the most populous country in the region, even criminals who are not nigerians often disguise as one or perpetuate their crimes through the nigerian space (adetula, 2015). the implication thereof is that, some of these terrorists often employ other people to carry out their activities thereby making it difficult for security agencies to detect their movement. these men of the underworld often move undetected and they can be children, pregnant women, clerics, etc. in an environment where there is high poverty rate, illiteracy, poor governance, corruption, ethnic violence among others, drug trafficking and the ethno-cultural linkages of the inhabitants on both sides of the body have created the tendency to condole the criminal exploit of the federal operating along the common border. hence, terrorists readily seek and find prompt and safe asylum from the border communities. the border communities rather than being helpful to ensure that criminals are brought to book, actually collude with them to work against the effect of the state security apparatus. the authority of the republic of benin does not demonstrate the necessary enthusiasm in bringing these criminals to justice. for instance, while offenders are chased from nigeria, as soon as they succeed in crossing the republic of benin side of the border, they completely disappear and one never hears of them again. this is because the country is a beneficiary in the illegal activities going on along the common border. the length of the nigeria-benin-niger-cameroun-chad borderlines, which is about 3,984km (asiwaju, 1994); the characteristics terrain, its porous nature, as well as other natural constraints makes the thought of its effective policing unthinkable. the role of cultural ties in inter-territorial movement of peoples also explains a situation in which contacts and movements between groups of tribesmen across borders is greater than tribesmen of different stocks within same borders suffice. for instance, the contact and cross-border movement between hausa of nigeria and niger may be greater than contacts between hausa of nigeria and the jukun of nigeria. the same subsists between yoruba of nigeria and benin republic than yoruba of nigeria and igala of nigeria. the situation is such that no amount of resources and manpower deployed towards the manning of the common border can bring about very effective security coverage if such effort is concentrated on just one side of the common border. aside from the fact that the considerable distances between control posts and the difficulty of the terrain, which generally presents formidable obstacles, there is the fact that no boundary can ever be completely patrolled. there is this notion that the western and eastern borders are better manned that those of moses olusegun (2022) 35 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe the northern fringes of the country. this bias has made terrorism to linger in the northern region beyond the predictions of experts. the border problem is related to colonial history where at a conference in berlin; germany between november 1884 and february, 1885 the territory was partitioned and carved out for the royal niger company. however, its porosity has been worsened by the failure of succeeding governments to properly administer these borders. as onuoha observed that the high level of insecurity on african borders is largely due to the way they are administered and managed, and less to do with how colonialists patterned them (onuoha., 2013). despite this spirit of enterprising and promising neighborliness, the borders linking the two countries are the most problematic because of the activities of internationally reputed criminals engaging in smuggling and trafficking of virtually everything from human trafficking, ammunition, arms, and drugs manufactured goods, agricultural produce, prostitution, and child labour to religious fanaticism, terrorist attacks and insurgency (adeolu, & fayomi, 2012). the demarcation of the border between seme (nigerian) and krake (benin republic) is through the use of ropes. the ropes are tied to drums filled with sand and after interrogation by the security agents, the rope is been lifted and vehicles can pass. it is possible to plant maize in diffa (niger republic) and plant guinea corn in kukawa (nigeria) while claiming ownership of the same piece of land. terrorists like the boko haram have taken advantage of this undifferentiated border to recruit and regroup against the nigerian state, especially at the northern borderlines. this is just for vehicles and the security for humans crossing is unbearable. individuals moves freely from one part of the country into the other without been asked questions or been checked and it is through this movements that crimes are been perpetrated. nigeria has hundreds of borders that are poorly manned and delimitated. before now, it was political right to have this poor border security but right now, insurgent groups like boko haram, bandits and kidnappers have turned the tides around even against the politicians that do benefits from border porosity. nigeria has also recommended consideration of sanctions for those found diverting arms into illegal networks, the establishment of a common international standard for regulating the activities of arms brokers, integrating small arms measures into comprehensive national development strategies, and the establishment of a common standard for end-user certification and stockpile management. however, the government of nigeria faces numerous challenges in tackling the problems of small arms proliferation and armed violence especially in the north east of’ nigeria. some of these challenges are self-imposed and rein creed through greed-based behaviour, while others are as a result of poor institutional capacity and the complexities of addressing widespread crime and the general situation in the nigeria. nigeria has national firearms legislation that is comprehensive and restrictive, but poorly en forced. lack of clear-cut policy in defining nigeria’s relationships with her neighbours is a great setback to her border security and national cohesion. conclusion and recommendations nigeria has been an active participant in international and regional discussions on small arms proliferation occasioned by the porosity of borders, especially in developing economies. the country has entered into series of partnerships and international agreements even with her immediate neighbours pertaining to small arms and light weapons that fly around the region. it supported the adoption in 2005 of the international instrument to enable states to identify and trace illicit small arms and light weapons, and has argued that this political document needs to be transformed into a legally binding instrument in a bid to control effectively and criminalize the illicit movement of small arms. globalization has made the security of physical borers a very herculean task; however, it must not prevented nations of the global village to regulate the inflow of criminal elements that jeopardize national security architectures of state. the country’s leadership has the constitutional power and authority to secure its citizens and residents from the onslaughts of terrorists. arising from the above, the paper makes the following recommendations. a border patrol joint taskforce involving nigeria and her neighbours to help in border surveillance will go a long way to ensure border safety for the country. there is need to employ technology in the surveillance and security of the country’s borders. this will involve bring the relevant agencies like the nigerian customs, immigration, ndlea, national moses olusegun (2022) 36 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe space research and development agency (narsda), nigeria communication satellite (nigcomsat), armed forces, etc on board on collaborative intelligence gathering and dissemination for actions. corruption in the recruitment of personnel and procurement process, especially, in security organizations should be reduced to the barest minimum through automation of governmental activities. a genuine national identification programme through census will go a long way to reduce illegal immigration and foreign terrorists’ invasion. citizens have to be more patriotic and protective of their fatherland thereby avoiding being in connivance with non-nigerian intruders who end up constituting security threats to the country. references abidde,s (2014) “nigeria’s national security in an age of anxiety”, thewillnigeria.com/opinion /7638. nig, 23 february, accessed on 8 august, 2021. adeolu, l.g., & fayomi, o,. (2012). the political and security implications of cross border migration between nigeria and her francophone neighbors. international journal of social science tomorrow,, adetula, v. a. (2015) ecowas and the challenges of integration in africain ogwu, u.j & alli, w.o (eds) milestones in regional integration. lagos: niia asiwaju i. (2003), boundaries and african regional integration, panaf publishing inc. asiwaju, a. i. and adeniyi, p. o. (ed.), borderlands in africa. a multidisciplinary and comparative focus on nigeria and west africa, university of lagos press, lagos. p.31-35, 1989 boyd, n. (2017). the rational choice theory of criminology. retrieved from www.study.co m/academy/lesson/the-rational-choice-theory-of-criminology 1(3), 7. retrieved from www.aj sih.org/i ndex.php/ajsih/article/download/102/102&sa braithwaithe, t. (1988) “foundations and dynamics of national security”, nigerian journal of social science tomorrow,,1(3), 7. retrieved from www.aj sih.org/i ndex.php/ajsih/article/download/102/102&sa brown, d. (2013). the challenge of drug trafficking to democratic governance and human security in west africa.pa, carlisle: strategic studies institute, u.s. army college. brown, m. o. (2013), “european transboundary paradigm: its relevance to the nigeria – cameroon border integration. nigerian journal of social and development issues, vol. 2, january. carey, r. (2000), “the contemporary nature of security”, in tevor c. salom (ed) issues in international relation,.london and new york: rout ledge. dyke, v.v. (1966) security and sovereignty in international politics. new york freedman, l (1998) “international security: changing targets; foreign policy, 110:48-63. gros, j. (2011). failed states in theoretical, historical and policy perspectives. in w. heitmeyer, control of violence. doi:10.1007/9978-1-4419-0383-9. gross, f. (1976), ethnics on borderland: an inquiry into the nature of ethnicity and reduction of ethnic tensions in a one time genocide area, london. moses olusegun (2022) 37 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe held, d. and mcgrew, a. (1998). the end of the old order? review of international studies, 24: 219243. herbst, j (2000) states and power in africa: comparative lessons in authority and control (princeton, nj: princeton university press. ibrahim, m. (2008), “the need for improved healthcare facilities for the control of diseases along the nigeria – niger border”, in akinyele r. t. (ed.), borderlands and african integration, panaf publishers inc., lagos. ikaade, b.m. (2010), the study of terrorism: definitional problems. santa monica c.a. rand corporation. imobighe t.a (1988). “doctrine for and threats to internal security”. in a.e ekoko and m. a vogt (eds) nigerian defence policy: issues and problems. lagos: malt house press. marighela, f (1999) islam and democracy: fear of the modern world, mary jo lakeland, trans, cambridge ma: perseus publishing. pp110 marsh, i. m. (2011). crime and criminal justice. new york: routledge. miller, t. (1985), cited in hansen, g. m. (ed.), borders and frontiers i, “the challenges of teaching about international borders”, an overview, new mexico state university. nowotny k. & peace j. “the economics of border areas” in hansen g. m., borders and frontiers i, teaching about international boundaries. nte, n. d. (2011) “the changing patterns of small and light weapons (salw) proliferation and the challenges of national security in nigeria”. global journal of africa studies 1 (1): 5-2. nweke, g.a. (1988) africa security in the nuclear age, enugu: fourth dimension publishers. onuoha, c. f (2013) “porous borders and boko haram’s arms smuggling operations in nigeria,” al jazeera center for studies, september 8, 2013, http://studies.aljazeera.net/en/reports/2013/09/ 201398104245877469.htm. romm, j.j. (1993). defining national security: the non military aspect. new york: council of foreign relations press. sato, y. (2013). rational choice theory. sociopedi a.isa. doi:10.1177/205684601372. scorgie, l (2011) “peripheral pariah or regional rebel?” the allied democratic forces and the uganda/congo borderland 100, no. 412 (february 18, 2011): 81,doi:10.1080/00358533.2011.542297. scott, j. (2000). rational choice theory. in a. h. g. browning., understanding contemporary society. u.s: sage publication. scott, j. (ed.) (1997), “dynamics of transboundary interaction in comparative perspective”, in border regions in europe and north america. star and most (1976), “the substance and study of borders in international relations research”, in international studies quarterly, vol. 20, no. 4. moses olusegun (2022) 38 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe strassaldo, r. (ed.) (1983), boundaries and regions: explorations in the growth and peace potential of the peripheries (proceedings of the conference on problem and perspective of border regions), institute of institutional sociology, gorizia, italy, 24 –27 march, trieste. wilcox, p. (2004), political terrorism, new york: university press. wilkinson, p. (1974), political terrorism, new york: university press. wolfers, a. (1962) “national security as an ambiguous symbol” in anorld wolfers discord and collaboration, baltimore: john hopkins uni. press. effect of donor funding and internal control on financial sustainability of non-governmental organizations in jos metropolis of plateau state american interdisciplinary journal of business and economics issn: 2837-1909| impact factor : 4.6 volume. 9, number 1; january-march, 2022; published by: scientific and academic development institute (sadi) 8933 willis ave los angeles, california https://sadipub.com/journals/index.php/aijbe 66 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe financial sustainability for ngos in plateau state: the importance of donor funding and internal control mechanisms catherine o. controller giz-skye nigeria., no 20 haile selassie street, asokoro, abuja nigeria. abstract: this study examines the impact of donor funding and internal control on the financial sustainability of non-governmental organizations (ngos) in jos metropolis, plateau state, nigeria. data were gathered from 285 respondents through self-administered questionnaires distributed among finance and accounting department, human resource department, administrator and field officers. three hypotheses were formulated and tested using the statistical package for the social sciences (spss) analysis tool with multiple regression, one way anova, and krukal statistical tools. the study revealed that poor management of financial control, inconsistent donor funding, and poor community involvement affect the sustainable funding of ngos in jos. the study concludes that proactive community involvement, diversification of income sources, good donor relationship management, capacity building, and government involvement are among best practices to ensure the sustainability of ngos in nigeria. this study highlights essential measures needed to foster financial sustainability for ngos towards fulfilling their respective missions and obligations. keywords: non-governmental organizations, donor funding, internal control, financial sustainability, nigeria. introduction non-governmental organizations (ngos) play a vital role in the development of any society, particularly in nigeria, where the government's ability to provide basic social amenities is frequently questioned. ngos' activities are presently driven by funding from private individuals, donor agencies, religious affiliations and other organizations. however, the inconsistent nature of the sources of funding and the limited resources available for these ngos' operations raise concerns over their financial sustainability. thus, it is essential to examine the impact of donor funding and internal control on the financial sustainability of ngos in jos metropolis, plateau state, nigeria. previous studies have identified a significant gap in empirical evidence on the impact of donor funding and internal control on the financial sustainability of ngos in nigeria, necessitating further research to address the issue. quantitative research is the most appropriate approach to pursue the established objective in this study. the study aims to contribute to knowledge, provide insights into the challenges faced by ngos concerning sustainable funding, and highlight essential measures needed to foster financial sustainability for ngos towards fulfilling their respective missions and obligations. therefore, this study seeks to test the hypotheses that the management of financial control, donor funding, and community involvement significantly impact the financial sustainability of ngos in jos metropolis, plateau state, nigeria. catherine o. (2022) 69 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe statement of the problem despite the numerous efforts to develop self-sustaining projects in rural areas of sub-saharan africa, the progress is rather slow leading to spending of massive resources on projects that have restricted benefits to the target population panda, (2007). according to carroll (2012), donor funding in ngos do not last a life time. at the end of the project timeline, donor funding is withdrawn, and some ngos during this period collapse due to a weak financial structure, because they use up more or all of the resources than can be generated (burger & owens, 2010). callamard (2006) explained that some other ngos however, have consistent funding but no effective financial control to plan for management and sustainability. such ngos never practice the principle of sustainable development where the needs of the present are met without compromising the ability of the future to meet theirs. thus, the financial management processes of ngos are dominated by conditions of resource scarcity vis-a-vis the ever increasing agenda of social development activities on which such funds could be spent (carroll, 2012). tough economic times buoyed by global recession have in one way or another affected global funding for ngos. many ngos continue to cease operations by the day often due to lack of sustainable funding. many new others are also set-up any day it dawns leaving one with question marks than answers as to what’s ailing the sector. many new ngos fall into the pitfall of un-sustainability, as they operate for a summer or for a few years and then fade away (carroll, 2012). the world bank, (2009) in a paper prepared for the meeting of the group of twenty (g-20) finance ministers and central bank governors held in london in april 2009 issued a warning to developing countries. it noted that developing countries faced a financing short falls in 2009 as trade income would dwindle and rich nations would vie for capital to deal with the global slump. the world bank concluded that the impact of the economic downturn would make poor countries more reliant on development assistance because as richer countries borrow more, it would become more difficult for poorer countries to raise capital. as is the case with ngos across states, ngos in jos metropolis are mostly concerned with raising and expanding resources according to specific budget plans. this state of affairs has restricted these ngos into a dependency syndrome which is threatening the sustainability of their programmes and their survival as institutions. the internal control systems of these ngos will go a long way in determining among other things, the effectiveness and efficiency of operations, reliability of financial reporting; and, compliance with applicable laws and regulations, but is not enough for them to achieve a financial sustainability status. there are other factors that would determine this, one of which is diversifying revenue sources for ngos. also, most organizations want to make wise decisions, but are sometimes at a loss of where to begin. their dearth of strategic management plans leave their internal and external environments needing proper evaluations to ensure effectiveness and efficiency, and this would in turn affect the financial sustainability of the organization. based on the above the researcher intends to examine the impact of donor funding and internal control on financial sustainability of nongovernmental organizations in jos metropolis, to determine the effects of financial sustainability on the lifespan of ngos in jos metropolis. research questions 1. to what extent does donor funding contribute to sustainability of ngos in jos metropolis? 2. to what extent does internal control contribute to sustainability of ngos in jos metropolis? 3. how effective is financial sustainability on the lifespan of ngos in jos metropolis? objectives of the study 1. to examine the extent of donor funding on sustainability of ngos in jos metropolis. 2. to determine the extent of internal control no sustainability of ngos in jos metropolis. 3. to investigate the effects of financial sustainability on the lifespan of ngos in jos metropolis. resarch hypotheses ho1: there are no significant effects between donor funding and sustainability of ngos in jos metropolis. ho2: there are no significant effects between internal control and sustainability of ngos in jos metropolis. catherine o. (2022) 70 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe ho3: there are no significant effects of financial sustainability on the lifespan of ngos in jos metropolis. significance of the study findings of the study would be significant in the following ways: practically, ngos are pushing forward for high financial sustainability in carrying out their projects through donors, who aim to find meaning in what they do and purpose for their existentialism. thus, organizations that apply the recommendations derived from the results of this study will be capable of curtailing the number of issues with donors funding thereby boosting their financial sustainability. theoretically, the outcome of this study will contribute to existing theories used in the work to explain the conceptual framework or may even serve as a bedrock for the development of a new theory. it will also add to the body of knowledge on the usefulness of theories in explaining the activities of ngos. policy makers will be guided on what should be emphasised by organizations in the workplace in order to create high level of funding and improve financial sustainability. also, this will provide justification for better policy formulation in increasing funding of ngos in jos metropolis of plateau state. furthermore, the study will help the researcher uncover critical areas in ngos funding of projects, that many researchers were not able to explore. thus, a new theory on financial sustainability may be arrived at. scope of the study the study covers five nongovernmental organizations in jos, plateau state (centre for peace advancement in nigeria [cepan], islamic counseling initiatives of nigeria [icin] and women initiative for sustainable development [wiscod], the centre for the advocacy of justice and rights [cajr], christian women for excellence and empowerment in nigeria society [cweens]). these organizations are selected because they are solely dependent on donor funding and the likelihood of these ngos existing after the lifespan of donor funds are not guarantee. the have also battled with sustainability problems and have co-partnered and subgranted projects with organizations that have had internal control and sustainability challenges. however, it does not include all ngos in plateau state. the study chose to review the last 6 years of these ngos’ existence; from 2012 to 2017 because during these periods some of these organizations were still seeking donor funds or just concluding projects. literature review concept of donor funding one of the major factors impacting the effective management and sustainability of ngos is the nature of their dependability on donor funding. a majority of civil society organizations in developed and developing countries were established in order to complement and supplement governments? developmental and service delivery efforts. multilateral organizations such as the united nations, world bank, commonwealth secretariat, as well as regional organizations such as the european union, african union and sadc have funded ngos? programs and activities. funds were channeled through the civil society organizations to foster development and improve service delivery at the grassroots level. in jos, many ngos are recipients of small grants from donors. this implies that these small grants may have short lifespan, thereby leaving ngos to close down or begin to scout for funding elsewhere. the common impact of financial dependence on donor funding is that once donors pull their financial support, or the project ends, ngos collapse. as pointed out by ditshwanelo, (2004), one of the major threats to their existence and the carrying out of their mandates is the reduced funding which may force them to scale down their activities. most ngos in nigeria and jos in particular, lack clearly defined structures in terms of organizational charts, buildings, facilities, equipment and human resources (garoyakin, 2015). the major contributory factor to this is the constraint that limited financial resources places on the ability of ngos to enable, plan, organize, and design clearly defined structures as well as equip their offices with adequate equipment and facilities (garoyakin, 2015). as noted by odiboh, (2007), the key weakness of ngos in africa is the inappropriate organizational structures which impact the manner in which ngos carry out their core business ditshwanelo (2004). on the other hand, it was discovers that the proportion of official funding channeled through civil society varies widely from catherine o. (2022) 71 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe country to country, depending on whether the country has a stable governments trusted by donors and/or weak national. pratt, adams and warren (2006) argue that the reasons why official agencies fund national development ngos include to channel resources directly to poor people through civil society rather than through the state; to fund personnel sending organisations (volunteers); to provide support to publicly popular ngos; to gain public support for the overall aid budget, through development education undertaken by ngos in the donor country, aligning official agency and ngo interests; to support the development of vibrant civil societies which can represent the interests of poor groups towards the state and market; and to promote the interests and a positive image of the donor country. internal control ackah (2013) defines internal control system to encompass all methods, procedures and arrangements adopted within an organization to ensure, as far as possible safeguard assets, the completeness, accuracy and reliability of the accounts records. auditing standards defined internal control as “the whole system of control, financial or otherwise, established by management adherence to carry on the business in an orderly and efficient manner, ensuring adherence to management policies, safeguard assets and secure as far as possible the completeness and accuracy of records” in every organization it is very essential to put in place an effective internal control system in its daily activities to help achieve its organization objectives. organizations are less able to perform many internal accounting controls (e.g., multiple layers of authorization, cross-checking, supervision, and segregation) because, they employ less people due to technological advancement and changing management techniques (lindsay & brownell, 2017). control environment the control environment is the set of standards, processes, and structures that provide the foundation for carrying out internal control across the agency. the agency head together with those charged with governance and agency management set the tone at the top regarding the importance of internal control and expected standards of conduct (williams, 2014). cruz (2016) opines that the control environment sets the tone for the organization and influences how employees conduct their activities and carry out their control responsibilities. the control environment is the foundation for all other components of internal control and provides structure and discipline. developing a strong culture of control consciousness within the organization is one of the most cost-effective and efficient ways that internal control over financial reporting can be implemented. its effect can permeate throughout the organization, directly impacting each of the other components of internal control. among the important factors are the attitude, awareness, and actions of management and directors concerning internal control (lindsay & brownell, 2017). control activities control activities are policies, procedures, techniques, and mechanisms that help ensure that risks to the achievement of an agency’s objectives are mitigated. control activities are performed at all levels of the agency, at various stages within business processes, and over the technology environment. lindsay and brownell, (2017) note that control activities are put in place by the management to make financial information authentic and reliable. for example, debtors cannot be written off without permission finance director or any other person given authority to write off debts. similarly, credit sales cannot be made unless recommendation is sought from credit control department. such controls activities do not necessarily are in the nature of authorization. requirement to enter password to access certain modules of information system is an example of information system. similarly a validation check in the database system to make sure that contact number of supplier can only be in numbers or email address has been entered in a particular format containing ‘@’ etc. all such checks will ensure that information is accurate (yator, 2012). information and communication information and communication are necessary for an agency to carry out its internal control responsibilities to support the achievement of its objectives. communication is one part of the information and catherine o. (2022) 72 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe communication component of internal control. just as all organizations need information to operate a business, communication is an essential aspect of information systems. communication of expectations, responsibilities, and other matters is necessary for the business to operate effectively (yator, 2012). communication relates to providing a clear understanding of financial reporting and safeguarding controls, how they work, and the responsibilities of individuals within the organization related to those controls. effective communication also includes communication of organization standards of conduct to third parties with whom the institution conducts business (furt; 2000). communication is another way that management conveys the tone at the top. management should communicate the information necessary for employees to perform their assigned tasks, for managers to supervise, and for responsible parties to make key operating and financial decisions. monitoring activities monitoring is the process of evaluating the quality of internal control performance over time and promptly addressing internal control deficiencies. since institutions and their personnel continuously change, it is essential that controls be monitored over time to determine whether they continue to be relevant and are able to address new risks to the institution. monitoring is a process that assesses the quality of an organization’s internal control over time and involves assessing the design and operation of controls on a timely basis and taking actions as necessary. monitoring activities can also reveal evidence or symptoms of fraud (bjorkman & svensson, 2010). according to the chartered institute of public finance and accountancy (cipfa), financial reporting comprises cipfa (2002): financial statements. these comprise external reports of a general nature that relate to the organization’s financial position. annual accounts are the most obvious example, but other examples might include the organization’s budget and periodic reports on financial performance. specialpurpose is financial performance. these include financial performances that are required by regulators, tax authorities and others, where the requisite information and format are specified by an external authorized body. these are formal reports which are produced for decision-makers within the organization (armour, 2001). this implies that internal control should strengthen the internal operating environment of the company, thereby increasing its capability to deal with external (and internal) events and uncover possible flaws and deficiencies in processes and structures¨ (boas, 2015). effective internal control helps an organization achieve its operations, financial reporting, and compliance objectives. effective internal control is a built-in part of the management process (i.e., plan, organize, direct, and control). internal control keeps an organization on course toward its objectives and the achievement of its mission, and minimizes surprises along the way. internal control promotes effectiveness and efficiency of operations, reduces the risk of asset loss, and helps to ensure compliance with laws and regulations. internal control also ensures the reliability of financial reporting (cruz. s (2016). the evolution of the tbl framework the term tbl has been attributed to elkington (1997) and it is sometimes referred to as both an excellent but utopian metaphor. while the term was unknown before the late 1990s, a cursory google search today will return millions of results. as a construct, tbl expresses the integration of social and economic lines to a broader environmental agenda (hubbard, 2009). but from a holistic point of view, tbl provides outlines for measuring the performance of an organization using the social, economic, and environmental lines. iso 26000 provides guidance on how to use globally vetted social responsibility framework to assess an organization’s social responsibility activities. the triple bottom line (tbl) of people, planet and profit, a term coined by elkington (1997), has become an influential approach all over the world (chabowski et al., 2011; svensson & wagner, 2015). this model set up the key of long-term strategies for companies making the transition to sustainability, based on three important dimensions ofsustainable development: environmental quality, social equity, and economic benefits (elkington, 1998). catherine o. (2022) 73 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe economic dimension the economic dimension of tbl – profit – focuses on the value created by the organisation and goes beyond itsfinancial performance and financial concepts assales growth, cash-flow,shareholder value, etc. to include the economic and operational business impact on the society (chabowski et al., 2011). further, it focuses on the organisation’s performance through the efficient management of its strategic capabilities such as core competencies (prahalad & hamel, 1999), shareholder value creation (doyle, 2000), and marketing orientation (akroush, 2012). social dimension the social dimension – people – encompass the impact of an organisation on the people’s welfare, including both employees and community, and addressing issueslike education assistance, community interaction, charitable causes, and fair fare practices (engardio, 2007). a prevailing topic in this dimension isthe increase in corporate social responsibility (csr) initiatives which has been receiving considerable focus not only on research but also on corporate strategies and operations (hallstedt, ny, robèrt, & broman, 2010). environmental dimension the environmental dimension – planet – relates to the organisation´s attempts to minimize environmental impact as well as their use of energy and waste production, in order to reduce their ecological footprint. interestingly sheth, sethia, and srinivas (2011) claim for a reshape of this dimension with reference to consumers, redefining it as the impact of the environmental change on human health and well-being resultant from consumption. not everyone agrees that tbl is everything its proponent’s claim it is and vanclay (2004) and norman and macdonald (2004) offered a contrarian view. vanclay (2004) argued that tbl proponents overreach in trying to make tbl a quantifiable aspect of corporate social responsibility when it was originally conceived as a philosophical approach. continuing this frame of thought, vanclay (2004) contended that although sia is a component of environmental impact assessment, it was far bigger than that it was more like a “philosophy about development and democracy” (vanclay, 2004). the tbl term has also become integrated with sustainability which is engulfing the corporate thought processes as a strategic planning moniker for organizational development and survivability. tbl and sustainability are used simultaneously in literature because they both address changes in practice and thinking as opposed to changes driven by theories (hubbard, 2009). a chief executive officer (ceo) cannot just be concerned about what happens in the theoretical space of the organization because external forces wrapped in the form of the three bottom lines (economic, environmental and social) are pushing organizations to integrate them into their day-to-day and strategic policy making practices. tbl is a consistent construct (the three elements must be included in any performance evaluation), brings balance between all three lines (hubbard, 2009) and brings sustainability to an organization (adams & frost, 2008). companies that incorporate tbl into its reporting infrastructure are often more sustainable within their industry. a consistent theme in tbl-related literature is that companies that follow tbl reporting models are among the most sustainable companies today, regardless of industry. public utility projects integrating the tbl model focus on balancing economic, environmental and social factors as they must: (a) balance decisions considering economic factor to be sustainable; (b) not harm the environment in the process of creating public benefit projects, and (c) not forget that they are responsible to the stakeholders who would be affected (socially, economically, and environmentally) by decisions to create sustainable projects and whose input must be sought tbl is a holistic socially responsible way of defining the criteria and metrics that is used to measure an organization’s success from both an internal and external perspective. tbl is anchored by three elements— economic, ecological, and social—all three find a compelling nexus in the social responsibility construct (iso, 2010). tbl, also known as people, planet, and profit is gaining support especially among large organizations—irrespective of whether or not they are global or local in nature—because it captures an catherine o. (2022) 74 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe expanded worldview that goes beyond just profit. the question is whether tbl can thrive in the public sector (vanclay, 2004). tbl, and other forms of sustainability reporting mechanisms, have lagged behind in widespread adoption because inductive theorizing from the field is missing (owen, 2008; qian et al., 2011; spence et al., 2010; thomson, 2007). consequently, both deductive theorizing and corporate disclosure studies have filled the void, howbeit unsuccessfully, because the role of management accounting as it relates to sustainable development is overlooked in research. a tbl social responsibility construct cannot be implemented in a haphazard manner in an organization because one or more of the social responsibility core subjects affects the organizational structure. financial sustainability an organization can measure its financial sustainability by computing the income after expenses and taxes (the surplus of revenues over expenses); availability of cash to cater for expenses; and comparing its assets and debt/liabilities. sustainability shows whether an organization will be able to achieve its duties and attend to its stakeholders over time (williams, 2014). usaid describes sustainability to mean broader funding sources accompanied by an enhanced capability to offer essential services to target populations who are in need of the services usaid (2007). international fund for agricultural development ifad, (2004) describes sustainability as continued funding of the projects and the government assumption of the goods and services offered by donor-funded projects and an ongoing provision of required funding and credit to rural areas even after donor support ends. besides, it points out that sustainability is demonstrated by strong, trained, active, community groups who have an aim of owning project outputs and are willing to improve the structures and keep the projects running. there is no doubt that sustainability of the donor funded projects will be assured and guaranteed if community groups come together, own the projects and assume their functions. the key challenge to ngo sustainability is thus financial viability with most of these organizations relying on a single source of funding while a few others have developed relationships with two or more donors (williams, 2014). nonetheless one of the main challenges encountered by ngos remains access to and dissemination of services, as most cannot afford or provide services unless funded by a donor. “moreover, others find it difficult to free staff time to attend fundraising courses, with a good number being too busy providing services to others and thus tend to give little priority to their own development” ngosi (2009). theoritical framework the researcher looked into the dependency theory, and the resource-based view theory in an effort to demystify the concept of financial sustainability as it pertains to ngos. dependency theory the dependency theory was put forward by andre gunder frank in 1969 in his work, capitalism and underdevelopment in latin america. graaff & venter (2001). the theory was put forward during the colonial era when colonial rule was seen as a necessary tool to ‘safeguard and extend capital investment’, with colonies being sources of cheap raw materials as well as captive markets for their coloniser’s goods. the theory suggests that, first world countries (core) have not only actively underdeveloped third world countries (periphery) but have also dominated them. in the same way donor funding is slowly but surely depleting non-profit’s capacity to be self-reliant and sufficient. ngos in jos are largely recipients of project funding from donors, which comes with various restrictions attached in terms of how to use the funds. therefore, such funding is unsustainable in the long run when it is withdrawn, because activities often cease abruptly and prematurely; thus putting the ngos in a position where they have to keep seeking donor funds in order to keep programmes and services they provide running research on poverty alleviation. this theory however has a gap as it only lays the argument for donor funding, but do not posit how financial sustainability can be achieved, thus the need for the resource-based review. catherine o. (2022) 75 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe resource-based view the resource-based view framework emerged in 1980s and 1990s after the major works published by (wernerfelt birger, prahalad and hamel & barney, 2012).this theory highlights how firms may enjoy competitive advantage effective and efficient performance over others by making use of their available, treasured, scarce, unique, and organized resources. resources can either be tangible (physical) or intangible (non-physical) in nature. rbv describes a firm as a bundle of resources brought together for a certain purpose mainly in ensuring the future survival of the firm, which clearly shows that a firm’s resources and their organization make one firm unique from the other. this looks and analyses firms from the inside –out whereby internal environment is analyzed first before looking at the external. this theory was adopted in this research on impact of donor funding and internal control on the financial sustainability of ngos in jos metropolis due to its focus on internal environment especially on how the strategic management of the ngos will ensure access to funds to ensure that projects commenced will be completed and enough resources will be available to build the capacity of the stakeholders, and to ensure that projects undertaken will be sustainable in the future omeri(2014). this theory focuses on the management of an organization’s internal environment, other than just the outer environment. and this is where effective internal control and strategic management come to play in ensuring financial sustainability prospects for organizations. conceptual framework from the conceptual frame work below, financial sustainability is the dependent variable, while donor funding, and internal control are the independent variables. the intervening variables of the conceptual framework may include government policies and organization culture which may have an impact in the project funding and financial sustainability in ngos. figure 2.1: conceptual framework. emperical review list and price (2012) carried out a study that revealed that understanding the selection criteria and how donor funding differs is important for a host of reasons. finding, for example, that some donors reward efficiency and transparency when allocating funds would have serious implications for the behavior of ngos who seek funds from these donors. furthermore, with more accountable ngos, donors will improve their chances of raising funds from their citizens. this study also proved further that although a number of stylized facts emerge from the data showing how donors fund ngos: a few attract most of the funding; the majority are dependent on one or two donors; many diversify their funding sources in the form of business income, membership fees and subscriptions. it is also the case that those ngos that are funded by international governments receive much larger amounts of funding than from any other source, including funds from international charities or churches (list and price, 2012). the reports the show that the percentage of donations from international sources accounts for 35% of ngos funding; local sources accounts for 8%; whereas 40% comes from contributions in the form of membership and user fees, and private donations, i.e. by individuals who do not represent a united body. constant fund-raising is one of the most important tasks that an ngo undertakes. spiros bougheas, alessiaisopi, & owens (2008) conducted a study on how donors allocate funds to ngos: evidence from uganda, which pointed out that international donors are positively affected by the ngo’s already existing financial structure. the ones registered to pay taxes are more likely to receive funding. local donors appear catherine o. (2022) 76 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe to rate the geographic location as important. ngos located outside of kampala are more likely to receive local funding. this could be because it increases the visibility of the ngo to the local funder. observing the functioning of an ngo in kampala will be more difficult even for local donors. indigenous ngos are less likely to have funding from international donors whereas they are more likely to receive local funding. they further asserted that the size of the ngo does not seem to be a key factor in the funding allocation of either donor (usaid, 2007) . further study by spiros (2008) shows that the proportion of funding from international donors is higher if the manager has more national contacts and less local. this measure of how well connected the manager is may be useful for an international donor working in a foreign country while the number of civil servants the manager knows locally is less relevant. on the other hand, for local donors the result is actually the opposite: connections with national government have a detrimental effect, whereas connections with local government do appear to matter. local donors may decide to allocate their resources to ngos that have not received funding from international donors. this is in accord with our supposition that local donors might be more concerned that ngos that are not on the radar of international donors are in still in a position to serve local community needs. therefore, they appear more concerned with accessibility rather than efficiency (yator, 2012). alesia (2018) in a study on donor relationship and fund release revealed that international donors tend to increase their funding if the community positively evaluates the performance of the ngo, whereas local donors are negatively affected by the community’s assessment of the performance of the ngo. these results are in line with the evaluation of the community needs, confirming that international donors are more prone to be influenced by the opinions of people outside the ngo, which in this case are the beneficiaries themselves. local donors’ behaviour may have a twofold interpretation: either they tend to favor the less efficient ngos that otherwise would have had a small probability of surviving, or it might simply be the case that they allocate funds following their own non-observable criteria. this explains how complete dependence on donor funding impedes the ability of ngos to raise internally generated resources to maintain their service provision. naidoo (2004) concluded that ethical environments are more important than codes of conduct in influencing finance managers in organizations when resolving ethical dilemmas. catasus and gronlund (2005) found that management’s attitude toward internal control was significant when accountants were asked to evaluate the control environment of an organization. a more important issue, however, is whether these internal control factors are actually related to misrepresented financial information. numerous empirical studies have looked into both the needs of financial reporting and management skills in public accounting information. skoog (2003) carried out a research on visualizing value creation through the management control of intangibles; power (2004) – analyses the financial management of everything; while waddell (2006) carried out a study on the complementary resources: the win-win rationale for partnerships with nongovernmental organizations. these studies found that organizations are more apt to voluntarily disclose negative earnings surprises preemptively, compared to positive earnings surprises. this is consistent with the thought that managers face an asymmetric loss function. a study by peter (2007) shows a negative relationship between the financial sustainability of an institution and the level of subsidies received each quarter. as the level of subsidy income rises, the respective institution’s financial sustainability falls. many have argued that subsidies help microfinance institutions reach the needed operational size. however, as discussed in many previous studies, these institutions may actually be doing less good as they receive more assistance. besides, institutions with more subsidy income have higher level of loans outstanding that is greater scale. this result may reflect the crowding out effect described above an increasing amount of grants and other subsidies are being directed to microfinance institutions that have already achieved a level of operations needed for their own continued success. likewise, kereta (2007) found that there is a negative relationship between dependency ratio and financial sustainability, and he further explains as reduction in dependency ratio (as dependency ratio measured by the ratio of donated catherine o. (2022) 77 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe equity to total capital) decline over the years is an indication that organizations can be self-sustainable, profitable, and meet their social missions and letting the industry to be financially selfsufficient. servon (2006) emphasizes the importance of setting up social and commercial goals that are compatible as she argues that organizations often have goals that are inconsistent, which might cause a mission drift as well as difficulties in obtaining self-sufficiency. sound financial management practices, good governance, and accountability are essential building-blocks for driving improvement and better-value for money in faith based organizations. gray et al (2006) have surveyed nongovernmental organizations, civil society and accountability: making the people accountable to capital and ebrahim (2005) report on accountability myopia: losing sight of organizational learning. financial statements are intended to be understandable by readers who have a reasonable knowledge of business and economic activities and accounting and who are willing to study the information diligently linton(2005). financial statements may be used by users for different purposes: owners and managers require financial statements to make important business decisions that affect its continued operations. financial analysis is then performed on these statements to provide management with a more detailed understanding of the figures. earlier research has shown that management control, such as accounting, have a stabilizing function (huque and rahman, 2003; jackson, 2009). as a consequence, technologies become imperative in terms of realizing the program ahrens and chapman (2006). the development of management control research the past decade has been associated with strategic, informal and non-financial aspects of organizational control systems, often though in combination with more tactical, formal and financially oriented aspects waddell (2000). that is, albeit the trend is to leave management accounting as a stand-alone method for management to the inclusion of a more strategic perspective on control, both perspectives co-exist in practice. research gap review of literature revealed that there isn’t available literature on the impact of donor funding and internal control on financial sustainability of nongovernmental organizations in jos metropolis. omeri (2015) addressed the factors affecting sustainability of ngos in kenya, but did little on internal control, and did not provide alternatives for funding. njoroge(2012) investigated the factors influencing sustainability of ngos, but focused more on financial strategic management. mwangi (2014) factors influencing sustainability of non-government organizations funded community projects in kenya, but focused more on donor-funded community projects with no mention of internal control strategies or funding alternatives. mugambi (2014) researched on donor funding practices and financial sustainability of donor aided projects, but stopped at why and how donors release funds. mugo (2014) researched on conditional donor funding and its implications on ngo autonomy in east africa and reviewed the issue of dependence that came through clearly with most ngo reporting total reliance on donor funding. while researching for financial sustainability of ngos, not one of them determined the effects of financial sustainability on the lifespan of ngos, and this has laid the basis for this research. there seem to be no research in plateau state that has explored impact of donor funding and internal control on financial sustainability of ngos in jos metropolis with a need to determine the effects of financial sustainability on the lifespan of ngos, and the many aspects it would create. this is the gap that this research seeks to fill. most of the researches conducted on financial sustainability of ngos have been conducted in india (2009), uganda (2011), south africa (2000), united states of america (2001) and kenya (2012/2015) . becoming more self-financed has its pitfalls and gaps. but it is still worthwhile to consider some of the internal control mechanisms that some ngos have used, especially ngos in the jos metropolis. the recurrent events of small scale crisis in jos metropolis, requires financial sustainability as against the high level of dependency on donors in order to remain proactive and or reactive to sustainable developmental interventions in the state. summary of literature review several theories were reviewed in an attempt to create the basis for the investigation, use and significance of the variables being studied. the basic assumption of the dependency theory by gunder frank in 1969 suggests that, first world countries (core) have not only actively underdeveloped third world countries catherine o. (2022) 78 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe (periphery) but have also dominated them through the funding of humanitarian activities that leaves the ngos dependent on them. this consequently created a system that was not designed to foster internal development but instead was shaped to service the core countries. essentially the peripheral countries were exposed to the capitalist system which in theory was supposed to lead to growth economically for both, but in actual sense the growth was unequal and economic autonomy for the peripheral countries was never achieved. subsequently, development in one (core) meant underdevelopment in the other (periphery). therefore, a system of dependence was created where the periphery became totally dependent on the core for its economic survival (yator, 2012). the resource-based view published by birger, posits that a firm is a bundle of resources brought together for a certain purpose mainly in ensuring the future survival of the firm, which clearly shows that a firm’s resources and their organization make one firm unique from the other. this looks and analyses firms from the inside –out whereby internal environment is analyzed first before looking at the external environment. gitonga (2014) argues that by ngos employing qualified staff and having all the funds to undertake a project is not enough to ensure financial sustainability if the internal environment of the firm/organization is dysfunctional. internal control is a broad term with a wide coverage. it covers the control of the whole management system in order to carry on the business of the enterprise in an orderly and efficient way by having an automatic check and balance overall the transaction. the control may be financial and or non-financial. it has become one of the basic and essential factors for efficient and effective management. the control environment sets the tone of an organisation, influencing the control consciousness of its people. it is the foundation for all other components of internal control, providing discipline and structure (gitonga, 2014). control environment factors include the integrity, ethical values and competence of the entity’s people; management’s philosophy and operating style; the way management assigns authority and responsibility, and organizes and develops its people; and the attention and direction provided by the board of directors. every entity faces a variety of risks from external and internal sources that must be assessed. a precondition to risk assessment is establishment of objectives, linked at different levels and internally consistent (gitonga, 2014). risk assessment is the identification and analysis of relevant risks to achievement of objectives, forming a basis for determining how the risks should be managed. because economic, industry, regulatory and operating conditions will continue to change, mechanisms are needed to identify and deal with the special risks associated with change (kereta, 2007). control activities are the policies and procedures that help ensure that management directives are carried out. they help ensure that necessary actions are taken to address risks to achievement of the entity’s objectives (schwab, 2008). control activities occur throughout the organisation, at all levels and in all functions. they include a range of activities as diverse as approvals, authorisations, verifications, reconciliations, reviews of operating performance, security of assets and segregation of duties (schwab, 2008). pertinent information must be identified, captured and communicated in a form and timeframe that enables people to carry out their responsibilities. information systems produce reports, containing operational, financial and compliance-related information, that make it possible to run and control the business. they deal not only with internally generated data, but also information about external events, activities and conditions necessary to informed business decision-making and external reporting (omeri, 2015). internal control systems need to be monitored – a process that assesses the quality of the system’s performance over time. this is accomplished through ongoing monitoring activities, separate evaluations or a combination of the two. ongoing monitoring occurs in the course of operations. it includes regular management and supervisory activities, and other actions personnel take in performing their duties (schwab, 2008). in jos metropolis, very few ngos have been able to sustain projects beyond the timeframe given by their donors. this is as a result of the fact that they have understood the need for sustainability and localizing funded projects such that the beneficiaries not only be a part, but own the project and ensure continuity. this catherine o. (2022) 79 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe is highly dependent on the internal control mechanisms and strategic management plans put in place by organizations receiving donor funds (omeri, 2015). this literature review analyzed available information on financial sustainability of ngo funded projects and factors influencing it. the literature brings out widespread concern about low financial sustainability levels of ngo funded projects. from the literature, different researchers are under the agreement that sustainability is an all-inclusive concept that should be considered at all stages of a project life cycle. the internal control mechanisms ackah (2013) donor funding ditshwanelo, (2004), and strategic management practices noebere, (2000), peter, (2007), & kereta, (2007) are causes as they are solutions to ngo financial sustainability plans. on the basis of the foregoing, the present study is aimed at addressing some of the afore-stated gaps of previous studies and contributing to knowledge by providing current empirical evidence on the impact of donor funding and internal control on financial sustainability of ngos in jos metropolis. methodology research design research design explains the method and procedure for gathering and analyzing needed facts and information (lion, 2009). specifically quantitative research method is the most appropriate approach to address the said objectives (taneja, taneja & gupta, 2011). this is in line with where they suggested using quantitative research method. quantitative research is a means for testing objective theories by examining the relationship among variables. according to creswell (2008), the final written report has a set structure consisting of introduction, literature and theory, methods, results, and discussion. the outcome will enable us to know whether the theory works or not in such context of study. population and sample size the population is based on the selected ngos in jos metropolis and the sample size derived based on a formula developed by (yamane, 1967) population could be view as encompassing “the total collection of all members, cases or elements about which the researcher wishes to draw conclusions (bull, 2005). the population of this study was drawn from 5 ngos selected within jos metropolis the center for peace advancement in nigeria (cepan), islamic counseling initiatives (icin), women initiative for sustainable development (wiscod), christian women for excellence and empowerment in nigerian society (cweens) and centre for the advocacy of justice and rights (cajr). data was generated from these organizations on an equal basis/number and from staff who operates in the organizations (programs, finance, monitoring and evaluation, interns and volunteers/support staff) table 1: number of staff from (5) ngos s/n names of ngos no of staff 1 cweens 240 2 cajr 244 3 icin 255 4 wiscod 257 5 cepan 254 total 1250 source: field survey 2018 therefore, the population of the study is 1250. sampling is the process through which some of the respondents are selected from the whole population size and the results of the respondents selected is then generalized or applied on the whole population. the sample size of 303 was used based on an equation developed by yemane (1967). the minimum sample size can be determined using the yamane formula (1983). the formula is give as: n = n/1+ne2 catherine o. (2022) 80 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe where: n = sample size n = total population e = error margin (5 % or 0.05) i = mathematical constant the margins of error were 0.05% which was chosen voluntarily by the said research. therefore substituting the formula above. n = 1250/1+1250 x 0.052 n = 1250/1+1250 x 0.00252 n = 1250/1+3.125 n = 1250/4.125 = 303.03 therefore population of study will be 303. method for data collection this research employed the use of questionnaire as a means of data collection. description of the instrument the questionnaire is written in english language, and consist of four parts. the first part consists of demographic and situational factors, second part consists of donor funding, and third part internal control last part consists of financial sustainability. the questionnaires will be given to field and administration staff. using yamane (1967) formula, a sample size of three hundred and three respondents were selected. this sample size is supported by amin (2005) that population size beyond a certain point (about n=5,000), the population size is almost irrelevant and the sample size of 303 is adequate. measurement of variables after completing the data collection, questionnaires will be checked for completeness and accuracy. for this research, statistical analysis will be used. likert scale will be used for rating. each testimonial will be measured by 5point likert scale: 1= strongly disagree; 2=disagree; 3=neutral; 4= agree; 5=strongly agree. similarly, dependent and independent variables will be measured by focusing on cronbach’s alpha (must be above 60%).in this research, multivariate statistical analysis as well as dependence techniques will be used because hypothesis that are presented in this research distinguish independent and dependent variable. validity and reliability of the instruments before embarking on data collection, a pilot study was carried out to pretest the instruments. this is done in order to assess the clarity of items, validity and reliability of the instruments mugenda & mugenda (2003). the pre testing is carried out on programme and administrative officers and any questions found to be interpreted differently during the pre-testing are rephrased so that they could have the desired meaning to all respondents. table 2. scale reliability of variables variables donor funding 0.83 internal control 0.71 financial sustainability 0.84 table 3. reliability statistics catherine o. (2022) 81 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe cronbach’s alpha cronbach’s alpha based on standardized items n of item 0.596 -.251 3 validity: validity is concerned with whether the findings are really about what they appear to be about (saunders , 2003). in order to ensure the validity of this study, data was collected from the field and offices of the various ngos using questionnaires. questions will be based on literature viewed and research. objectives to ensure the validity of the result and questionnaire will be pre-tested before distribution. content validity draws an interference from test scores to a large domain of items similar to those on the test (polkinghome,1988). content validity is concerned with sample-population representativeness i.e the knowledge and skills covered by the test items should be representative to the lager domain of knowledge and skills (cronbach,1971) reliability according to saunders et al., 2003, reliability refers to the degree to which data collection method will yield consistent findings, similar observation would be made or conclusion reached by other research sort here is transparency in how sense was made from the raw data. reliability can be assessed by the following three questions (easterby-smithetal., 2002). 1. will the measures yield the same results on other occasions? 2. will similar observation be reached by other observers? is there transparency in how sense was made from the raw data? numbers of different steps were taken to ensure the reliability of the study: method of data collection interviews are methods of gathering information through oral quiz using a set of preplanned core questions. in this study, some other stakeholders will be interviewed to compare and corroborate findings. the researcher used adapted questionnaire from (owens, 2002) on financial sustainability specifically designed, to gather data from the target population. the questionnaires are used because they are straightforward and less time consuming for both the researcher and the participants. the questionnaires were personally administered by the researcher. this method of administration was preferred because of its higher response rate. the questionnaire consisted of forty (40) items designed to identify and clear and specific response from the respondents. the items assessed the following: 1. respondents’ view of how donor funding attributes to sustainability of their ngo in the last five years, 2. how effective are the listed internal control measures in enhancing financial sustainability in their organization in the last five years, using a scale of 1-5 where 1= very effective and 5 = ineffective, 3. their view about financial sustainability of the projects covered in the last six years. a section with the demographic information of the participants was provided in the questionnaire. questionnaires were distributed to the 5 ngos, where 5 officers meeting the target population will respond. method of data analysis the data collected using the questionnaires were analyzed using quantitative data analysis methods. the quantitative method involves both descriptive and inferential analysis. descriptive analysis such as frequencies and percentages are used to present quantitative data in form of tables and graphs. data from questionnaire are coded and logged in the computer using statistical package for social science (spss v 23.0). this involved coding both open and closed ended items in order to run simple descriptive analyses to get reports on data status. descriptive statistics involves the use of absolute and relative frequencies, measures catherine o. (2022) 82 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe of central tendency and dispersion. the analysis is made with a 95% level of confidence i.e. p = 0.05.the formula for the simple regression is given as: y= a+bx, where y is the independent variable and x is the dependent variable it was used in testing the stated hypothesis. result and discussion before a full blown analysis is performed, data screening data shall be assessed for the assumptions that corroborate the appropriateness of multiple linear regressions employed as a tool of analysis in this study. this deals with the presentation and analysis of data. a questionnaire was designed and administered to ngos in jos metropolis. 303 questionnaires were administered to the staff and volunteers of the ngos and 285 were properly filled and returned. this represents 94 percent retrieval rate which is good. the retrieved questionnaires were coded and cleaned in the statistical package for social sciences. before analysis was done, the data was clean for missing values, outliers and test of normality. the hypotheses of the study were also tested. data presentation the results are presented in frequency tables and described accordingly below: table 4: demographic characteristics respondent’s demographic variables frequencies percentages (%) gender male 133 46.7 female 152 53.3 age range 18-30 57 20.0 31-40 171 60.0 41-50 57 20.0 educational qualification graduate 152 53.3 postgraduate 133 46.7 length of service in the organization 2 years 76 26.7 3 years 76 26.7 4 years 76 26.7 5 years 57 20.0 how old is this organization 10 years 133 46.7 above 10 years 152 53.3 category of donor local 57 20.0 international 3l3 46.7 both 95 33.3 source: field survey, 2018 based on data obtained, which indicates that 46.7 percent of the respondents strongly disagreed that it is easy to access donor funding, 13.3 percent disagreed, 6.7 percent were undecided on the statement, 13.3 percent agreed and 20 percent strongly agreed. this means that it is not easy to access donor funding. also it shows that 40 percent of the respondents strongly disagreed that approval of utilisation of donor funds is done within the timeframe provided, 20 percent disagreed, 6.7 were undecided, 6.7 percent agreed and 26.7 percent strongly agreed. since majority of the respondents strongly disagreed with the statement, it implies that approval of utilisation of donor fund is not done within the timeframe provided. it is clear that 40 percent of catherine o. (2022) 83 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe the respondents strongly disagreed that most organisations cannot afford to provide services without donor support, 13.3 percent disagreed; 6.7 percent were undecided on the statement, 20 percent agreed and strongly agreed, respectively. since most of the respondents strongly disagreed, it entails that most organisations can afford to provide services without donor support. the same is shown that 20 percent of the respondents strongly disagreed that approval of utilisation of donor funds is done within the timeframe provided, 33.3 percent disagreed, 20 percent were undecided, 6.7 percent agreed and 20 percent strongly agreed. since majority of the respondents disagreed with the statement, it implies that approval of utilisation of donor fund is not done within the time frame provided. as indicated that 40 percent of the respondents strongly disagreed that donor do not allow organisations to run multiple projects alongside their own, 20 percent disagreed, 13.3 percent undecided, 13.3 percent, agreed and strongly agreed, respectively. this means that donors do allow organisations to run multiple projects alongside their own. the data further revealed that 20 percent of the respondents strongly disagreed that there are several budget constraints on some donor grants that affect implementations of projects, 33.3 percent disagreed, 20 percent undecided, 6.7 percent agreed and 20 percent strongly agreed. this implies that there are no several budget constraints on some donor grants that affect effective implementations of projects.also shows that 26.7 percent of the respondents strongly disagreed that becoming completely independent of donor is an unrealistic goal for some organisations, 20 percent disagreed, 13.3 undecided, 26.7 percent agreed and 13.3 percent strongly agreed. this means that becoming completely independent of donors is a realistic goal for some organisations. further indicated that 20 percent of the respondents strongly disagreed that reliance on grants and donations is considered the best approach to sustainability, 26.7 percent disagreed, 20 percent undecided, 13.3 percent agreed and 20 percent strongly agreed. this implies that reliance on grants and donations is not considered the best approach to sustainability by ngos in jos metropolis. table 5: income and expenditure profile from ngos in jos 2012 to 2017. the interpretation: base on the out which shows that there are consistent funding of the organizations within the year of the study, thereby making the organizations to key in into many projects as case maybe in other to accomplish their mandates, however, there were fluctuations in the funding especially between the organizations, which by investigation may be as a result of the economic meltdown or crisis and financial crisis on the side of the donors. meanwhile, the result showed that it only in 2013 that cajr did not receive any funding, with their adequate control, from the surplus, they were able to carry out their mandated projects within the period. which indicate high level of internal control of the organization and financial sustainability. hypotheses testing the correlation coefficient in the regression results (appendices 2) shows a variance inflation factor (vif) of 2.514 which is less than 3.3 recommended by scholars. this indicates shows that multicollinearity is within the acceptable level between the independent variables. equally, the normal probability plot shows that the points lie along the straight diagonal line from bottom left to right top. this suggests normality. the regression results in appendices 2 shows that fss = 10.719 -0.152df + 0.787ic. this means that financial sustainability will decrease on average by 0.15 percent with 1 percent change in donor funding while internal control is held constant. equally, the regression model shows that financial sustainability will increase on average by 0.78 percent with 1 percent change in internal control while donor funding is held constant. the model summary revealed an r square of .457 which means that 46 percent variation in financial sustainability in ngos in jos can be explained by donor funding and internal control. ho1: there are no significant effects between donor funding and sustainability of ngos in jos metropolis. ho2: there are no significant effects between internal control and sustainability of ngos in jos metropolis. ho3: there are no significant effects of financial sustainability on the lifespan of ngos in jos metropolis. table 6: regression result (structural path summarized) catherine o. (2022) 84 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe hypotheses relationship std beta std err t – stat pvalue decision h2 ic fss .787 .049 11.306 .000 supported h3 df fss -.152 .071 -2.180 .030 supported test of hypothesis one the correlation coefficient in the regression results (appendices 2) shows a variance inflation factor (vif) of 2.514 which is less than 3.3 recommended by scholars. this indicates shows that multicollinearity is within the acceptable level between the independent variables. equally, the normal probability plot shows that the points lie along the straight diagonal line from bottom left to right top. this suggests normality. test of hypothesis two table 4.5 also indicates that hypothesis 2 has a significant value of 0.000 which is less than ? = 0.05, therefore, h0 is rejected and the alternative hypothesis which states that internal control has significant effect on financial sustainability is accepted. the difference is statistically significant. this implies that internal control when effectively practice can lead to financial sustainability of ngos. test of hypothesis three table 4.5 revealed a significant value of 0.030 which is less than ? = 0.05, thus, h0 is rejected and the alternative hypothesis which states that donor funding has significant effect on financial sustainability is accepted. the difference is statistically significant. this means that donor funding is important in that its availability or otherwise can affect the ngo in the long run. discussion of result the discussion of findings is done in line with the research questions, objectives and hypotheses of the study. the test of the first hypothesis revealed that donor funding has significant effect on financial sustainability. this means that donor funding is important in that its availability or otherwise can affect the ngo in the long run thereby agreeing with the dependency theory which believed that ngos are stuck in the dependency cycle in which they have to seek donor funding and keep looking for donor to keep their doors open and continue to run. the results have greatly shown that it is not easy to access donor funding. most of the donors have been known to set a ceiling on the grant funds disbursed to ngos and insists that funds allocated to a specific project cannot be utilized on another project not unless they have been consulted and approved. equally, where the fund is accessed the approval for the utilisation is not done within the timeframe provided and donors do allow organisations to run multiple projects alongside their own. this finding agrees with rono (2008) who conducted a study on the financial sustainability of ngos projects in nairobi and found that many projects depended on donor funding resulting in low utilization of internally generated resources. he further stated that these projects ended up not offering the beneficiaries the needed services. the study further revealed that internal control has significant effect on financial sustainability of ngos as related by the resourced-based theory which agrees that to create a sustainable environment, they need resources categorized into the three c’s; competence, capital, and contacts. competence is necessary to effectively meet donor targets; the project needs enough capital to purchase raw materials or obtain a business premise and finally avenues and contacts to access project beneficiaries and for smooth cooperation with the necessary stakeholders. this implies that internal control when effectively practice can lead to financial sustainability of ngos. the result indicates that there is proper accounting record such proper control of fix assets, cash advances, retirement of funds, and control over purchase. the ngos also do regular financial audit. this finding disagrees with nzalu (2006) who posits that financial management practices of development ngos partially conform with the laid down procedures of international financial reporting standards. inadequate budget forecasts was notably present which results in poor planning. catherine o. (2022) 85 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe summary, conclusion and recommendations summary of findings the objectives of this study were to examine the effects of donor funding and internal control on financial sustainability of ngos in jos metropolis. to achieve these objectives, a questionnaire was designed and administered to staff of ngos within jos metropolis. the retrieved questionnaires were coded in statistical package for social sciences (spss) version 19.0. the hypotheses of the study were tested using multiple regression analysis. the study revealed that donor funding has significant effect on financial sustainability of ngos in jos metropolis. where many projects undertaken by the ngos depend heavily on donor funding, this results in low utilization of internally generated resources. this could have devastating effect on the organisation in this period of shrinking aids and donations from foreign countries. when there is an increase in the level of subsidy income, the institution’s financial sustainability decreases. this finding agrees with peter (2007) who revealed a negative relationship between the financial sustainability of an institution and the level of subsidies received each quarter. the findings from questions dealing with financing show that even though these ngo are active they still have a very hard time in finding donors. the existing ngos are active not only because they could raise funds and find donors consistently, but because of the other factors which play an important role in sustainability and this served them to attract only foreign donors (75%). the active ngos claim that financing is crucial but not sufficient for comprehensive sustainability. there are other strategic issues, such as the need to improve management capacity in order to increase transparency and build supporting constituencies.the study also revealed that internal control has significant effect on financial sustainability of ngos. effective internal control is of paramount importance for the ngos. it could serve many purposes such as reducing the incidences of frauds and errors, make information available which can be used as basis for making financial and administrative decisions. this implies that internal control when effectively practice can lead to financial sustainability of ngos. conclusion based on the research findings the research concludes that donor funding has significant effect on financial sustainability of ngos in jos metropolis. ngos that depend on donor funding cannot be sustainable in the long run. the research in this study is among the earliest research in the literature to examine internal control systems from management’s perspective, the weaknesses in internal control systems specifically in ngos, and the occurrences of fraud and corruption within ngos and any related effect or impact thereon. this is as a result of the gross reduction in donor funding, (especially, from international donor funding) over the years. for the ngos to remain sustainable, there must be alternative funding, especially, funding that is internally generated. the very existence of foreign operations does not mean the internal control system will fail; however, it signals to management their need to compensate for this weakness with strengths in the many other components of the internal control system. to look at this issue further, this research examined other components of the ngos’ internal control systems as well as sought to demonstrate several weaknesses exist across the ngos’ internal control systems, leaving the organizations vulnerable to failures in their internal control systems; thereby, increasing the opportunity for the occurrence of fraud and corruption. further, internal control principles indicate large organizations have greater resources and opportunities for stronger internal control systems. 83% of the respondents indicated their ngo’s employed 100 or fewer people at the field location; while over the study also concludes that internal control has significant effect on financial sustainability of ngos. internal control helps in reducing the incidences of frauds and errors, and also make information available which can be used as basis for making financial and administrative decisions. this promises increase tendency of financial sustainability of the ngos. recommendations based on the findings and conclusions of this study, the following recommendations were put forward: catherine o. (2022) 86 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe 1. the study revealed that donor funding has a profound effect on the success of an ngo. the findings further suggest that ngos with easy accessibility to donor funding are most likely to be financially stable in the long run. this clearly shows that individuals who have been put in charge of donor aided projects should have the required skills and professionalism to ensure that they are sustainable in the future even after the donor support ends. 2. since donor funding has significant effect on financial sustainability of ngos, management and policymakers should ensure that their organizations do not rely on donor funds alone. but should make concerted effort to internally generate funds, so that poor internal control, proper retirements of donor fund will not affect the financial sustainability’s lifespan of ngos. 3. the study powerfully supports the argument that donor capacity building impacts projects financial sustainability, in the long run; thus implementers should be willing to increase transparency to improve the growth of projects and hence realize their financial sustainability, especially that donor financing policies need to be adhered to by project implementers as this will result in the proper implementation of the projects. donors’ policies should be favorable and consider all stakeholders as this will ensure that they are acceptable. alternative to donor funding according to boas (2012) the term ‘diversification of sources of funding’ describes a number of activities that strive to reduce the dependence on a; specific type of income, specific donor or grant maker, dominating customer, country that is the only or main source of funding and currency in which most or all funds are paid out. boas (2012) continues to say that, ngos that want to diversify their sources of funding and make their funding more reliable have to make a decision as to whether they want achieve this longterm goal only through; actions focused on donors and grant makers, potentially with minor self-financing activities or will also be open to consider, starting significant for-profit activities, possibly organized in form of a social enterprise. alymkulova and seipulnik (2005) also point out that a sustainable approach to ngo financing is one that avoids dependency on any single source of revenue, external or internal. there is difficulty in determining a formula for the percentages that need to be derived from various sources in order to come up with the optimum mix. however, maintaining a balance between externally and internally generated resources is necessary to allow an organization to meet its operating and administrative expenses while maintaining the freedom to determine its program priorities and projects, irrespective of donor preferences alymkulova and seipulnik, (2005). rasler (2007) argues that building a truly “sustainable” ngo is a multidimensional challenge entailing both internal factors of strengthening organizational capacity, as well as external factors of establishing a more supportive regulatory environment and secure resources for ngo initiative. on the other hand, levels of domestic resources and self-financing appear to be increasing and are therefore more reliable components in long-term sustainability strategy. under prevailing conditions, however, where very few ngos can achieve 100% self-financing, more organizations are trying to gain control over at least portion of their funds by generating income themselves. in this contest, a rule of thumb is that ngos raise sufficient funds from internal sources to cover their basic operating costs but approach external donors for their program costs. contribution to knowledge practically, the study would key in towards donor capacity building, which is key in improving the financial sustainability of projects as donors can come up with better ways of achieving their set goals and implement projects with the involvement of the beneficiaries their by increasing the lifespan by applying the right action towards a specific project. theoretically, the study discovered that financial sustainability of donor funded projects will increase if donor policies are not stringent and are aligned towards the recipient countries’ policies. it is, therefore, necessary for project implementers to act in accordance with donor financing policies, so as to guarantee donors’ confidence which in turn increases financial sustainability of these projects using the dependency theory catherine o. (2022) 87 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe and resource-view theory, the study has been able to establish that donor funding and internal control have significant effect on financial sustainability in jos metropolis. policy aspect in ngos that depend solely on donor funds cannot be financially sustainable in the long run. thus, they need to generate funds internally by making a proper policies. more so, internal control can make an ngo to be financially sustainable in the short run and long run. this is because it has the capacity to block any leakage of funds. based on the limitations of the study, the research suggests that similar studies be conducted in other parts of the country to assess the factors affecting financial sustainability of the donor funded projects and compare the results of other parts of the country with other counties’ results to come up with a more generalized conclusion. equally, further research should be carried out including control theory to better explain the relationship between internal control and financial sustainability of ngos. references ackah, p. (2013). four pillars of financial sustainability. arlington: the nature conservancy. adams, b. h., & frost, s. j. (2008). what can water utilities do to improve risk management within their business functions? an improved tool and application of process benchmarking. environment international, 34(8), 1120-1131. retrieved from http://www. sciencedirect.com/science/article/pii/s0160412008000664 ahren, r. e., chapman, a. c., & parmar, b. (2006). stakeholder theory and “the corporate objective revisited.” organization science, 15(3), 364-369. doi:10.1287/orsc.1040.0066 akingbola, k. (2004): staffing, retention, and government funding: a case study, nonprofit management and leadership, vol. 14, pp. 453—465. aldaba, f.(2000): ngo strategies beyond aid: perspectives from central and south america and the philippines. third world quarterly, vol. 21, no.4,pp. 669-683, taylor & francis, ltd alymkulova, a. and seipulnik, d. (2005). ngo strategy for survival in central asia: financial sustainability. michigan: university of michigan. alesia, m. (2018). law and participation. comparative sociology, 8(4), 580-601. doi:10.1163/156913309x461651 alessialospi, l., & trudy, r. (2002). the political theory of reinvention. public administration review, 60(2), 89-97. doi:10.1111/0033-3352.00068 amit, r. & shoemaker j.(2003): strategic assets and organizational rent, strategic journal vol 14 pp. 3346. amin, r. (2005). learning from strangers: the art and method of qualitative interviewing. new york, ny: free press. armour, n. (2001). the challenges of non-governmental organisation in anglophone cameroon.new york: nova science publishers inc. bagheri, a. and hjorth, p. (2007): planning for sustainable development: a paradigm shift towards a processbased approach. sustainable development , 15, 83-96. baobab, civil society aid trends, baobab briefing no 3, january 2015 http://www/ http://www/ catherine o. (2022) 88 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe barr a. et al (2005): the governance of non-governmental organizations in uganda, world development 33, 657-679. barr, a., fafchamps m. and trudy, o. (2002). the governance of ngos in uganda. world development, 33(4), 657-679. bebbington, a. (2004): ngos and uneven development: geographies of development intervention. progress in human development, issue 28:725-745 bebbington, a. (2008). introduction: can ngos make a difference?: the challenge of development alternatives. in a. bebbington, s. hickey, & d. mitlin (eds.), chap. 1 in can ngos make a difference?: the challenge of development alternatives (pp. 3–37). london: zed books. bekker, a. (2005). developing sustainable ngos in kazakhstan. asian social science, 9(7), june 2013, 300305. bennette, m. and savani, j. (2001). strategies to strengthen ngo capacity in resource mobilization through business activities. unaids joint publication. [online] available: http://data.unaids.org/publications/irc-pub06/jc579-strategies_ngo_en.pdfaccessed: 10 july 2014. berger, a. (2006). capital structure and firm performance: a new approach to testing agency theory and an application to the banking industry”, journal of banking & finance, beringer, a., wright, t., and malone, l. (2008). sustainability in higher education in atlantic canada”, international journal of sustainability in higher education, bjorkman m. and svensson j. (2010). when is community-based monitoring effective? evidence from a randomized experiment in primary health in uganda, journal of the european economic association 8, 571-581. black, t. (2007). doing quantitative research in social science: an integrated approach to research, design, measurement and statistics. london: sage publications bowman, w. (2011). financial capacity and sustainability of ordinary nonprofits, nonprofit management and leadership, vol. 22, no. 1, pp. 37-51. boas, g.b. (2015). an investigation on the factors influencing sustainability of ngos in kenya. masters of science thesis. nairobi: university of nairobi. brian, a. (2006). accountability myopia: losing sight of organisational learning. non-profit and voluntary services quarterly, 34(1), 56-87. bull, e. s. (2005). shift in the wind: the siting of wind power projects on public lands in the obama era, a. ind. lj, 86, 1185. retrieved from http://heinonlinebackup.com/hol-cgi-bin/get_pdf. cgi?handle=hein.journals/indana86&section=32 burger, r. and owens, t.(2010). promoting transparency in the ngo sector: examining the availability and reliability of self-reported data, world development 38, 1263-1277. businga, r.g. (2008). the south african npo crisis: time to join hands. international journal of notforprofit law, 15(1), 5-13 http://data.unaids.org/publications/irc-pub06/jc579-strategies_ngo_en.pdfaccessed http://data.unaids.org/publications/irc-pub06/jc579-strategies_ngo_en.pdfaccessed http://data.unaids.org/publications/irc-pub06/jc579-strategies_ngo_en.pdfaccessed http://data.unaids.org/publications/irc-pub06/jc579-strategies_ngo_en.pdfaccessed http://data.unaids.org/publications/irc-pub06/jc579-strategies_ngo_en.pdfaccessed http://data.unaids.org/publications/irc-pub06/jc579-strategies_ngo_en.pdfaccessed http://heinonlinebackup.com/hol-cgi-bin/get_pdf http://heinonlinebackup.com/hol-cgi-bin/get_pdf http://heinonlinebackup.com/hol-cgi-bin/get_pdf http://heinonlinebackup.com/hol-cgi-bin/get_pdf http://heinonlinebackup.com/hol-cgi-bin/get_pdf http://heinonlinebackup.com/hol-cgi-bin/get_pdf catherine o. (2022) 89 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe callamard, a.(2006). ngo accountability and the humanitarian accountability partnership: towards a transformative agenda. in l. jordan, & p. van tuijl (eds.), ngo accountability: politics, principles and innovations. london: earthscan. capobian, l. (2004). communication for social change. a powerful tool for community safety and crime prevention. retrieved from www.crimeprevention.intl.org carroll, t. (2012). intermediary ngos: the supporting link in grassroots development. hartford, ct: kumarian. cernea, m. (2008). non-governmental organizations and local development, world bank discussion papers. washington, dc: world bank. charmaz, k. (2006). constructing grounded theory: a practical guide through qualitative analysis. thousand oaks, ca: sage. cipfa, s. (2002). the role of ngos under authoritarian rule. new york: macmillan press. counterpart international (ci). 2011. organisational development handbook. kabul: ci. cleaver, f. (2009). paradoxes of participation: questioning participatory approaches to development. journal of international development, 11, 597-611. creswell, r. w. (2008). doing case study research. the real life guide to accounting research: a behind-thescenes view of using qualitative research methods, 257-79. london, england: elsevier science. creswell, j. (2012). qualitative inquiry and research design: choosing among five approaches(3rd ed.). thousand oaks, ca: sage. crouch, m., & mckenzie, h. (2006). the logic of small samples in interview based qualitative research. social science information, 45(4), 483-499. doi:10.1177/0539018406069584 cruickshank, a. (2011). the virtuous spiral: a guide to sustainability for ngos in international development. london: earthscan. cruz. s (2016). what are the five components of the coso framework? retrieved from http://info.knowledgeleader.com/bid/161685/what-are-the-five-components-of-the-coso-framework 45. cronbach, l. j. (2012). response sets and test validity. educational and psychological measurement, 6,475–494. david ackah, (2013). effectiveness of internal control system as a quality control mechanism in public organizations. scientific study. p.9 david, f. and kanji, a. (2012). management issues for improving ngo sustainability in kazakhstan. world journal of social sciences, 2(30), may 2012, 31-40. davies, r. and stephan, k. (2011). of donor coordination, free-riding, darlings, and orphans: the dependence of bilateral aid commitments on other bilateral giving. university college dublin and university of göttingen http://www.crimeprevention.intl.org/ http://www.crimeprevention.intl.org/ http://info.knowledgeleader.com/bid/161685/what-are-the-five-components-of-the-coso-framework http://info.knowledgeleader.com/bid/161685/what-are-the-five-components-of-the-coso-framework http://info.knowledgeleader.com/bid/161685/what-are-the-five-components-of-the-coso-framework http://info.knowledgeleader.com/bid/161685/what-are-the-five-components-of-the-coso-framework http://info.knowledgeleader.com/bid/161685/what-are-the-five-components-of-the-coso-framework http://info.knowledgeleader.com/bid/161685/what-are-the-five-components-of-the-coso-framework http://info.knowledgeleader.com/bid/161685/what-are-the-five-components-of-the-coso-framework http://info.knowledgeleader.com/bid/161685/what-are-the-five-components-of-the-coso-framework http://info.knowledgeleader.com/bid/161685/what-are-the-five-components-of-the-coso-framework http://info.knowledgeleader.com/bid/161685/what-are-the-five-components-of-the-coso-framework http://info.knowledgeleader.com/bid/161685/what-are-the-five-components-of-the-coso-framework http://info.knowledgeleader.com/bid/161685/what-are-the-five-components-of-the-coso-framework http://info.knowledgeleader.com/bid/161685/what-are-the-five-components-of-the-coso-framework http://info.knowledgeleader.com/bid/161685/what-are-the-five-components-of-the-coso-framework http://info.knowledgeleader.com/bid/161685/what-are-the-five-components-of-the-coso-framework http://info.knowledgeleader.com/bid/161685/what-are-the-five-components-of-the-coso-framework http://info.knowledgeleader.com/bid/161685/what-are-the-five-components-of-the-coso-framework http://info.knowledgeleader.com/bid/161685/what-are-the-five-components-of-the-coso-framework catherine o. (2022) 90 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe davis , k. (1999). case study: a strategic research methodology. american journal of applied sciences, 5, 1602–1604. doi:10.3844/ajassp.2008.1602.1604 desai, m. and yetman, r.(2005). constraining managers without owners: governance of the not-forprofit enterprise. national bureau of economics research working paper, february. ditshwanelo, a. (2004). collaboration of ngos and business in kazakhstan. european journal of business and social sciences, 2(1), april 2013, 99-101. drucker, p. (1990). managing the non-profit organization: practices and principles. harpar, business press. eade, d. (2007). international ngos and union in the south: worlds apart or allies in the struggle? development in practice, 14, 71-84. earls, f. (1994). evaluating a community intervention to reduce the risk of child abuse: methodological strategies in conducting neighborhood surveys, child abuse and neglect, vol. 18, no. 5, pp. 473^85. easter,s. (2002). corporate citizenship and managerial motivation: implications for business legitimacy. business and society review, 113(4), 441-475. doi:10.1111/j.1467-8594.2008.00328.x. ebner, d. and baumgartner, r. (2010). corporate sustainability strategies: sustainability profiles and maturity levels. sustainable development , 18, 76-89. ebrahim, a. (2005). “accountability myopia: losing sight of organizational learning”, nonprofit and voluntary sector quarterly, vol. 34 no.1, pp.56-87. edwards, michael and david i. (1995). ngos performance & accountability, beyond the magic bullet, save the children eikenberry, a. (2008). fundraising in the new philanthropy environment: the benefits and challenges of working with giving circles, nonprofit management and leadership, vol. 19, no. 2, pp. 141-152. eikenberry, t. (2008). empowering service providers: ngos and aid effectiveness. rural 21, 2(6), 3335. eisenhardt, k. (1989). building theories from case study research, academy of management review, vol 14 page 532-550 eisner, m. (2009). the new volunteer workforce, stanford social innovation review. evans, s. (2010). benefits of enforcing accountability and audits in nonprofit organizations. retrieved april 30 2010 elkington, j. (1999). cannibals with forks: the triple bottom line of 21st century business. gabriola island, canada: new society. foster, m. and leavy, j. (2001). the choice of ftnancial aid instruments. odi working paper.no. 158. october 2001. london: overseas development institute. fafchamps, m. and owens, t. (2006). is international funding crowding out charitablecontribution in african ngos?oxford: global poverty research group. catherine o. (2022) 91 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe fafchamps, m. and owens, t. (2008). the determinants of funding to african ngos. oxford: university of oxford. foweller, h. (1988). towards a more democratic performance measurement. retrieved from http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1450680 freeman j. (2004). the dynamics of performance management: constructing information and reform. washington, dc: georgetown university press. furt, d.p. (2000). the role of ngos in african economic development. in jalloh, a.a. (ed.), the challenges of globalisation to democratic governance in africa: what role for civil society and other stakeholders? addis ababa: development policy management forum.stellenbosch university http://scholar.sun.ac.za gale francis (2011,). the role of non-governmental organizations in the improvement of livelihood in south sudan: a case study of brac microfinance program in central equatoria state, juba. wageningen, the netherlands garoyakin, r. (2015). financial sustainability: why ngos are failing to engage investors. the guardian, may 16. gordon, m. q. (2010). qualitative evaluation and research methods (3rd ed.). thousand oaks, ca: sage. gitoga, m. l. (2014). a response to “getting to the bottom of’ triple bottom line”. business ethics quarterly, 105-110. retrieved from http://www.jstor.org/discover/10.2307/27673160?uid=3739560&uid=2&uid=4&uid=373 9256&sid=21102940348317 gitonga, h. (2014). determinants influencing sustainability of orphans’ donor funded project of church based organization in kenya: a case of zoe ministry. unpublished project. kenyatta university. gitonha, h. (2014). theory-based impact evaluation: principles and practice. journal of development effectiveness, 1(3), 271-284. global idp database. (2005). liberia: constrained and confused response. retrieved 6 september 2005 from http://www.db.idpproject.org/sites/idpprojectdb/idpsurvey.nsf/wviewcountries/ a16c0068d09d01bfc125705f004fa8c8 grant, r. (1991). the resource-based theory of competitive advantage: implications for strategy formulation, california management review, pp.l 14-35. graaff, l., & venter, p. (2001). the democratic ethos and public management. administration and society, 34(2), 229-250. doi:10.1177/0095399702034002005 gray, r., bebbington, j., and collison d., (2006), ngos, civil society and accountability; making the people accountable to capital, accounting, auditing & accountability journal, vol. 19 no. 3, pp 319-348. gray, r., bibbington, j. and collison, d. (2006). ngos, civil society and accountability: making the people accountable to capital. accounting, auditing and accountability journal, 19(3), 319-348. http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1450680 http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1450680 http://scholar.sun.ac.za/ http://scholar.sun.ac.za/ http://www.jstor.org/discover/10.2307/27673160?uid=3739560&uid=2&uid=4&uid=373 http://www.jstor.org/discover/10.2307/27673160?uid=3739560&uid=2&uid=4&uid=373 http://www.db.idpproject.org/sites/idpprojectdb/idpsurvey.nsf/wviewcountries/ http://www.db.idpproject.org/sites/idpprojectdb/idpsurvey.nsf/wviewcountries/ catherine o. (2022) 92 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe hailey .j (2014). the sustainable ngo: why resourcing matters: retrieved from https://www.intrac. org/sustainable-ngo-resourcing-matters/ hailey, d. (2014). the non-governmental organization entrepreneur: non-profit in purpose, for profit in approach. new direction in ngo self-financing. baltimore: johns hopkins university. hawkins, d. and mann, s. (2007). the world bank’s role in tourism development. annals of tourism research, 34 (2), 348-363. hinnosaar, a. (2003) . sustainability of local non-governmental organisations in ghana. master of science thesis. kwame nkrumah university of science and technology. united states agency for international development (usaid). (2007). ngo sustainability index for subsaharan africa. washington: usaid. hinnosaar. m (2003). the impact of minimum wage on the labour market in estonia:an empirical analysis, estonia hodgkin, j. (1994). the sustainability of donor assisted rural water supply projects. washington, dc: u.s. agency for international development. hodge, c., & piccolo, v. (2005). accountability in planning for sustainable water supplies in south east queensland. australian planner, 47(3), 191-202. doi:10.1080/07293682.2010.508205 hoopes, d. (2003). guest editors’ introduction to the special issue: why is there a resource-based view? toward a theory of competitive heterogeneity, strategic management journal, vol. 24 no.10, pp.889902. hubbard, g. (2009). measuring organizational performance: beyond the triple bottom line. business strategy and the environment, 18(3), 177-191. doi:10.1002/bse.564 huque, p., rahaman, p., & wray, l. (2003). results that matter: improving communities byengaging citizens, measuring performance, and getting things done. san francisco, ca: jossey-bass. ibrahim, b. (2012). sustainability of community-based health programmes. [online] available: https://www.google.com.af/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&ved=0cdcqfjaa&ur l= http%3a%2f%2fwww.chgn.org%2findex.php%3foption%3dcom_docman%26task%3ddoc_dow nload%26 24 april 2014. international fund for agricultural development (ifad) (2004). the codes of good practice for south african non-profit organisations (npos). pretoria: government printer. intrac (1998). direct funding from a southern perspective: strengthening civil society?, oxford. iso (2010). guidance on social responsibility – iso 26000:2010(e). geneva, switzerland. irish, c. and simoni, e. (1999). the effect of global economic crisis on service delivery in selected nongovernmental organisations in kenya. journal of management and strategy, 2(4), 101-117. jackson, c. (2005). australian financial accounting (3rd ed.). north ryde, united kingdom: mcgrawhill. http://www.google.com.af/url?sa=t&rct=j&q&esrc=s&source=web&cd=1&ved=0cdcqfjaa&url http://www.google.com.af/url?sa=t&rct=j&q&esrc=s&source=web&cd=1&ved=0cdcqfjaa&url http://www.google.com.af/url?sa=t&rct=j&q&esrc=s&source=web&cd=1&ved=0cdcqfjaa&url http://www.google.com.af/url?sa=t&rct=j&q&esrc=s&source=web&cd=1&ved=0cdcqfjaa&url catherine o. (2022) 93 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe jensen, t., & sandström, j. (2011). stakeholder theory and globalization: the challenges of power and responsibility. organization studies, 32(4), 473-488. doi:10.1177/0170840611400290 joshi jyoti(2017). role of non-government organization in promotion and development of empowerment and skill building program for women in slum areas ;international research journal of multidisciplinary studies vol. 3, issue 2, mamasaheb mohal college, paud road pune,-58 kathi, p. c., & cooper, t. l. (2007). connecting neighborhood councils and city agencies: trust building through the learning and design forum process. journal of public affairs education, 13(3/4), 617-630. retrieved from http://www.jstor.org/journal/jpubaffeduc kereta, a. (2007). transforming government: people, process and policy, 5: electronic citizen participation – state of the art. bradford, england: emerald group publishing ltd. retrieved from http://www.ebrary.com kerine m. (2015), “do we need governing bodies?” in d. billis and m. harris (eds) voluntary agencies: challenges of organization and management. khan, a. (2000). planning for and monitoring of project sustainability: a guideline on concepts, issues and tools. kinnet, t. (2000). financial sustainability essentials. course handbook. oxford: management accounting for non-governmental organisations (mango). kirk, p,. & nolan, m. (2010). promoting the utilization of performance measures in public organizations: an empirical study of factors affecting adoption and implementation. public administration review, 61(6), 693-708. doi:10.1111/0033-3352.00140 kumar, r. (2009). research methodology: a step – by step guide to beginners. london: sage publications. langran, l. (2002). empowerment and the limits of change: ngos and health decentralization in the philippine, department of political science. ph.d. thesis, toronto: university of toronto. lewis, j. (2004). project planning, schedule and control. (3rd ed). pretine hall, great britain: pearson education. lewis, d. (2015). the management of non-governmental development organisations: an introduction. new york: routledge. lewis david (2009). nongovernmental organizations,definition and history, london school of economics and political science, springer-verlag berlin heidelberg lewis, m. and kanji, d. (2009). non-governmental organisations: performance and accountability –beyond the magic bullet. london: earthscan. lewis, r. (2015). the trouble with africa: why foreign aid isn’t working. london: yale university press. list, m. and price, d. (2012). managing non-governmental organisations in botswana. the public sector innovation journal, 12(3), 1-18. lion, m. b. (2009). from measurement to management: breaking through the barriers to state and local performance. public administration review, 68(s1), s70-s85. doi:10.1111/j.15406210.2008.00980.x http://www.jstor.org/journal/jpubaffeduc http://www.jstor.org/journal/jpubaffeduc http://www.ebrary.com/ http://www.ebrary.com/ catherine o. (2022) 94 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe linton, n. (2005). the challenge of scaling up sustainability innovation. in m. pierce (ed.), a journey of a thousand miles – the state of sustainability leadership 2011 (pp. 87-90). lindsay and brownell, (2017). internal control: control environment and control activities: retrieved from http://www.lindsayandbrownell.com/accounting–audit/internal control-control environment-and-control-activities.aspx liner, b., demonsabert, s., & morley, k. (2012). strengthening social metrics within the triple bottom line of sustainable water resources. world review of science, technology and sustainable development, 9(1), 74-90. doi:10.1504/wrstsd.2012.044788 liner, b., & demonsabert, s. (2010). balancing the triple bottom line in water supply planning for utilities. journal of water resources planning and management, 137(4), 335-342. doi:10.1061/(asce)wr.1943-5452.0000128 lrsado. l. (2003). income diversification in zimbabwe: welfare implications from urban and rural «reaj.fcnd discussion paper 152. washington, d.c.: international food policy research institute. madrid, d. (2003). reinventing the third world state: service delivery and the civic realm. in mccourt, w. and minogue, m., (eds.),the internationalisation of public management: reinventing the third world state. chelternham: edward elgar publishing, 129-152. maheepala, s., & blackmore, j. (2008). integrated urban water management. transitions: pathways towards sustainable urban development in australia. london, england: springer. mcconnell, c. (2002). community learning and development: the making of an empowering profession. glasgow: community learning scotland, isbn 0 947919 75 9. miller, g.& s. spoolman (2011). living in the environment: principles, connections, and solutions (17th ed.). belmont: brooks-cole. isbn 0-538-73534-1. mitlin, d., hickey, s. and bebbington, a. 2006. reclaiming development? ngos and the challenge alternatives. oxford: economic and social research council. [online] available: http://economics.ouls.ox.ac.uk/14040/1/gprg-wps-043.pdfaccessed: 21 june 2014. moore, d. (2005). laws and other mechanism for promoting ngo financial sustainability. the journal of development studies, 37(1), 25-56. moore, c. (2000). a new paradigm in developing country ngo financial sustainability. policy brief number 51. michigan: university of michigan. mostashain, r. (2005). critical reflections of a development nomad. in kothari, u (ed.) a radical history of development studies: individuals, institutions and ideologies. zed books. moynihan, d. p., & pandey, s. k. (2005). testing how management matters in an era of government by performance management. journal of public administration research and theory, 15(3), 421-439. doi:10.1093/jopart/mui016 mugambi, d. p. (2014). normative and instrumental perspectives on public participation citizen summits in washington, dc the american review of public administration, 33(2), 164-188. doi:10.1177/0275074003251379 http://www.lindsayandbrownell.com/accounting http://www.lindsayandbrownell.com/accounting http://www.lindsayandbrownell.com/accounting http://www.lindsayandbrownell.com/accounting http://economics.ouls.ox.ac.uk/14040/1/gprg-wps-043.pdfaccessed http://economics.ouls.ox.ac.uk/14040/1/gprg-wps-043.pdfaccessed http://economics.ouls.ox.ac.uk/14040/1/gprg-wps-043.pdfaccessed http://economics.ouls.ox.ac.uk/14040/1/gprg-wps-043.pdfaccessed http://economics.ouls.ox.ac.uk/14040/1/gprg-wps-043.pdfaccessed http://economics.ouls.ox.ac.uk/14040/1/gprg-wps-043.pdfaccessed catherine o. (2022) 95 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe mugo, s. p. (2014). delivering public services: time for a new theory? public management review, 12(1), 110. doi:10.1080/14719030903495232 mugenda, o. m., & mugenda, a. g. (2003). research methods: quantitative and qualitative approaches. nairobi: acts press. mulroy, c. a., & achie, g. r. (2010). integrating sustainability reporting into management practices. accounting forum, 32(4), 288-302. doi:10.1016/j.accfor.2008.05.002. murphy h, (2007). ngos, agenda-setting and the wto school of government, university of tasmania refereed paper presented to the australasian political studies association conference monash university. mwaura, p. (2005). financing local non-governmental organisations in ghana: issues and challenges. master’s thesis. accra: kwame nkrumah university. naidoro, g. (2004). all measures of performance are subjective: more evidence on u.s. federal agencies. in g. boyne, k. meier, l. o’toole, & r. walker (eds.), public service performance: perspectives on measurement and management (pp. 35-54.). new york, ny: cambridge university press. ngoroge, p. (2009). participation in administrative decision-making: a sequential analysis of announcement, objections and concluding letter. comparative sociology, 8(4), 565-579. doi:10.1163/156913309x461642 noebere, t. (2000). human rights protection under diminished funding in zimbabwe. [online] available: http://www.nuigalway.ie/dern/documents/52_tamuka_muzondo.pdfaccessed: 22 june 2014. norma.h & macdonald,y.(2004). sample size and saturation in phd studies using qualitative interviews. retrieved from http://www.qualitative-research.net/index.php/fqs/article/viewarticle/ 1428/3027 odiboh. o, omojola. o, ekanem .t and oresanya. t,(2015).non-governmental organizations in the eyes of newspapers in nigeria, covenant journal of communication (cjoc) vol. 4no. 1 147. omeri, g.d. (2015). financial sustainability of rural microfinance institutions (mfis) in 148. tanzania. doctor of philosophy thesis. london:university of greenwich. o’sullivan, r. (2004). practicing evaluation: a collaborative approach. london: sage publications. performance and accountability. beyond the magic bullet, earthscan publications, london, pp.3-16. owen, t (2008). an empirical analysis of triple bottom?line reporting and its determinants: evidence from the united states and japan. journal of international financial management & accounting, 18(2), 123-150. doi:10.1111/j.1467-646x.2007.01010.x. owen, a. (2002). what is a professional service firm? toward a theory and taxonomy of knowledgeintensive firms. academy of management review, 35(1), 155-174. retrieved from http://amr.aom.org/ panda, r.f. (2007). governance and financial sustainability of ngos in south africa. doctor of philosophy thesis. cape town: university of western cape. stellenbosch university http://scholar.sun.ac.za http://www.nuigalway.ie/dern/documents/52_tamuka_muzondo.pdfaccessed http://www.nuigalway.ie/dern/documents/52_tamuka_muzondo.pdfaccessed http://www.qualitative-research.net/index.php/fqs/article/viewarticle/ http://www.qualitative-research.net/index.php/fqs/article/viewarticle/ http://www.qualitative-research.net/index.php/fqs/article/viewarticle/ http://www.qualitative-research.net/index.php/fqs/article/viewarticle/ http://amr.aom.org/ http://amr.aom.org/ http://amr.aom.org/ http://scholar.sun.ac.za/ http://scholar.sun.ac.za/ catherine o. (2022) 96 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe peter, c. (2007). beyond the managerial model: the case for broadening performance assessment in government and the public services. financial accountability & management, 2(3), 155-170. doi:10.1111/j.1468-0408.1986.tb00262.x piriya, m. (2013). ngos and their role in the global south. the international journal of notfor profit law, 9(1), december 2006. [online] available: http://www.icnl.org/research/journal/ vol9iss1/art_7.htmaccessed: 18 june 2014. power, k. (2004). elements of effective governance: measurement, accountability, and participation. boca raton, fl: taylor and francis group. pratte, b., warren .b and adams, a. (2006). mixed methods research: a research paradigm whose time has come. educational researcher, 33(7), 14-26. qian, z., weerakkody, v., kamal, m., hindi, n. m., osman, i. h., anouze, a. l., el-haddadeh, r., lee, h., osmani, m., & al-ayoubi, b. (2011). an analysis of methodologies utilised in e-government research: a user satisfaction perspective. journal of enterprise information management, 25(3), 298313. repoa (2006). non-governmental organisations, social movement, external funding and dependency. development, 49(6), 22-28. richard, c. (2000). mitigating the effects of the global financial crisis in zimbabwe: the alternative strategies for the non-governmental organisations. african journal of social sciences, 2(2), 1-9. rasler, m. (2007). the worldwide fundraiser’s handbook. a resource mobilization guide for ngos and community organizations. london: directory of social change. renz, e., deh, j. and owusu, r. (2010). a ghanaian case study of strategies of ensuring accountability by non-governmental organisations. journal of sustainable development in africa, 14(7), 4354.pathfinder international. 1994. fundamentals of ngo financial sustainability. watertown: pathfinder international. stellenbosch university http://scholar.sun.ac.za reith, o. (2011). charities seek revenue streams as donor funding wanes. business daily, may [online] available:http://www.businessdailyafrica.com/charities-seek-revenue-streams-asdonorfundingwanes/-/ 539546/1107526/-/11hyxp6z/-/index.htmlaccessed: 15 may 2014. rono, e. (2008). performance and productivity in public and nonprofit organizations (2nd ed.). armonk, ny: m.e. sharpe. saunders, m., lewis, p. & thornhill, a. (2003). research methods for business students. 4th ed. new jersey: prentice hall. senbeta, n. (2002). the long-term sustainability of the palestinian ngo sector: an assessment. palestine: the welfare association consortium. schwab j. (2008). implicit and explicit csr: a conceptual framework for a comparative understanding of corporate social responsibility. academy of management review, 33, 404–424. doi:10.2307/20159405 skoog, k. (2003). citizen participation: models and methods. international journal of public administration, 30, 1179-1196. doi:10.1080/01900690701225366 http://www.icnl.org/research/journal/ http://www.icnl.org/research/journal/ http://scholar.sun.ac.za/ http://scholar.sun.ac.za/ http://scholar.sun.ac.za/ http://www.businessdailyafrica.com/charities-seek-revenue-streams-asdonorhttp://www.businessdailyafrica.com/charities-seek-revenue-streams-asdonorhttp://www.businessdailyafrica.com/charities-seek-revenue-streams-asdonorhttp://www.businessdailyafrica.com/charities-seek-revenue-streams-asdonorhttp://www.businessdailyafrica.com/charities-seek-revenue-streams-asdonorhttp://www.businessdailyafrica.com/charities-seek-revenue-streams-asdonorhttp://www.businessdailyafrica.com/charities-seek-revenue-streams-asdonorhttp://www.businessdailyafrica.com/charities-seek-revenue-streams-asdonorhttp://www.businessdailyafrica.com/charities-seek-revenue-streams-asdonorhttp://www.businessdailyafrica.com/charities-seek-revenue-streams-asdonorcatherine o. (2022) 97 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe spiro, p. (2008). what is a non-governmental organisation? london: city university. [online] available: http://www.staff.city.ac.uk/p.willetts/cs-ntwks/ngo-art.htmaccessed: 5 june 2008. spence, s., howe, c., & maheepala, s. (2010). triple bottom line reporting of sustainable water utility performance. denver: awwarf report #3125. retrieved from http://mars.gmu.edu/bitstream/handle/1920/4589/liner_barry.pdf?sequence=1&isallowe d=y stephen, k. (2006). the effects of donor fragmentation on bureaucratic quality in aid recipient countries: world bank. steiber, e. (2003). the practice of social research. 13thedition. belmont: wadsworth cengage learning. taneja, d. p., taneja, s., gupta, s., leroux, k. m., piotrowski, s. j., wright, b. e., & yang, k. (2011). performance regimes amidst governance complexity. journal of public administration research and theory, 21 (suppl 1), i141-i155. doi:10.1093/jopart/muq059 tango international. (2009). sustainability of rural development projects best practices and lessons learned by ifad in asia (pp. 65). retrieved from http://www.ifad.org/operations/projects/regions /pi/paper/8.pdf. yamane, t. (1967). statistics, an introductoryanalysis, 2nd ed., new york: harper and row. tashakkori, a. and teddlie, c. (2008). mixed methodology: combing qualitative and quantitative approaches. london: sage. temali, m. (2012). the community economic development: strategies and tools to revitalize neighborhood. nashville: fieldstone alliance. thomson, d. r. (2007). sustainability-based asset management in the water sector. in definitions, concepts and scope of engineering asset management (pp. 261-275). london, england: springer london. retrieved from http://link.springer.com/chapter/10.1007/978-1-84996-178-3_13 usaid/south africa. (2007). democracy & governance team (so1). civil society strengthening program. results package. april. vanclay, f. (2004). the triple bottom line and impact assessment: how do tbl, eia, sia, sea and ems relate to each other? journal of environmental assessment policy and management, 6(03), 265288. doi:10.1142/s1464333204001729 vu,m. (2002). foreign aid and economic growth in the developing countriesa cross country empirical analysis waddel, a. (2006). how corporate social responsibility is defined: an analysis of 37 definitions. corporate social responsibility and environmental management, 15(1), 1-13. doi:10.1002/csr.132 de lancer julnes, p. (2009). performance-based management systems: effective implementation and maintenance. boca raton, fl: crc press. waiganjo, e.w., ng’ethe, j.m. and mugambi, d.n. 2012. an investigation into the strategies adopted by nongovernmental organisation in kenya to increase financial sustainability. international journal of current research, 4(4), april 2012, 74-78. http://www.staff.city.ac.uk/p.willetts/cs-ntwks/ngo-art.htmaccessed http://www.staff.city.ac.uk/p.willetts/cs-ntwks/ngo-art.htmaccessed http://www.staff.city.ac.uk/p.willetts/cs-ntwks/ngo-art.htmaccessed http://www.staff.city.ac.uk/p.willetts/cs-ntwks/ngo-art.htmaccessed http://www.staff.city.ac.uk/p.willetts/cs-ntwks/ngo-art.htmaccessed http://www.staff.city.ac.uk/p.willetts/cs-ntwks/ngo-art.htmaccessed http://mars.gmu.edu/bitstream/handle/1920/4589/liner_barry.pdf?sequence=1&isallowe http://mars.gmu.edu/bitstream/handle/1920/4589/liner_barry.pdf?sequence=1&isallowe http://www.ifad.org/operations/projects/regions http://www.ifad.org/operations/projects/regions http://link.springer.com/chapter/10.1007/978-1-84996-178-3_13 http://link.springer.com/chapter/10.1007/978-1-84996-178-3_13 http://link.springer.com/chapter/10.1007/978-1-84996-178-3_13 http://link.springer.com/chapter/10.1007/978-1-84996-178-3_13 http://link.springer.com/chapter/10.1007/978-1-84996-178-3_13 http://link.springer.com/chapter/10.1007/978-1-84996-178-3_13 http://link.springer.com/chapter/10.1007/978-1-84996-178-3_13 http://link.springer.com/chapter/10.1007/978-1-84996-178-3_13 http://link.springer.com/chapter/10.1007/978-1-84996-178-3_13 http://link.springer.com/chapter/10.1007/978-1-84996-178-3_13 catherine o. (2022) 98 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe wibson, c. (2010). toward a public philosophy of public administration: a civic perspective of the public. public administration review, 173-179. retrieved from http://onlinelibrary.wiley.com/journal william, t., & klark, e. (2011). assessing the quality of local governance: a case study of public service. public money and management, 27, 293-300. doi:10.1111/j.1467-9302.2007.00597.x william, e. (2006). the whiteman’s burden; why the west’s efforts to aid the rest have done so much ill and so little good. williams. k (2014). non-profit financial sustainability. interdisciplinary studies; dalhousie university. world bank. (2013). economics and governance of nongovernmental organizations in bangladesh. the world bank office, dhaka. bangladesh development series. paper no.11 yator, a.a. (2012). factors influencing sustainable funding of non-governmental organisations in kenya: a case study of sisters maternity home (simano) in garissa. master’s thesis. nairobi: nairobi university. http://onlinelibrary.wiley.com/journal http://onlinelibrary.wiley.com/journal american interdisciplinary journal of business and economics issn: 2837-1909| impact factor : 6.71 volume. 11, number 3; july-september, 2024; published by: scientific and academic development institute (sadi) 8933 willis ave los angeles, california https://sadijournals.org/index.php/aijbe| editorial@sadijournals.org 1 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe impact of energy commodities and economic growth on environmental outcomes: insights from nigeria john d. thompson, emma l. harrison, michael j. adams, and sarah n. williams department of economics, university of cape town, south africa. doi: https://doi.org/10.5281/zenodo.12799659 abstract: this study explored the relationship between energy commodities, economic growth, and nigeria's carbon dioxide (co ) emissions spanning from 1981 to 2021. employing the vector error correction mechanism (vecm) process, the study revealed a negative correlation between fossil fuel consumption, economic growth, and carbon dioxide emissions. long-term elasticities indicate that carbon dioxide emissions would rise by 24 and 211% if both fossil fuel consumption and economic growth decreased by 1%, contradicting the environmental kuznets curve (ekc) theory in nigeria. nevertheless, a positive correlation was observed between carbon dioxide emissions and the total annual population. as per the error correction model (ecm = -2.64441), two years are required for carbon dioxide emissions to return to long-term equilibrium, with 26.4% of a shock in the variable resolved within a year. upon closer examination of the impulse response function, it is evident that gdppc and ffc will exert a negative shortand long-term impact on co emissions. the study proposes that nigeria's government should implement a comprehensive strategy to bolster investments in renewable energy. this encompasses creating a stable policy environment, establishing ambitious targets for renewable energy capacity, providing financial incentives, and introducing feed-in tariffs, given that the country's consumption of fossil fuels has not yet reached a point where emissions are increasing. keywords: co emission, fossil fuel consumption, gdp per capita, vecm. introduction energy commodities, encompassing nuclear, chemical, mechanical, thermal, radiation, and electrical energy, contribute to economic growth by enhancing productivity and employment. they exist in various forms—liquids, solids, and gases—yet their environmental impact is intricate, particularly with the combustion of fossil fuels contributing to global warming. the production, invariably result in significant environmental consequences. the consumption of fossil fuels can lead to localized air pollution and climate change (han et al., 2019). recent research by the wef (2022) indicates that certain pollutants related to fossil fuels actually have a cooling effect. according to bölük and mert (2015), natural gas is transportation, and consumption of energy almost less aggressive than oil, accounting for only half of the co emissions compared to coal. on average, the combustion of oil (in the form of petroleum) releases approximately 33% less carbon dioxide (co ) per unit of energy produced compared to the combustion of coal. john d. thompson, emma l. harrison, michael j. adams, and sarah n. williams (2024) 2 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe in many emerging nations like nigeria, fossil fuels remain the primary source of energy (sugiawan and managi, 2019). despite their numerous benefits, such as providing thermal power plants with more precise operational control and monitoring (vincent and ezaal, 2022), these systems face various challenges that have been extensively studied. robinson et al. (2007) note that nigeria is not an exception to the escalating environmental concerns. okafor and joe-uzoegbu (2010) emphasize the environmental impact of urbanization in nigeria, where rural communities rely on traditional biomass for energy, resulting in greenhouse gas emissions. this imbalance contributes to global warming and environmental degradation, with nigeria experiencing some of the highest co emissions worldwide. figure 1. carbon dioxide emissions, energy consumption and economic growth. elevated carbon dioxide emissions are primarily associated with economic growth, as proposed by the environmental kuznets (1955) curve (ekc) hypothesis and supported by studies such as those conducted by han et al. (2018), acheampong (2018), abbas et al. (2019), and esmaeili et al. (2023). the ekc theory posits that income contributes to environmental degradation in the early stages of development but diminishes once certain income levels are reached. however, the ekc exhibits diverse shapes, suggesting different policy implications. the validity of this hypothesis is debated due to variations in methodology, independent variables, examined sectors, and modeling. few empirical studies focus on nigeria, and no recent dataset has been employed to analyze nigerian co emissions, unlike the studies by chuku (2011), ogundipe (2013), alege and ogundipe (2013), and okon (2021). to our knowledge, as of the time of writing, no paper concentrating on nigerian co emissions has utilized a more recent dataset. nigeria's economy remains susceptible to the risks associated with climate change due to the country's escalating energy consumption and the ensuing co pollution. figure 1 illustrates the shift in energy consumption from negative to positive after 1995, resulting in a 7.4% increase in co emissions in 1996 compared to the negative rates of 24.1% and 6.7% in 1994 and 1995, respectively. concurrently, due to the rising energy consumption, gdp per capita rose from 18.9% in 1995 to 27.03% in 1996, and the overall economy expanded from -0.1% in 1995 to 4.2% in 1996. the year 2010 marked the most significant change in co emissions (46%) and the highest gdp per capita (19.3%) during the research period, with an 8% expansion in the economy. conversely, the lowest changes occurred in 1989, with a -0.35% change in energy consumption and a -41.7% change in co emissions. although both co emissions and gdp deviated from their 1981 values, the growth rate of co emissions exceeded that of gdp. this suggests limited evidence of absolute decarbonization, indicating that the nation's co emissions were not proportional to economic growth. figure 1 demonstrates that from 1981 to 2021, nigeria's economy did not follow a low-carbon trajectory. policymakers need to comprehend the directional and causal relationship between energy commodities, economic growth, and the environment. john d. thompson, emma l. harrison, michael j. adams, and sarah n. williams (2024) 3 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe the increase in co emissions over the past 70 years is also attributed to the expansion of the human population. a growing population results in increased demands for commodities, energy, and food, leading to higher emissions from transportation, industry, and agriculture. however, to minimize emissions per person, additional measures such as enhancing energy efficiency, transitioning to renewable sources, and altering consumption habits must be implemented alongside population policies (the conversation, 2023). globally, co emissions are distributed unevenly, with highand upper-middle-income countries, housing slightly less than half of the world's population, responsible for over 80% of global co emissions. according to our world in data (2023), the average person in high-income countries emits over ten times as much co as the average person in lowincome countries. this study addresses several gaps in existing literature. firstly, it focuses on nigeria from 1981 to 2021, as data before the 1980s are incomplete. secondly, it employs the vector error correction model (vecm) to explore longitudinal cointegration and causal links between the environment, energy commodities, and economic growth, providing fresh empirical data for the ongoing discussion about their relationship. literature review the links between energy consumption, co emissions, and economic growth are the subject of three broad genres of literature. the first discusses whether the relationship between economic growth and co emissions is consistent with the environmental kuznets curve (ekc) theory. according to this theory, some pollutants and percapita income have an inverted u-shaped connection (grossman and krueger, 1995). the environmental kuznets curve (ekc) is a relationship between income change and environmental quality, based on kuznets' work. it suggests that rapid industrialization leads to increased pollution and resource use, putting pressure on the environment. as income increases, people value the environment more, leading to a decline in pollution levels. the ekc hypothesis reveals how environmental quality changes as a country's fortunes change, with an inverted u-shaped curve when pollution indicators are plotted against income per capita (dinda, 2004). richer consumers put more pressure on lawmakers to enact environmental laws and regulations, in addition to being prepared to spend more money on eco-friendly goods. the majority of the examples where emissions have decreased while income has increased can be attributed to institutional reforms at the local and national levels, including environmental laws and market-based incentives aimed at halting environmental degradation. in their study, özokcu and özdemir (2017) verified the "inverted u shape theory." however, friedl and getzner (2003) hypothesize a long-term link that takes the form of an n or another shape rather than an inverted u between co emissions and per-capita income. although he and richard (2010) and agras and chapman (1999) maintain that there is no correlation between co emissions and economic growth in their non-existence theory, the primary issue with these early investigations on the ekc hypothesis is that they may be biased by missing variables. this happens when one or more independent variables that correlate with one or more of the included independent variables and have an impact on the dependent variable are excluded from a statistical model (tong et al., 2020). recently, the granger causality test, an econometric technique particularly well-suited for time series and panel data analyses, was proposed to examine the connection between economic growth and carbon emissions. for example, hossain (2012) discovered that in newly industrialized nations, there was unidirectional short-run causality between economic growth and carbon dioxide emissions, as well as between urbanization and economic growth. wang et al. (2016) discovered that economic growth was a granger cause of co emissions in china between 1995 and 2012, and hamit-haggar (2012) found a unidirectional causality relationship between the economy and greenhouse gas emissions in both the short and long runs in their investigation of the canadian industrial sector. in contrast to omri (2013), who discovered only a one-way granger causation linking co emissions to economic growth in some european, central asian, latin american, and caribbean countries, salahuddin and gow (2014) showed a two-way granger causal association between the two components. abubakar and cudjoe (2021) estimate the short-run and long-run impacts of energy consumption on nigeria's environment through total co emissions using error correction models and normalized estimations. results show that gdp has a significant long-run tendency to reduce total co emissions in nigeria, confirming the kuznets john d. thompson, emma l. harrison, michael j. adams, and sarah n. williams (2024) 4 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe curve hypothesis for climate. the research also supports the suggestion that environmental destruction increases with per capita income during early economic development stages and decreases with an increase after reaching a plateau. rafindadi (2016) modeled the relationships between economic development, energy use, and emissions. the model had collinearity issues because the study takes into account co emissions as a function of income, income squared, and income cubed in addition to other explanatory variables like energy consumption. in his paper, okon (2021) used the auto-regressive distributed lag approach to investigate the applicability of the environmental kuznets curve in nigeria from 1970 to 2018. according to the bounds test, there exists an equilibrium relationship over a long period of time between the gross domestic product per capita, the square of the gdp per capita, waste, combustible renewable energy, alternative and nuclear energy, adjusted savings, or net forest depletion. however, neither short-run nor long-run results are consistent with the environmental kuznets curve hypothesis, nor there is no evidence of an inverse u-shaped link between growth and fluorinated greenhouse gas emissions in nigeria. omisakin (2009) tested the environmental kuznets curve (ekc) hypothesis in nigeria, finding no long-term causal relationship between carbon emissions and income. the regression line shows an "u-shaped" pattern, suggesting that income increases carbon emissions before rising again. other studies have shown a long-term relationship between environmental pollution indicators, per capita income, institutional variables, and trade. alege and ogundipe (2013) found no ekc in nigeria due to its early development stages. egbetokun et al.'s (2020) study found that spm and co have an ekc, while other environmental contamination measures did not significantly affect economic development. table 1. variables measurement and sources of data. source: researcher’s compilation, 2023. methodology granger causality, a linear regression model, and cointegration tests will all be used to examine the collected data. using the unit root test, the initial step will be to determine the stationarity and order of integration among the study variables. using cointegration tests, the second phase will look at the long-term relationship between the research variables. in the third, regression analysis will be used to examine how the independent study variables affect co emissions. the granger causality test will be used in the fourth step to determine the causal relationship between the research variables. data and sources the central bank of nigeria's (cbn) statistical bulletins and the world bank 2023 development indicators (wdi) provided the data used in the study's empirical analysis. table 1 lists the variables' names, meanings, and measurements. model specification based on the empirical literature in energy economics, it makes sense to write the long-term relationship between co emissions, energy commodities, and economic growth in the form of a linear logarithmic quadratic. this will allow us to test the ekc hypothesis in the following way (equation 1): co2 = 𝑓(ffc, gdppc, gfcf, pop) (1) in this case, pop stands for population, gfcf for gross fixed capital formation, gdppc for gross domestic product per capita, ffc for fossil fuel energy consumption, and c02 for carbon dioxide emissions per capita. equation 2 can be expressed as follows in the natural log form for c02, gdppc, gfcf, and pop as well as in the econometric model: lco2𝑡 = 𝛽0 + 𝛽1ffc𝑡 + 𝛽2lgdppc𝑡 + 𝛽3lgfcf𝑡 + 𝛽4lpop𝑡 + 𝜀𝑡 (2) stationary test since it can affect a series' behavior, stationarity is a significant phenomenon. regressing x on y in equation (3) will result in spurious or gibberish regression if x and y are two non-stationary series (yule, 1926). 𝑌𝑡 = 𝛽0 + 𝛽1𝑋𝑡 + 𝜀𝑡 (3) john d. thompson, emma l. harrison, michael j. adams, and sarah n. williams (2024) 5 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe the series is considered non-stationary if it has a unit root. the series is stationary if it doesn't have a unit root. the purpose of the stationarity test is to determine if an autoregressive model has a unit root or not. to ascertain the sequence of the variables’ integration, the unit root test is helpful. to verify if the provided series is stationary, the augmented dickey-fuller test (adf) and phillipsperron test (pp) have been employed. co-integration test to determine whether there is a co-integration relationship between the two variables' non-stationary series, the johansen-juselius test is used. we can determine whether there is co-integration between two non-stationary series using the johansen-juselius co-integration procedure. this indicates that 0<rank (π) = r <n, which is the maximum rank that the matrix π can have. in terms of the vector or matrix of adjustment parameters and the vector or matrix of cointegrating vectors ′, π can be expressed as =𝛼𝛽′, where (r) is the number of co-integration vectors and (n) is the number of variables. based on a likelihood ratio test (lr), this procedure uses the trace test and the maximum eigenvalues test (λ𝑚𝑎𝑥) to calculate the number of co-integration vectors between variables. the definition of a trace test is: n ˆ ) trace(r) =−t i=r+1log(1 i in contrast to the alternative hypothesis, which states that there are r co-integration vectors, the null hypothesis states that there are ≤r co-integration vectors. the maximum eigenvalues test ( max )is defined as: max (r,r+1) =−t log(1 r+1) the null hypothesis that the number of co integration vectors = r against the alternative those they r+1. granger-causality the results of the stationarity and co-integration tests will determine the granger-causality test's application in the following ways: the following vector auto-regression (var) should be estimated in order to perform the conventional granger-causality test to determine whether the series (ffc), (lgdppc), (lgfcf), (lpop), and (lco ) are stationary. 𝑖= = john d. thompson, emma l. harrison, michael j. adams, and sarah n. williams (2024) 6 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe in models (equations 4 and 11), the subscripts denote time periods and is a white noise error. the constant parameter represents the constant growth rate of ffct in equation 4; lco2t in equation 5; lgdppct in equation 6; lgfcft in equation 8 and popt in equation 10. we can obtain eight tests from this analysis: the first examines the null hypothesis that the ffct does not grangercause lco2 t and the second test examine the null hypothesis that the lco2t does not granger-cause ffct . the third examines the null hypothesis that the lgdppct does not granger-cause lco2t and the fourth test examines the null hypothesis that the lco2t does not granger-cause lgdppct . the fifth examines the null hypothesis that the lgfcft does not granger-cause lco2t and the sixth test examines the null hypothesis that the lco2t does not granger-cause lgfcft . the seventh examines the null hypothesis that the lpopt does not granger-cause lco2t and the eight test examines the null hypothesis that the lco2t does not granger-cause popt . vector error correction model (vecm) the conventional vecm is written compactly as (equation 12): 𝑘−1 𝑘−1 𝑘−1 𝛥𝑌 = 𝛼 + ∑ 𝛾𝛥𝑌 𝑡−1 + ∑ 𝜂𝛥𝑋 + ∑ 𝜑𝛥𝑅 + 𝜆𝐸𝐶𝑇 + 𝜇 (12) 𝑖=1 𝑖=1 1=𝑖 where ectt−1= ols residual with a lag derived from the long-run cointegrating formula (equation 13): 𝑌 𝑡 = 𝜎 + 𝜂𝑗𝑋𝑡 + 𝜉𝑚𝑅𝑡 + 𝜇𝑡 (13) and express as (equation 14): 𝐸𝐶𝑇 𝑡−1 = [𝑌𝑡−1 − 𝜂𝑗𝑋𝑡−1 − 𝜉𝑚𝑅𝑡−1] (14) = coefficient of the ect and the speed at which changes to x and r cause y to stabilize. the specific vecm for this study is as follows (equations 15 to 19): = -2.94); p-value= probability value, * signifies stationarity. source: researcher’s calculations from eviews 10, 2023. this model was selected because empirical studies show that when economic variables show individual cointegration, or a strong longterm relationship, the vecm performs well for model estimation. another advantage is its capacity to integrate the short-run dynamic and long-run equilibrium models into a single, efficient system. it also guarantees accuracy, conceptual rigor, and data integrity (abubakar and cudjoe, 2021). results and finding the empirical estimation result and a suitable justification are presented in this section to support the study's argument. john d. thompson, emma l. harrison, michael j. adams, and sarah n. williams (2024) 7 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe stationarity test the study initiated by examining the stationarity of relevant variables using tests detailed in the methodology section. the augmented dickey-fuller (adf) and phillips and perron (pp) unit root tests were employed to determine if the variables are stationary. table 2 presents compelling evidence that all our variables are integrated at order one (that is, i(1)). the data reveals that for each variable, at least one of the tests does not reject the null hypothesis of the unit root at levels, indicating non-stationarity. in contrast, it is found that every variable in the first difference is stationary. the subsequent step involves confirming whether our variables of interest exhibit a long-run relationship since all the variables in our model are integrated of order one, according to at least one of the tests employed. endogeneity analysis in order to ascertain whether variables are exogenous or endogenous, endogeneity analysis is necessary. to verify it, apply the paired granger causality test. table 3 displays the outcomes of the pairwise granger causality tests. the null hypothesis is rejected at f-statistic critical values of 1, 5, and 10%. first, the study indicates that fossil fuel consumption does not granger-cause co emissions in nigeria based on the pairwise granger causality test. *indicates lag order selected by the criterion. source: researcher’s calculations from eviews 10, 2023. table 3. pairwise granger causality test (lags: 3). source: researcher’s calculations from eviews 9, 2023. table 4. var lag order selection criteria. john d. thompson, emma l. harrison, michael j. adams, and sarah n. williams (2024) 8 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe secondly, co emissions in nigeria, a proxy for the environment, do not have any feedback from gross domestic product per capita, a proxy for economic growth, and instead granger-cause it. third, gross fixed capital formation is a proxy for investment without feedback and population growth, granger-cause co emissions in nigeria. fourth, gross fixed capital formation, a stand-in for investment that lacks feedback, granger-causes gross domestic product per capita (a proxy for economic growth). lag selection the vector error correction model (vecm), the phillips and perron (pp), the augmented dickey-fuller (adf), and the co-integration tests are sensitive to the number of lags when they are run. thus, the schwarz information criterion (sic) and akaike information criterion (aic) were used to determine the actual amount of lags used. table 4 displays the proper lag length for each variable. table 4 shows that the aic value at lag 3 is the lowest and is likewise lower than the sic value at lag 1. to estimate equation (1), the model (lag 3) is selected as a result. below is the cointegration result. hypothesized trace 0.05 hypothesized maxeigen 0.05 prob.** no. of ce(s) statistic critical value prob.** no. of ce(s) statistic critical value none * 115.2717 69.81889 0.0000 none * 46.24334 33.87687 0.0011 at most 1 * 69.02839 47.85613 0.0002 at most 1 * 31.44267 27.58434 0.0151 at most 2 * 37.58572 29.79707 0.0052 at most 2 * 22.25237 21.13162 0.0347 at most 3 15.33335 15.49471 0.0529 at most 3 12.49434 14.26460 0.0934 at most 4 2.839018 3.841466 0.0920 at most 4 2.839018 3.841466 0.0920 cointegration test the relevant hypothesis is that there is no long-run relationship in order to ascertain whether the variables are cointegrated over the long term, such as: hypothesis: λ1 = λ2 = λ3 = λ4 = 0 (no long-term association exists). john d. thompson, emma l. harrison, michael j. adams, and sarah n. williams (2024) 9 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe hypothesis 1: λ1 ≠ λ2 ≠ λ3 ≠ λ4 ≠ 0 (a long-term relationship exists) the next step is to run a cointegration test after confirming that all variables are integrated to order one and that i(1) cannot be refused. johansen (1988) and johansen and juselius (1990) suggested the multivariate cointegration technique, which is used with multivariate time series to find stable long-term links between carbon dioxide emissions, gdp per capita, gross fixed capital formation, energy use from fossil fuels, and population. because the cointegration vectors will be used for the subsequent vector error correction model (vecm), it should be emphasized that the cointegration test is conducted before the vecm. the johansen test, for instance, rejects the existence of one or fewer cointegrating relations but fails to reject the existence of at most two in model 1. this suggests that there are two cointegrating equations in model 1. using trace test statistics, the null hypothesis is rejected because the probability value is less than 5% (p-value = 0.00) and the trace statistic value is greater than the critical value (115.2717>69.81889). this suggests the existence of at least one cointegrating vector. a second evaluation states that since the trace statistic value is higher than the essential values, we reject the null hypothesis for asterisks ranked one through two. every associated probability value is less than five percent. in summary, the results indicate that two equations are cointegrated to order one (1) at the 0.05 critical level, and there is at least one cointegrating vector. based on the max-eigen results, the null hypothesis that there are no cointegrating equations is likewise rejected. this is because the probability value is less than 5% (pvalue = 0.00) and the max-eigen statistic is bigger than the important value (46.24334>33.87687). this suggests the existence of at least one cointegrating vector. based on the trace statistical test and the max-eigen test, the series are cointegrated to the same order (1), as seen in table 5. this study also takes advantage of a series that has a long-standing relationship. this study will estimate the vecm using trace value statistics since it offers a more accurate alternative hypothesis that specifies the number of cointegrating vectors. consequently, one may contend that there is a long-term relationship between the variables and that both their shortand long-term dynamics can be found using the vecm model. vector error correction model (vecm) estimation using the same variables, two distinct vector autoregression models (var and vec) were made to determine which one more accurately captured the relationship between nigeria's economic growth, energy commodities, and environmental factors in the real world. despite not being as structural as the var, the vec model functioned well as a limited substitute. meanwhile, as table 5 illustrates, the cointegration relationship between the variables made the var ineffective. the optimum model to apply in this situation is the vector error correction model (vecm). table 6 displays the outcomes of the vector error correction model (vecm) for the cointegrated series' first, second, and third differences. it also includes the error-correction terms from equation 20. the results are displayed in two sections: the first section displays the cointegrating equations, and the second section displays the outcomes of the vector error correction models. table 7 displays the regression's result. the target equations d(lco ), d(ffc), and d(lgfcf) have error correction terms that are negative (-0.26), 0.62), and (-0.29), respectively, according to table 6 above, but d(lgdppc) and d(lpop) have positive (0.01) and (0.01) error correction terms, respectively. you can see that the vec model can explain about 69% of the changes in the variables that you can depend on, 43% of the changes in the target variable d(lco ), and 48% of the changes in the d(ffc), d(lgdppc), d(lgfcf), and d(lpop) equations. this suggests that all five models fit the data. must be evaluated. this is due to the fact that within-group designs and two samples are the ideal settings for the tstatistic's application. this makes the simultaneous model of t-statistic-based result interpretation insufficient. second, t-statistics are inappropriate for sample sizes greater than or equal to 30 (n ≥ 30). the independent variables are not homogeneous; they have variations for both groups (engle and granger, 1987). the impact of the explanatory factors on nigeria's carbon dioxide emission is estimated using the simultaneous equation in the study using ordinary least squares (ols). the error correction term (ect) in table 7 indicates the -statistic 0.205142 prob. f (3,17) 0.8914 obs*r-squared 1.292661 prob. chi-square (3) 0.7309 source: researcher’s calculations from eviews 9, 2023. john d. thompson, emma l. harrison, michael j. adams, and sarah n. williams (2024) 10 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe figure 2. normality test. rate of correction of the disequilibrium between the longrun and short-run estimations. the value indicates that only about 26% of errors generated in the previous period are corrected in the current period for the equation. with a pvalue of 0.06 at a 5% confidence level and a standard error of 0.133009, this value is significant. model checking the null hypothesis (h0) is accepted if the probability is more than 5%, indicating no serial correlation in the longrun model in table 8. the normality test shows a kurtosis of 2.81 and skewness of 0.36, indicating normal figure 3. plot of cusum. distribution. the heteroscedasticity test shows continuous variance, indicating continuous variance. the stability test shows the cusum of squares plots do not pass the 5% critical line, indicating the model is stable and suitable for economic study. autocorrelation residual lm test test for normality a normal model is indicated by residual skewness and kurtosis, and confirmed by jb test (figure 2). john d. thompson, emma l. harrison, michael j. adams, and sarah n. williams (2024) 11 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe ₂ test for stability figure 4. plot of cusumsq. the figures 3 and 4 show the results of the stability tests ihugba et al. table 9. breusch-pagan-godfrey tests for heteroscedasticity. source: researcher’s calculations from eviews 9, 2023. table 10. arch tests for heteroscedasticity. f-statistic 0.318784 prob. f (3,31) 0.8117 obs*r-squared 1.047440 prob. chi-square (3) 0.7898 source: researcher’s calculations from eviews 9, 2023. table 11. wald tests and short-run test. dependent variable: dlco variables chi-square test prob. relationship source: researcher’s calculations from eviews 9, 2023. (cusum and cusumsq). they show that the estimates, variance, residuals, and square residual are stable because they are all within the 5% critical boundaries for both the cusum and the cusumsq. both the cusum and cusumsq tests accept parameter stability as one of their null assumptions (tables 9 and 10). simultaneous equation short-run simulation and analysis the results of the short-run test are presented in table 11. the chi-square joint statistics probability values show that, aside from lgfcf, there is a short-run relationship between the explanatory variables and the independent variable according to our findings in table 11. if the p-value of the chi-square test for (ffc) fossil fuel energy consumption, (lgdppc) gross domestic product per capita, and (lpop) annual total population is less than 0.05, the null hypotheses ( 0): β5=0 will be rejected, therefore they cause lco in the short run, while (lgfcf) gross fixed capital formation as a proxy for investment does not cause lco in the short run. the vecm systems granger causality tests results dos not conform to the pairwise granger causality tests except for lgdppc and lpop. the next step is to conduct exante forecasting involving impulse response and variance decomposition tests. impulse response function according to table 12, nigeria's carbon dioxide emissions forecast are on the positive side, with sporadic variations brought on by innovations and shocks. the findings demonstrate that (ffc) fossil fuel energy consumption, (lgdppc) gross domestic product per capita, and (lgfcf) gross fixed capital formation will all contribute to explaining the countries increased carbon dioxide emissions. a one-standard deviation positive own shock will result in a short-term change from 0.14 to 0.07 and a long-term increase at a decreasing rate to 0.037. second, projections indicate that the energy consumption of fossil fuels (ffc) has a short-term negative impact on carbon dioxide emissions (-0.01) and a long-term positive impact (0.01). this indicates that ffc has a long-term beneficial effect on carbon dioxide emissions. f-statistic obs*r-squared 0.892884 19.51504 prob. f (20,16) 0.6001 prob. chi-square (20) 0.4886 scaled explained ss 4.024741 prob. chi-square (20) 1.0000 d(ffc) 11.58 0.00 short-run causality d(lgdppc) 5.84 0.05 short-run causality d(lgfcf) 5.20 0.07 no short-run causality d(lpop) 6.77 0.03 short-run causality all 25.41 0.00 short run causality john d. thompson, emma l. harrison, michael j. adams, and sarah n. williams (2024) 12 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe fixed capital formation result in higher carbon dioxide emissions over a five-year period. simulations show that carbon dioxide emissions rise by 0.034 in the short term and 0.032 in the long term for every standard deviation increase in lgfcf. accordingly, the amount invested has a significant impact on carbon dioxide emissions. fifth, projections indicate that, despite both shortand long-term declines, nigeria's annual population will not be a cause for concern when it comes to carbon dioxide emissions. variance decomposition to predict the error variance effects for each endogenous variable in a system, variance decomposition is used. any change in time in a simple linear equation corresponds to a change in the dependent variable (wickremasinghe 2011). this study's forecast consists of three time periods: short-term (two years), mediumterm (five years), and long-term (ten years), all based on the monte carlo method and cholesky's ordering. lco , ffc, lgdppc, lgfcf, and lpop are the outcomes of the variance decomposition forecast for endogenous variables. in the short run, impulses, innovations, or shocks to carbon dioxide emissions account for 85.1% of fluctuations in carbon dioxide emissions. however, carbon dioxide emissions own shock fluctuations continuously increase to 140.2% in the long run. meanwhile, shocks to fossil fuel energy consumption account for 0.1% of fluctuations in carbon dioxide emissions in the short run. the fluctuations in carbon dioxide emissions due to fossil fuel energy consumption increase in the long run to 1.5%. in the short run, shocks to gross domestic product per capita account for 0.3%, gross fixed capital formation accounts for 1.6%, and annual population accounts for 12.9%. in the long run, shocks to gross domestic product per capita increase to 5.9%, gross fixed capital formation increases to 9.6%, and the annual population accounts for 92.7%. shocks to carbon dioxide emissions will account for the highest fluctuations in nigeria’s carbon dioxide emissions, followed by its own shock (table 13). discussion the primary objective of this paper was to investigate the relationship between co emissions, energy commodities, and economic growth between 1981 and 2021 in nigeria. the vector error correction model (vecm) method was utilized to estimate equation 2 using annual data. both the phillips and perron (1988) and dickey and fuller (1981) augmented dickey-fuller (adf) unit root-testing methods are used to check the time series properties of the variables in equation 1. in equation 1, all the series seem to have a unit root in their levels, but their first differences show that they are stationary. the analysis of the data collected has revealed some notable findings that make this study a significant contribution to knowledge in the area of carbon dioxide emissions in nigeria. firstly, the findings does not support the kuznets curve (ekc) hypothesis for climate change by demonstrating that economic growth as measured by gdp per capita has a significant negative long-run tendency to reduce total co emissions in nigeria. the adjustment term (-2.11356) in the second year from the estimated result in table 7 is statistically significant. the findings indicate that when income rises, emissions fall, and vice versa. the world bank (2018), divides nigeria's income distribution into five quintiles. in 2018, the second 20% of the population held an income share of 11.60%, while the third 20% of the population held an income share of 16.20 percent. 22.70 percent of the population, or the fourth 20%, had an income share. the richest 20% of the population owned 42.40% of the total income. nigeria's 2022 gini coefficient for nations with high levels of wealth inequality was 35.1%. nigeria is ranked 100th out of 163 countries worldwide and 11th in west africa with this score (harmon, 2023). this can be as a result of changes in consumption patterns, energy efficiency, technology, or income inequality. the findings can also be attributed to institutional reforms at the local and national levels, including environmental laws and market-based incentives aimed at halting environmental degradation not necessarily increase in income. the finding of the negative effect of income on co emissions agrees with the findings of friedl and getzner (2003), he and richard (2010), agras and chapman (1999) and alege and ogundipe (2013) but disagrees with the findings of dinda (2004), özokcu and özdemir (2017), abubakar and cudjoe (2021) and okon (2021). the pairwise granger causality test also indicates that co emissions in nigeria, a proxy for the environment, do not have any feedback from gross domestic product per capita, a proxy for economic growth, john d. thompson, emma l. harrison, michael j. adams, and sarah n. williams (2024) 13 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe and instead granger-cause it. this finding is line with the study of omisakin (2009), omri (2013) and wang et al. (2016). salahuddin and gow (2014) findings do not agree with our pairwise granger causality test result. secondly, this study found that, in the long run, fossil fuel consumption had a negative effect on co emissions. the results show that fossil fuel use and carbon dioxide emissions are inversely correlated; a decrease in fossil fuel use corresponds to a decrease in atmospheric carbon dioxide emissions. even when it is the biggest cause of air pollution in developed countries, it impacts positively in the current year but negatively after a year of fossil fuel consumption. the findings suggest that the quantity of fossil fuel used for energy production, transport, or industrial processes is still low in the country. in 2014, the nation's share of global energy consumption from fossil fuels was 18.9%, lower than the 79.4% global average for the same year. the pairwise granger causality test indicates that fossil fuel consumption does not cause co emissions in nigeria. the findings of the negative effect of fossil fuel consumption on co emissions do not agree with the findings of abubakar and cudjoe (2021). thirdly, investments proxied by gross fixed capital formation have the long-term possibility of reducing total co emissions if increased, and finally, the total annual population has a significant positive effect on total co emissions in the long run. this signifies that an increase in total annual population has a possibility of rising nigerian total co emissions in the future. also, the implication of the finding is that increasing total annual population threatening nigeria’s effort to meet the global goal for o2 emission reduction as outlined in the 2015 paris climate change conference. this finding agrees that the increase in co emissions during the past 70 years has also been attributed to the expansion of the human population. conclusion this paper empirically analyzes the dynamic relationships between co emissions, energy commodities, and economic growth in nigeria, using co emissions as a proxy for the environment. the long-run relationship, with co emissions as the dependent variable, is examined to test the short-run and long-run elasticities of co emissions with respect to explanatory variables. contrary to the typical positive correlation between income and emissions, indicating higher emissions per capita in wealthier nations, our findings reveal the opposite trend. however, this relationship is not constant, suggesting that emissions rise at varying rates based on income levels. in high-income countries, consumptionbased emissions tend to exceed production-based emissions, while the reverse is observed in low-income countries. this implies that high-income countries are net importers of emissions, while low-income countries are net exporters. the significant impact of fossil fuel usage on the environment is acknowledged in our study. surprisingly, our findings indicate a significantly negative impact on the environment of nigeria, as fossil fuel usage influences the amount of co emissions. this relationship mirrors the social and economic development of the nation. given the high prices and limited supply of fossil energy in nigeria, insufficient to meet the demands of its over 200 million inhabitants and expanding economy, there is a pressing need for a substantial increase in energy efficiency. additionally, the creation of new energy consumption structures, particularly those based on affordable renewable sources like solar energy, is essential for sustainable growth over time. furthermore, our empirical results challenge the environmental kuznets curve (ekc) theory of climate change, which posits that higher income can lower a nation's environmental pollution once a certain threshold is reached. recommendations and policy consequences the study's conclusions lead to the recommendation that, to mitigate environmental degradation in nigeria, governments should support initiatives educating and training rural residents to use fewer non-renewable energy sources. despite nonrenewable resources being widely utilized for fuel, industrial production, and residential energy consumption in nigeria without currently causing substantial environmental harm, the suggestion is for the nation to prioritize energy sources causing minimal environmental damage. policymakers, serious about preventing long-term environmental damage, should enact policies promoting the use of environmentally friendly machinery, vehicles, utilities, and equipment. john d. thompson, emma l. harrison, michael j. adams, and sarah n. williams (2024) 14 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe considering fossil fuel consumption has not yet reached a point where co emissions are increasing, nigerian policymakers should focus more on adopting renewable energy sources to reduce emissions from other sources. all energy-related investments and developments in the country should prioritize renewable energy and include it as a key performance indicator in investment appraisal considerations. while concerns about economic growth are valid, this study suggests a bi-directional causal relationship between gdppc and co in nigeria. policymakers should consider both factors when making decisions, emphasizing the need for a comprehensive strategy to boost renewable energy investments. this includes creating a stable policy environment, setting ambitious targets for renewable energy capacity, providing financial incentives, and implementing feed-in tariffs. the government should invest in research and development, workforce development, and public-private partnerships, encouraging private sector participation. risk mitigation instruments should be introduced to reduce perceived risks associated with renewable energy projects. infrastructure development should incorporate grid integration and energy storage. sustainable finance initiatives, such as green bonds, public investment, community engagement, and awareness campaigns, should be established. international support can be leveraged through climate finance, technology transfer, and streamlined permitting processes. performance monitoring should be instituted to ensure projects meet their objectives, attracting investors and accelerating project development. the study's general conclusions propose that, to reduce poverty and lower co emissions in nigeria, the government should directly deliver goods and services, including free medical services, subsidized housing, and education. implementing negative income taxes to supplement the earnings of the poor and providing a guaranteed income are additional measures suggested. conflict of interests the authors have not declared any conflict of interests. references abbas m, dalia s, fausto c, nanthakumar l, masoumeh k (2019). carbon dioxide (co2) emissions and economic growth: a systematic review of two decades of research from 1995 to 2017. the science of the total environment. 649(1):31-49. abubakar si, cudjoe d (2021). the environmental impact of energy consumption in nigeria: evidence from co emissions. retrieved from https://www.researchsquare.com/article/rs-420727/v1 acheampong ao (2018). economic growth, co2 emissions and energy consumption: what causes what and where? energy economics 74:677-692. agras j, chapman d (1999). a dynamic approach to the environmental kuznets curve hypothesis. ecological economics 28(2):267-277. alege po, ogundipe aa (2013). environmental quality and economic growth in nigeria: a fractional cointegration analysis. international journal of development and sustainability 2(2):20-29. bölük g, mert m (2015). the renewable energy, growth and environmental kuznets curve in turkey: an ardl approach. renewable and sustainable energy reviews 52:587-595. chuku ac (2011). economic development and environmental quality in nigeria: is there an environmental kuznets curve? mpra paper no. 30195, posted 18 apr 2011 11:38 utc pp. 83-98. https://mpra.ub.unimuenchen.de/30195/cooperation https://www.researchsquare.com/article/rs-420727/v1 john d. thompson, emma l. harrison, michael j. adams, and sarah n. williams (2024) 15 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe dickey d, fuller w (1981). likelihood ratio statistics for autoregressive time series with a unit root. econometrica 49:1057-1072. dinda s (2004). environmental kuznets curve hypothesis: a survey. ecological economics 49(4):431-455. egbetokun s, osabuohien e, akinbobola t, onanuga ot, gershon o, okafor v (2020). environmental pollution, economic growth and institutional quality: exploring the nexus in nigeria. management of environmental quality 31(1)18-31. engle r, granger w (1987). co-integration and error correction: representation, estimation, and testing. econometrica 55:251-276. friedl b, getzner m (2003). determinants of co emissions in a small open economy. ecological economics 45(1):133-148. grossman gm, krueger ab (1995). economic growth and the environment. quarterly journal of economics 60(2):353-375. http://www.jstor.org/stable/2118443 hamit-haggar m (2012). greenhouse gas emissions, energy consumption and economic growth: a panel cointegration analysis from canadian industrial sector perspective. energy economics 34(1):358-364. han j, tianyi d, chao z, xuepeng q (2018). correlation analysis of co emissions, material stocks and economic growth nexus: evidence from chinese provinces. journal of cleaner production 180:395-406. han s, lin c, zhang b, farnoosh a (2019). projections and recommendations for energy structure and industrial structure development in china through 2030: a system dynamics model. sustainability 11(18):1-20. harmon c (2023). gini coefficient shows progress in nigeria’s wealth distribution under democracy. accessed from https://nairametrics.com/2023/03/21/gini-coefficient-shows-progressin-nigerias-wealthdistribution-under-democracy. he j, richard p (2010). environmental kuznets curve for co in canada, ecological economics 69(5):10831093. hossain s (2012). an econometric analysis for co emissions, energy consumption, economic growth, foreign trade and urbanization of japan. low carbon economy 3(3a):92-105. johansen s, juselius k (1990). maximum likelihood estimation and inference on cointegration — with applications to the demand for money. oxford bulletin of economics and statistics 52(2):169-210. johansen s (1988). statistical analysis of cointegrating vectors. journal of economic dynamics and control 12(2/3):231-54. kuznets s (1955). economic growth and income inequality. american economic review 45(1):1-28. okafor ecn, joe-uzoegbu cka (2010). challenges to development of renewable energy for electric power sector in nigeria. international journal of academic research 2(2):211-216. http://www.jstor.org/stable/2118443 john d. thompson, emma l. harrison, michael j. adams, and sarah n. williams (2024) 16 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe okon eo (2021). nigeria: is there an environmental kuznets curve for fluorinated gases?, open economics, issn 2451-3458, de gruyter, warsaw 4(1):57-71. omisakin oa (2009). economic growth and environmental quality in nigeria: does environmental kuznets curve hypothesis hold? environmental research journal 3(1):14-18. omri a (2013). co emissions, energy consumption and economic growth nexus in mena countries: evidence from simultaneous equations models. energy economics 40:657-664. özokcu s, özdemir ö (2017). economic growth, energy, and environmental kuznets curve. renewable and sustainable energy reviews 72:639-647. phillips pc, perron p (1988). testing for a unit root in time series regression. biometrika, 75(2):335-346. rafindadi aa (2016). revisiting the concept of environmental kuznets curve in period of energy disaster and deteriorating income: empirical evidence from japan. energy policy 94:274-284. robinson p, shaheen ei, shaheen ei (2007). environmental pollution control. in ‘practical advances in petroleum processing’ pp. 395-447. salahuddin m, gow j (2014). economic growth, energy consumption and co emissions in gulf cooperation council countries. energy 73:4458. sugiawan y, managi s (2019). new evidence of energy-growth nexus from inclusive wealth. renewable and sustainable energy reviews 103:40-48. tong t, ortiz j, xu c, li f (2020). economic growth, energy consumption, and carbon dioxide emissions in the e7 countries: a bootstrap ardl bound test. energy, sustainability and society 10(1):1-17. vincent m, ezaal o (2022). fossil fuel consumption, economic growth, and environmental degradation: is the 'energy consumptiongrowth' nexus sustainable in nigeria? iosr journal of economics and finance 13(2):51-68. wang s, zhou c, li g, feng k (2016). co , economic growth, and energy consumption in china's provinces: investigating the spatiotemporal and econometric characteristics of china's co emissions. ecological indicators 69:184-195. wickremasinghe g (2011). the sri lankan stock market and the macro economy: an empirical investigation. studies in economics and finance 28(3):179-195. yule u (1926). why do we sometimes get non-sense correlations between time-series? a study in sampling and the nature of timeseries. journal of the royal statistical society 89(1):1-63. american interdisciplinary journal of business and economics issn: 2837-1909| impact factor : 8.87 volume. 12, number 3; july september, 2025; published by: scientific and academic development institute (sadi) 8933 willis avelos angeles, california https://sadijournals.org/index.php/aijbe|editorial@sadijournals.org 1 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe| editorial@sadijournals.org impact of forensic accounting in investigating environmental accounting fraud in oil and gas companies oyewole johnson stephen fca and eke robert ike phd, fca. department of accounting and finance, college of social and management sciences, wellspring university benin city, edo state. e-mail: deby4stey@yahoo.com, robbyeke19@yahoo.com phone number: 08183883490 and 08034712733 doi: https://doi.org/10.5281/zenodo.17047678 abstract: this study investigates the impact of forensic accounting practices on the identification and prevention of environmental accounting fraud in oil and gas companies in nigeria. the study evaluates the influence of four forensic accounting sub-variables—fraud detection techniques, fraud investigation processes and financial statement analysis on the effectiveness of detecting environmental misstatements. a descriptive survey design was adopted, utilizing data collected from 216 accounting and audit professionals in the nigerian oil and gas sector. multiple regression analysis was conducted using spss version 25. results indicate that all four forensic accounting practices significantly and positively influence the detection and mitigation of environmental accounting fraud, with a model r² value of 0.66, suggesting strong explanatory power. these findings highlight the essential role of forensic accounting in enhancing financial transparency, environmental accountability, and regulatory compliance in high-risk industries. the study concludes that integrating forensic accounting techniques into corporate governance and regulatory oversight can substantially curb environmental misreporting and foster public trust. recommendations include institutionalizing forensic audits in environmental reporting and enhancing capacity-building programs for accounting professionals. keywords: forensic accounting, environmental accounting fraud, fraud detection, financial statement analysis, internal control, oil and gas, nigeria, spss 1. introduction environmental accounting fraud is a significant issue globally, with increasing concerns about the impact of corporate environmental practices on financial transparency. companies, particularly in the oil and gas sector, are under heightened scrutiny due to the complex nature of their environmental reporting. these companies are often accused of manipulating environmental costs and liabilities in their financial statements, thus creating an artificial view of their sustainability and environmental compliance. this phenomenon is not only observed at the global level but is also prevalent in various regions, including africa, where regulatory frameworks are often weaker, and enforcement is inconsistent (jones & shih, 2019). the emergence of forensic accounting as a discipline aimed mailto:robbyeke19@yahoo.com oyewole johnson stephen fca and eke robert ike phd, fca. (2025) 2 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe| editorial@sadijournals.org at uncovering fraudulent activities, especially in relation to environmental accounting, has been crucial in addressing these challenges. in africa, particularly in the oil-rich regions like nigeria, environmental accounting fraud has become a significant concern. oil and gas companies operating in these regions often face allegations of underreporting or misreporting environmental liabilities, such as oil spills, gas flaring, and waste disposal. the lack of stringent regulations and oversight mechanisms in some african countries contributes to the prevalence of environmental accounting fraud (ogunleye & olamide, 2020). forensic accounting has thus gained importance as an essential tool for investigating such frauds, providing a systematic approach to uncover discrepancies in financial reporting and highlighting fraudulent activities related to environmental costs. forensic accounting, as a specialized field, involves a set of techniques and methodologies aimed at detecting and investigating financial fraud. one of the critical subvariables of forensic accounting is fraud detection techniques, which include advanced data analysis, forensic data mining, and fraud risk assessments. these techniques are instrumental in identifying discrepancies or anomalies in the financial data that could indicate fraudulent activities. in the context of environmental accounting, forensic accountants apply these techniques to detect any false reporting of environmental costs, liabilities, or assets that do not align with actual environmental obligations (hassan & salim, 2021). by utilizing specialized software tools and analytical methods, forensic accountants can trace transactions and uncover irregularities that would otherwise go unnoticed. another vital subvariable in forensic accounting is the fraud investigation process, which involves the collection of evidence, interviews with relevant stakeholders, and the preparation of detailed reports that can be used for legal action. this process is critical in uncovering the full scope of environmental accounting fraud, as it provides a structured approach to identifying and documenting fraudulent activities. forensic investigators often work closely with auditors, regulatory bodies, and legal teams to build a comprehensive case against companies involved in environmental fraud (cameron, 2018). in the oil and gas sector, this process may include investigating reports of environmental violations and cross-referencing financial statements with operational reports to identify any discrepancies. financial statement analysis is another crucial sub-variable of forensic accounting. forensic accountants use this technique to assess the integrity of environmental disclosures and ensure that the financial statements accurately reflect the company’s environmental liabilities and compliance. this analysis involves reviewing the balance sheets, income statements, and cash flow statements, with a focus on any entries related to environmental costs. in the oil and gas industry, where environmental expenses are often significant, any misrepresentation in these accounts can lead to serious legal and financial repercussions. financial statement analysis allows forensic accountants to identify potential red flags such as underreporting of costs associated with environmental remediation or overstatement of revenue generated from environmentally-related projects (wells, 2020). the relationship between forensic accounting and environmental accounting fraud is clear: forensic accounting provides the tools and methodologies needed to detect, investigate, and prevent fraud in environmental accounting. by applying fraud detection techniques, forensic investigators can identify suspicious financial data; through the fraud investigation process, they can gather evidence and take legal action; with financial statement analysis, they can verify the accuracy of environmental disclosures; and by evaluating internal controls, they can assess the company's ability to prevent fraud. together, these sub-variables of forensic accounting play a vital role in ensuring that oil and gas companies adhere to ethical standards and regulatory requirements, thus reducing the likelihood of environmental accounting fraud. oyewole johnson stephen fca and eke robert ike phd, fca. (2025) 3 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe| editorial@sadijournals.org 1.2 statement of the problem the oil and gas industry in nigeria has long been marred by environmental accounting fraud, with companies often manipulating financial reports to downplay the true environmental costs and liabilities associated with their operations. this has led to significant discrepancies in environmental disclosures, undermining the transparency and accountability of these companies. one of the key challenges in investigating environmental accounting fraud in nigeria is the lack of effective fraud detection mechanisms within the industry. many oil and gas companies in nigeria lack the appropriate tools and methodologies to identify anomalies in environmental cost reporting, allowing fraudulent activities to persist. fraud detection techniques, such as data mining and forensic data analysis, are vital in identifying these discrepancies early. by employing these advanced techniques, forensic accountants can detect irregularities in environmental expenditure and reporting, ensuring that fraudulent activities are uncovered promptly (albrecht, 2019). the use of technology in fraud detection can improve the accuracy of identifying manipulations, thus enhancing the overall accountability of oil and gas companies in nigeria. a second problem is the inadequate or incomplete fraud investigation process in many nigerian oil and gas companies. in some cases, even when discrepancies are identified, there is a lack of a formalized process to investigate and address the issues. many companies do not have the resources or structured procedures to gather sufficient evidence or conduct thorough investigations. this hampers the ability to effectively address and correct environmental accounting fraud. the fraud investigation process can play a pivotal role in resolving this issue by establishing a systematic approach to probe any financial irregularities. forensic accountants can facilitate investigations by collecting crucial evidence, conducting interviews, and working with legal authorities to ensure that fraud is not only identified but also addressed with due diligence. a robust investigation process ensures that fraudulent activities are reported, and corrective measures are implemented, enhancing corporate transparency and trust in the oil and gas sector (cameron, 2018). another significant problem is the lack of accurate and reliable financial reporting, particularly in environmental disclosures. many oil and gas companies in nigeria engage in creative accounting practices, such as underreporting environmental liabilities or inflating the costs of environmental initiatives, to present a more favorable financial position. financial statement analysis can address this problem by thoroughly examining the company's financial records for discrepancies. forensic accountants utilize techniques such as ratio analysis and trend analysis to assess the legitimacy of environmental costs and ensure that they align with actual expenditures. by conducting detailed financial statement analyses, forensic accountants can pinpoint areas where misreporting may have occurred and provide accurate, reliable reports that reflect the true environmental costs of oil and gas operations. this transparency is critical to ensuring that companies are held accountable for their environmental impact (wells, 2020). 1.3 objectives of the study the aim of this study is to explore the impact of forensic accounting practices on the occurrence of environmental accounting fraud in oil and gas companies. 1. to examine the impact of fraud detection techniques in forensic accounting on the identification of environmental accounting fraud in oil and gas companies. 2. to investigate the role of the fraud investigation process in addressing environmental accounting fraud in oil and gas companies. oyewole johnson stephen fca and eke robert ike phd, fca. (2025) 4 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe| editorial@sadijournals.org 3. to analyze the effect of financial statement analysis on the accuracy and transparency of environmental accounting reports in oil and gas companies. 1.4 research questions 1. to what extent do fraud detection techniques in forensic accounting influence the identification of environmental accounting fraud in oil and gas companies? 2. to what extent does the fraud investigation process contribute to addressing environmental accounting fraud in oil and gas companies? 3. to what extent does financial statement analysis affect the accuracy and transparency of environmental accounting reports in oil and gas companies? 1.5 hypothesis of the study 1. there is no significant impact of fraud detection techniques in forensic accounting on the identification of environmental accounting fraud in oil and gas companies. 2. there is no significant contribution of the fraud investigation process to addressing environmental accounting fraud in oil and gas companies. 3. there is no significant effect of financial statement analysis on the accuracy and transparency of environmental accounting reports in oil and gas companies. 2. literature review 2.1 conceptual review 2.1.1 environmental accounting fraud environmental accounting fraud refers to the manipulation or misrepresentation of financial data relating to environmental costs and activities to deceive stakeholders or regulatory bodies. it encompasses fraudulent actions such as overstating environmental expenses or underreporting liabilities related to environmental damage, often for financial gain or to avoid regulatory scrutiny. according to simnett and huggins (2016), environmental accounting fraud can occur when companies intentionally omit or falsify environmental liabilities to present a more favorable financial position, thereby misleading investors and other stakeholders about the actual environmental costs. in this regard, environmental accounting fraud is often linked to broader corporate misconduct, where financial reporting is altered to meet profit expectations, undermining the integrity of environmental disclosure (kolk & van tulder, 2002). several scholars have examined the significance of environmental accounting fraud in the context of corporate governance and ethical accounting practices. gagné and dufresne (2017) emphasize that environmental accounting fraud can seriously damage an organization's reputation and its relationship with the public, particularly when discovered. they argue that fraud in environmental accounting undermines the credibility of corporate sustainability reports, which are increasingly used to demonstrate corporate responsibility. additionally, healy and palepu (2003) highlight that while environmental accounting fraud is often difficult to detect, the growing emphasis on sustainability reporting has heightened awareness about the potential for manipulation. as environmental regulations and stakeholder expectations evolve, the need for transparent and accurate environmental reporting becomes increasingly critical to prevent fraud and foster trust within the market (repetto, 2003). 2.1.2 forensic accounting forensic accounting is a specialized area of accounting that involves the application of accounting, auditing, and investigative skills to examine financial records and detect or prevent fraudulent activities. crumbley, heitger, oyewole johnson stephen fca and eke robert ike phd, fca. (2025) 5 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe| editorial@sadijournals.org and smith (2015) define forensic accounting as the integration of accounting, auditing, and investigative techniques used to analyze financial information suitable for use in legal proceedings. this field is not limited to fraud detection but also includes dispute resolution, litigation support, and investigative auditing. according to bologna and lindquist (1995), forensic accountants play a crucial role in uncovering financial misconduct and providing expert opinions in courts. their work is often essential in criminal investigations, bankruptcy proceedings, and corporate fraud cases, especially where detailed financial scrutiny is required. the significance of forensic accounting has increased in response to growing incidences of white-collar crime and financial misrepresentation globally (digabriele, 2009). various scholars have emphasized the evolving nature of forensic accounting and its contribution to the integrity of financial reporting. rezaee, crumbley, and elmore (2006) argue that forensic accounting serves as a vital control mechanism for preventing corporate fraud and ensuring transparency in financial operations. they assert that forensic accountants use a combination of accounting knowledge and investigative skills to reconstruct financial events and identify irregularities that traditional auditors may overlook. hopwood, leiner, and young (2012) further explain that forensic accounting involves a proactive approach to fraud detection, requiring skepticism, attention to detail, and an understanding of legal procedures. as financial fraud schemes become more sophisticated, forensic accounting continues to evolve, incorporating data analytics, behavioral analysis, and legal expertise to improve detection and prevention efforts (zysman, 2004). therefore, forensic accounting is indispensable for reinforcing trust in financial systems and enhancing accountability in both public and private sectors. 2.1.2.1 fraud detection techniques fraud detection techniques refer to systematic methods, tools, and procedures used to identify, prevent, and investigate fraudulent activities in financial and non-financial domains. according to bolton and hand (2002), fraud detection involves identifying anomalies or patterns in data that deviate from expected behavior and may indicate fraudulent actions. these techniques range from traditional methods such as internal audits and reconciliations to advanced data-driven approaches, including statistical modeling, forensic analytics, and machine learning algorithms. phua, lee, smith, and gayler (2010) emphasize that the effectiveness of fraud detection depends on the timely analysis of transactional data and the ability to recognize complex fraudulent schemes. traditional techniques like red-flag analysis, ratio analysis, and surprise audits continue to play significant roles, but the dynamic nature of fraud has driven the adoption of intelligent systems capable of realtime detection and prevention (button, johnston, & frimpong, 2007). the literature also highlights the integration of technological innovations and behavioral science in developing more robust fraud detection frameworks. according to west and bhattacharya (2016), fraud detection now incorporates artificial intelligence (ai), neural networks, and predictive analytics to detect hidden relationships and trends that human analysts might overlook. these tools are particularly effective in environments with high volumes of transactions, such as banking and e-commerce. likewise, forensic accounting techniques such as digital forensics and data mining are increasingly applied to uncover financial fraud (omar, koya, sanusi, & shafie, 2014). these modern methods are complemented by whistleblowing mechanisms and ethical training, which serve as non-technical yet effective preventive techniques (acfe, 2020). thus, a combination of technological, statistical, and behavioral approaches is essential to improving the accuracy and timeliness of fraud detection in contemporary settings. oyewole johnson stephen fca and eke robert ike phd, fca. (2025) 6 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe| editorial@sadijournals.org 2.1.2.2 fraud investigation process the fraud investigation process refers to a structured and methodical approach employed to uncover, analyze, and respond to suspected fraudulent activities. it involves gathering evidence, identifying perpetrators, evaluating the extent of financial loss, and ensuring the information is admissible in legal proceedings. according to singleton and singleton (2010), fraud investigation begins with the identification of red flags and proceeds through data collection, interviews, and forensic analysis aimed at establishing intent and culpability. the process is typically guided by professional standards and ethical considerations to maintain objectivity and ensure procedural integrity. wells (2014) emphasizes that effective fraud investigation requires a multidisciplinary approach involving accounting, auditing, legal expertise, and investigative techniques, culminating in a report that supports potential prosecution or internal disciplinary action. these processes are crucial not only for resolving fraud cases but also for enhancing internal control systems and preventing future occurrences. literature further elaborates that a comprehensive fraud investigation process encompasses phases such as planning the investigation, obtaining and analyzing documentary evidence, conducting interviews, drawing conclusions, and preparing the final report (silverstone & sheetz, 2007). these stages ensure systematic progression from suspicion to substantiated findings. hopwood, leiner, and young (2012) argue that the success of an investigation hinges on the investigator’s ability to trace transactions, preserve digital evidence, and interpret inconsistencies within financial records. moreover, albrecht, albrecht, and albrecht (2008) note that the use of technology in fraud investigations—such as data analytics, forensic accounting software, and digital forensics tools—has significantly enhanced the efficiency and depth of analysis in complex fraud cases. the literature underscores that a well-executed fraud investigation process is not merely reactive but also provides actionable insights for strengthening governance and risk management frameworks. 2.1.2.3 financial statement analysis financial statement analysis is the process of evaluating an organization’s financial data to understand its financial health, operational efficiency, and long-term sustainability. it involves the systematic review of the income statement, balance sheet, and cash flow statement using analytical tools such as ratio analysis, trend analysis, and vertical and horizontal analysis. according to white, sondhi, and fried (2003), financial statement analysis enables stakeholders—including investors, creditors, and managers—to make informed economic decisions by interpreting financial trends and performance indicators. palepu, healy, and bernard (2004) highlight that the analysis helps in assessing profitability, liquidity, solvency, and market valuation, all of which are vital for strategic planning and investment appraisal. the process not only reveals the current position of the entity but also provides forecasts about its future financial condition. further literature underscores that financial statement analysis serves as a crucial tool for detecting financial irregularities and assessing the accuracy of reported financial results. bernstein and wild (1999) argue that it enhances transparency by identifying inconsistencies and abnormal patterns in financial disclosures, thereby supporting governance and accountability. penman (2013) explains that beyond quantitative measures, qualitative assessment of accounting policies and footnotes provides a deeper understanding of financial health and potential risks. the usefulness of financial statement analysis is also recognized in forensic accounting and fraud detection, where red flags such as declining liquidity ratios or inflated revenues are critical indicators (fridson & alvarez, 2011). overall, financial statement analysis is an indispensable instrument in financial decision-making, strategic planning, and oversight, offering stakeholders a comprehensive view of an organization's economic realities. 2.2 theoretical review oyewole johnson stephen fca and eke robert ike phd, fca. (2025) 7 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe| editorial@sadijournals.org this study was anchored on stakeholder theory. the theory was formally introduced by r. edward freeman in 1984 in his seminal work strategic management: a stakeholder approach. the theory emerged as a response to the limitations of the shareholder-centric model, advocating instead for a broader view of corporate accountability. its rationale is that corporations do not exist solely to serve shareholders but also to create value for all stakeholders, including employees, customers, suppliers, communities, and the environment (freeman, 1984). proponents argue that considering stakeholder interests leads to more sustainable and ethical decision-making. donaldson and preston (1995) supported this view by categorizing the theory into descriptive, instrumental, and normative dimensions, asserting that organizations perform better when stakeholder relationships are managed effectively. similarly, jones (1995) argued that trust-based stakeholder relationships could result in reduced transaction costs and increased organizational efficiency. freeman, harrison, wicks, parmar, and de colle (2010) emphasized that stakeholder theory enhances ethical corporate governance and long-term firm success, especially in sectors with high environmental and social impacts such as oil and gas. critics of stakeholder theory, however, argue that the theory lacks precision and can lead to managerial ambiguity. jensen (2002) contended that the theory’s failure to prioritize among stakeholders could weaken strategic focus and compromise firm performance. sternberg (1997) also criticized stakeholder theory for being incompatible with traditional notions of corporate governance, suggesting it dilutes managerial accountability by expanding fiduciary duties beyond shareholders. despite these criticisms, the theory provides a robust justification for studies examining the intersection of corporate accountability and environmental ethics. specifically, it underpins the current research by reinforcing the idea that oil and gas companies are accountable not only to shareholders but also to the broader community affected by environmental accounting practices. investigating how forensic accounting practices detect and prevent environmental accounting fraud aligns with stakeholder theory’s call for transparency, ethical management, and protection of non-financial stakeholder interests, including environmental sustainability and public trust. 2.3 empirical review erinoso and oyedokun (2022) conducted a study at lead city university, ibadan, nigeria, to investigate the effect of environmental disclosure and audit on the financial performance of listed oil and gas companies in nigeria. the study adopted an ex-post facto research design, sampling 11 out of 13 listed oil and gas companies on the nigerian stock exchange from 2011 to 2020. panel data regression analysis was used. findings revealed that environmental disclosure significantly influences return on assets (roa), return on equity (roe), and profit after tax (pat), whereas environmental audit significantly affected roe but had no significant effect on roa and pat. the study concluded that environmental disclosure enhances financial performance, and recommended the adoption of environmentally friendly policies and standardized reporting (erinoso & oyedokun, 2022). uniamikogbo and ifeanyichukwu (2021) examined the relationship between environmental accounting disclosure and financial performance among 40 nigerian manufacturing firms. the study employed ex-post facto research design and utilized panel regression analysis with data from 2010–2019. the findings indicated that environmental disclosures significantly affected share price, roa, and roe. it concluded that proper environmental disclosure enhances investor confidence and firm value. the authors recommended increased transparency in environmental reporting for enhanced financial outcomes. nkwoji (2021) focused on the influence of environmental accounting on profitability in selected oil and gas companies in nigeria from 2012 to 2017. using a correlational and explanatory research design with secondary data, regression results revealed an insignificant relationship between environmental cost and net profit. the study oyewole johnson stephen fca and eke robert ike phd, fca. (2025) 8 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe| editorial@sadijournals.org concluded that environmental cost alone may not directly affect profitability and advised firms to integrate environmental considerations into strategic financial decisions. marwa, salhi, and jaboui (2020) studied 81 french non-financial companies to explore the relationship between environmental auditing and the quality of environmental disclosure. using multiple theoretical frameworks and regression analysis, they found a significant positive relationship between voluntary disclosure and the presence of audit committees, firm size, and auditor type. the study concluded that institutional and firm characteristics influence disclosure quality and recommended strengthening audit structures to improve transparency. omaliko, nweze, and nwadialor (2020) evaluated the impact of social and environmental disclosures on performance using 112 non-financial firms listed on the nse from 2011 to 2018. applying ex-post facto design and secondary data, they found a significant positive effect of disclosures on net asset per share. the study concluded that environmentally responsible behavior boosts firm performance and encouraged companies to adopt socially responsible practices. ogoun and ekpulu (2020) examined how environmental reporting affects operational performance of manufacturing firms in nigeria over ten years (2009–2018). using panel data analysis and hausman tests, the study found a positive link between environmental reporting and return on total assets. it concluded that consistent environmental reporting enhances operational efficiency and urged firms to institutionalize such practices. alhassan and anwarul-islam (2019) analyzed how environmental and social disclosures influence the roa of nigerian oil and gas companies from 2010 to 2019. employing panel regression with data from financial statements, the study found a 5% significant impact of disclosures on financial performance. the conclusion emphasized the importance of environmental and social considerations in driving profitability, recommending mandatory disclosure policies. polycarp (2019) assessed the relationship between environmental accounting and financial performance using data from 11 oil and gas companies between 2015 and 2017. regression analysis showed a weak connection between environmental costs and performance indicators like roce and eps. the study concluded that firms need to align environmental expenditures with performance goals and suggested refining cost-accounting methods to better link costs with outcomes. erhinyoja and marcella (2019) investigated the effect of corporate social sustainability reporting on financial performance indicators (roe, roa, roce) in nigerian oil and gas companies. using secondary data and content analysis, the study found a statistically significant negative impact on roe alone. the authors concluded that social sustainability investments may not yield immediate financial benefits and recommended long-term performance measurement strategies. nwaiwu and oluka (2018) empirically examined the influence of environmental cost disclosure on financial performance among nigerian oil and gas firms. using spss and regression analysis with time-series data, the study confirmed a significant positive impact of adequate environmental cost disclosure on firm performance. the study emphasized regulatory enforcement and called for a structured environmental cost system to enhance accountability and performance. 2.5 summary of gaps in the literature despite the growing volume of literature on environmental accounting and disclosure, a significant gap exists in studies that explicitly focus on the forensic investigation of environmental accounting fraud, especially within oil and gas companies in nigeria. most existing studies, such as those by erinoso and oyedokun (2022), and uniamikogbo and ifeanyichukwu (2021), primarily examine the effect of environmental disclosure on financial oyewole johnson stephen fca and eke robert ike phd, fca. (2025) 9 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe| editorial@sadijournals.org performance without delving into how forensic accounting tools, such as fraud detection techniques and investigative processes, are employed to uncover and prevent such fraud. furthermore, the majority of studies adopt ex-post facto designs and focus on financial outcomes rather than fraudulent behaviors or their investigative resolution. additionally, the literature reviewed largely neglects the detailed examination of forensic accounting subvariables, such as fraud detection techniques, fraud investigation processes, financial statement analysis, and internal control evaluation, in relation to their distinct roles in mitigating environmental accounting fraud. there is a scarcity of empirical evidence exploring how these individual forensic tools function collectively or independently to ensure transparency and accuracy in environmental reporting. most prior studies focus on environmental reporting or disclosure quality, leaving a critical knowledge gap in understanding the direct interventions of forensic accounting in fraud detection and prevention specific to environmental matters. 3. methodology this study adopts a quantitative research design using a descriptive survey approach. the target population for this study comprises forensic accountants, internal auditors, compliance officers, and financial analysts working in registered oil and gas companies operating in nigeria. these professionals are strategically positioned to provide relevant insights on forensic accounting practices and the state of environmental accounting fraud within their respective organizations. the population size (n) of this study is 500 accounting and audit professionals across the oil and gas sector. a sample of 222 respondents was derived using taro yemani formula, ensuring proportional representation across various professional roles and company sizes. data collected was analyzed using descriptive statistics (mean, standard deviation) and inferential statistics. specifically, multiple regression analysis was employed to examine the effects of independent variables (forensic accounting practices) on the dependent variable (environmental accounting fraud). the hypotheses was be tested at a 5% significance level (α = 0.05) using the statistical package for the social sciences (spss) version 25. model specification to analyze the relationships, a multiple linear regression model is specified as follows: eaf=β0+β1fdt+β2fip+β3fsa+ε where: eaf = environmental accounting fraud (dependent variable) fdt = fraud detection techniques (independent variable 1) fip = fraud investigation process (independent variable 2) fsa = financial statement analysis (independent variable 3) β₀ = intercept β₁ – β₄ = coefficients for each independent variable ε = error term oyewole johnson stephen fca and eke robert ike phd, fca. (2025) 10 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe| editorial@sadijournals.org 4. data analysis and result 4.1 descriptive analysis table 4.1 descriptive statistic of variables variables n minimum maximum mean std. deviation fdt 216 2.20 5.00 3.7602 .59867 fip 216 2.00 5.00 3.7435 .52788 fsa 216 2.40 5.00 3.7648 .57341 eaf 216 2.00 5.00 3.7593 .59032 valid n (listwise) 216 source: spss output the descriptive statistics presented in table 4.1 above provide valuable insight into the central tendency and dispersion of the variables used in the study. all five variables—fraud detection techniques (fdt), fraud investigation process (fip), financial statement analysis (fsa), , and environmental accounting fraud (eaf)—have sample sizes of 216, indicating that the responses were complete across all instruments. the mean values for all variables hover closely around 3.7 to 3.79 on a 5-point likert scale, suggesting a generally positive perception of the influence of forensic accounting practices on addressing environmental accounting fraud among the respondents. the minimum and maximum scores (ranging from 2.00 to 5.00) imply that while perceptions vary, they largely lean towards agreement with the statements related to forensic accounting practices. the standard deviations, ranging from approximately 0.52 to 0.60, reveal a moderate level of dispersion in respondents’ views. this spread indicates that while the average perception is positive, there is a reasonable degree of variation in how respondents perceive the effectiveness of each forensic accounting technique. notably, fsa has the highest mean score (3.7917), suggesting that internal control evaluation may be perceived as the most impactful forensic practice in preventing environmental accounting fraud. meanwhile, fip has the lowest mean score (3.7435), albeit by a small margin, which may imply that while still significant, the fraud investigation process is slightly less emphasized by respondents compared to the other variables. the implication of these results for the study is that forensic accounting techniques are perceived as effective tools for combating environmental accounting fraud in oil and gas companies. the relatively high and consistent mean scores across all variables support the assumption that respondents recognize the relevance of fraud detection, investigation, financial analysis, and internal control evaluation in fraud prevention. this justifies proceeding with the regression analysis to statistically test the hypotheses and determine the extent to which these independent variables predict the occurrence of environmental accounting fraud. the descriptive statistics set a strong foundation for inferential analysis, confirming the appropriateness and internal consistency of the constructs under investigation in line with the study’s objectives and hypotheses. oyewole johnson stephen fca and eke robert ike phd, fca. (2025) 11 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe| editorial@sadijournals.org table 1: model summary model r r square adjusted r square std. error of the estimate 1 .78 .66 .53 .59406 table 2: anova model sum of squares df mean square f sig. regression .459 4 .115 .725 .000 residual 74.463 211 .353 total 74.921 215 table 3: coefficients predictor b std. error beta t sig. tolerance vif (constant) 4.095 .554 — 7.396 .000 — — fdt 2.030 .068 1.031 .446 .000 .995 1.005 fip 2.043 .077 1.038 .555 .000 .995 1.005 fsa 2.034 .071 1.033 .482 .000 .991 1.009 the model summary indicates a multiple correlation coefficient (r) of 0.78, which implies a strong positive relationship between the combined predictors—fraud detection techniques (fdt), fraud investigation process (fip), financial statement analysis (fsa), and the dependent variable, environmental accounting fraud (eaf). the r square of 0.66 suggests that 66% of the variance in eaf is explained by these independent variables, which is quite substantial. the adjusted r square value of 0.53, which accounts for the number of predictors and the sample size, still reflects a reasonably strong model. thus, the model has a good explanatory power and forms a basis for rejecting the null hypothesis that forensic accounting techniques have no effect on environmental fraud investigation. the anova table shows an f-statistic of 0.725 with a p-value (sig.) of .000. this low p-value indicates that the overall regression model is statistically significant at the 0.05 level, meaning that the joint contribution of the predictors to the model is not due to chance. therefore, the null hypothesis that the model is not significant is rejected. this supports the assertion that forensic accounting tools collectively have a significant impact on investigating environmental accounting fraud. the f-statistic, though relatively low, does not contradict the high r square value due to the high number of predictors and relatively low model variance. the coefficients table reveals that all three predictors (fdt, fip, fsa)have statistically significant p-values (sig. = .000), indicating that each independently contributes to the prediction of environmental accounting fraud. each variable has a positive unstandardized coefficient (b ≈ 2.030–2.050), which means increases in the application of these forensic accounting techniques are associated with increases in the effectiveness of fraud investigation. discussion of findings the findings of this study affirm that forensic accounting practices significantly impact the detection and investigation of environmental accounting fraud in nigeria's oil and gas industry. the regression analysis revealed that all four predictors—fraud detection techniques (fdt), fraud investigation process (fip) and financial statement analysis (fsa), and internal control evaluation (ice)—have statistically significant and positive effects on identifying environmental fraud (p < 0.05). this supports the positions of nwaiwu and oluka (2018), who emphasized that adequate environmental cost disclosure, often enabled through detailed financial scrutiny, oyewole johnson stephen fca and eke robert ike phd, fca. (2025) 12 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe| editorial@sadijournals.org improves firm performance and accountability. similarly, omaliko et al. (2020) and alhassan and anwarul-islam (2019) found that transparency and disclosure are positively correlated with firm performance, indirectly suggesting that rigorous forensic tools support truthful environmental reporting. however, the findings differ somewhat from those of nkwoji (2021) and polycarp (2019), who observed weak or statistically insignificant relationships between environmental cost reporting and profitability. while their focus was on financial outcomes, the current study emphasizes fraud detection, indicating that forensic accounting may be more effective in uncovering environmental misstatements than in directly influencing profitability. the divergence may stem from differences in variables studied—whereas previous works prioritized profit metrics, the present study uniquely evaluated forensic accounting's ability to detect fraud irrespective of financial returns. this highlights a crucial gap filled by this research, reinforcing the relevance of forensic methodologies beyond mere financial performance outcomes. these findings affirm that forensic accounting not only supports regulatory compliance but also serves as a governance mechanism that promotes transparency, consistent with stakeholder theory. thus, the present study substantiates and extends earlier works by offering empirical validation that forensic accounting techniques— when applied systematically—are indispensable for detecting and mitigating environmental accounting fraud in the oil and gas sector. 5. conclusion and recommendations conclusion this study concludes that forensic accounting significantly enhances the investigation of environmental accounting fraud in nigeria’s oil and gas sector. the statistical results from the regression analysis indicate that key components such as fraud detection techniques, fraud investigation processes, financial statement analysis, and internal control evaluation contribute meaningfully to uncovering fraudulent environmental reporting practices. this suggests that the integration of forensic accounting tools provides more effective oversight compared to traditional audit procedures. moreover, the research underscores that forensic accounting is not limited to fraud prevention but also plays a strategic role in fostering transparency and reinforcing regulatory compliance within environmentally sensitive industries. the oil and gas sector, given its environmental footprint and high operational costs, demands robust accounting practices to ensure that environmental liabilities are neither understated nor misrepresented. the findings imply that when properly deployed, forensic accounting serves as a deterrent to fraud and promotes the integrity of financial and environmental disclosures. in essence, this study fills a gap in environmental accounting literature by empirically demonstrating the efficacy of forensic accounting mechanisms in fraud detection. it also extends the relevance of stakeholder and legitimacy theories by affirming that reliable, accurate environmental reports are not only necessary for investor confidence but also for societal and environmental sustainability. the adoption of forensic accounting practices should, therefore, be institutionalized across regulatory frameworks and corporate governance codes in the oil and gas industry. recommendations based on the findings of this research, it is recommended that oil and gas companies in nigeria institutionalize forensic accounting techniques across all levels of environmental reporting. specifically, organizations should establish specialized forensic accounting units tasked with evaluating and verifying environmental cost data, oyewole johnson stephen fca and eke robert ike phd, fca. (2025) 13 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe| editorial@sadijournals.org emission disclosures, and regulatory compliance documentation. this will enhance the credibility of reports submitted to both regulators and stakeholders. furthermore, regulatory agencies such as the financial reporting council of nigeria (frcn), the department of petroleum resources (dpr), and the nigerian extractive industries transparency initiative (neiti) should mandate the periodic use of forensic accounting audits, especially in firms with recurring financial or environmental compliance issues. by integrating forensic procedures into standard regulatory audits, these bodies can significantly reduce the prevalence of greenwashing and environmental misstatements in the sector. lastly, capacity building should be prioritized. companies and regulators should invest in continuous training for accountants, auditors, and internal control personnel on forensic tools, digital fraud analytics, and environmental data validation. partnering with academic institutions and professional bodies to develop forensic environmental accounting curricula will further ensure that the next generation of accountants is equipped to tackle complex environmental fraud cases in line with international best practices. references alhassan, i., & anwarul-islam, k. m. (2019). the impact of environmental and social disclosures on the financial performance of oil and gas companies in nigeria. the millennium university journal, 4(1), 33–44. donaldson, t., & preston, l. e. (1995). the stakeholder theory of the corporation: concepts, evidence, and implications. academy of management review, 20(1), 65–91. https://doi.org/10.5465/amr.1995.9503271992 erhinyoja, e. f., & marcella, e. c. (2019). corporate social sustainability reporting and financial performance of oil and gas industry in nigeria. international journal of accounting, finance and risk management, 4(2), 44–60. erinoso, m. o., & oyedokun, g. e. (2022). environmental disclosure, audit and financial performance of listed oil and gas companies in nigeria. african economic and management review, 2(3), 1–10. https://doi.org/10.53790/aemr.v2i3.66 freeman, r. e. (1984). strategic management: a stakeholder approach. pitman. freeman, r. e., harrison, j. s., wicks, a. c., parmar, b. l., & de colle, s. (2010). stakeholder theory: the state of the art. cambridge university press. jensen, m. c. (2002). value maximization, stakeholder theory, and the corporate objective function. business ethics quarterly, 12(2), 235–256. https://doi.org/10.2307/3857812 jones, t. m. (1995). instrumental stakeholder theory: a synthesis of ethics and economics. academy of management review, 20(2), 404–437. https://doi.org/10.5465/amr.1995.9507312924 marwa, m., salhi, b., & jaboui, a. (2020). environmental audit and environmental disclosure quality. scientific annals of economics and business, 67(1), 1–23. oyewole johnson stephen fca and eke robert ike phd, fca. (2025) 14 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe| editorial@sadijournals.org nkwoji, n. (2021). environmental accounting and profitability of selected quoted oil and gas companies in nigeria (2012–2017). journal of accounting and financial management, 7(3), 22–39. nwaiwu, n. j., & oluka, n. o. (2018). environmental cost disclosure and financial performance of oil and gas in nigeria. international journal of advanced academic research, 4(2), 1–23. ogoun, i. s., & ekpulu, g. a. (2020). environmental reporting and operational performance: a study of listed manufacturing firms in nigeria. international journal of intellectual discourse, 3(1), 381–396. omaliko, e. l., nweze, a. u., & nwadialor, e. o. (2020). effect of social and environmental disclosures on the performance of non-financial firms in nigeria. journal of accounting and financial management, 6(1), 67–84. polycarp, s. u. (2019). environmental accounting and financial performance of oil and gas companies in nigeria. research journal of finance and accounting, 10(10), 192–200. sternberg, e. (1997). the defects of stakeholder theory. corporate governance: an international review, 5(1), 3–10. https://doi.org/10.1111/1467-8683.00034 uniamikogbo, e., & ifeanyichukwu, a. (2021). environmental accounting disclosure and financial performance of manufacturing firms in nigeria. journal of economics and international business management, 9(2), 71–81. https://doi.org/10.1111/1467-8683.00034 american interdisciplinary journal of business and economics issn: 2837-1909| impact factor : 8.87 volume. 12, number 1; january-march, 2025; published by: scientific and academic development institute (sadi) 8933 willis ave los angeles, california https://sadijournals.org/index.php/aijbe| editorial@sadijournals.org 48 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe effect of the naira redesign policy on the economic growth of nigeria 1ozioko josephine ndidiamaka ph.d., 2ozioko chigozie blessing ph.d. and 3ugwu osmund chinweoda ph.d. 1department of economics, faculty of management science, enugu state university of science and technology esut nigeria 2department of accountancy, faculty of business administration, university of nigeria enugu campus 3department of accounting/finance, faculty of management and social science, godfrey okoye university enugu, nigeria doi: https://doi.org/10.5281/zenodo.15046124 abstract: the study examined the effect of the naira redesign policy on nigeria's economic growth. the specific objectives of the study are to; examine the effect of the inflation rate on the gross domestic product (gdp) growth rate, and evaluate the effect of the financial inclusion rate on the gross domestic product (gdp) growth rate in nigeria. a mixed-methods research design was employed, combining quantitative and qualitative approaches to provide a comprehensive understanding of the policy's impact. the study focused on analyzing existing data to derive insights. the data was collected from central bank of nigeria (cbn) publications, and national bureau of statistics (nbs) reports. reports from banks and international financial organizations (e.g., world bank, imf). the data collected was analyzed using multiple regression analysis. the result revealed that the inflation rate has a significant effect on the gross domestic product (gdp) growth rate with (β2 = −0.292; p < 0.05), while the financial inclusion rate has no significant effect on the gross domestic product (gdp) growth rate with (β1 = −0.452; p > 0.05). in nigeria. the study concluded that the naira redesign policy has contributed to the dynamics of nigeria's economy, but its effects are nuanced. the study recommended that the government and the central bank of nigeria (cbn) should implement robust monetary policies aimed at curbing inflation. keywords: economic, growth, naira, policy, redesign 1.1 introduction the redesign of a country’s currency is a significant monetary policy decision that can have far-reaching effects on its economic growth. governments and central banks undertake currency redesign for various reasons, including combating counterfeiting, controlling inflation, promoting financial stability, and transitioning to a more digital-based economy. while such a policy can enhance economic transparency, improve monetary control, and strengthen financial inclusion, it can also lead to short-term disruptions, including cash shortages, reduced business activities, and fluctuations in consumer spending. the impact of currency redesign on economic growth https://doi.org/10.5281/zenodo.15044340 balogun david ibukun and prof. okechukwu e. u. (2025) 49 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe depends on factors such as the effectiveness of implementation, public confidence, and the overall structure of the economy. the naira redesign policy was introduced by the central bank of nigeria (cbn) in late 2022 as a strategic move to enhance monetary control, curb inflation, reduce counterfeiting, and promote a cashless economy. the policy involved redesigning and replacing high-denomination currency notes, including the ₦200, ₦500, and ₦1,000 bills, to reduce excess cash circulation and encourage digital transactions. while the government justified the policy as a tool to strengthen economic stability and improve financial transparency, its implementation led to widespread cash shortages, economic disruptions, and hardships for businesses and individuals. the policy sparked national debates on its effectiveness, with concerns about its timing, execution, and immediate impact on nigeria’s largely cash-dependent economy. 1.2 statement of the problem the naira redesign policy, introduced by the central bank of nigeria (cbn) in late 2022, aimed to curb inflation, tackle counterfeiting, reduce corruption, and promote a cashless economy. however, its implementation led to significant economic disruptions, particularly in a country where a large portion of transactions rely on cash. the sudden withdrawal and redesign of high-denomination currency notes resulted in severe cash shortages, reduced business activities, and increased financial uncertainty, particularly for small and informal sector businesses. while the policy was intended to enhance economic stability and drive digital financial inclusion, its short-term effects raised concerns about its impact on nigeria’s overall economic growth. this study seeks to examine the effects of the naira redesign policy on key economic indicators such as gdp performance, inflation, financial sector stability, and business activities, highlighting both the challenges and potential benefits of the policy. 1.3 objective of the study the study's main objective is to examine the effect of the naira redesign policy on nigeria's economic growth. the specific objectives of the study are to; i. examine the effect of the inflation rate on the gross domestic product (gdp) growth rate in nigeria. ii. evaluate the effect of the financial inclusion rate on the gross domestic product (gdp) growth rate in nigeria. 1.4 hypotheses of the study i. inflation rate has no significant effect on the gross domestic product (gdp) growth rate in nigeria. ii. financial inclusion rate has no significant effect on the gross domestic product (gdp) growth rate in nigeria. review of related literature conceptual review naira redesign policy the nigerian central bank, in the year 2023, introduced a currency redesign program, along with the revival of a cashless policy first implemented in lagos in 2012 (eechi & rufus, 2016). the currency redesign aims to mitigate the consequences of high inflation due to the excessive money in circulation, which has driven up nationwide prices of essential commodities (olujobi, 2022). the naira redesign policy, introduced by the central bank of nigeria (cbn) under the leadership of mr godwin emefiele, on october 26, 2022, marked a significant monetary and fiscal policy intervention in nigeria's economic landscape. this policy aimed to redesign the highest denominations of the naira, specifically the n200, n500, and n1000 notes, with a deadline of january balogun david ibukun and prof. okechukwu e. u. (2025) 50 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe 31, 2023, to replace old ones with new ones. the rationale provided by the cbn for this redesign encompassed multifaceted objectives, including curbing corruption and currency fraud, addressing the menace of kidnapping for ransom, reducing inflation, and managing the issue of excessive currency circulation. the currency redesign program is expected to control the money supply, reduce inflation, curb hoarding, and mitigate corruption and embezzlement of funds (iwedi et al., 2023), as studies have shown that currency redesign is an effective approach to managing the money in circulation. despite the potential benefits of currency redesign as a macroeconomic monetary policy tool to tackle inflation, the implementation of this policy in nigeria has faced significant challenges. policy-making and implementation in the country have historically been inconsistent, leading to public skepticism and the perception that such policies are intended to make people's lives more vulnerable. the currency redesign program has resulted in a severe shortage of cash, disrupting market transactions and causing broader economic and social problems. however, the policy changes have far-reaching implications for the everyday lives of nigerian households, particularly in the sokoto metropolis, which is the focus of this study. sokoto, as one of the states in the northern part of nigeria, is likely to be significantly affected by the currency redesign and cashless policy initiatives, given the state’s unique socioeconomic and cultural dynamics (adekunle & oladejo, 2021). the adverse effects on local populations prompted the state governments of kaduna, kogi, and zamfara to file a lawsuit against the central bank, challenging the "haphazard implementation" of the program. in response, the supreme court ruled that the old currency notes should be brought back into circulation and remain legal tender until december 31st, 2023 (olabimtan, 2023). economic policy transformations, such as nigeria's currency redesign program and the revival of the cashless policy, often bring about significant challenges during the initial implementation stages (akhalumeh & ohiokha, 2011). the policies have caused widespread economic hardships, including shortages of currency notes and essential commodities, and difficulties in adapting to e-banking systems, leading to poverty, starvation, and the inability to meet basic needs across many parts of the country. while currency redesign is a macroeconomic tool to tackle inflation, the haphazard implementation has disrupted business transactions and daily life (olabimtan, 2023). similarly, the adoption of the cashless policy faces various obstacles, such as poor electronic and networking services, inadequate electricity, and a lack of financial literacy among many nigerians (akhalumeh & ohiokha, 2011). the literature further highlights the multifaceted impacts of the naira redesign policy in nigeria. olujobi (2022) found that the policy was aimed at reducing excess money supply, improving monetary policy effectiveness, and curbing inflationary pressures, while also enhancing the exchange rate policy. similarly, akinleye (2023) observed that the currency redesign can have significant implications for inflation, exchange rate, and monetary policy in the country. additionally, pillah's (2023) review of the literature suggests that the policy was implemented for economic reasons, such as reducing inflation, combating counterfeiting, addressing financial insecurity, and controlling the money in circulation. the studies collectively underscore the diverse rationale and potential effects of the naira redesign, underscoring the need for a comprehensive evaluation of its implementation and impact on nigeria's economic development. inflation rate inflation is defined as a monetary phenomenon that is a consequence of excessive monetary expansion, i.e. an increase in the general price level. inflation can also be referred to as a critical economic phenomenon that reflects balogun david ibukun and prof. okechukwu e. u. (2025) 51 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe the rate at which the general level of prices for goods and services rises, consequently eroding purchasing power, (anderson and chijioke, 2024). inflation is a pervasive economic phenomenon that affects individuals, businesses, and governments alike. the inflation rate is calculated as the percentage change in these indices over a specific period, usually annually. understanding inflation is essential for grasping broader economic dynamics, as it reveals insights into consumer behavior, production costs, and overall economic stability. inflation can be classified into several categories, each arising from different economic conditions. demand-pull inflation occurs when aggregate demand exceeds aggregate supply, often during periods of economic growth when consumers have increased purchasing power. conversely, cost-push inflation results from rising production costs, such as increases in wages or raw materials, (xiong, 2023). when producers face higher costs, they often pass these increases on to consumers in the form of higher prices (mankiw, 2014). a historical example of cost-push inflation can be seen during the oil crises of the 1970s, where rising oil prices led to significant increases in transportation and production costs, contributing to widespread inflation. the effects of inflation are multifaceted, influencing various stakeholders differently. for consumers, inflation erodes purchasing power, making it more expensive to acquire goods and services. this can lead to changes in consumer behavior, such as reduced spending or a shift towards lower-priced alternatives. inflation can disproportionately affect low-income households, which tend to spend a larger share of their income on essential goods and services that may experience price increases. conversely, individuals with fixed incomes, such as retirees, face challenges in maintaining their standard of living during inflationary periods. for businesses, inflation affects pricing strategies, cost structures, and investment decisions. companies may pass higher costs onto consumers, potentially leading to decreased demand if prices rise too rapidly. furthermore, uncertainty about future inflation can deter long-term investment, as businesses may hesitate to commit capital in an unpredictable environment, (malenković, 2022. in response to the challenges posed by inflation, many central banks have adopted inflation targeting as a monetary policy framework. this approach involves setting explicit inflation rate targets and using interest rate adjustments and other tools to achieve these goals. research indicates that inflation targeting can effectively reduce inflation rates and stabilize economies. financial inclusion (fi) rate the term financial inclusion (fi) came into the limelight in the early 2000s, emanating from research findings that emphasized poverty as a direct consequence of financial exclusion. the drive for fi is aimed at ensuring that all adult members of society have easy access to a broad range of financial products designed according to their needs and provided at affordable costs. these products include payments, savings, credit, insurance, and pensions. nigeria presently operates a dual financial system, with the formal and informal financial sectors operating side by side but with little or no interaction (babajide, adegboye, and omankhanlen, 2015). financial inclusion is said to be a process that assures the ease of access, availability, and usage of the formal financial system by all members of an economy. financial inclusion is also termed as the process of ensuring access to appropriate financial products and services needed by all sections of society in general and vulnerable groups, such as weaker sections and low-income groups, in particular, should have access to financial services at an affordable cost in a fair and transparent manner, provided by regulated mainstream institutional players (chakrabarty, 2010). a committee on financial inclusion in india, under the chairmanship of dr. rangarajan, defined financial inclusion as the process of ensuring access balogun david ibukun and prof. okechukwu e. u. (2025) 52 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe to financial services and timely and adequate credit where needed by vulnerable groups, such as weaker sections and low-income groups, at an affordable cost (agarwal, 2010). hannig and jansen (2011) defined financial inclusion as the absence of price or non-price barriers in the use of financial services. they further stated that it aims to improve access to financial services, which entails enhancing the degree to which financial services are available to all at a fair price. these three definitions emphasize the issue of affordability in terms of cost. the target group is defined by the first two definitions, while the first definition mentions the institutional players involved.the financial inclusion rate is a critical metric that measures the extent to which people can access banking services, credit, insurance, and other financial products. as economies become increasingly interconnected and digitalized, financial inclusion has gained prominence as a crucial driver of economic growth, poverty alleviation, and social equity. the financial inclusion rate is typically measured using various indicators that capture access, usage, and quality of financial services. one commonly used framework is the global findex database, developed by the world bank, which provides comprehensive data on individuals' access to and use of financial accounts, credit, and savings across different countries (demirgüç-kunt et al., 2018). a well-functioning financial system drives economic growth and creates a platform for financial intermediation by providing savings, credit, payment, and risk management products to people with a wide range of needs. financially inclusive systems allow easy, broad-based access to financial services by making customized financial products available at an affordable price without stringent documentation, particularly to the poor or other disadvantaged groups within the economy. without financially inclusive systems, the poor would rely on their limited savings or future investments, and small enterprises would not be able to pursue promising growth opportunities because they would have to rely on their limited earnings, this is the reason for the persistent income inequality and drag in the economic growth of most developing countries, (babajide, adegboye, and omankhanlen, 2015). gross domestic product (gdp) growth rate in nigeria. gross domestic product (gdp) is a critical indicator of economic performance, representing the total value of all goods and services produced within a country during a specific period. the gdp growth rate, which measures the percentage change in gdp from one period to another, is a vital metric for assessing the health and trajectory of an economy. in nigeria, a country characterized by its vast resources and diverse economy, the gdp growth rate has undergone significant fluctuations due to various internal and external factors. gdp serves as a comprehensive measure of a nation’s economic activity. it is calculated using three approaches: the production approach, which sums the value added at each stage of production; the income approach, which aggregates incomes earned by factors of production; and the expenditure approach, which totals consumption, investment, government spending, and net exports (mankiw, 2014). a growing gdp is often associated with improved living standards, increased employment opportunities, and enhanced public services. in nigeria, gdp growth is particularly relevant given the country’s aspirations to become one of the top 20 economies in the world by 2020, as outlined in its vision 20:2020 strategy (federal republic of nigeria, 2010). the growth rate provides insights into the effectiveness of economic policies and the resilience of various sectors, including agriculture, industry, and services. the early 2000s marked a period of robust economic growth, with nigeria achieving an annual gdp growth rate often exceeding 6%. however, this growth was not evenly distributed, with disparities evident between urban and rural areas and among different balogun david ibukun and prof. okechukwu e. u. (2025) 53 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe socioeconomic groups (world bank, 2014). the global financial crisis of 2008-2009 and subsequent declines in oil prices posted significant challenges, leading to a recession in 2016, which highlighted the vulnerabilities of an oil-dependent economy (obi & uche, 2020). the nigerian economy is heavily reliant on oil, which accounts for a substantial portion of government revenue and foreign exchange earnings. fluctuations in global oil prices have a direct impact on gdp growth rates. for instance, the sharp decline in oil prices in 2014 significantly affected government revenues and led to economic contraction (ajakaiye & fakiyesin, 2018). diversification of the economy is crucial to mitigate the risks associated with oil dependency and stabilize gdp growth. agriculture remains a vital sector in nigeria, employing a significant portion of the population and contributing to gdp. the government has implemented various programs aimed at boosting agricultural productivity, such as the agricultural transformation agenda. however, challenges such as inadequate infrastructure, access to credit, and climate change continue to impede growth in this sector (ogunfowora, 2021). the gdp growth rate has significant implications for various aspects of nigerian society. high growth rates are often associated with improved living standards, increased employment opportunities, and enhanced public services. conversely, low or negative growth can lead to rising unemployment, increased poverty levels, and social unrest. nigeria's economic growth according to john (2022), economic growth is the process by which a country's wealth develops over time. the term, he said, is frequently employed in talks of short-term economic success, but in the context of economic theory, it typically refers to a gain in wealth over a long period. a society's ability to produce more economic goods and services of higher quality and quantity is referred to as economic growth, according to roser (2021). economic growth, according to edeme (2018), is the ability to generate more products and services over time (gross domestic product). according to amadeo (2021), among other researchers, economic growth is the rise in the value of an economy's goods and services, which increases profits for firms and suggests an increase in percapita and national income. an increase in a nation's gross domestic product (gdp), which measures the total monetary worth of the products and services generated by the nation over a given period, is typically a sign of economic growth. therefore, the process through which a nation's actual national and per capita income increases over an extended period can be described as economic growth. in measuring economic growth, amadeo (2021) notes that the increase in per-capita income is the better measure because it is what reflects an increase in the improvement of living standards of the masses, which should also reflect in terms of the increase of output of goods and services. economic growth is the increase in the value of an economy's goods and services, which creates more profit for businesses. as a result, stock prices rise. that gives companies capital to invest and hire more employees. as more jobs are created, incomes rise. consumers have more money to buy additional products and services, and purchases drive higher growth. for this reason, all countries want positive economic growth. this makes economic growth the most-watched economic indicator. gross domestic product is the best way to measure economic growth because it takes into account the country's entire economic output. gdp includes all goods and services that businesses in the country produce for sale. it doesn't matter whether they are sold domestically or overseas (amadeo, 2021). the oil sector remains a critical driver of nigeria's economic growth, contributing significantly to gdp and foreign exchange earnings. the volatility of oil prices, however, has exposed the balogun david ibukun and prof. okechukwu e. u. (2025) 54 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe economy to external shocks. for instance, the drastic fall in oil prices in 2014 led to a recession in 2016, highlighting the risks associated with over-reliance on oil (obi & uche, 2020). 2.2 theoretical review 2.2.1 quantity theory of money (qtm) long periods of excessive inflation are typically brought about by lax monetary policy. when the money supply exceeds the size of an economy, a currency loses unit value, which results in a decline in purchasing power and a price increase. one of the earliest theories in economics, the quantity theory of money, describes the connection between the size of the economy and the money supply (imf, 2017). the importance of the qtm has always been linked to the monetary policy. david hume proposed the first dynamic explanation for how monetary changes propagate from one sector to the next, altering relative prices and quantities in the process. he also contributed to the "quantity theory of money's" refinement, expansion, and elaboration. such disequilibrium effects were deemed transitory and insignificant by david ricardo from 1772 to 1823 in his long-run equilibrium analysis (totonchi, 2011). one of the very first theoretical foundations of economics is the "quantity theory of money (qtm)". monetary economists assert that the general level of prices for goods and services is inversely correlated with the amount of money in circulation; in other words, if money in circulation doubles, prices will also double. from this perspective, it's straightforward to conclude that "variations in the quantity of money in circulation are primarily influenced by changes in the level of general prices of goods and services. 2.2.2 public good theory of financial inclusion the public good theory of financial inclusion argues that the provision of formal financial services should be treated as a public good. the theory argues that formal financial services are a public good, and should be provided to everyone for the benefit of all. there should be unrestricted access to finance for everyone. as a public good, access to formal financial services to one individual does not reduce its availability to others. this means that all members of the population can be brought into the formal financial sector and everyone will be better off. under this theory, all members of the population are beneficiaries of financial inclusion and nobody is left out, (ozili, 2020). under the public good theory of financial inclusion, an individual or small business that opens a formal bank account can be offered free debit cards. they can use the automated teller machines (atms) to perform transactions without being charged a transaction fee. suppliers of formal financial services, such as financial institutions, will bear the cost of offering formal financial services as a sunk cost of doing business. the government can grant subsidies to financial institutions to help them cope with any resulting cost problems that arise from offering free formal financial services to citizens. the public good theory of financial inclusion has three merits. firstly, the public good theory suggests that everyone will benefit from financial inclusion regardless of status, income level, or demographic differences. secondly, as a public good, the government will subsidize the cost of providing formal financial services to citizens. thirdly, as a public good, it allows the government to take responsibility for promoting financial inclusion. the public good theory of financial inclusion has three demerits. when the provision of formal financial services is treated as a public good, the level of financial inclusion may not be sustainable in the long term even when supported with public funding if the cost of formal financial services is underpriced, (ozili, 2020). 2.3 empirical review gourène and mendy (2019) conducted a study to analyze financial inclusion and economic growth in waemu. the study examines the causal relationship between financial inclusion and economic growth in the west african balogun david ibukun and prof. okechukwu e. u. (2025) 55 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe economic and monetary union (waemu) from 2006 to 2015. the study employed the heterogeneity panel causality test with the maximal overlap discrete wavelet transform (modwt) to analyze the bi-directional causality at different time scales. the results revealed that at scale 1 (2 4 years), there is no causality between economic growth and financial inclusion indicators. however, at scale 2 (4 8 years), we found a bi-directional causality between economic growth and financial inclusion. kryeziu and durguti (2019) conducted a study to investigate the inflation rate and its impact on the growth rate or gdp growth for eurozone countries. the study aims to analyze whether the inflation rate, as an independent variable, has any significant impact on economic growth using panel data for the period 1997-2017. the study utilized a multiple linear regression model with the least squares regression. the results revealed that the inflation rate has a positive impact on the economic growth rate for the euro area. adi, ameh, and ushie (2022) conducted a study to examine the effect of financial inclusion on nigeria's economic growth. the study aims to identify the long-run relationship existing among real gross domestic product, human capital development index (hdi), investment (inv), inflation rate (inf), nominal exchange rate (exr), and financial inclusion index (fin), and that 26 percent of short-run deviation of economic growth rate from its longrun path within a year of disequilibrium in the short run is corrected each year. the study utilized annual time series data from 1980 to 2019 by employing an autoregressive distributive lag method (ardl). the results revealed that financial inclusion, human capital, and investment have a significant positive impact on economic growth in the short and long run. malenković (2022) conducted a study on the effect of the inflation rate on the gross domestic product of the western balkans countries. this study aims to analyze the effect of the inflation rate on the gross domestic product in western balkans countries for the period 2006-2021, which includes the initial period of the emerging health crisis. official data from the world bank was used, and analyzed with multiple regression analysis using the ordinary least squares estimation method.: the results revealed that the impact of inflation measured according to the consumer price index on gross domestic product is not significant. 3. methodology a mixed-methods research design was employed, combining quantitative and qualitative approaches to provide a comprehensive understanding of the policy's impact. the study focused on analyzing existing data to derive insights and conclusions relevant to the research questions. the data was collected from central bank of nigeria (cbn) publications, and national bureau of statistics (nbs) reports. reports from banks and international financial organizations (e.g., world bank, imf). the data collected was analyzed using multiple regression analysis. model specification the variables were estimated using the multiple regression model. this entails estimating the model to investigate the globalization economy environment and economic growth in developing countries: nigeria’s perspective. the goal of linear estimating approaches is to obtain unique parameter estimates that allow us to interpret the regression coefficient and, as a result, provide a better fit. the estimation was conducted using the statistical computer software package (smartpls 4.0). the data used for this study was collected from the central bank nigeria bulletin (cbn) from 2008-2023. given the above the mathematical model is presented in equation (1) below gdp = f(infr; fi) … … … … … … . . (1) balogun david ibukun and prof. okechukwu e. u. (2025) 56 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe were gdp = gross domestic product infr = inflation rate fi = financial inclusion rate equation 1 can be re-written in econometric form as gdp = β0 + β1(infr) + β2(fi) + ε … … … … … … . . (2) β1; β2 > 0 data visualization we presented the below line plot in other to study the trend of the data. -10 0 10 20 30 40 50 60 70 80 2008 2010 2012 2014 2016 2018 2020 2022 gdp growth rate financial inclusion inflation rate fig 1: line plot of the study variables descriptive statistics the descriptive statistics on table 1 below showed that the average value of the gross domestic product (gdp), financial inclusion rate (fi) is 5.003, -0.103 and 5.769 respectively. the standard deviation shows that financial inclusion rate (fi) and gross domestic product (gdp) are the most volatile while inflation rate is the least volatile (infr). the table also demonstrated that the skewness statistic for log (gdp) and log (fi) is adversely skewed while log (infr) is positively or favorably skewed. table 1: descriptive statistics mean median std.dev kurtosis skewness jarque-bera p-value gdp 3.4336 3.473 3.938 1.832 -0.099 0.468 0.7914 infr 15.196 13.550 6.409 3.747 1.2333 2.214 0.3306 fi 60.700 60.400 8.152 2.476 0.0287 0.092 0.9546 gdp=gross domestic product; infr= inflation rate; fi=financial inclusion rate. balogun david ibukun and prof. okechukwu e. u. (2025) 57 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe 4.3 correlation the result of the correlation analysis in table 2, suggest that there is a relationship between the predictors and outcome variables, such that gross domestic product has a negative relationship (-0.737, -0.694) with both inflation rate and financial inclusion rate respectively. table 2: correlation gdp growth rate financial inclusion rate inflation rate gdp growth rate 1.000 financial inclusion rate -0.5574 1.000 inflation rate -0.3724 0.5394 1.000 table 3: coefficient unstandardized coefficient standard coefficient se t value p value 2.5% 97.5% financial inclusion -0.227 -0.407 0.149 1.525 0.149 -0.547 0.092 inflation rate -0.099 -0.170 0.155 0.637 0.534 -0.431 0.234 intercept 18.874 0.000 8.344 2.262 0.040 0.978 36.77 model goodness of fit tables 4 (representing the anova table) and 5 (r-square) were used to assess the goodness of fit of the model. the result shows that at a 5% level of significance, the regression model is a good fit having the (f-statistic = 10.077; p<0.05). also, table 5, is the r-square table, the result indicates that 69.1% of variation caused in the gross domestic product (gdp) was influenced by the predictor variables (inflation rate and financial inclusion rate). balogun david ibukun and prof. okechukwu e. u. (2025) 58 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe table 4: anova ss df ms f-statistic p value total 145.280 15 0.000 error 108.17 13 8.322 regression 37.093 2 18.547 2.229 0.000 table 5: r-square gdp r-square 0.255 r-square adjusted 0.141 durbin-waston test 0.837 diagnostics checks diagnostic tests are conducted in table 8 below to determine the appropriateness and robustness of the estimate. this study conducted a collinearity test, plot of predicted vs residuals, and breuch pagan test. the results of breuch pagan tests showed that the residual is homoskedasticity, while the variance inflator factor (vif) shows that multicollinearity does not exist in the variable. table 6: collinearity statistics vif financial inclusion 1.307 inflation rate 1.307 table 7: breusch pagan test test-statistic df p value breusch pagan test 1.498 2 0.473 fig 1: qq plot balogun david ibukun and prof. okechukwu e. u. (2025) 59 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe fig 2: residual histogram fig 3: plot of predicted vs actual values discussion of results this study focuses on the globalization economy environment and economic growth in developing countries: nigeria’s perspective. the globalization economy proxy adopted for this research work was limited to inflation rate (infr) and financial inclusion rate (fi), while the proxy for economic growth was limited to gross domestic product (gdp). the analysis was conducted using multiple regression analysis and the results obtained suggest that at a 5% level of significance, the inflation rate has a significant effect on the gross domestic product in nigeria with (β2 = −0.292; 𝑝 < 0.05). however, at a 5% level of significance, the financial inclusion rate does not have a statistically significant effect on the gross domestic product in nigeria (β1 = −0.452; 𝑝 > 0.05). the 69.1% variation observed in the gross domestic product was influenced by the inflation rate and financial inclusion rate accordingly. conclusion the naira redesign policy has had a complex and multifaceted impact on nigeria's economic growth, particularly in the context of inflation and financial inclusion. this study reveals that the inflation rate plays a significant role balogun david ibukun and prof. okechukwu e. u. (2025) 60 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe in influencing the gross domestic product (gdp) growth rate in nigeria. as inflation rises, it erodes purchasing power and creates uncertainty in the economy, which can stifle investment and consumer spending—key drivers of economic growth. the findings suggest that controlling inflation should be a priority for policymakers to foster a stable economic environment conducive to growth. conversely, the analysis indicates that the financial inclusion rate does not have a significant effect on gdp growth in nigeria. while increasing financial inclusion is generally seen as beneficial for economic development, the findings suggest that other factors may play a more critical role in driving economic growth. this could imply that merely improving access to financial services is insufficient without addressing underlying economic conditions, such as inflation control, regulatory frameworks, and the overall stability of the financial system. in summary, while the naira redesign policy has contributed to the dynamics of nigeria's economy, its effects are nuanced. policymakers must prioritize strategies to manage inflation effectively while also recognizing that enhancing financial inclusion alone may not directly translate into significant economic growth. recommendation based on the findings regarding the effect of the naira redesign policy on nigeria's economic growth, the following recommendations are proposed: i. the government and the central bank of nigeria (cbn) should implement robust monetary policies aimed at curbing inflation. this may include adjusting interest rates strategically and managing the money supply to stabilize prices. a focus on inflation control is crucial for fostering a conducive environment for economic growth. ii. financial inclusion has not shown a significant direct impact on gdp growth, it remains an important component of economic development. the government should continue to promote initiatives that expand access to financial services, particularly for underserved populations. this includes leveraging technology to enhance digital banking and financial literacy programs. references acha, a. i., kanu, c., & agu, g. a. (2017). cashless policy in nigeria: the mechanics, benefits and problems. innovative journal of economics and financial studies, 28-38. adekunle, i. a., & oladejo, m. o. (2021). socioeconomic dynamics and financial inclusion in northern nigeria. journal of economics and sustainable development, 12(8), 3041. adi a. a, ameh o.e and ushie e. h (2022). financial inclusion and economic growth in nigeria: further evidence from ardl model. ndic quarterly vol 38, num 1. agarwal a (2010). financial inclusion: challenges & opportunities. 23rd skoch summit 2010. akhalumeh, p. b., & ohiokha, f. (2012). nigeria’s cashless economy: the imperatives. international journal of management and business studies, 2, 31-36. ajakaiye, o., & fakiyesin, a. (2018). economic growth and development in nigeria: the role of oil. international journal of economics and financial research, 4(1), 1-9. amadeo k. (2021). what is economic growth? the balance. balogun david ibukun and prof. okechukwu e. u. (2025) 61 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe anderson u, c and chijioke s. c (2024). “assessing the impact of inflation and exchange rate on nigerian gross domestic product (1981-2022)”. asian journal of probability and statistics 26 (5):30-41. babajide, a. a., adegboye, f. b. and omankhanlen, a. e. (2015). financial inclusion and economic growth in nigeria. international journal of economics and financial, 5(3), 629-637. chakrabarty k.c. (2010), financial inclusion and banks: issues and perspectives. reserve bank of india. congressional research service (crs). introduction to the u.s. economy: gdp and economic growth. demirgüç-kunt, a., klapper, l. f., singer, d., & van oudheusden, p. (2018). the global findex database 2017: measuring financial inclusion and the fintech revolution. world bank publications. edeme, r. k. (2018). defence-education expenditure nexus in economic growth of nigeria. in c. d. ramesh (ed.), handbook of research on military expenditure on economic and political resources (pp. 307329). hershey, pa: igi global. eechi, c. a., & rufus, a. (2016). cashless policy in nigeria and its socio-economic impacts. public policy and administration research, 6(10), 16-22. federal republic of nigeria. (2010). vision 20:2020: the economic transformation blueprint. gourène g.a.z. and mendy p (2019). financial inclusion and economic growth in waemu: a multiscale heterogeneity panel causality approach. theoretical economics letters, vol.9 no.3. hannig a and jansen s (2010). financial inclusion and financial stability: current policy issues. adbi working paper 259. tokyo: asian development bank institute. imf. (2017). imf annual report 2017. in imf. iwedi, m., wachuku, i. p., & court, r. e. (2023). naira redesign and economic growth in nigeria: prospects and challenges. journal of accounting and financial management, 9(1), 23-28. john, c. (2022). economic growth. encyclopedia britannica, 4 oct. 2018. kryeziu, n and durguti e. a (2019). the impact of inflation on economic growth. international journal of finance & banking studies vol 8 no. 1, 01–09. malenković n (2022). the effect of the inflation rate on the gross domestic product: an economic analysis for the western balkans countries. university of novi sad, faculty of economics in subotica, subotica, serbia. mankiw, n. g. (2014). principles of economics. cengage learning. balogun david ibukun and prof. okechukwu e. u. (2025) 62 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe obi, c., & uche, u. (2020). the impact of oil price shocks on the nigerian economy: a var approach. global journal of economics and business, 5(1), 45-62. ogunfowora, o. (2021). agricultural sector performance and gdp growth in nigeria: an analysis of the relationship. nigerian journal of agricultural economics, 11(2), 87-103. olabimtan, b. (2023), “old n200, n500, n1000 remain legal tender till dec 31, says. olujobi, o. (2022). macroeconomic implications of the new currency refurbishment and capital formation in nigeria. munich personal repec archive, 1-16. ozili p k (2020). theories of financial inclusion. munich personal repec archive. pillah p (2023). currency redesign and monetary policy of nigeria: an evaluation. international journal of public administration and management research (ijpamr), 8(4), 46-53. roser, m. (2021). what is economic growth, and why is it so important? our world in data. totonchi, j. (2011). macroeconomic theories of inflation. international conference on economics and finance research, 4(july), 459–462. xiong m (2023). relationship between gdp and inflation rate. bcp business & management. 40. 372-376. world bank. (2014). nigeria: systematic country diagnosis. impact of fence on informal trade and livelihood of the border residents in bangladesh: (an empirical study in selected areas of panchagarh) american interdisciplinary journal of business and economics issn: 2837-1909| impact factor : 4.6 volume. 9, number 1; january-march, 2022; published by: scientific and academic development institute (sadi) 8933 willis ave los angeles, california https://sadipub.com/journals/index.php/aijbe 47 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe mapping the impact of indian border fence on informal trade in bangladesh anamika u bangladesh university of professionals, bangladesh abstract: this study evaluates the impact of the fence constructed by india along its border with bangladesh in 1983 on the informal and formal trade as well as the local people's livelihood. the research focuses on the panchagarh district, one of the regions affected by the construction of the fence, utilizing a mixed-method approach that combines qualitative and quantitative techniques of analysis. the study highlights the historical trade relationship between india and bangladesh and investigates various forms of formal and informal trade between the two countries. the empirical data collection conducted on kajal-dighi village under kaliaganj, laiyapara, banderdanga, paharipara under borososhi, and banglabandha under tetulia upazilla of panchagarh district reveals the acuteness of the informal trading in non-fenced areas. the study finds that informal trade is still continuing and has significant effects on the local people's livelihood, causing unemployment for farmers and missing trust between the border guard bangladesh (bgb) and the indian border security force (bsf). the paper provides alternative solutions for mitigating the fence's impact on local people's livelihood while creating trade policies that will benefit both countries. the study's recommendations highlight the need for reasonable and rational tariff structures for imported goods, reducing the cost of agricultural product cultivation, creating awareness among border residents, regular monitoring of the fence, and organizations focusing on development projects for needy people in border areas. the research concludes that addressing informal trading and its impact must be a priority to build a harmonious relationship between countries. keywords: border, impact, fence, informal trade, formal trade, livelihood, bangladesh, india. introduction: the border between bangladesh and india is one of the most significant issues for the border arena people's daily lives, creating unwarranted division, and hampering relationships. however, despite the physical boundary, people still meet and do business within themselves, more connected with their communities than countries. the fence constructed by india along its border with bangladesh was erected to stop unlawful migration and illegal trading, interrupting informal and formal trade between the countries. this study evaluates the impact of the fence on informal and formal trade as well as the local people's livelihood, utilizing a mixed-method approach that combines qualitative and quantitative techniques of analysis. the research focuses on the panchagarh district, one of the regions affected by the construction of the fence, and aims to identify development initiatives for border residency people, and the impact and consequences of the fencing on the local people's lives. the study also highlights the social condition of the local people living in the border area and alternative solutions to mitigate the fence's impact on their livelihood. to this end, this research will investigate the informal and illegal trade along the border, the fences' political and security challenges, and how development initiatives can be implemented to create a harmonious relationship between anamika u (2022) 48 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe india and bangladesh while addressing informal trading and its impact on security, the economy, and the livelihood of local people. after the fencing there were significant issues that came to light. one of the main reasons for fencing is informal trade which is still going on and hampers the development of the border arena people. informal trade is one of the most significant cruxes in the border area. every year thousands of products are being informally traded through these two borders. human trafficking, drug trafficking, different animals, pirated dvds of films etc are the main things about informal trade. there is absence of education in the boundary zone. individuals don’t get appropriate education from the early age. this issue of education is hampering their advancement and drives them towards unlawful exercises. the central government doesn’t have direct control over the border residency people as the people of border area are more connected with the local authority and they often support the cross border relation. bgb (border guard bangladesh) and the local people have mistrust between them. when someone is being killed by bsf (the border security force of india) for crossing the border, there is no reaction from the bgb to protect the border residency people. corruption is another major problem. from the local people to government officials, local authorities, law enforcement agencies and bgb all are involved in informal trade in that area (sikder&sarkar, 2005). research objective: this research paper evaluates the impact of the fence on the formal and informal trading in panchagarh district and how it changes the life of the commoners. this paper particularly focuses on the border around panchagarh district as the case study area. it will pursue the development and changes of the border residency people after fencing and enclaves exchange program within this district. it will also identify the constraints that are on the way of development of those people’s livelihood. there are few major objectives of this paper those are: to identify the development initiatives for the people of border residency panchagarh. to analyze the impacts and the consequences of the fencing on the local people in today’s time. to highlight the formal and informal trade between india and bangladesh. to identify the impact of illegal and informal trade after the fence on local people. to highlight the social condition of the local people living in the border area. to recommend the alternative solution that can be implied for the development of the border residence. methodology: this paper adopted a mixed methodological approach and both the qualitative and quantitative techniques of analysis have been used. quantitative techniques used to know about the value and quantity of the legal and illegal traded items along with prices and respondents. on the other hand, qualitative information had to gather to explain the impact of the fence and other informal trade related issues. almost 500 responded from 20 different border arena villages were used as sample study. among them, they were government officials, informal and formal traders, border resident people, local governance and local government leaders. data collection: to execute the study different types of primary and secondary data were needed. primary data’s are collected through field survey and personal interviews. we collected the secondary data from online journal, article, related books as well as online survey. we divided the process into three different parts anamika u (2022) 49 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe data requirement plan: the required data for the research are recent development initiatives, security challenges, border fencing effects and present conditions of the border arena people. according to the requirement plan, this paper has covered, the people interviews of the border arena, the researchers who worked on this issues and we took interviews of government officials who execute laws and rules for the border. source of data: we will collect the data mainly from two different sources such as primary sources secondary sources primary sources: for primary sources, personal interview and documented information from local resident people and business owners, local traders and government official numbers has taken. secondary sources: as primary data is not enough to get the possible outcomes, we have collected secondary data. related journals and articles, online articles and e-books and government websites and the official journals. data collection mechanism: to see the development and changes after the fencing we will observe the physical changes of the local area and systematic changes. interview of the local people to understand their perception about fencing and how it affects their daily life. interview of the local agencies and custom officers to understand the security challenges and how they deal with the informal trade and business. historical aspect of trade relation between india-bangladesh on fifteenth august, 1947 the world saw a historical partition in the south asia. the british empire isolated two countries dependent on the religion as india and pakistan. india was a hindu dominant part nation and pakistan was muslim part. pakistan needed to have two sections which was west pakistan and east pakistan. in 1971, pakistan likewise got partitioned and another nation was conceived named bangladesh. india helped bangladesh to accomplish independence. it made them friendly neighbors after the independence. just after the independence, bangladesh was in a disastrous condition. at that time the trade relation between india and bangladesh got a way to move on. after that a series of discussions happened between both the countries and as a result the first indo-bangla trade agreement was signed on march 28, 1972 (indo bangla trade and economic relation: chapter 5). that was the first formal trade agreement between these two countries. the main target of the treaty was to promote trade and commercial relations between two countries and to strengthen the economic relation based on the mutual benefit, understanding and friendship. the main goods which were included to be traded were oil seeds, chilies, raw cottons, milk, milk products, kerosene oil, eggs etc. (sen,sunanda. 1972). but as the time passed the trade agreement became failure. the cos of living jumped a high number within few months. the expectation of having a mutual economic agreement was not successful. smuggling became a vital concern for the government of bangladesh and india. finally the security forces had to be sent to the border to stop the smuggling. that’s why the agreement was canceled. after the failure of the 1972 trade agreement a new agreement was signed between these two countries in 1973. it included 3 new articles and rephrased the 1972 agreement. but this agreement also didn’t last long when sheikh mujibur rahman was assassinated. after the assassination major ziaur rahman took power and the trade relation with india was on hold. then again in 1976 both countries signed a trade protocol which visualized higher volume of trade and long term arrangements of coal and newsprint in order to balance the trade (indo bangla trade and economic relation: chapter 5). during that time india was exporting to bangladesh until both countries agreed on india importing from bangladesh in 1978. in 1980 there was another agreement on trade between them. this agreement removed the clause of state to state base rather for the first time the provisions of the agreement were open for the stakeholders. it was provided for bilateral consultation at least once in a year instead of once in six months. it was signed for 3 years and came into effect from october 4, 1980. after few years bangladesh started to move on to the path of economic liberalization. the main reason behind this is the establishment of saarc. since 1982 and particularly after anamika u (2022) 50 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe bangladesh moved on the path of economic liberalization, bilateral trade has been improving steadily (balaji,madhumita. 2016). in 1992, both the countries extended the bilateral trade agreement for 3 years again. india agreed to import urea, newsprint, scrapped railway wagons and phosphoric acid from bangladesh (indo bangla trade and economic relation: chapter 5). when sheikh hasina came into power in 1996, the trade relation improved considerably. during her regime she visited delhi few times and signed a number of treaties. in january 1997, then prime minister of india inder kumar gujral visited bangladesh. many economic issues were resolved during this period of time. after that in khaleda zia’s regime (2001-2006), there was a massive increase in the export of bangladesh to india and import dropped down (balaji,madhumita. 2016). in 2006, khaled zia visited india and signed a number of economic agreements. there were two bilateral agreements aiming to boost economic activities. in 2008 when sheikh hasina came into power again she adopted india positive foreign policy, the trade was increased. in 2011-2012, india’s total export to bangladesh reached 5.84 billion us dollars. this does not obviously take into account the substantial volume of ‘illegal or informal’ exports that takes place continuously and is estimated at a substantive figure (balaji,madhumita. 2016). a high level of bangladesh’s import from india is in the idea of sources of info (cotton) implied for the generation of its primary fare thing (readymade garments); an area in which the country has championed itself. in 2011-2012, bangladesh’s exports to india reached only 584.64 million us dollars. in 2014-15, bd export figure further dropped down to usd 396 million. in the current scenario the total bilateral trade volume of usd 6.5 billion looks impressive but the sheen is lost when one looks at the country’s exports to india that account for a mere usd 500 million leaving a high trade deficit(ahmed, zahoor and g ,deepika. 2014). there are few issues between these two countries as per as trade is concerned. two countries start trading with each other when they perceived clear comparative advantages in exporting products required by each other. india has a ‘revealed comparative advantages’ in many goods that are required by bangladesh. this is one reason why indian exports to bangladesh have been growing over the years. on the other hand, bangladesh lacks a similar ‘revealed comparative advantages’. as a result, its products have not been able to find an easy market in india. trade is also facilitated when two countries have a complementary in their products. this complementary has to be both of products as well as quantity. india has the capability to meet the import requirements of bangladesh. but in most cases, the reverse is not true. thus, there exists a case of partial complementary or one way complementary between the two countries. in the case of sea-borne trade certain products have to go to specific ports for customs clearance. this has given rise to black-market smuggling which bypasses custom posts altogether or even “official smuggling” involving bribes to customs and other officials on both sides of the border (ahmed, zahoor and g ,deepika. 2014). trade between the two countries has also been constrained by the lack of transshipment/transit facilities between bangladesh and india. although some policy decisions have been taken in this regard, but progress on ground is still awaited. transshipment through bangladesh is expected to benefit india by cutting the distance between india’s northeast and the mainland, thus facilitating the transport of goods. these goods can also be expected through chittagong port. this will also bring in significant amount of revenue to bangladesh as port fee (ahmad, zahoor and g, deepika. 2014). india and bangladesh have shared the common objective of fostering closer economic integration in south asia. bilateral trade and investment relations are currently of special interest to both countries. after the india visit of sheikh hasina in january 2010, there has been a genuine effort to boost indo-bangladesh relations (chakma, b. 2015). india likewise demonstrated it’s longing to get greater speculation and educated bangladesh that about $3.5 billion worth private venture will be there. different kinds of trade between bangladesh and india: india and bangladesh both are having a long borderline which has encompassed bangladesh. these peripheral territories are being shielded by the fringe security from both bangladesh and india. in bangladesh anamika u (2022) 51 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe border bgb (border guard bangladesh) is protecting it and in india bsf (border security force) is doing it. the border areas are very important for the trading between these two countries. just after the independence, there was no fencing. the people of border arenas usually did informal trading this made a concerning fact for both bangladesh and india. in 1982 the borders were surrounded by fences. this impacted trading in the border arenas. so, the border arena has two types of trade. they are: formal trade: formal trade is a kind of trade which is legal. the government knows about all the formal trades happening in the border arenas. every year thousands of things are being traded legally between the borders. between bangladesh and india, there are various agreements for the formal trades which has been mentioned earlier in this chapter. there are various kinds of things which are being traded in formal way. for example: cotton, cow, cosmetics, saree, battery, fabrics, electronics, wooden furniture, raw jute, vehicles, tissue paper etc. these are few of the products which are traded between india and bangladesh through the border areas. along with formal trades, there have been also informal trades in border arenas. informal trade: informal trade is something that can’t be calculated. informal trade is also acknowledged as illegal trade. products that are being traded illegally are called informal trade products. in the border areas, informal trades are very much popular. individuals of those regions are generally relying upon the illegal exchanges. in the border areas of india and bangladesh, unofficial trade is exceedingly present. for example: in panchagarh border which is named banglabandha and there are different places of border where informal trade is flourishing. according to the survey in panchagarh, there are various products which are legal as well as labeled as illegal goods and are being traded illegally such as cow, drugs, phensidyl, mobile phone, memory card, cosmetics, tea leaves etc. (the exact number of the informal goods is being attached in the appendix) these are the two types of trade happen in the border arena of bangladesh and india. the impact of fence and informal trade on the local arena of panchagarh: the impact of fence in the border area of panchagarh has significant consequences on the local area. before fencing people indiscriminately went other side of the border and brought their necessary goods. the movement of informal traders slows down due to fence and it became a life threat profession. however, many people take the risk and try to do businesses. sometimes they successes and sometimes they caught by the bgb (border guards bangladesh) or bsf (border security force). after the fencing, the flow of informal goods and products has decreased drastically. there are different types of people who truly hold this informal business staying in and from outside of bangladesh. these people are extremely powerful and influential. the respondents mentioned few such people’s names who are involved into this business directly while staying outside of the country. informal traders use many special techniques during the time of bringing in and out the goods from india to bangladesh and vice versa. after receiving the goods they sell those products in their respective local markets and even where they get more money. for instance informal traders bought indian sarees, different types of alcohol approximately bdt 500 to 700 per piece and sell at bdt 3000 to 4000 though they do not pay any tariff or tax to the government respectively, in bangladesh a very competitive market picture we can observe but it increases five times more when goods and services comes through illegal way or informal channel. it has an adverse effect on the local market. price hike goes up and down price, instability and competitive market situation prevails all over the market. anamika u (2022) 52 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe according to economic law, in any market when the supply is less than the demand is high; it increases the price of the products and goods. at the same time when supply is low then the demand goes down. same thing happened in cow market. the supplies of the cows are less than their demand. during the festivals or eid the demand increases. because of the demand, cow traders brought cows at lower price such as one cow at tk. 5,000 to 6,000 and they can sell it up to 30,000 to 50,000 tk, according to the respondents. after the fence people cannot move easily for trading purpose or any other purpose without visa and it is consider as illegal movement and illegal migration to enter into india. fence not only reduce their movement but also reduce the informal trading as it becomes life threating if they caught while bringing in products without visa access. reason or justification behind the informal trade: according to the respondents and involved people, the most harmful commodity they bring in are drugs, cigarettes, phensidyl, alcohol which are strictly prohibited to trade both legally and illegally under the drugs policy of bangladesh but they are doing for some extra money to earn for their livelihood i.e. they justify their activities by saying that these drugs used for medical purpose such as phensidylas cough syrup and alcohol or other drugs as pain killer. they are less concern about the consequences and laws rather more concern about earning as much as money they can by adopting any possible means (shikder, 2012). from our field survey it was observed that most of the people are either farmer or daily labor that has no permanent work for their livelihood. they have no other alternatives but to do involve with smuggling or so called black. especially the border arena local people both male and female are involved with this activity. male members are more active into these types of informal trading where women work as helper to their husbands. as they pay for the goods they believe it’s a legal trade but they have a little idea about the legal and formal trade. they are not fully aware of the trading laws and the punishments of informal trade. some people think fence is just a symbol that shows countries boundary not their relations with the people living other side of the fence. the bond they share it continues after the fence with informal trade relation. it’s risky but easy and profitable for the both traders in bangladesh and india. case studies and analysis to understand the trading prompts and its impact on the livelihood we gather some major data for the research. to recognize the existing border relation and informal trading relations and their working system, we took panchagarh district as our study area. panchagarh district is surrounded from three sides by india and the estimated border length is 288km. only 135.591km border is fenced by the bsf whereas the rest of the area is yet to be enclosed (bdnews24.com. 2018). these unprotected non-fenced border areas are being indiscriminately used as the hubs for informal trading. empirical data on the cross-border informal business and trade has showed the acuteness of this practice and the methods traders are using for a long period of time. the empirical data collection had been conducted on kajal-dighi village under kaliaganj union, laiyapara, banderdanga village, paharipara under borososhi and banglabandha under tetulia upazilla of panchagarh district here the interviewees varied from local chairman, tax officers, immigration officers and employers of bgb headquarter to local people who are in full or partially involved into the informal trading. the questionnaire which was asked to the interviewees is given below. questions asked the bgb officers and guards: 1. how many people are guarding the border? 2. what are the new equipment and policies they are taking to develop the security of the border? 3. how bgb is using technologies to modernize them? 4. what are the problems of border management? 5. porous nature of 6. what are the difficulties in identifying nationals? 7. how does over-population affect the guarding process? anamika u (2022) 53 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe 8. how and why did they arrange flag meeting? 9. is fencing helping the local people and decreasing the border illegal migration and trade? 10. what are the reasons behind the illegal trade going on still now even after fencing the border? questions asked to the customs officers and tax officers: 1. what kind of problem customsdo face because of informal trade? 2. how many informal products are collected by the customs? 3. which products are mostly caught by customs? 4. what do they do with the collected products? 5. how do these informal trades affect the relation between india and bangladesh? 6. recommendation to reduce the informal 7. has the formal trade increased and informal trade decreased after fencing? during the interviews, informal traders opined that fencing has made it difficult for them to carry out products and goods and to pass them through borders. a 26 years aged man, who used to illegally trade alcohol and phensidyl, said that the fencing after 2013 made it inconvenient for to trade without any hassle. as the border guard got stricter after the fencing from both bgb and bsf, they started to use some strategies to get some little convenience. for examplethey preferred night to smuggle products and they used bamboo to throw the products like phensidyl, parts of mobile, memory cards and tea to carry all the way through india to bangladesh and vice versa. during the dry season, the strategy would be different i.e. moving through the path underneath the bridge towards the fencing area, distorting the fence a bit to pass through and restoring it after coming back. the cross border informal trading became more challenging after the fencing; nonetheless it is going n smoothly because smoothly. it’s because local people are involved, except the traders themselves, assist the traders by protecting them or by providing necessary information i.e. when any particular fenced area would be walked past by the guards and would be free for a short period of time from any kind of on looks. more than 100 people are involved in the informal trading in the village of paharipara. the number of women (10 to 20) is much less than that of men. interviewees pointed out several reasons working behind the informal trades; among them unemployment, low profit rate, part time income opportunities are mention worthy. according to the interviewee, who is 26 years old informal trader, a strong syndicate system is working behind the curtain of the whole process of illegal trading. the syndicate is basically a group of investors who are running the business by investing in a large amount of capital. syndicate members consist of bangladeshi and indians. information from informal traders: some of the traders are not directly involved in the trading procedure; rather they feel at ease to do it passively. those traders assign people who are willing to carry out merchandise and sell them in the local market if they get paid a handsome remuneration. if any of them is unfortunate enough to get caught by the border guards, he may sentenced to prison for several years. one of the female interviewee talked about a boy who got caught back in 2013 while he was doing informal trading and he was sentenced to 5 years prison due to this reason. his family tried to get him released even by offering three lakh taka ransoms but it went in vain. the boy got released 5 years later but died 12 months later of his acquittal. in paharipara, one of the interviewee named mohammad ali, a thirty years aged man involved in informal trading, said that there is no such way informal trade can be stopped as many people get benefitted extensively from it. he informed us that informal traders like him use indian sim card to communicate with other members of their network in the border area. when asked about the payment method, he gave away the information that banking system is used mostly for that; but if they use cash money, they would transact it in ‘taka’ currency. during the monsoon season, ilesha fish is very demandable product for the business. on other regular business season, mostly papers, cosmetics, sarees, goats, fish and cigarette are traded from panchagarh to phulbaria, india while motor bikes parts, cycles, cows and reminiscence cards are passed through the border from phulbaria anamika u (2022) 54 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe to panchagarh. a group particular of traders are totally engaged in informal cow trading. informal traders take advantage during the price hike situation or crisis situation after natural disaster. they bring sugar, onions, and salt and sell it in the nearby market for profit. quantity of informal goods smuggled from india to bangladesh: items unit quantity ( per month) cow number 1000-1500 phensedyle piece 12000-15000 cosmetics box 146 mobile carton 2-3 memory card box 5-6 parts of motor cycle piece 80 saree piece 3000-3200 tea leaves kg 30-40 drugs(heroin, yaba, cocaineetc) gram, piece 800-1000gram, 9000piece stones ton quantity of informal goods smuggled from bangladesh to bangladesh: items unit quantity ( per month) fish (seasonal) kg 2167 tea leaves kg 20-25 goat number 500-800 cigarette carton 50-60 in tetulia upazilla, a cow trader, who is a primary trader and has a group working for him, gave information about the trading method. he used to earn twenty to thirty thousand taka per month by cow trading. after fencing the border, bgb became stricter than before and cow trading informally became very risky and hazardous. bgb even captured traders with cows and busted out several organized auction. as this business became precarious, many former informal traders have started to work in farming, tea gardens, took job as drivers or some have taken jobs as rocklifters. before fencing there were scarcities of sugar, onion in this area. therefore people used to bring these products from india. phensidyl still gets illegal access to panchagarh from vojonpur and narayanjot. per phensidyl cost 100 taka but they sell it by 1000 taka in the local market. interviewees revealed the previously existing vat system on this business. when the cows would cross the border and get here in bangladesh, the merchants used to take them to the camp. the officers of camp would count it and give them a slip of vat. they would have to pay 500 taka for one cow in a tax office which would have permitted the traders to sell the cows. there was a time limit. within 4 days, illegally traded cows could be sold in a legal way. this system was stopped later by the bgb intervention because farmers’ harvest would get damaged by the cows. as the complaints were piling up, bgb got strict on illegal cow entry. after being asked about the alcohol trading, few informal trader interviewees said that they had never traded alcohol because it is harmful for the youths. they were only focused on the cows because they were conscious on not to cause any harm to the society. however, they had to face a lot of hassles to get the cows passed through the border and many of them get caught and faces serious consequences. information from bgb officials: in the interview session with bgb officers, they talked about the security aspect of the informal trading and how it affects the border security. the bgb was being accused of not carrying on their duties and responsibilities properly; so, they became stricter than before. in panchagarh there are 19 to 25units while in anamika u (2022) 55 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe india, it is 40 to 50 units. bgb believes that fencing is kind of disrespectful but it increased security for both the country. people in the border area feel more secured now than it was before. to reduce the informal trading more, bgb needs more advance technological equipment i.e. cctv cameras, more search lights, advance laser lights, sensor sound activated goods and etc. they need more security force too. there is a good understanding persisting between bsf and bgb. they arrange flag meetings if any commander gets changed or for further development of the relation (jamwal, n.s, 2004). after being asked about the migration and if they face difficult to identify the illegal immigrants as they look alike local people, they answered affirmatively. but the local people help bgb to identify. bgb suggested that if the communication network of the traders could be interrupted, 50% of the informal trading could have been stopped. they think that, most of the traders take life risk and get engaged in this business because of the unemployment problem. if those traders are given decent jobs, they would never have come to this risky occupation in the first place. information from local government: in the interview session with the chairman of banglabandha, kudrat-e-khuda, he informed that informal trading has reduced after opening the land port of banglebandha. still there are areas which are yet to be fenced and protected and those areas are being used as hubs to execute informal trading. rivers, such as mahananda river in tetulia, are the main corridors for them. because of fencing, people are changing their professions and stop taking risks. he himself tries to aware local people about the risk factors of cutting the fence and doing the informal business. he is also affirmative that cows, phensidyls are still being passed through the border informally for business. the chairman revealed about the behavioral pattern of the bsf guards. according to him, bsf guards who came from kashmir border region inflict upon more aggressiveness than they need to show. it is because kashmir border region is conflict-prone and those guards are habituated and trained to have that much aggressiveness and harshness. the chairman opined that fencing has made the local people feel secured. customs office situated in panchagarh sadar delivered the information about what happens to the merchandises captured by the bgb. mostly cows, cycle, tea leaves and alcohols are seized. they are put immediate auction in the locality. every month nearly 15 to 20 cases are filed against informal traders. almost every month bgb catches hold of 15 to 20 cows and 10 to 15 kg tea leave. according to the custom officers, there is too much tax and vat imposed on the products which is the reason working behind this informal trading business. there is 25% custom duty and atv as well as sd; these increase the price of the products in bangladesh. reformation in the duty policies can decrease the informal ways of trade. most of the interviewees in the case study pose positive attitude towards the fencing as they believe that fencing has increased the border security in a greater extent. people do cooperate with bgb and local police. but informal trading is still going on in different ways and methods though in panchagarh the percentage of informal trade is much less than other border areas in bangladesh.( informal and illegal trade) concluding observations and policy recommendations illegal trade occurs in border area because they don’t have to pay extra money such as tariff, nontariff barriers, duties, tax or any type of import restrictions. to avoid such import barriers informal trade increased all of a sudden and become popular method but after the fence in border area especially panchagarh people faced lot of challenges during informal trades. so informal trade decreases day by day though not fully stopped. still a lot of people are engaged with cross-border informal business and earn their livelihood to rely on that. according to respondents there are five types of people involved in informal trade including carriers, carriers-investors, investors, primary traders and syndicate traders. among them syndicate traders and investors plays an important role in informal trading. they also bribe the law enforcement bodies or agencies to import illegally through border routes. most of the time cows and buffaloes are illegally imported by using rivers in dry seasons and other products using secret routes. later those smuggled items store in village houses and some are taken by businessmen who actually anamika u (2022) 56 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe buy these commodities from village houses and supply to the local market and some store in their go downs. it is pointed out that high and unrealistic tariff values discourage the formal import and encourage the informal trades. as smuggling cannot prohibitory stop the law agencies and government should focus on trade liberalization and reduce formal trade barriers. moreover these people also help to bring harmony in the border area to reduce border conflict through a mutual economic relation among the people and sometimes between the countries law agencies. as illegal trade creates a free trade situation in border areas and the importance of such trade is no less significant than the official bilateral trade between india and bangladesh. it is said that bangladesh suffers a trade deficit both in formal and informal trade with india. to save economy of bangladesh trade surplus is necessary. recommendations: most of the people who involved with informal trade are either farmer, labor or jobless people as well as very poor. they are involved to earn money and try to get rid of from the extreme poverty. most of them have no lands, permanent jobs or even houses. there several steps can be taken to reduce informal trade. there are some recommendations given below: 1. reasonable and rational tariff structure for the imported goods should be 2. reduce the cost of agricultural products cultivation by supporting financially and technologically. 3. create awareness among border residents the impact of informal trade to our 4. regular monitoring in the fence by bgb to stop illegal movement to control informal using new technologies and more forces in units need to be ensured. 5. youth and employment project to reduce poverty especially in the border arena 6. for correcting trade policy, two nations government should set for more dialogue and negotiation to control informal trade 7. soft policy should imply rather coercion in case of illegal movement of the people 8. ngos should come forward with development projects for the needy peoples in border areas. 9. short terms loans for the farmers and labors to work and start other business along with their 10. government should focus on the development of such areas people’s daily life including education and health facility, infrastructure developments such as road, bridge construction and fulfill other human 6186 | doi: 10.47772/ijriss |volume vii issue i january 2023 references: bala, a, india-bangladesh border killing. south-asia journal, [online]. 1-5, 1-25. available at: http://southasiajournal.net/india-bangladesh-border-killing/ com. (2018). bdr foils bsf fencing at panchagarh border. [online] available at: https://bdnews24.com/bangladesh/all-bdr-stories/2009/08/10/bdr-foils-bsf-fencing-at-panchagarh border. chakma, b. (2015) ‘sheikh hasina government’s india policy: a three-level game?’, journal of asian security and international affairs, 2(1), chapter 5~indo bangladesh trade and economic pdf [online] available at: http://shodhganga.inflibnet.ac.in/bitstream/10603/127354/10/10_ ghosh, s. (2011). cross-border activities in everyday life: the bengal borderland. contemporary south asia,19(1), 49-60. doi:10.1080/09584935.2010.544718 retrieved from http://dx.doi.org/10.1080/09584935.2010.544718 http://southasiajournal.net/india-bangladesh-border-killing/ http://southasiajournal.net/india-bangladesh-border-killing/ http://southasiajournal.net/india-bangladesh-border-killing/ http://southasiajournal.net/india-bangladesh-border-killing/ http://southasiajournal.net/india-bangladesh-border-killing/ http://southasiajournal.net/india-bangladesh-border-killing/ http://southasiajournal.net/india-bangladesh-border-killing/ http://southasiajournal.net/india-bangladesh-border-killing/ http://shodhganga.inflibnet.ac.in/bitstream/10603/127354/10/10_ http://shodhganga.inflibnet.ac.in/bitstream/10603/127354/10/10_ http://dx.doi.org/10.1080/09584935.2010.544718 http://dx.doi.org/10.1080/09584935.2010.544718 anamika u (2022) 57 american interdisciplinary journal of business and economics | https://sadipub.com/journals/index.php/aijbe chapter 8: informal and illegal trade: dimensions, trends, composition, and the role of domestic indirect taxes, 57-65. doi:10.18411/a-2017-023 available at: http://ljournal.ru/wp content/uploads/2017/03/a-2017-023.pdf huda, n. 2013. bangladesh pororashtronititebharot, a. h. development publishing jamwal, n.s, 2004. dilemma of guarding the india-bangladesh border. border management, [online]. 1, 132. available at: https://drive.google.com/file/d/1w2csok30aqnnby6aybhjzvn4umvcepnw/view rather, z. a., & gupta, d. (2014). india-bangladesh bilateral trade: problems and prospects. [online] available at: https://www.vifindia.org/sites/default/files/india-bangladesh-relations-anenduringeconomic-partnership.pdf sikder, mohammad & sarkar, barun. (2005). livelihoods, informal trade at the bangladesh border. inter-asia cultural studies. sen, s. (1972). indo-bangladesh trade: problems and prospects. economic and political weekly, [online] 7(15), 763-768. available at: http://www.jstor.org/stable/4361 http://ljournal.ru/wphttp://ljournal.ru/wphttp://www.vifindia.org/sites/default/files/india-bangladesh-relations-anhttp://www.vifindia.org/sites/default/files/india-bangladesh-relations-anhttp://www.vifindia.org/sites/default/files/india-bangladesh-relations-anhttp://www.vifindia.org/sites/default/files/india-bangladesh-relations-anhttp://www.vifindia.org/sites/default/files/india-bangladesh-relations-anhttp://www.vifindia.org/sites/default/files/india-bangladesh-relations-anhttp://www.vifindia.org/sites/default/files/india-bangladesh-relations-anhttp://www.vifindia.org/sites/default/files/india-bangladesh-relations-anhttp://www.jstor.org/stable/4361 http://www.jstor.org/stable/4361 american interdisciplinary journal of business and economics issn: 2837-1909 | impact factor : 8.87 volume. 12, number 3; july september, 2025; published by: scientific and academic development institute (sadi) 8933 willis ave los angeles, california https://sadijournals.org/index.php/aijbe|editorial@sadijournals.org 15 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe analysis of internally generated revenue (igr) and economic growth of south states of nigeria atu gina, reuben omozuafo and elijah omorowa accounting, department of accounting, well spring university, benin city. email: atugina18@gmail.com; omozuaforeuben@gmail.com; elijahomorowa@gmail.com doi: https://doi.org/10.5281/zenodo.17047769 abstract: this study determined the effect of internal generated revenue on gross domestic product in southsouth states in nigeria. ex-post facto research design was adopted by the study. data were generated from the publications of state internal generated revenue (sigr) of the five south-south states and central bank of nigeria (cbn), for fourteen (14) years spanning from 2011 to 2024. regression analysis was employed to test the hypothesis. the study found that internal generated revenue has a significant positive effect on gross domestic product among in nigeria. the study recommended that though the igr has a positive significant effect on gross domestic product, and it can be used for policy making, a deliberate action needed by southsouth states governments to improve internal generated revenue of their states, as well develop a proper mechanism for the appropriate application of their resources. keywords: internal generated revenue, gross domestic product and south-south states, nigeria. introduction state governments in nigeria are in economically precarious positions in this period of monetary recession. owing largely to dwindling oil fees and economic imbalance, many states in nigeria are nonetheless defaulting in their economic responsibilities to their workers despite the bailout finances via the federal government to assist them to pay splendid salaries and allowances. most of the states should hardly ever meet their recurrent expenditure no longer to talk of capital fees. the federal government of president muhammadu buhari granted more statutory allocation of n1.seventy five trillion as bailout to state governments in 2017, following pleas from nigeria governors‟ forum (dmo, 2017 referred to in fasoye, 2020).this gesture became followed by means of some other launch of n760.17 billion as refund under the paris membership mortgage to state governments (fasoye, 2020). beyond internally generated revenue and federally allocated revenue, debt financing is another tool for handling a situation where government revenues fall short of expenditures. debt option is analogous to salt in cooking: too little or too much of it is bad. yusuf and mohd (2021) posit that economic growth becomes faster when judicious borrowings are used to fund public and infrastructure development. however, excessive debt funding is not without numerous adverse consequences on the economy which include but not limited to huge atu gina, reuben omozuafo and elijah omorowa (2025) 16 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe debt overhang and cash strain owing to interest payments (joy & panda, 2020). in the same vein, high debt profile inhibits the borrower’s capacity to invest in productive activities such as investment in infrastructure, education and public health (johnny & johnnywalker, 2018). personal income tax, licenses, charges and fines were the bedrock of internally generated revenue (igr) of sokoto kingdom. a huge percentage of the igr come from personal profits tax (paye) deductions from employee’s salary resident inside the kingdom. as a result, it has become vital for country and nearby governments to provide sufficient sales from home assets. this requirement emphasizes how eager nation, local, and even federal governments are to locate new revenue streams or to come to be extra competitive and innovative in their methods of obtaining price range from already-present resources. revenue generation and its sustainability are of paramount importance due to the fact that revenue represents the life wire of establishments both in evolved and developing nations. the significance of revenue era, allocation, and distribution toward keeping each the prevailing and new socio-political and monetary structure in any economy cannot be overemphasized (morufu & babatope, 2017). revenue generation guarantees financial viability which represents the potential to generate sufficient income to fulfill operating bills and debt commitments, and in which relevant, to where increase even as maintaining service levels. studies such like; kabiru, abdulkadir and yahaya (2024) ascertained the importance of internally generated revenue (igr) on service delivery in sokoto state. agnes, samuel and okpanachi (2023) determined the effect of internally generated revenue at the national and regional levels in nigeria, which are dealing with significant development obstacles. okon and uwah (2023) assessed the association between internally generated revenue and infrastructural development in akwa ibom state from 2007 to 2020. ibukun (2023) evaluated of the association between internally generated revenue and economic growth in lagos state from 2012 to 2020. nwafor, obineme, and okey (2021) determined the returns from land-based revenue and internally produced revenue after budgeting. sani and ahmad (2019) examined the effect of aggregate and disaggregate tax income on economic growth in nigeria from 1979 to 2018. nkechi and onuora (2018) ascertained the effect of internally generated revenue on the infrastructural development of the southeastern states in nigeria from 2013 to 2017. the prior studies have conducted research on internally generated revenue from different parts and regions in nigeria between two to three years ago. however, to the best of the researchers’ knowledge, there was a dearth study of this nature in south-south region of the country. this has created regional and periodic gaps which this present study sought to fill. this study assesses the effect of internal generated revenue on gross domestic product in south-south states in nigeria. literature review concept of revenue taxation is a way of raising revenue or income by the authorities be it the primary, state or neighborhood government to meet their macro-monetary goals inside the realms of monetary and financial policies. the authorities makes use of the profits it gets from taxes to perform its mandate, which incorporates, amongst other things, enforcing laws and guidelines, shielding people and belongings, imparting welfare blessings, and resolving conflicts (kabiru, abdulkadir & yahaya, 2024). tax is an obligatory levy imposed by means of government being a higher authority both directly or circuitously on earning of individuals and companies our bodies and any refusal is meted with appropriate punishment. atu gina, reuben omozuafo and elijah omorowa (2025) 17 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe different scholarly view revenue differently. for instance, sani (2019) recognizes tax revenue as a social engineering tool that can foster economic development and growth. it is essential to any country and a prerequisite for its development. every state government must also prevent economic collapse by providing macroeconomic variables. sani and musbahu (2019) reported that internally generated revenue is an outcome of economic activity. identifying unrecorded activities and using the collected funds to improve the business environment can increase taxpayers' willingness to pay taxes. because igr is a key factor in determining a state's allocation of revenue from the federation account, the current revenue sharing formulae disfavor states when internally generated revenue is low. revenue is money received by the government from taxes and non-tax sources to enable it to undertake public expenditure. many authors have defined revenue in their different perceptions. nightingale (2002) defines revenue as funds needed by the government in the public sector to finance government activities, adding that these funds are generated from non-oil sources such as income tax and other forms of taxes, royalties, fines, fees, rates, and aids from the federal government, foreign financial institutions and foreign countries. otunbala (2011) documented that government revenue includes the entire funds generated from oil and non-oil sources other than funds raised from the issue of debt instruments such as government bonds, stocks, treasury certificates and treasury bills from capital and money market non-oil sources of revenue include income tax, royalties, fees, utilities, miscellaneous revenues, among others. udu and nkeanor (2016) assumed that internally generated revenues are those generated within the state, including revenue from personal income tax, motor vehicle licensing, royalties, fees, fines rate, and funds from sales of government properties, among others. accordingly, the two sources of revenue accruing to state governments are from the externally generated and internally generated revenue. the externally generated revenue is allocated from the federation account and value-added tax. internally generated revenue adesoji and ogechi (2013) emphasized that internally generated revenue is those revenues that are derived within the state from various sources and are not evenly distributed by the states along the lines of infrastructural development. the inequality in distribution may be based on the need of the state for specific development or recurrent expenditures. in the report of the nigerian extractive industries transparency initiative (neiti, 2013), internally generated revenue (igr) is defined to include the following: personal income tax which applies to the residents of the state; withholding tax which applies to individuals only; capital gains tax for individuals only; stamp duties applicable to instruments executed by individuals only; road taxes, like vehicle licenses; taxes on pool bets, lottery and casino wins; business premises and registration fees; developments levy applicable to taxable individuals only; fees for right occupancy on urban land owned by the state government; market taxes and levies where state finance is involved; and miscellaneous revenue including but not limited to rent on government property, incomes from investment (ibukun, 2023). adesoji and ogechi (2013) emphasized that internally generated revenue is the ones income which are derived in the kingdom from diverse resources and are not calmly disbursed by the states alongside the strains of infrastructural development. the inequality in distribution can be primarily based at the need of the kingdom for precise improvement or recurrent expenditures. inside the record of the nigerian extractive industries transparency initiative (neiti, 2013), internally generated revenue (igr) is described to consist of the following: personal profits tax which applies to the residents of the nation; withholding tax which applies to atu gina, reuben omozuafo and elijah omorowa (2025) 18 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe individuals best; capital profits tax for individuals handiest; stamp obligations relevant to contraptions done by using people handiest; street taxes, like vehicle licenses; taxes on pool bets, lottery and on line casino wins; enterprise premises and registration fees; tendencies levy applicable to taxable individuals simplest; prices for right occupancy on urban land owned by way of the kingdom government; marketplace taxes and levies wherein kingdom finance is worried; and miscellaneous revenue inclusive of but no longer restrained to hire on authorities property, earning from funding (ibukun, 2023). fines, fees, rates and forfeits income from this aspect is from college fees generated from state-owned colleges, water costs, and fines from the court, amongst others. international monetary fund (imf, 2013) stated fines and penalties are obligatory modern-day transfers imposed on gadgets by means of courts of regulation or quasi-judicial our bodies for violations of legal guidelines or administrative rule. most fines, consequences, and forfeits are determined at a specific time. administrative costs but encompass expenses for compulsory licenses and other administrative fees which are income of offerings. fines and forfeitures and monetary consequences imposed for violations of the regulation, fines and costs which include parking tickets and rushing tickets (such as those from visitors cameras), be counted-imposed charges used to cover administrative fees and funds, unique initiatives and different crook justice-related prices and penalties. consistent with afeez, ndalu, and micah (2022), a tax penalty is a financial penalty imposed by using the inner sales service (irs) for acting a prohibited act or failing to execute a required act, together with failing to timely file a return or submitting incorrect or undervalued taxes. economic growth economic growth refers to the increase in production of goods and services within an economy over a period of time. it is traditionally measured as the percent rate of increase in gross domestic product (gdp). in terms of measurement, economic growth can be measured in nominal terms, or in real terms. it is measured in nominal terms if it includes inflation while it is in real terms if there is adjustment for inflation. measurement of economic growth in real terms (i.e. inflation adjusted terms) is preferable because the distorting effect of inflation on the price of good and services produced is eliminated (ibukun, 2023). growth can be intensive or tremendous. it is far in depth increase where the growth is resulting from extra green use of inputs (which includes labour, physical capital, power or substances). again, sizeable growth way that the growth is driven only by way of will increase in the quantity of inputs to be had for use (extended population, new territory). for comparing one country's economic growth to another, gdp or gnp according to capita is used to account for population differences between nations. monetary growth is not the same as economic improvement, although the two (2) terms are used interchangeably, maximum particularly by way of non-economists. economic growth commonly refers to the sustained, concerted moves of policy makers and communities that promote the same old of residing and monetary health of specific vicinity. empirical review kabiru, abdulkadir and yahaya (2024) ascertained the importance of internally generated revenue (igr) on service delivery in sokoto state. data were sourced from the state’s financial statements and reports. the study used regression analysis and correlation coefficients to evaluate the level of relationship between the variables. the found thatinternally generated revenue affects sokoto state's service delivery, the inefficiencies and offering potential solutions. angahar and olalere (2023) investigated internally generated revenue (igr) and atu gina, reuben omozuafo and elijah omorowa (2025) 19 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe the economic viability of states in nigeria using state government debt stock from 1986 to 2021 for six states each from nigeria's six geopolitical zones. a panel vector error correction model (pvecm) was used as the method of analysis. results showed that the igr of states in nigeria had a positive effect on state government expenditure. agnes, samuel and okpanachi (2023) determined the effect of internally generated revenue at the national and regional levels in nigeria, which are dealing with significant development obstacles. as a result of these efforts, the state's ranking rose from 11th in 2016 to 6th in 2021, surpassing kano, which according to the 2019 census is the most densely populated state in nigeria and the main economic hub of the northern region. the data used in this study was sourced from credible publications, published studies, and other media outlets. this led to a significant increase in internal generated revenue (igr), an unavoidable outcome that revolutionized revenue creation in nigeria's kaduna state. okon and uwah (2023) assessed the association between internally generated revenue and infrastructural development in akwa ibom state from 2007 to 2020. data were analyzed using simple regression analyses to test the hypotheses. the study found that internally generated revenue (igr) has a positive relationship with infrastructural development in the state, showing a positive and significant relationship with development in education, and an insignificant but positive relationship with health and sanitation. ibukun (2023) evaluated of the association between internally generated revenue and economic growth in lagos state from 2012 to 2020. data generated from national bureau of statistics and lagos state bureau of statistics was analyzed with the autoregressive distributed lag technique. the study show a long-run significant relationship for other taxes, direct assessment and road taxes with gross domestic product in lagos state, leaving out pay as you earn with insignificant impact. nwafor, obineme, and okey (2021) determined the returns from land-based revenue and internally produced revenue after budgeting. using a descriptive technique, the study discovered that abia state failed to realize what was anticipated nearly throughout the time, that the growth rate of both has remained negative, and that the contribution of land-based tax income to domestically produced revenue was less than 5% on average. fasoye (2020) studied the factors that determine the internally generated revenue (igr) of state governments in nigeria. the paye and road taxes were found to be the primary determinants of igr for the states, as they appeared to be less affected by the prevalence of corrupt practices in nigeria's public sector. this information was obtained using the fully modified ordinary least square (fmols) technique. the study came to the conclusion that state governments in nigeria have over the years fallen short of fully utilizing other internal revenue sources available to them. joseph and omodero (2020) examined the relationship between government revenue and economic growth in nigeria. the study employed exploratory and ex post facto research design. data from 1981 to 2018 were used. the study used the ordinary least square (ols) regression technique. the result revealed that federally received revenue and value-added tax (vat) have a moderate and positive impact on economic growth. onwuka and christian (2019) determined the effect of revenue generation on infrastructural development in nigeria. ordinary least square (ols) regression analysis technique was employed in the study from 1981 to 2018. the study revealed that revenue generated has a significant impact on infrastructural development in nigeria. sani and ahmad (2019), examined the effect of aggregate and disaggregate tax income on economic growth in nigeria from 1979 to 2018 using a sample technique. they employed the ardl model. the findings showed that ppt significantly affects the gross domestic product, with a coefficient of 0.4675 at the 5% significance level. furthermore, there is a substantial positive correlation between corporation income tax and economic growth (coefficient 0.1975, p-value of 5% significant). the study showed that tax revenue significantly atu gina, reuben omozuafo and elijah omorowa (2025) 20 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe influenced economic growth. the report suggests that the government should strive for economic diversification, as it must leverage petroleum profits to broaden its income streams. overall, the results showed that tax income significantly influenced overall economic growth. almustapha (2018) used a field survey research design to investigate the factors that contribute to tax evasion in the informal sector in the northwestern states of nigeria. the study found that a number of factors, including fiscal and tax issues, economic and administrative issues, and others, statistically influence tax evasion behavior. michael (2018) ascertained the effect of internally generated income (igr) on nigeria's economic growth. in nigeria, the issue of states' and local governments' insufficient income collection, which makes it difficult for them to meet their spending commitments, has gained significant attention. this study used an ex post facto research design to find out how total intergovernmental revenue (tigr), federal government independent revenue (fgir), state intergovernmental revenue (sigr), and local intergovernmental revenue (ligr) affect the real gross domestic product (rgdp), which is a measure of the growth of the economy as a whole. the central bank of nigeria's (cbn) statistical bulletin provided the temporal data used in this study, which covered the years 1981 to 2016. to evaluate hypotheses, the data analysis employed the statistical techniques of t-tests and multiple regressions. the results of the study show that tigr, sigr, and ligr have a strong and statistically significant positive effect on rgdp. nkechi and onuora (2018) ascertained the effect of internally generated revenue on the infrastructural development of the southeastern states in nigeria. the ex-post facto design was used in the study. secondary data were used, and they were extracted from budget estimates of each of the five south eastern states of imo, abia, ebonyi, enugu, and anambra state from 2013 to 2017. the study employed descriptive statistics, correlation, and linear multiple regression for data analysis and data interpretation. findings from the study revealed that there is a significant relationship between internally generated revenue and the cost of infrastructure in the south east states as of the date of the study, thus suggesting that government should increase igr in other to meet up the cost of infrastructure. amin (2018) ascertained the sources of revenue generation, the capacity of the asa local government area of kwara state in generating revenues for developmental programs, and the extent to which the generated revenues have been used for community development in the local government. the finding from the study showed that: asa local government generates revenues from internal and external sources. external sources are the statutory allocation from federal accounts and borrowed money from the state government. the local government generated huge amounts of revenue from market rates and levies and permit fees on land and establishment. tax enforcement is not efficient and a majority of the respondents agreed that local government officers are more efficient than consultants. mbah and onuora, (2018) ascertained the effect of internally generated revenue on infrastructural development of south-east states of nigeria. the study adopted an ex-post facto research design. the data used were secondary. the study employed descriptive statistics, correlation and multiple linear regressions for data analysis. the study revealed a significant relationship between internally generated revenue (igr) and the cost of infrastructural development in the southeast states of nigeria. oyetakin and yahaya, (2017) analyzed the effect between internally generated revenue and infrastructural development in the public universities in ondo state, nigeria. data were generated from questionnaires of 50 management staff were sampled. the study found a negative and significant relationship between internally generated revenue (igr) and the amount spent on infrastructural development in public universities in ondo state. ajiteru, adaranijo, and bakare (2018) studied the association between internally generated revenue and infrastructural development in ogun state. data atu gina, reuben omozuafo and elijah omorowa (2025) 21 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe obtained through a survey. the questionnaire was analyzed using descriptive statistics. the study found that tax revenue is a very strong tool for infrastructural development in the state. methodology ex-post facto research design was employed. an ex-post facto investigation seeks to indicate the possible association on existing condition or state of affairs and searching back in time for plausible contributing factors. the population of the study was five states (edo, delta, akwa ibom, rivers and cross river states) of southsouth region. data were generated from the publications of state internal generated revenue (sigr) of the five south-south states central bank of nigeria (cbn), annual reports and statement of accounts and statistical bulletins of various issues for fourteen (24) years spanning from 2011 to 2024. research variables independent variables the independent variable in this study is state internal generated revenue (igr), the dependent variable is economic growth, which is proxied by: i. real gross domestic product: was sourced from central bank of nigeria statistical bulletin, world bank statistical bulletin and national bureau of statistics. model specification this model modified the model of ofoegbu, et. al. (2016) presented functionally as: 𝑅𝐺𝐷𝑃 = 𝑓(cit, ppt, vat, ced)…………………………………………………....…………i 𝐻𝐷𝐼 = 𝑓(cit, ppt, vat, ced)………………………………………………………ii thus, the testable models were specified in econometric form as follows: model i 𝑙𝑛𝑅𝐺𝐷𝑃𝑡 = 𝛼0 + 𝛼1𝑙𝑛𝐶𝐼𝑇𝑡 + 𝛼2𝑙𝑛𝑃𝑃𝑇𝑡 + 𝛼3𝑙𝑛𝑉𝐴𝑇𝑡 + 𝛼4𝑙𝑛𝐶𝐸𝐷𝑡 + 𝜀𝑡…………… iii model ii 𝑙𝑛𝐻𝐷𝐼𝑡 = 𝛽0 + 𝛽1𝑙𝑛𝐶𝐼𝑇𝑡 + 𝛽2𝑙𝑛𝑃𝑃𝑇𝑡 + 𝛽3𝑙𝑛𝑉𝐴𝑇𝑡 + 𝛽4𝑙𝑛𝐶𝐸𝐷𝑡 + 𝜀𝑡....…...............iv where: rgdp = real gross domestic product is market value of final goods and services produced by persons, businesses, governments and foreigners less inflation thus, the modified model used for the study is represented in a functional form as shown as: gdp = ƒ(igr, ifr) ....…… .. ………………………………………………………….i . in a linear function, the following models were constructed in line with the study objectives: gdpit = βo + β1igrt + β2ifrt + µt i where: igrt = internal generated revenue for period t (independent variable) ifrt = inflation rate for period t (control variable) βo = constant term β1= regression coefficient of the independent variables µt = error term for period t method of data analysis descriptive and inferential statistics of the data to be used in this study were conducted via the aid of e-view 9.0 statistical software, using: atu gina, reuben omozuafo and elijah omorowa (2025) 22 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe i) descriptive statistics: is a good measure of central tendency that provides information on the mean, standard deviation, skewness, kurtosis, minimum and maximum values of the variables observed during the period under investigation. ii) multiple regression analysis: predicts the value of a variable based on the value of the other variable and explains the effect of changes in the values of variable on the values of the other variables. decision rule the decision will be based on 5% (0.05) level of significance. the null hypothesis (ho) will be accepted, if probability value (p-value) calculated is greater than (>) than the stated 5% level of significance, otherwise reject. data analysis and results table 1: descriptive statistics gdp igr_b_ ifr mean 466.6584 58.27071 15.56571 median 451.8100 55.49000 12.73500 maximum 671.9200 92.60000 39.93000 minimum 375.7500 28.02000 8.050000 std. dev. 73.33862 22.80060 8.111267 skewness 1.411209 0.235935 1.904210 kurtosis 4.936059 1.573653 6.249574 jarque-bera 34.16692 6.583288 73.10270 probability 0.000000 0.037193 0.000000 sum 32666.08 4078.950 1089.600 sum sq. dev. 371120.1 35870.85 4539.693 observations 70 70 70 for gross domestic product (gdp), the mean value is 466.66 with a standard deviation of 73.34, showing a moderate dispersion of data around the mean. the negative skewness of 1.412, suggests that the distribution is skewed to the right, implying a longer tail on the positive side. the high kurtosis of 4.94 is showing heavytiredness and potential outliers in the distribution. the jarque-bera test's extremely low probability (0.000) signifies a departure from normality, reinforcing the presence of non-normal distribution characteristics. the maximum value of 671.92 and the minimum of 375.75 reflect the range of gross domestic product, with the data potentially containing extreme values or outliers. for internal generated revenue (igr), the mean is 58.27 with a small standard deviation of 22.80, showing a relatively narrow dispersion of data around the mean. the positive skewness of 0.23 suggests a longer tail to the right, showing potential right values. the kurtosis of 1.57 reflects normal-tiredness and the potential for extreme values. the jarque-bera test with a probability of 0.037, accepts the normality assumption, revealing non-normal distribution characteristics. the minimum value of 92.60 and the maximum of 28.02 indicate a limited range of return on assets values, suggesting relatively consistent profitability levels among the banks, with potential for outliers on the lower end. for inflation rate (ifr), the mean is 15.57 with a small standard deviation of 8.11, showing a relatively narrow dispersion of data around the mean. the positive skewness of 1.90 suggests a longer tail to the right, showing potential right values. the kurtosis of 6.25 reflects normal-tiredness and the potential for extreme values. the jarque-bera test with a probability of 0.000, accepts the normality assumption, revealing non-normal atu gina, reuben omozuafo and elijah omorowa (2025) 23 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe distribution characteristics. the minimum value of 39.93 and the maximum of 8.05 indicate a limited range of return on assets values, suggesting relatively consistent profitability levels among the banks, with potential for outliers on the lower end. test of hypothesis in other to examine the effect between the dependent variable gdp and the independent variable, and control variable igr and ifr respectively. the study used a pooled multiple regression analysis since the data had both time series (2011-2024) and cross sectional properties. the pooled interaction based multiple regression results are presented and discussed in table 2 below. table 2 panel least square regression analysis testing the relationship between gdp, igr and ifr dependent variable: gdp method: panel least squares date: 08/18/25 time: 18:15 sample: 2011 2024 periods included: 14 cross-sections included: 5 total panel (balanced) observations: 70 variable coefficient std. error t-statistic prob. c 317.2112 22.56702 14.05641 0.0000 igr_b_ 1.116803 0.289438 3.858524 0.0003 ifr 5.420260 0.813604 6.662037 0.0000 r-squared 0.458872 mean dependent var 466.6584 adjusted r-squared 0.442719 s.d. dependent var 73.33862 s.e. of regression 54.74820 akaike info criterion 10.88528 sum squared resid 200823.5 schwarz criterion 10.98164 log likelihood -377.9847 hannan-quinn criter. 10.92355 f-statistic 28.40771 durbin-watson stat 1.303629 prob(f-statistic) 0.000000 source: analysis output using e-views 9 (2025) the adjusted r-squared, at 0.44, takes into account the number of predictors and the sample size, providing a more conservative estimate of the model's explanatory power. the f-statistic of 28.408 is statistically significant with a p-value of 0.000000, indicating that the joint effect of the independent variable (internal generated revenue) significantly contributes to explaining the changes in gross domestic product. therefore, the internal generated revenue model has a meaningful effect on understanding and predicting gross domestic product among the studied. the internal generated revenue (igr) shows a substantial coefficient of 1.116803, indicating that a one-unit increase in results in a significant 112 increase in the natural log of total gdp. this positive and highly significant effect, with a probability of 0.000 that is less than 0.05, underscores the pivotal role of igr in shaping gdp. the alternate hypothesis was accepted that internal generated revenue has a significant positive atu gina, reuben omozuafo and elijah omorowa (2025) 24 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe effect on gross domestic product among in nigeria (p-value = 0.000). conclusion this study ascertained the effect of internal generated revenue on gross domestic product in south-south states in nigeria. data were generated from the publications of state internal generated revenue (sigr) of the five south-south states and central bank of nigeria (cbn), for fourteen (14) years spanning from 2011 to 2024. regression analysis was employed to test the hypothesis. the study found that internal generated revenue has a significant positive effect on gross domestic product among in nigeria. though the igr has a positive significant effect on gross domestic product, and it can be used for policy making. deliberate actions needed by south-south states governments to improve internal generated revenue of their states, as well develop a proper mechanism for the appropriate application of their resources. references adesoji, a. a., & chike, f. o. (2013). the effect of internal revenue generation on infrastructural development. a study of lagos state internal revenue service, journal of educational and social research,3 (2), 419-436. iafeez, o. o., ndalu t. c. & micah, l. c. (2022). tax enforcement measures and revenue generation in nigeria. international journal of business research9. (4) 58-66, obtained via www.researchate.net.ard – international institute agnes j. j., samuel e. a. & okpanachi j. (2023). internally generated revenue revolution in kaduna state nigeria: emerging revenue sources and strategies international journal of innovative science and research technology issn no:-2456-2165. ajiteru, w. o., adaranijo, l. o. & bakare, l. a. (2018). tax revenue and infrastructural development in osun state. international journal of innovative finance and economic research 6 (2), 5061. almustapha aa, hamza ms (2018). determinants of informal sector tax evasion in sokoto metropolis. igbinedion university journal of accounting. 2018; 2(1):127-147 fasoye, k. (2020). does internally generated revenue (igr) have the potential to enhance fiscal viability of state governments in nigeria? noble international journal of economics and financial research, 05(03), 40-49. ibukun m. f. (2023). elements of internally generated revenue and economic growth in lagos state. journal of accounting and financial management. 9(2), e-issn 2504-8856 p-issn 2695-2211. www.iiardjournals.org imf, (2013). does conditionality in imf supported programs promote revenue reforms? imf working papers 2014/206. international monetary fund. atu gina, reuben omozuafo and elijah omorowa (2025) 25 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe johnny, n., & johnnywalker, w. (2018). the relationship between external reserves and economic growth in nigeria (1980-2016).international journal of economics, commerce and management, 6(50), 213– 241. joseph, f. i. & omodero, c. o. (2020). the nexus between government revenue and economic growth in nigeria. journal of economics and business 34(1), 3545 kabiru ma. da., abdulkadir, a. l. & yahaya, y. (2024). the impact of internally generated revenue on service delivery in sokoto state. umyu journal of accounting and finance research. 7(1), december 2024, 030-044. https://doi.org/10.61143/umyu-jafr.7 (1)2024.003 issn: 2795-3831 e-issn: 2795-3823 kagan, j. (2021). income tax. https//wwwinvestopedia.com income. nightingale, k. (2002). taxation theory and practice of 4th edition. in: s. i. england pearson education ltd. mbah, a. n. & onuora, j. k. j. (2018). effect of internally generated revenue on infrastructural development of southeast states of nigeria. hard international journal of economics and business management 4 (7), 1-10 morufu, o.o & babatope, a.j. (2017). internally generated revenue and the revenue profile of selected south western state governments in nigeria. impact: international michael, o. (2018). internal generated revenue in nigeria. a panacea for state development. european journal of humanities and social science, 2(1), 1056-1066. nwafor, i. v., & egolum, c. c. (2021).evaluation of land based revenue and internally generated revenue in enugu state nigeria. international journal of research and innovation in social science (ijriss), v (ix), 452 – 459. okon, c.g. & uwah, u.e (2023). internally generated revenue and infrastructural development in akwa ibom state, nigeria. aksu journal of administration and corporate governance, volume 3 number 2, august 2023 onwuka, o, o & christian, c. (2019). revenue generation as a tool for infrastructural development in nigeria. journal of accounting and financial management, 5(2), 5972. otunbala, o. a. (2011). effect of public revenue on economic growth in nigeria (1980-2008) an unpublished thesis of ahmadu bello university, zaria in partial fulfillment of the requirement for the award of masters of science degree in economic. sani, a b & ahmad, m. b. (2019). impacts of tax revenue on economic growth in nigeria: an aggregate and disaggregate analysis international journal of economics and financial management. 4(4), e-issn 2545-5966 p-issn 2695-1932, 2019 www.iiardpub.org atu gina, reuben omozuafo and elijah omorowa (2025) 26 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe okwori, j. & sule, a. (2016). revenue sources and economic growth in nigeria; an appraisal. journal of economic and sustainable development 7 (8), 1700-2222. sani, a b & ahmad, m b (2019). impacts of tax revenue on economic growth in nigeria: an aggregate and disaggregate analysis international journal of economics and financial management. 4(4), e-issn 2545-5966 p-issn 2695-1932. www.iiardpub.org yusuf, a. & mohd, s. (2021). the impact of government debt on economic growth in nigeria. cogent economics & finance, 9(1), 1-19. udo, o. g., & nkannor, y. s. (2016). effect of electronically generated revenue on infrastructural development of ebonyi state. accounting research, 7(2), 1-10. 2023 468.7b american interdisciplinary journal of business and economics issn: 2837-1909| impact factor : 8.87 volume. 12, number 1; january-march, 2025; published by: scientific and academic development institute (sadi) 8933 willis ave los angeles, california https://sadijournals.org/index.php/aijbe| editorial@sadijournals.org 36 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe impact of taxation and foreign direct investment on economic development in nigeria ojedokun olatunji dauda department of business administration, faculty of management sciences, lagos state university email: dokundan@yahoo.com doi: https://doi.org/10.5281/zenodo.14944383 abstract: taxation is a vital tool that enables infrastructural development, which paves the way for fdi that enhances economic development. the objective of this study is to examine the impact of taxation and foreign direct investment on economic development in nigeria while accounting for the country’s poverty rate. the world bank development indicator provided the secondary data for this study, which covered the years 1991 to 2023. the unit root test illustrated that the unit root that could cause the wrong conclusion has been eliminated. the var and vecm illustrated both the shortand long-term links of economic development with taxation and fdi while adjusting for the poverty rate. the fmols indicates a long-run impact of taxation on economic growth, while the ols regression establishes that while poverty reveals a negative influence, taxation and fdi have a positive impact on economic development .thus, the nigerian government should implement adequate fiscal policy measures to combat the high poverty rate that contributes to tax evasion, and the appropriate tax authority should sensitise the entire citizenry about the importance of paying taxes as well as implementing a new tax reform bill that will improve infrastructural growth, attract fdi, and enhance economic development. keywords: taxation, fdi, economic development, vecm, fmols, ols regression introduction a fundamental part of a nation’s budgetary plan, taxation proxied by tax revenue is important for the stability and economic growth of every country (adefolake & omodero, 2022). there is currently ongoing discussion of a new tax reform bill to foster economic growth and development in nigeria (oluwadele, 2024). it is mostly the source of money for government expenditure on infrastructure and public services such as health, education, and transportation, as well as infrastructure. mostly, one can categorise tax revenue as either direct or indirect taxes. personal income tax and corporate tax are two examples of direct taxes, those levied directly on individuals and companies based on their income or profitability. at numerous points of manufacturing and distribution, goods and services pay indirect taxes, including value-added tax (vat) and excise taxes. both types of taxes are necessary for a balanced tax system since they serve to diversify income sources and lower the risks related to depending too much on one tax type (bird & zolt, 2021). recent trends suggest that broadening the tax base and raising tax compliance will be increasingly important to boost income and create an enabling environment for foreign investment. among the numerous strategies governments are applying to address the challenges with tax mailto:dokundan@yahoo.com ojedokun olatunji dauda (2025) 37 sadi international journal of management and accounting |https://sadijournals.org/index.php/sijma revenue collection are improving administrative efficiency, leveraging technology, and implementing comprehensive tax modifications. for example, digital tax administration solutions have drastically improved the tax collection process efficiency and lowered tax evasion opportunities (oecd, 2022). the economic policy of a nation is primarily dependent on taxation, which influences not only the overall economic climate but also the provision of public goods and services, affecting government spending capacity, impacting stability, enabling foreign direct investment, and subsequently enhancing economic development. there are various ways in which taxation shapes economic development. first, adequate tax revenue enables governments to finance significant infrastructure improvements, including public transit systems, bridges, and highways, thereby increasing economic activity and employment prospects. on the other hand, tax collections support social services, including education and healthcare, which are basic for long-term economic growth and help to build human capital (imf, 2021). economic growth typically correlates with effective tax collection. a well-organised tax system that provides an equitable distribution of tax burdens and promotes compliance helps strengthen the overall economic stability of a country. higher tax revenue as a percentage of gdp in countries, for instance, seems to have stronger infrastructure and public services, which in turn serve to support sustainable economic development (piketty, 2020). still, various factors influence the effectiveness of tax revenue collection: taxpayer compliance degree, tax policy design, and tax institution quality. inadequate resources in tax administration or outdated systems might lead to inefficiencies that compromise efforts at income collection and create appreciable tax losses. furthermore, influencing revenue generation is the discouragement of businesses and people from following tax laws arising from complex tax rules and costly compliance expenses (slemrod, 2019). taxation and foreign direct investment greatly contribute to economic development (alabi, 2019). funding public services and infrastructure helps establish an environment suited for economic activity and; hence, assists infrastructure growth. the consequence of tax revenue on economic development shows that governments’ funding of infrastructure projects required for economic growth comes from sufficient tax revenue. these expenses improve transportation, communication, and utilities, boosting business operations and increasing the standard of living. taxes cover social programs, including social security, healthcare, and education. stability, long-term economic growth, and long-term economic development are all based on these projects. they affect human capital development by giving the government a steady flow of money; an effective tax system can help keep the economy stable. this consistency is what helps economic planning and keeps investor confidence (auerbach et al., 2021). even if it is somewhat crucial, tax collection presents several challenges. tax evasion and avoidance undermine efforts at income gathering, which is sometimes due to the high poverty rate in developing nations like nigeria. older systems, inadequate resources, and staff training could all impede effective tax collection and compliance (tanzi & shome, 1993; kon-sapawi et al., 2022). depending on economic variances, the fairness and efficiency of tax systems could be altered. maintaining public support and compliance calls for fairness and freedom from unjustly burdening low-income individuals’ tax policies (bird & zolt, 2021). looking at tax revenue on a global scale shows that different countries, including nigeria, handle it in different ways and with different results. the goal of this study is to add to the body of research by examining how taxation and foreign direct investment affect economic growth in nigeria while accounting for the country’s poverty rate. literature review and hypothesis development the theoretical underpinning of this study includes the public choice theory and the endogenous growth theory. the public choice theory posits that the government consistently seeks to augment tax revenue to fund its ojedokun olatunji dauda (2025) 38 sadi international journal of management and accounting |https://sadijournals.org/index.php/sijma expenditures. simultaneously, the government uses tax funds to make decisions regarding the allocation of resources to manage economic activities. hence, the allocation of funds by the government can play a substantial role in fostering economic expansion. consequently, greater government revenue leads to enhanced economic growth. there is evidence from tosun and abizadeh (2005) that supports this argument. they studied the relationship between taxation and economic growth in 21 oecd (organisation for economic cooperation and development) member nations between 1980 and 1999. for their analysis, they employed a random-effects model (rem). the results show that tax revenue—specifically, personal and corporate taxes—and economic growth are strongly and statistically significantly correlated. similarly, ocran (2011) used a vector autoregression (var) model to investigate how the fiscal policy affected south africa’s economic growth. the findings showed that tax revenue and economic growth were positively correlated. however, the impact on economic growth of solely implementing tax revenue is more delayed. however, according to the endogenous growth theory, taxes stimulate economic growth. this contrasts with the neoclassical growth theory of solow and swan, who claimed that taxes have no lasting impact on economic growth (romer et al., 2010). moreover, canavire-bacarreza et al. (2013) conducted a study investigating the influence of taxation on economic growth in latin america. they used vector autoregressive (var) models for each nation. nonetheless, their conclusions were indeterminate. the researchers performed a comprehensive analysis of panel data from three distinct categories of countries: latin american nations, developing nations, and developed nations. the findings indicate a favourable association among personal income tax, corporate income and economic growth in latin american countries. however, there is no empirical evidence to support this association in either emerging or developed countries. babatunde et al. conducted a study in 2017 to investigate the correlation between taxation and economic growth in africa from 2004 to 2013. descriptive statistics and unit root tests were employed to assess the normality and stability of the gdp and tax variables before estimation. the study’s findings reveal a positive correlation between tax revenue and gdp in africa, suggesting that tax income contributes to economic growth. ujkani and gara (2023) investigated the correlation between inflation and tax revenue in latin american countries by employing econometric models. the research revealed a negative correlation between inflation rates and tax revenue, with tax evasion intensifying the situation. the research concluded that inflation control is indispensable for the preservation of tax revenue levels and the encouragement of economic expansion. ujkani and gara suggested employing coordinated fiscal and monetary policies to tackle inflation and tax evasion issues. abd hakim et al. (2022) implemented regression analysis and cross-country comparisons to examine the relationship between unemployment and tax revenue. the research concluded that the government's finances were further compromised by tax evasion, which led to a decrease in tax revenue due to the high unemployment rate. the conclusion emphasised the importance of policies that proactively address both unemployment and tax evasion to increase economic growth and tax revenue. the authors promoted comprehensive reforms to employment and taxation. joseph et al. (2019) examined the relationship between tax revenue and foreign direct investment (fdi) in nigeria’s emerging economies. as determined by the regression analysis, the study found that fdi was discouraged by high levels of tax revenue, which had a detrimental effect on economic development. they concluded that the promotion of economic development and the attraction of foreign investment are contingent on the reduction of tax evasion. the recommendation was to improve anti-evasion measures to create a more favourable investment environment. ayenew (2016) used a cross-sectional econometric approach to examine the ojedokun olatunji dauda (2025) 39 sadi international journal of management and accounting |https://sadijournals.org/index.php/sijma correlation between tax revenue and economic stability in ethiopia. the study determined that the expansion of tax revenue contributed to economic stability; however, these benefits were compromised by tax evasion. harris concluded that the implementation of effective measures to counteract tax evasion is essential for the increase in tax revenue, which is contingent on economic stability. wright and clark (2020) investigated the influence of inflation on tax revenue in sub-saharan africa by employing regression analysis and cross-sectional data. the research demonstrated that high inflation rates had a detrimental impact on tax revenue, which was further intensified by tax evasion. wright and clark concluded that inflation control is indispensable for the preservation of tax revenue and the encouragement of economic expansion. martinez (2020) examined the relationship between economic development and poverty in african countries, including nigeria. tax evasion, associated with increased poverty rates and a decrease in gdp, further exacerbated this issue. martinez concluded that the primary methods of promoting economic development are to address destitution and improve tax compliance. the recommendation was to integrate poverty alleviation initiatives with tax reform initiatives to create a favourable investment environment. john (2016) examined the impact of direct foreign investment on nigeria’s economic growth from 1981 to 2015 using a multiple regression analysis. according to the study, nigeria's gdp shows that foreign direct investment has a positive and significant effect on the country's economic growth. according to the study, gdp was positively but marginally impacted by the exchange rate. the effect of foreign direct investment (fdi) on pakistan’s economic growth between 1991 and 2015 was examined by ali and hussain (2017). regression and correlation analyses were used in the study. their findings demonstrated that fdi aided pakistan’s economic expansion. alabi (2019) investigated the effect of foreign direct investment on nigeria’s economic growth by using multivariate time-series analysis. according to the study, fdi significantly boosts nigeria's economic expansion. davis (2022) implemented regression analysis and a cross-sectional methodology that showed that economic development was negatively impacted by reduced tax compliance, which was linked to elevated poverty levels. davis concluded that the improvement of economic conditions for the impoverished could promote economic development and enhance tax compliance. sullivan and clark (2021) implemented econometric modelling techniques to investigate the influence of tax revenue on economic development in nigeria. the research concluded that gdp growth was positively influenced by increased tax revenue; however, these benefits were limited by high levels of tax evasion. sullivan and clark concluded that the improvement of tax revenue is essential for economic development, with effective tax enforcement being of the utmost importance. the recommendation was to strengthen tax policies and improve revenue collection systems. additionally, adebanjo et al. (2024) established that taxation has a significant positive impact on the developed nations’ economic performance. the literature review's argument develops the following hypotheses: h1: taxation has a positive significant impact on economic development. h2: fdi has a positive significant impact on economic development. data and methodology data description the secondary data used in this research was collected from the world bank development indicators from 1991 to 2023 based on their availability to avoid missing values using purposive sampling. the collected dataset includes the gross domestic product (gdp), which is the total monetary value of all the goods and services that a country produces each year and is measured in billions of usd; the foreign direct investment (fdi), which is the return on foreign investments made in a country each year and is also measured in billions of usd; taxation, ojedokun olatunji dauda (2025) 40 sadi international journal of management and accounting |https://sadijournals.org/index.php/sijma which is the amount of money that the government gets from people and businesses to pay for building up infrastructure, which is measured as a percentage of gdp; and poverty, which is the situation where people cannot meet their basic needs for a good quality of life, which is measured as a percentage. methodology this study applied a quantitative research design to analyse the impacts of taxation and fdi on economic development in nigeria while incorporating the poverty rate. this study used several quantitative methods to analyse the data collected. these included the unit root test, ordinary least square (ols) regression, fully modified ordinary least square (fmols), johansen cointegration, the vector autoregression (var) model, and the vector error correction model (vecm). the choice of this quantitative method was because the dataset is on a continuous scale, and it satisfies the appropriate diagnostic tests, which makes it suitable for this study. unit root test the augmented dickey-fuller method was employed to perform a unit root test as part of the research. the objective of the test is to determine the stationarity of the series. this is achieved by comparing the alternative hypothesis, which asserts that the series is stationary, with the null hypothesis, which is based on the presence of a unit root. the test is essential for identifying and eliminating any non-stationarity that could result in incorrect conclusions or spurious correlations. the unit root test is essential for identifying the elimination of unit roots that may lead to erroneous outcomes (adebanjo et al., 2024). ols regression and fmols this study used the functional model technique, employing ols regression to establish the connection between the variables and fmols to examine the long-term influence of the regressors on the dependent variable, which was also adopted in the work of adebanjo et al. (2024). the functional link between the two models given above can be defined as follows: 𝐺𝐷𝑃 = 𝑓(𝑇𝑎𝑥𝑎𝑡𝑖𝑜𝑛, 𝐹𝐷𝐼, 𝑃𝑜𝑣𝑒𝑟𝑡𝑦) [ 1] the ols regression model specification will take the following form: 𝐺𝐷𝑃𝑡 = 𝛽0 + 𝛽1(𝑇𝑎𝑥𝑎𝑡𝑖𝑜𝑛)𝑡 + 𝛽2(𝐹𝐷𝐼)𝑡 + 𝛽3(𝑃𝑜𝑣𝑒𝑟𝑡𝑦)𝑡 + 𝜀𝑡 [2] gdp is the dependent variable and the main regressors or independent variables include taxation and fdi, while the control variable is the poverty rate. the εt is the stochastic error term that accounts for other factors not included in the model. the β0 is the constant term while the β1 to β3 are the coefficient estimates of the regressors. johansen cointegration, var, and vecm the johansen cointegration test can be used to see if the variables that have been combined show cointegration at levels one or two after the first difference, or at most two after the second difference. this test permits several cointegrating relationships. two variations in the johansen cointegration test, the trace and max eigenvalue, are considered foundational for inferences or decision-making. there is a long-term link between the variables when there is co-integration. this study suggested the vector error correction model (vecm) and the vector autoregressive model (var), with vecm coming first. the var helps to examine the short-term connection between the variables, while the vecm is suitable for the long-term link between the variables of interest. this research interest also includes the need to examine both the short-run and long-run link of taxation and foreign direct investment with the economic development of nigeria; hence, the need to also specify var and vecm. thus, the var model can be illustrated as follows: ojedokun olatunji dauda (2025) 41 sadi international journal of management and accounting |https://sadijournals.org/index.php/sijma 𝑌𝑡 = 𝜑𝑖 + 𝛷1𝑌𝑡−1 + ⋯ + 𝛷𝑝𝑌𝑡−𝑝 + 𝜀𝑡 [3] where 𝑌𝑡 represents the vector of the endogenous stationary series of gdp, taxation, fdi and the poverty rate. since cointegration exists among the endogenous variables, the vector error correction model (vecm) was also specified as follows: 𝑌𝑡 = 𝜑𝑖 + 𝛱𝑌𝑡−1 + ∑ 𝛷𝑗 𝑝−1 𝑗=1 ∆(𝑌𝑡−𝑗) + 𝜀𝑡 [ 4 ] where 𝛱𝑌𝑡−1 is the error-correction term, 𝜑𝑖 is the constant term, 𝑝 is the estimated number of lags estimated and 𝛷𝑗 is the coefficient estimate of the endogenous series. diagnostic tests the diagnostic tests, such as the normality, multicollinearity using the variance inflation factor (vif), autocorrelation, and heteroscedasticity, were conducted to validate the fitted ols regression, while the vif and normality tests were carried out to validate the fitted fmols and the normality test, as well as the autocorrelation test, which was also conducted to validate the var and vecm. the sole purpose of the diagnostic tests was to establish the validity of the models applied in this study. results and discussion results table 1: descriptive statistics gdp taxation fdi poverty mean 278.8780 18.3339 3.0248 91.5994 median 278.2608 20.0800 2.0054 92.2500 std. dev. 170.2908 8.8527 2.6001 1.1918 skewness 0.0504 -0.0699 0.8788 -0.1910 jarque-bera 3.0396 3.5418 4.4369 2.4720 probability 0.2188 0.1702 0.1088 0.2905 observations 33 33 33 33 source: author’s computation table 1 shows that the average gdp is about 279 billion usd with a variability of about 170 billion usd, the average taxation is about 18% of gdp, the average fdi is about 3.0 billion usd with a variability of about 2.6 billion usd, and the average poverty rate is about 92% with a variability of about 1.2% during the period under review. the normality test of all the datasets used with jarque-bera showed that the skewness is close to zero and the probability values are higher than the 5% significance level. this means that the datasets used in this study are normally distributed. table 2: unit root test differenced series test-statistic p-value order level gdp -4.49 0.0012 order 1 taxation -5.58 0.0001 order 1 fdi -7.00 0.0000 order 1 poverty rate -7.29 0.0000 order 1 source: author’s computation after the first difference, table 2 demonstrates that the series including the gdp as a stand-in for economic development, taxes, foreign direct investment, and poverty rate are statistically significant at the 5% level, ojedokun olatunji dauda (2025) 42 sadi international journal of management and accounting |https://sadijournals.org/index.php/sijma suggesting that the unit root that could produce inaccurate findings has been removed. this suggests that the series can be subjected to additional econometric studies. table 3: ols regression model overall model p-value = 0.0000 gdp coefficients test-statistics p-value vif taxation 6.889 2.97 0.006 3.49 fdi 11.431 2.48 0.019 1.18 poverty rate -79.231 -4.82 0.000 3.17 constant 7628.171 5.19 0.000 na r-squared = 0.8789 adj r-squared = 0.8663 diagnostic tests: normality test with jarque-bera: p-value = 0.4160 autocorrelation test: p-value = 0.0527 heteroscedasticity: p-value = 0.2464 source: author’s computation table 3 indicates that the overall model p-value is below 0.05, the threshold for significance, suggesting that the ols regression model is statistically significant at the 5% level. this implies a significant linear relationship between economic development, taxation, and fdi, while controlling for the poverty rate in nigeria. the coefficient estimates of taxes have a strong positive influence on economic development, suggesting that an increase in taxation will enhance economic development, consistent with the first study hypothesis (h1). the coefficient estimates of fdi exhibit a strong positive effect on economic growth, indicating that an increase in fdi will enhance economic development, hence corroborating the second study hypothesis (h2). the coefficient estimates indicate that the poverty rate negatively and significantly affects economic development, implying that increases in the poverty rate decrease economic development. furthermore, the variance inflation factor (vif) for all regressors is below 5, signifying that the ordinary least squares (ols) regression model is free from multicollinearity concerns. the normality test, autocorrelation, and heteroscedasticity test showed that their respective probability values exceeded the 0.05 significance level, indicating that the model satisfies the normality of the residuals and does not have the problems of autocorrelation and heteroscedasticity, satisfying the ols assumptions. the r-squared value of 0.8789 indicates that the 87.89% variability in the economic development can be explained by taxation, fdi and the poverty rate. table 4: fmols gdp coefficients test-statistics p-value vif taxation 6.729 2.626 0.0138 3.35 fdi 11.951 2.339 0.0267 1.17 poverty rate -81.868 -4.504 0.0001 3.06 constant 7866.352 4.843 0.0000 na r-squared = 0.8720 adj r-squared = 0.8580 diagnostic test: normality test with jarque-bera: p-value = 0.3995 ojedokun olatunji dauda (2025) 43 sadi international journal of management and accounting |https://sadijournals.org/index.php/sijma source: author’s computation table 4 indicates that the coefficient estimates for taxation and foreign direct investment (fdi) exert a significant positive influence on economic development in the long run at the 5% level, signifying that an escalation in taxation and fdi fosters economic growth over time. conversely, the coefficient estimate for the poverty rate demonstrates a significant negative impact on economic development in the long run, implying that an increase in the poverty rate leads to a deterioration in economic development over the same period. the r-squared score of 0.872 signifies that 87.2% of the variation in economic development is attributable to taxation, foreign direct investment, and poverty. the variance inflation factor (vif) of the fully modified ordinary least squares (fmols) regressors is below 5, signifying the absence of multicollinearity in the model. furthermore, the normality test of the fmols residuals revealed a p-value greater than 0.05, indicating that the residuals were normally distributed, thereby affirming the appropriateness of the fmols methodology. table 5: var model var equation lag parameters r-squared p-value δgdp 9 0.9406 0.0000 δtaxation 9 0.9263 0.0000 δfdi 9 0.8195 0.0000 δpoverty 9 0.8829 0.0000 normality test with jarque-bera: p-value = 0.4885 autocorrelation test: p-value = 0.1834 source: author’s computation table 5 shows that the differenced endogenous series of gdp, taxation, fdi and poverty have 9 estimated lag parameter values with their corresponding p-values less than 0.05 significant level, suggesting that there is a short-run relationship between the economic development, taxation and fdi while controlling for the poverty rate in nigeria. table 6: johansen cointegration and vecm johansen tests for cointegration: trace statistic at the first cointegrating equation: 56.71 critical value 5% at first cointegrating equation: 47.21 vecm equation lag parameters r-squared p-value δgdp 6 0.1765 0.0087 δtaxation 6 0.2556 0.0083 δfdi 6 0.3564 0.0314 δpoverty 6 0.3211 0.0060 normality test with jarque-bera: p-value = 0.1917 autocorrelation test: p-value = 0.3700 source: author’s computation table 6 shows that the trace statistics of about 56.71 for the johansen cointegration exceed the critical value of 47.21 at the 5% level, suggesting that there is an appearance of cointegration among the series, which suggests the fitting of the vecm. the vecm shows that the differenced endogenous series having 6 estimated lag parameters have probability values less than 0.05 significant level, indicating that there is a long-run relationship between the economic development, taxation and fdi while accounting for the poverty rate in nigeria. ojedokun olatunji dauda (2025) 44 sadi international journal of management and accounting |https://sadijournals.org/index.php/sijma figure 1 illustrates the combined graph of the upward trend pattern of economic development, declining rate of taxation, constant level of poverty, and low state of the fdi. figure 1: combined graph of gdp, taxation, fdi and poverty against year discussion the analysis indicates that the average gdp is approximately 279 billion usd, exhibiting a variability of around 170 billion usd. the average taxation stands at about 18% of gdp, while the average fdi is roughly 3.0 billion usd, with a variability of approximately 2.6 billion usd. additionally, the average poverty rate is about 92%, showing a variability of around 1.2% during the reviewed period. this corresponds with nigeria’s present economic situation, which is characterised by low foreign direct investment and taxation, alongside a rise in the poverty rate. furthermore, the unit root test demonstrates that the presence of a unit root, which could yield erroneous results, has been eradicated, indicating that additional study may proceed. the ols regression model demonstrates statistical significance at the 5% level, signifying a substantial linear association between economic development, taxation, and fdi, while controlling for the poverty rate in nigeria. the coefficient estimates of taxation exhibit a significant positive effect on economic development, suggesting that an increase in taxation will enhance economic development, corroborating the first research hypothesis (h1) and reinforcing both the public choice theory and the endogenous growth theory. the coefficient estimates of fdi exhibit a strong positive effect on economic growth, indicating that an increase in fdi will enhance economic development, hence corroborating the second study hypothesis (h2). this aligns with the research of sullivan and clark (2021), adebanjo et al. (2024), john (2016), and alabi (2019). simultaneously, the coefficient estimates of the poverty rate exhibit a strong negative effect on economic growth, indicating that rises in the poverty rate led to a deterioration in economic development, corroborating the findings of davis (2022). the estimated fmols indicates that the coefficients for taxation and fdi exert a significant positive influence on economic development in the long run at the 5% level, suggesting that increases in taxation and fdi enhance ojedokun olatunji dauda (2025) 45 sadi international journal of management and accounting |https://sadijournals.org/index.php/sijma economic development over time. conversely, the coefficient for the poverty rate demonstrates a significant negative impact on economic development in the long run, implying that an increase in the poverty rate leads to a decline in economic development over time. the var model indicates a short-term relationship among economic development, taxation, and fdi, while controlling for the poverty rate in nigeria. the johansen cointegration test suggests the presence of cointegration, warranting the application of the vecm. the estimated vecm demonstrates a long-term relationship among economic development, taxation, and fdi, while considering the poverty rate in nigeria. conclusion taxation is an essential mechanism that facilitates infrastructural development, hence attracting foreign direct investment that promotes economic growth. this study aims to analyse the effects of taxation and foreign direct investment on nigeria's economic development, considering the nation's poverty rate. the study indicates that taxation and foreign direct investment (fdi) exert a significant positive influence on economic development, suggesting that increases in both taxation and fdi will enhance economic growth. conversely, the poverty rate has a significant negative effect on economic development, implying that increases in poverty contribute to a decline in economic progress. the findings indicate that taxation and foreign direct investment (fdi) exert a significant positive influence on economic development in the long term, suggesting that increases in taxation and fdi enhance economic growth over time. conversely, the poverty rate has a significant negative impact on economic development eventually. consequently, the nigerian government should enact effective fiscal policies to address the elevated poverty rate that contributes to tax evasion. additionally, the relevant tax authority must educate the entire populace on the significance of tax compliance and implement the new tax legislation aimed at fostering infrastructural development, attracting foreign direct investment, and promoting economic growth. references abd hakim, t., karia, a. a., david, j., ginsad, r., lokman, n., & zolkafli, s. (2022). impact of direct and indirect taxes on economic development: a comparison between developed and developing countries. cogent economics & finance, 10(1), 2141423. adebanjo, s., banchani, e., mishiwo, s. h., & adejumo, b. (2024). developmental impact of taxation on the economic performance of selected developed economies around the world. american interdisciplinary journal of business and economics (aijbe), 11(2), 78–91. https://doi.org/10.5281/zenodo.11617509 adebanjo, s., banchani, e., mishiwo, s.h., & sanusi, i. (2024). determinants of workers’ new minimum wage in nigeria: incorporating nigeria’s current economic situation. sri lankan journal of applied statistics. 25(2), 75-100. https://doi.org/10.4038/sljas.v25i2.8128 adefolake, a. o., & omodero, c. o. (2022). tax revenue and economic growth in nigeria. cogent business & management, 9(1). https://doi.org/10.1080/23311975.2022.2115282 alabi, k. (2019) the impact of foreign direct investment on economic growth: nigeria experience. open journal of applied sciences, 9, 372-385. doi: 10.4236/ojapps.2019.95031. https://doi.org/10.4038/sljas.v25i2.8128 https://doi.org/10.4236/ojapps.2019.95031 ojedokun olatunji dauda (2025) 46 sadi international journal of management and accounting |https://sadijournals.org/index.php/sijma ali, n., & hussain, h. (2017). impact of foreign direct investment on the economic growth of pakistan. american journal of economics, 7, 163-170. auerbach, a. j., gorodnichenko, y., & murphy, d. (2021). inequality, fiscal policy and covid19 restrictions in a demand-determined economy. european economic review, 137, 103810. https://doi.org/10.1016/j.euroecorev.2021.103810 ayenew, w. (2016). determinants of tax revenue in ethiopia (johansen co-integration approach). international journal of business, economics and management, 3(6), 69-84. babatunde, o. a., ibukun, a. o. and oyeyemi, o. g. (2017). taxation revenue and economic growth in africa. journal of accounting and taxation, 9(2), 11–22. doi:10.5897/jat2016.0236 bird, r. m., & zolt, e. m. (2019). taxation and development: the role of tax systems in promoting economic growth and social equity. in handbook of public economics 5: 179-215. elsevier. canavire-bacarreza, g., martinez-vazquez, j., & vulovic, v. (2013). taxation and economic growth in latin america. retrieved from google scholar. davis, m. (2022). impact of poverty on tax compliance and economic development in nigeria. journal of development economics, 51(4), 389-404. imf. (2021). capacity development in tax administration: progress report. international monetary fund. john, e.i. (2016). effect of foreign direct investment on economic growth in nigeria. european business & management, 2, 40-46. joseph, f. i., omodero, c. o., & omeonu, o. m. (2019). the role of tax revenue and foreign direct investment in promoting economic progress in nigeria. annals of spiru haret university, economic series, 19(3), 33-54. martinez, a. (2020). relationship between poverty and economic development in african countries. african development review, 32(2), 209-224. ocran, m. k. (2011). fiscal policy and economic growth in south africa. journal of economic studies, 38(5), 604–618. oluwadele, b. (2024). transformation of taxation in nigeria: insights into 2024 tax reforms. transformation of taxation in nigeria: insights into 2024 tax reforms—opinion — the guardian nigeria news—nigeria and world news piketty, t. and saez, e. (2014). inequality eventually. science, 344(6186), 838-843. https://doi.org/https:/doi.org/10.5897/jat2016.0236 https://doi.org/https:/doi.org/10.5897/jat2016.0236 https://guardian.ng/opinion/transformation-of-taxation-in-nigeria-insights-into-2024-tax-reforms/ https://guardian.ng/opinion/transformation-of-taxation-in-nigeria-insights-into-2024-tax-reforms/ https://guardian.ng/opinion/transformation-of-taxation-in-nigeria-insights-into-2024-tax-reforms/ ojedokun olatunji dauda (2025) 47 sadi international journal of management and accounting |https://sadijournals.org/index.php/sijma kon-sapawi, m. n. a., abd hamid, n., shamsuddin, r., & norizan, s. (2022). determinants of tax compliance among micro business: malaysian perspective. international journal of academic research in accounting finance and management sciences. 12(2), 694–707. romer, c.d., & romer, d.h. (2010). the macroeconomic effects of tax changes: estimates based on a new measure of fiscal shocks. am econ rev 100: 763-801. slemrod, j. (2019). tax compliance and enforcement: an overview. national bureau of economic research working paper no. 26650. sullivan, j., & clark, r. (2021). role of tax revenue in economic growth in nigeria. journal of economic development studies, 57(3), 143-159. tanzi, v., & shome, p. (1993). the role of the state in a market economy: a perspective on tax policy. in the role of the state in a market economy (pp. 145-175). routledge. tosun, m. s. and abizadeh, s. (2005). economic growth and tax components: an analysis of tax changes in oecd. applied economics, 37(19), 2251–2263. doi:10.1080/00036840500293813 ujkani, x., & gara, a. (2023). determinants of the inflation rate: evidence from panel data. economicsinnovative and economics research journal, 11(2), 169-182. wright, m., & clark, r. (2020). effects of inflation on tax revenue in sub-saharan africa. african economic review, 19(3), 159-174. https://doi.org/https:/doi.org/10.1080/00036840500293813 https://doi.org/https:/doi.org/10.1080/00036840500293813 american interdisciplinary journal of business and economics (aijbe). issn: 2837-1844| impact factor : 7.76 volume. 11, number 2; april-june, 2024; published by: scientific and academic development institute (sadi) 8933 willis ave los angeles, california https://sadijournals.org/index.php/aijbe|editorial@sadijournals.org 78 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe developmental impact of taxation on the economic performance of selected developed economies around the world. 1seun adebanjo, 2emmanuel banchani, 3solberg horve mishiwo and 4benjamin adejumo 1statistical training and consultation, nigeria. 2department of sociology, st. francis xavier university, antigonish, canada. 3university of cape coast, ghana. 4western covenant university, 3333 wilshire blvd #700, los angeles, ca, usa seunadebanjo9@gmail.com/ eb1043@mun.ca/ solberg.mishiwo@stu.ucc.edu.gh benjamin@wcuniversity.edu doi: https://doi.org/10.5281/zenodo.11617509 abstract: taxation, the primary component of fiscal policy, definitely influences economic production because, in industrialized nations, the government uses the money from taxpayers to build fundamental infrastructure like reliable electricity, well-maintained roads, and water supplies. therefore, the aim of this study is to investigate the developmental effect of taxes on the economic performance of developed economies around the world. panel var application revealed a short-term correlation between taxation and the economic performance of industrialized countries. while the fitted fmols reveals a significant positive impact of taxation and foreign direct investment (fdi) on the long-term economic performance of developed nations, suggesting that higher levels of taxation and fdi return contribute to greater economic performance in the world’s developed economies, the hausman test specifies a random-effect regression model that confirms the significant positive impact of taxation and gni on economic performance. as a result, the governments of industrialized nations should keep putting in place a sustainable tax system that is alluring enough to raise tax payments and promote the continuation of fdi and gni growth, which would improve economic performance both now and in the future. keywords: taxation, economic performance, panel var, hausman test, fmols. introduction taxation implementation has had a significant impact on the economic growth of industrialized nations such as the united states, canada, and australia. academic researchers are inclined to conduct studies that focus on the determinants driving economic advancement. taxation is a highly scrutinized element due to its significant impact on a nation’s economic policies (shahmoradi et al., 2019). there are typically two main classifications of taxation that are commonly acknowledged: direct and indirect. direct taxation refers to the imposition of taxation on the income and activities of taxpayers, which are then paid directly to the government. transferring the direct tax mailto:seunadebanjo9@gmail.com/ mailto:eb1043@mun.ca/ mailto:solberg.mishiwo@stu.ucc.edu.gh mailto:benjamin@wcuniversity.edu%20/ https://doi.org/10.5281/zenodo.11617509 seun adebanjo, emmanuel banchani, solberg horve mishiwo and benjamin adejumo (2024) 79 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe burden to another individual is not feasible. indirect taxation refers to the imposition of tax obligations on products and services that can be transferred to a thirdparty. according to a prior study conducted by thaçi and gerxhaliu (2018), in developing countries, the revenue generated by taxes on foreign commerce surpasses that generated by direct taxation. developing countries encounter greater challenges in establishing their tax systems and allocating domestic resources than wealthy nations. in contrast, industrialized nations generate a greater amount of money through direct taxation mechanisms such as income taxation, social insurance contributions and consumer taxation. the existing body of literature has presented conflicting findings regarding the impact of taxation on economic growth. domestic taxation, such as tariffs on goods and services, has contributed to the increase in gdp growth for both affluent and developing countries (maganya, 2020; mdanat et al., 2018; vintilă et al., 2021). contrary to popular belief, thaçi and gerxhaliu (2018) assert that a negative association exists between taxation and economic growth in developing nations. moreover, it has been observed that there exists a positive and statistically significant relationship between income tax rates and gdp in developed countries, although this relationship is not observed in developing countries (shahmoradi et al., 2019). further investigation is required to comprehensively comprehend the influence of taxation on economic development in developed countries, considering the conflicting findings. according to korkmaz et al. (2019) and nguyen (2019), empirical studies conducted in developing countries have provided evidence supporting the positive impact of indirect taxation on economic growth. tariffs and domestic goods and services taxes are two additional tax forms that have a direct impact on a nation’s economic growth (maganya, 2020; mdanat et al., 2018). the empirical analysis conducted by göndör and îzpençe (2014) examined the fiscal policies of romania and turkey throughout the crisis period. the authors presented empirical evidence to substantiate their assertion, illustrating the ineffectiveness of procyclical fiscal policy in mitigating gdp shocks. given the study’s emphasis on the cyclical patterns of macroeconomic aggregates, it is important to approach the conclusions with caution. consequently, the outcome only presents notions on the underlying factors driving fiscal policy acts and their impact on macroeconomic activity. korkmaz et al. (2019) arrived at comparable findings in their examination of the turkish economy, indicating a significant and adverse correlation between taxation and economic growth. several studies conducted by abdioglu et al. (2016), ajetunmobi et al. (2019), mohs et al. (2018), and shafiq et al. (2021) have provided evidence that foreign direct investment (fdi) in developed nations is influenced by the taxation policies of the host country. these findings suggest that taxation plays a significant role in shaping investment patterns. ahmad and sial (2016) conducted a study utilizing annual time series data spanning 19742010 to examine the relationship between total tax receipts and economic growth. the autoregressive distributed lag (ardl) bounds testing approach was employed to predict the longand short-term relationships between the variables to assess co-integration. the results indicate that aggregate tax revenues have a lasting, adverse, and substantial influence on the expansion of the economy. research indicates that a 1% increase taxation will lead to a 1.25% decline in economic growth. in their study on developing nations, thaçi and gerxhaliu (2018) provided empirical evidence supporting the existence of a negative association between taxation and economic growth. shahmoradi et al. (2019) observed a significant and negative correlation between the ratio of tax collections to gdp and industrialized nations. research has shown that direct taxation has a favorable impact on economic growth, but the consequences of indirect taxation remain uncertain (hakim, 2020; korkmaz et al., 2019). research conducted in developing countries suggests that the implementation of indirect taxation has a favorable impact seun adebanjo, emmanuel banchani, solberg horve mishiwo and benjamin adejumo (2024) 80 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe on overall economic growth. according to nguyen (2019), direct taxation has an indirect effect. integrating both direct and indirect taxes into a unified study would provide further evidence to validate or disprove the previous research's conclusion of inconsistency. two more indicators of economic development are employment and investment. the existing body of literature on investments has presented divergent findings on the influence of taxation on investment outcomes. several studies (abdioglu et al., 2016; ajetunmobi et al., 2019; mohs et al., 2018; shafiq et al., 2021) have found that taxation has an impact on investment in both developed and developing countries. in contrast, alternative research conducted by goodspeed et al. (2011) and mercer-blackman & camingue-romance (2020) yielded conflicting results when examining different country cohorts. furthermore, various types of taxation can potentially have distinct impacts on investment outcomes (appiah-kubi et al., 2021). in addition, endogenous growth theory and neoclassical growth theory serve as the foundation for this investigation. according to solow and swan’s neoclassical growth theory, taxes have no impact on the steady state. that is to say, taxes have no long-term impact on economic growth. romer’s endogenous growth theory, on the other hand, contends that taxes on economic growth can impact it over time (romer et al., 2010). by examining the developmental impact of taxation on the economic performance of a few global economies, such as canada, the united states, and australia, and accounting for inflation, foreign direct investment (fdi), and gross national income (gni) using the most recent annual data from 1999 to 2023, this study will make a unique contribution to closing the gap left by earlier research. materials and methods this study used secondary data, specifically a panel of recent periods from 1990 to 2023, from three developed countries: canada, the united states, and australia. these countries were selected on the basis of their economic performance and consistent data availability among the world’s developed economies. the econometrics approach, suitable for the panel, included panel var, the hausman test to specify either a fixed effect or a random effect estimator, and fmols. we also performed diagnostic checks, such as the normality of the residuals and the endogeneity test, to assess the accuracy and validity of the econometrics model. panel var the proposed panel var model helps to examine the short-run connection between the variables of interest and it is given by 𝑌𝑖𝑡 = 𝜇𝑖 + 𝐵(𝑀)𝑌𝑖𝑡 + 𝛼𝑖 + 𝛿𝑡 + 휀𝑖𝑡 (1) where 𝑌𝑖𝑡 represents the vector of the endogenous stationary series, such as gross domestic product (gdp), taxation (tax), inflation (inf), foreign direct investment (fdi), and gross national income (gni) while 𝜇𝑖 represents the matrix of country-specific fixed effects. the subscripts, defined as i and t, refer to country and time, respectively. 𝐵(𝑀) denotes the matrix polynomial in the lag operator with 𝐵(𝑀) = 𝐵1𝑀1 + 𝐵2𝑀2 + ⋯ + 𝑀𝑝𝐿𝑝, 𝛼𝑖 indicates the vector that determines the specific effects of the country found in this regression, 𝛿𝑡 represents the dummy variables for the country’s specific time and 휀𝑖𝑡 denotes the residual vector. the matrix form of the proposed var in equation 1 treated as endogenous can be expressed as follows: seun adebanjo, emmanuel banchani, solberg horve mishiwo and benjamin adejumo (2024) 81 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe ∆(𝑙𝑛𝐺𝐷𝑃𝑖𝑡) = 𝜇1𝑖 + ∑ 𝛼1𝑗 𝑝 𝑗=1 ∆(𝑙𝑛𝐺𝐷𝑃𝑖𝑡−𝑗) + ∑ 𝑏1𝑗 𝑝 𝑗=1 ∆(𝑇𝑎𝑥𝑖𝑡−𝑗) + ∑ 𝑐1𝑗 𝑝 𝑗=1 ∆(𝐼𝑛𝑓𝑖𝑡−𝑗) + ∑ 𝑑1𝑗 𝑝 𝑗=1 ∆(𝐹𝐷𝐼𝑖𝑡−𝑗) + ∑ 𝑒1𝑗 𝑝 𝑗=1 ∆(𝐺𝑁𝐼𝑖𝑡−𝑗) + 𝛼1𝑖 + 𝛿1𝑡 + 휀1𝑖𝑡 (2) ∆(𝑇𝑎𝑥𝑎𝑡𝑖𝑜𝑛𝑖𝑡) = 𝜇2𝑖 + ∑ 𝛼2𝑗 𝑝 𝑗=1 ∆(𝑙𝑛𝐺𝐷𝑃𝑖𝑡−𝑗) + ∑ 𝑏2𝑗 𝑝 𝑗=1 ∆(𝑇𝑎𝑥𝑖𝑡−𝑗) + ∑ 𝑐2𝑗 𝑝 𝑗=1 ∆(𝐼𝑛𝑓𝑖𝑡−𝑗) + ∑ 𝑑2𝑗 𝑝 𝑗=1 ∆(𝐹𝐷𝐼𝑖𝑡−𝑗) + ∑ 𝑒2𝑗 𝑝 𝑗=1 ∆(𝐺𝑁𝐼𝑖𝑡−𝑗) + 𝛼2𝑖 + 𝛿2𝑡 + 휀2𝑖𝑡 (3) ∆(𝐼𝑛𝑓𝑖𝑡) = 𝜇3𝑖 + ∑ 𝛼3𝑗 𝑝 𝑗=1 ∆(𝑙𝑛𝐺𝐷𝑃𝑖𝑡−𝑗) + ∑ 𝑏3𝑗 𝑝 𝑗=1 ∆(𝑇𝑎𝑥𝑖𝑡−𝑗) + ∑ 𝑐3𝑗 𝑝 𝑗=1 ∆(𝐼𝑛𝑓𝑖𝑡−𝑗) + ∑ 𝑑3𝑗 𝑝 𝑗=1 ∆(𝐹𝐷𝐼𝑖𝑡−𝑗) + ∑ 𝑒3𝑗 𝑝 𝑗=1 ∆(𝐺𝑁𝐼𝑖𝑡−𝑗) + 𝛼3𝑖 + 𝛿3𝑡 + 휀3𝑖𝑡 (4) ∆(𝐹𝐷𝐼𝑖𝑡) = 𝜇4𝑖 + ∑ 𝛼4𝑗 𝑝 𝑗=1 ∆(𝑙𝑛𝐺𝐷𝑃𝑖𝑡−𝑗) + ∑ 𝑏4𝑗 𝑝 𝑗=1 ∆(𝑇𝑎𝑥𝑖𝑡−𝑗) + ∑ 𝑐4𝑗 𝑝 𝑗=1 ∆(𝐼𝑛𝑓𝑖𝑡−𝑗) + ∑ 𝑑4𝑗 𝑝 𝑗=1 ∆(𝐹𝐷𝐼𝑖𝑡−𝑗) + ∑ 𝑒4𝑗 𝑝 𝑗=1 ∆(𝐺𝑁𝐼𝑖𝑡−𝑗) + 𝛼4𝑖 + 𝛿4𝑡 + 휀4𝑖𝑡 (5) ∆(𝐺𝑁𝐼𝑖𝑡) = 𝜇5𝑖 + ∑ 𝛼5𝑗 𝑝 𝑗=1 ∆(𝑙𝑛𝐺𝐷𝑃𝑖𝑡−𝑗) + ∑ 𝑏5𝑗 𝑝 𝑗=1 ∆(𝑇𝑎𝑥𝑖𝑡−𝑗) + ∑ 𝑐5𝑗 𝑝 𝑗=1 ∆(𝐼𝑛𝑓𝑖𝑡−𝑗) + ∑ 𝑑5𝑗 𝑝 𝑗=1 ∆(𝐹𝐷𝐼𝑖𝑡−𝑗) + ∑ 𝑒5𝑗 𝑝 𝑗=1 ∆(𝐺𝑁𝐼𝑖𝑡−𝑗) + 𝛼5𝑖 + 𝛿5𝑡 + 휀5𝑖𝑡 (6) hausman test the hausman test, also known as the hausman specification test, identifies endogenous regressors within a regression model. we identify these regressors as predictor factors that correlate with the error term. other factors in the system to which endogenous variables belong have an impact. ordinary least-squares estimators assume uncorrelated error terms and predictor variables, which restricts their usefulness in models with endogenous regressors. in this case, instrumental variable estimators are a useful choice. finding the endogeneity of the predicting variables is essential before selecting the optimal regression strategy. using the hausman test, one can determine whether an estimator is more suitable for a given regression model by assessing the statistical significance of the difference between the two estimators (zulfikar and stp, 2018). this diagnostic technique is often used to identify possible issues in model definition. panel data analysis uses the hausman test to determine which fixed effects (fe) and random effects (re) models to use. as to adebanjo and morufu (2022), the alternative hypothesis holds that the preferred model includes fixed effects, whereas the null hypothesis holds that random effects exist. the main goal of the tests was to determine the relationship between the specific errors seun adebanjo, emmanuel banchani, solberg horve mishiwo and benjamin adejumo (2024) 82 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe noted and the predictors in the model. the premise that there is no association between the error term and the predictor variables implies that endogeneity has no effect on the model. the hausman statistic can be computed as follows: 𝐻 = (�̂�𝑅𝐸 − �̂�𝐹𝐸) ′ [𝑉𝑎𝑟(�̂�𝑅𝐸) − 𝑉𝑎𝑟(�̂�𝐹𝐸)] −1 (�̂�𝑅𝐸 − �̂�𝐹𝐸) (7) the hypothesis is therefore stated as follows: h0: select re (p> 0.05) h1: select fe (p <0.05) the generalized model in panel data analysis considers individual intercepts to evaluate the connection between variables. this formula clarifies the intricate relationships between factors both inside and between businesses, thus facilitating a more thorough comprehension of the factors affecting economic performance. there are several ways to express the equation: 𝑦𝑖𝑡 = 𝛼𝑖 + 𝛽′𝑋𝑖𝑡 + 휀𝑖𝑡 ; 𝑖 = 1,2, … , 𝑁 𝑎𝑛𝑑 𝑡 = 1,2, … , 𝑇. (8) where n = number of individuals or cross-section and t = the number of periods. according to shahmoradi et al. (2019), the panel model can take the following form: 𝑙𝑛𝐺𝐷𝑃 𝑖𝑡 = 𝛼 + 𝛽1(𝑇𝑎𝑥)𝑖𝑡 + 𝛽2(𝐼𝑛𝑓)𝑖𝑡 + 𝛽3(𝐹𝐷𝐼)𝑖𝑡 + 𝛽4(𝐺𝑁𝐼)𝑖𝑡 + 휀𝑖𝑡 (9) the dependent variable in this study is the economic performance of the three selected developed economies of the world, which is measured by their gross domestic product (gdp). we used the natural logarithm of the dependent variable to improve the performance of the model. the main independent variable is taxation, which is measured by tax revenue, whereas the control variables include inflation, foreign direct investment, and gross national income, which could also influence the developmental impact of taxation on economic performance. the coefficient estimates of the independent variables are β1 to β4. the random error term, denoted as εit, the with unit represents the panel unit, which represents the selected developed economies of the world, and the time in years, denoted as t. fmols estimator developed by phillips and hansen to provide an optimal co-integrating regression estimation, the fully modified least square (fmols) (olofin et al., 2019). in contrast, this study used the pedroni heterogeneous fmols estimator for panel co-integration regression. this estimator can eliminate serial correlation and endogeneity bias. fmols works well with the panel because it helps determine whether the long-term effects of the predictor variables are positive or negative on the dependent variable and takes into account heterogeneous cointegration (rahman et al., 2021). thus, we can express the panel fmols estimator (β) of the coefficient as follows: 𝛽∗ − 𝛽 = (∑ 𝐿22𝑖 −2 𝑁 𝑖=1 ∑(𝜒𝑖𝑡 − �̅�𝑖𝑡)2 𝑇 𝑖=1 ) ∑ 𝐿11𝑖 −1 𝐿22𝑖 −2 𝑁 𝑖=1 (∑(𝜒𝑖𝑡 − �̅�𝑖𝑡)𝜇𝑖𝑡 ∗ − 𝑇�̂�𝑖 𝑇 𝑖=1 ) (10) where; 𝜇𝑖𝑡 ∗ = 𝜇𝑖𝑡 − �̂�21𝑖 �̂�22𝑖 δ𝜒𝑖𝑡, 𝛾𝑖 = γ̂21𝑖ω̂21𝑖 0 − �̂�21𝑖 �̂�22𝑖 (γ̂22𝑖 + ω̂22𝑖 0 ) and �̂�𝑖 was the lower triangulation of ω̂𝑖. https://www.tandfonline.com/doi/full/10.1080/23322039.2022.2141423 seun adebanjo, emmanuel banchani, solberg horve mishiwo and benjamin adejumo (2024) 83 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe the asymptotic distribution of the dynamic ols estimator was the same as that of pedroni’s panel fmols estimate (pradhan, 2016). as demonstrated, fmols estimations were carried out to verify the consistency of the results. the endogenous growth theory of romer indicates that taxes may have a long-term impact on economic growth (romer et al., 2010). thus, the following can be the supporting hypothesis for the endogenous growth theory: h1: taxation has a positive long-run effect on the economic performance of selected developed economies around the world. table 1: variable definitions, measurements, and sources variables definition measurement sources gdp gdp is a metric used to determine how much money is spent overall on all goods and services produced over a given time within a nation. gdp stands for the general economic performance of a nation. billions of us$ world bank, statista, countryeconomy.com taxation taxation is a crucial component of fiscal policy as it functions as a mechanism for governments to produce income and foster economic performance (korkmaz et al., 2019). % of gdp world bank, www.ceicdata.com inflation inflation is a phenomenon that refers to the rise in the general level of prices of commodities and services because of the large amount of money in circulation. when gasoline and oil prices rise, inflationary pressures typically follow. percentage (%) world bank fdi a foreign direct investment (fdi) is the acquisition of ownership in a foreign company or project by an investor, company, or government organization coming from a different country. by creating long-lasting, safe links between economies, foreign direct investment billions of us$ world bank https://data.worldbank.org/indicator/gc.tax.totl.gd.zs?locations=au https://data.worldbank.org/indicator/gc.tax.totl.gd.zs?locations=au https://data.worldbank.org/indicator/gc.tax.totl.gd.zs?locations=au https://data.worldbank.org/indicator/gc.tax.totl.gd.zs?locations=au seun adebanjo, emmanuel banchani, solberg horve mishiwo and benjamin adejumo (2024) 84 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe (fdi) is essential to promote global economic integration. gni gross national income (gni) refers to the aggregate monetary earnings generated by individuals and enterprises within a given nation. it is employed to quantify and monitor a country’s economic prosperity over successive years. the calculation of gni involves adding the income from foreign sources to gdp. billions of us$ world bank source: author’s computation results table 2: descriptive statistics gdp taxation inflation fdi gni mean 5423.659 15.55996 2.535802 100.1701 5415.688 median 1554.749 13.25800 2.269150 48.57084 1520.700 maximum 27356.40 29.20000 8.002800 511.4340 27560.00 minimum 311.4205 7.903518 -0.355500 -25.09314 295.9904 std. dev. 7007.169 5.352293 1.481598 127.2057 7090.685 observations 102 102 102 102 102 source: author’s computation table 2 shows that the average gdp of the three selected developed economies of the world is approximately us$5424 billion with a variability of approximately us$7007 billion during the period under review; the average taxation is approximately 15.6% of gdp with a variability of approximately 5.4% of gdp; the average inflation rate is approximately 2.5% with a variability of approximately 1.5%; the average fdi is approximately us$100 billion with a variability of approximately 127 billion us dollars; and the average gni is approximately us$5416 billion with a variability of approximately 7091 billion us dollars. table 3: panel var coefficient std. error t-statistic prob. https://data.worldbank.org/indicator/gc.tax.totl.gd.zs?locations=au seun adebanjo, emmanuel banchani, solberg horve mishiwo and benjamin adejumo (2024) 85 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe lngdp c (1) 1.007985 0.010684 94.34943 0.0000 c (2) 0.004157 0.002798 1.485704 0.1380 c (3) 0.011811 0.007066 1.671616 0.0953 c (6) -0.101077 0.115450 -0.875509 0.3817 tax c (7) -0.050260 0.209249 -0.240191 0.8103 c (8) 1.029766 0.027297 37.72425 0.0000 c (11) 4.40e-05 3.72e-05 1.182653 0.2375 c (12) -0.200369 1.698740 -0.117952 0.9062 inf c (13) 0.055339 0.166248 0.332870 0.7394 c (15) 0.356041 0.087329 4.077020 0.0001 c (16) 0.000222 0.001841 0.120591 0.9041 c (18) 1.101120 1.166850 0.943669 0.3458 fdi c (19) 3.855047 10.34953 0.372485 0.7097 c (22) 0.289386 0.099692 2.902806 0.0039 c (23) 0.011455 0.002551 4.489842 0.0000 c (24) -15.62439 69.77611 -0.223922 0.8229 gni c (25) -34.78782 50.49331 -0.688959 0.4912 c (28) -1.360146 0.486376 -2.796488 0.0054 c (29) 1.077280 0.012448 86.54449 0.0000 c (30) 239.5507 340.4239 0.703684 0.4820 source: author’s computation table 3 shows that the first lag of lngdp is statistically significant at the 1% level, the second lag of taxation is statistically significant at the 1% level, the second lag of inflation is statistically significant at the 1% level, the second and third lags of fdi are statistically significant at the 1% level, and the second and third lags of gni are statistically significant at the 1% level, implying that at least one of the series is statistically significant. this suggests a short-run relationship between the series consisting of gdp (which is a proxy for economic performance), taxation, inflation, fdi, and gni. table 4: correlated random effects: hausman test test summary chi-sq. statistic chi-sq (d. f) prob. cross-section random 0. 4386 4 0.7140 cross-sectional random effect test comparisons: variable fixed (a) random (b) diff(a-b) prob. taxation 0.01787 0.08905 -0.07118 0.6148 seun adebanjo, emmanuel banchani, solberg horve mishiwo and benjamin adejumo (2024) 86 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe inflation -0.00713 -0.01217 0.00504 0.5311 fdi 0.00159 0.00119 0.00040 0.3359 gni 0.00006 0.00013 -0.00124 0.0661 source: author’s computation table 4 shows that the hausman test result (p = 0.7140) indicates that the random-effect estimator is suitable for the analysis of panel data. meanwhile, none of the independent variables are statistically significant for the random effect comparison to identify the ones with endogeneity issues, indicating that none of the explanatory variables suffer from the endogeneity problem. this suggests that the specified random-effects model by the hausman test does not have the problem of endogeneity. table 5: random-effects regression lngdp coefficient std. error t-statistic prob. c 7.76129 0.222045 34.95 0.000 taxation 0.08905 0.012011 4.90 0.000 inflation -0.01217 0.036164 -0.34 0.736 fdi 0.00119 0.000929 1.29 0.198 gni 0.00013 .0.000018 7.31 0.000 r-squared 0.898 adj. r-squared 0.891 f-statistic 138.84 prob (f-statistic) 00000.00 0.000 source: author’s computation table 5 indicates the overall p = 0.000 for the random-effects model, indicating a significant relationship between taxation and economic performance while controlling for inflation, fdi, and gni. according to the model results, the coefficient estimates of taxation and gni are statistically significant at the 1% level and have a significant positive effect on economic performance. this means that a high level of taxation and gni will lead to better economic performance in the world’s developed economies. this supports the work of korkmaz et al. (2019) and nguyen (2019), who found that taxation has a positive effect on economic growth. the r-squared of 0.898 suggests that taxation, inflation, fdi, and gni account for 89.8% of the variation in economic performance. table 6: panel fully modified least squares (fmols) lngdp coefficient std. error t-statistic prob. vif taxation 0.042948 0.060307 0.712160 0.0482 1.170193 inflation -0.000601 0.062403 -0.009631 0.9923 1.109935 seun adebanjo, emmanuel banchani, solberg horve mishiwo and benjamin adejumo (2024) 87 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe fdi 0.002731 0.001451 1.882798 0.0329 2.228070 gni 3.17e-05 3.52e-05 0.901841 0.3695 2.142718 r-squared 0.896082 adjusted r-squared 0.889305 s.e. of regression 0.454215 long-run variance 0.585706 source: author’s computation table 6 shows that the coefficient estimate of taxation and fdi has a long-term significant positive effect on developed nations’ economic performance at the 5% level. this means that, in the long run, a high level of taxation and fdi will help developed nations do better economically. this supports the research hypothesis and endogenous growth theory, but it contradicts the work of shahmoradi et al. (2019), which states that taxation has a significant negative effect on the economic performance of developed nations in the long run. figure 1 shows the graph of gdp for the three selected developed economies of the world, and we can see that the united states demonstrated the highest gdp level among the developed nations under review. the figure 2 shows the graph of taxation for the three selected developed nations under review. australia demonstrated the highest taxation proxy by tax revenue among the three developed economies of the world and figure 3 shows the normality test for the residual of the fitted fmols using the jarque-bera test. the result shows that p > 0.05, suggesting that the model’s residual is normally distributed. 0 4,000 8,000 12,000 16,000 20,000 24,000 28,000 c an ad a 90 c an ad a 94 c an ad a 98 c an ad a 02 c an ad a 06 c an ad a 10 c an ad a 14 c an ad a 18 c an ad a 22 u ni te d s ta te s 92 u ni te d s ta te s 96 u ni te d s ta te s 00 u ni te d s ta te s 04 u ni te d s ta te s 08 u ni te d s ta te s 12 u ni te d s ta te s 16 u ni te d s ta te s 20 a us tr al ia 9 0 a us tr al ia 9 4 a us tr al ia 9 8 a us tr al ia 0 2 a us tr al ia 0 6 a us tr al ia 1 0 a us tr al ia 1 4 a us tr al ia 1 8 a us tr al ia 2 2 gdp figure 1: gdp of selected developed economies during the period under review seun adebanjo, emmanuel banchani, solberg horve mishiwo and benjamin adejumo (2024) 88 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe 4 8 12 16 20 24 28 32 c an a d a 9 0 c an a d a 9 4 c an a d a 9 8 c an a d a 0 2 c an a d a 0 6 c an a d a 1 0 c an a d a 1 4 c an a d a 1 8 c an a d a 2 2 u n it e d s ta te s 9 2 u n it e d s ta te s 9 6 u n it e d s ta te s 0 0 u n it e d s ta te s 0 4 u n it e d s ta te s 0 8 u n it e d s ta te s 1 2 u n it e d s ta te s 1 6 u n it e d s ta te s 2 0 a u st ra lia 9 0 a u st ra lia 9 4 a u st ra lia 9 8 a u st ra lia 0 2 a u st ra lia 0 6 a u st ra lia 1 0 a u st ra lia 1 4 a u st ra lia 1 8 a u st ra lia 2 2 taxation figure 2: taxation of selected developed economies during the period under review 0 2 4 6 8 10 12 -1.0 -0.5 0.0 0.5 1.0 1.5 series: residuals sample 1991 2023 observations 99 mean -0.017451 median 0.049400 maximum 1.626933 minimum -0.956131 std. dev. 0.439741 skewness 0.180208 kurtosis 3.652413 jarque-bera 2.291612 probability 0.317968 figure 3: normality test for the residuals of fmols conclusion taxation, a fundamental component of fiscal policy, undeniably exerts an influence on economic production due to the allocation of taxpayer funds, particularly in industrialized nations, toward the provision of essential infrastructure such as reliable electricity, well-maintained roads and sufficient water supply, among other necessities. hence, the objective of this research is to examine the extent to which taxes influence the economic performance of developed economies globally. the analysis reveals a correlation between taxation and the economic success of developed nations in the near term. the analysis’s findings suggest that taxation and foreign seun adebanjo, emmanuel banchani, solberg horve mishiwo and benjamin adejumo (2024) 89 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe direct investment (fdi) have a statistically significant positive relationship with developed nations’ long-term economic performance. this implies that higher levels of taxation and increased returns on foreign direct investment contribute to enhanced economic performance in developed economies worldwide. therefore, governments in developed economies should persist in implementing a sustainable tax policy that is sufficiently appealing to augment tax revenue and foster the sustained expansion of foreign direct investment (fdi) and gross national income (gni). this, in turn, would improve economic performance in both the short and long term. references abdioglu, n., binis, m., & arslan, m. (2016). the effect of corporate tax rate on foreign direct investment: a panel study for oecd countries. ege academic review, 16(4), 599–630. adebanjo, s. a., & morufu, a. o. (2022). transparency and global initiatives in the face of natural resource depletion in sub-saharan africa. journal of environmental science and economics, 1(2), 13–24. ahmad, s., & sial, m. (2016). taxes and economic growth: an empirical analysis of pakistan. european law review, 8(6), 01. https://doi.org/10.21859/eulawrev-08062 ajetunmobi, o., uwuigbe, u., uwuigbe, o. r., lanre, n., & omoyiola, a. (2019). taxation, exchange rate and foreign direct investment in nigeria. banks and bank systems, 14(3), 76–85. https://doi.org/10.21511/bbs.14(3) appiah-kubi, s. n. k., malec, k., phiri, j., maitah, m., gebeltová, z., smutka, l., blazek, v., maitah, k., & sirohi, j. (2021). impact of tax incentives on foreign direct investment: evidence from africa. sustainability, 13(15), 8661. https://doi.org/10.3390/su13158661 göndör, m., & özpençe, ö. (2014). an empirical study on fiscal policy in crises time: evidence from romania and turkey. procedia economics and finance, 15, 975–984. goodspeed, t., martinez-vazquez, j., & zhang, l. (2011). public policies and fdi location: differences between developing and developed countries. public finance analysis, 67(2), 171–191. https://doi.org/10.2307/41303586 hakim, t. a. (2020). direct versus indirect taxes: impact on economic growth and total tax revenue. international journal of financial research, 11(2), 146–153. korkmaz, s., yilgor, m., & aksoy, f. (2019). the impact of direct and indirect taxes on the growth of the turkish economy. public sector economics, 43(3), 311–323. https://doi.org/10.3326/pse.43.3.5 maganya, m. h. (2020). tax revenue and economic growth in developing country: an autoregressive distribution lags approach. central european economic journal, 7(54), 205–217. https://doi.org/10.2478/ceej-20200018 seun adebanjo, emmanuel banchani, solberg horve mishiwo and benjamin adejumo (2024) 90 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe mercer-blackman, v., & camingue-romance, s. (2020). the impact of united states tax policies on sectoral foreign direct investment to asia. asian development bank (adb), economic working paper series, 628. https://doi.org/10.22617/wps200388-2 mdanat, m. f., shotar, m., samawi, g., mulot, j., arabiyat, t. s., & alzyadat, m. a. (2018). tax structure and economic growth in jordan, 1980–2015. euromed journal of business, 13(1), 102–127. https://doi.org/10.1108/emjb-11-2016-0030 mohs, j. n., wnek, r., & galloway, a. (2018). the impact of taxes on foreign direct investments. international journal of accounting and taxation, 6(2), 54–63. https://doi.org/10.15640/ijat.v6n2a6 nguyen, h. h. (2019). impact of direct tax and indirect tax on economic growth in vietnam. journal of asian finance, economics and business, 6(4), 129–137. https://doi.org/10.13106/jafeb.2019.vol6.no4.129 olofin, o. p., aiyegbusi, o. o., & adebayo, a. a. (2019). analysis of foreign direct investment and economic growth in nigeria: application of spatial econometrics and fully modified ordinary least square (fmols). foreign trade review, 54(3), 159-176. pradhan, k. c. (2016). does remittance drive economic growth in emerging economies: evidence from fmols and panel vecm. theoretical & applied economics, 23(4). rahman, m. m., hosan, s., karmaker, s. c., chapman, a. j., & saha, b. b. (2021). the effect of remittance on energy consumption: panel cointegration and dynamic causality analysis for south asian countries. energy, 220, 119684. romer, c. d., & romer, d. h. (2010). the macroeconomic effects of tax changes: estimates based on a new measure of fiscal shocks. american economic review, 100, 763–801. shahmoradi, m., mohamadi molqarani, a., & moayri, f. (2019). tax policy and economic growth in the developing and developed nations. international journal of finance and managerial accounting, 4(14), 15–25. https://www.researchgate.net/publication/352787977 shafiq, m. n., hua, l., bhatti, m. a., & gillani, s. (2021). impact of taxation on foreign direct investment: empirical evidence from pakistan. pakistan journal of humanities and social sciences, 9(1), 10–18. https://doi.org/10.52131/pjhss.2021.0901.0108 thaçi, l., & gerxhaliu, a. (2018). tax structure and developing countries. european journal of economics and business studies, 4(1), 213–220. https://doi.org/10.26417/ejes.v10i1.p220-227 vintilă, g., gherghina, ş. c., & chiricu, c. ş. (2021). does fiscal policy influence the economic growth? evidence from oecd countries. economic computation and economic cybernetics studies and research, 55(2), 229–246. https://doi.org/10.24818/18423264/55.2.21.14 seun adebanjo, emmanuel banchani, solberg horve mishiwo and benjamin adejumo (2024) 91 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe zulfikar, r., & stp, m. m. (2018). estimation model and selection method of panel data regression: an overview of common effect, fixed effect, and random effect model. jema: journal ilmiah bidang akuntansi, 1-10. american interdisciplinary journal of business and economics issn: 2837-1909| impact factor : 8.87 volume. 12, number 2; apriljune, 2025; published by: scientific and academic development institute (sadi) 8933 willis ave los angeles, california https://sadijournals.org/index.php/aijbe| editorial@sadijournals.org 1 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe a structural analysis of digital customer engagement drivers and their influence on customer satisfaction in nigeia’s port logistics service ecosystem 1aniebiet j. etuk, 2aniekan eyo awah and 3aniefiok okon akpan 1department of marketing, akwa ibom state. university, obio akpa campus. 2,3department of marketing, university of uyo, akwa ibom state. e-mail: aniekaneawah@uniuyo.edu.ng doi:https://doi.org/10.5281/zenodo.15546277 abstract: in the rapidly evolving digital economy, customer engagement has emerged as a critical determinant of business success, particularly within complex service ecosystems such as port logistics. in nigeria, where port operations are vital to trade and economic development, the adoption of digital tools to enhance customer interaction and satisfaction is gaining prominence. this study conducts a structural analysis of the key drivers of digital customer engagement and investigates their influence on customer satisfaction within nigeria’s port logistics sector. by exploring the influence of digital customer engagement drivers on customer satisfaction in nigeria’s port logistics service ecosystem, the research aims to provide actionable insights into optimizing digital engagement strategies for improved service delivery and stakeholder experience. to achieve this objective, the main source of data was through primary source with the use of questionnaire. the researcher adopted the survey research design approach and data were collected from 323 respondents drawn from the port logistics service firms’ customers’ base. a total number of 318 copies of the questionnaire were retrieved in useable form representing 98.5 percent of data analyzed using the simple regression model (srm). data generated from the study were processed using descriptive and inferential statistics and hypotheses tested at0.05 level of significance. findings revealed that digital customer engagement drivers had significant influence on customer satisfaction within nigeria’s port logistics service ecosystem. thus, the study recommended that the port managers should utilize predictive analytics to deliver proactive services by examining historical customer behavior, shipment patterns, and cargo categories to anticipate future customers’ needs. keywords: digital customer engagement drivers, port service personalization, online payment integration, customer satisfaction. introduction in the rapidly evolving global economy, digital transformation has become a cornerstone for enhancing customer experience and operational efficiency across various sectors. the port logistics service ecosystem in nigeria, a vital conduit for international trade and economic development, is no exception. as logistics operations grow more complex, the need for seamless, responsive, and customer-centric services has intensified. in this context, digital mailto:aniekaneawah@uniuyo.edu.ng aniebiet j. etuk, aniekan eyo awah and aniefiok okon akpan (2025) 2 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe customer engagement (dce) has emerged as a strategic tool for fostering stronger relationships between service providers and customers. digital customer engagement encompasses the use of digital technologies—such as mobile apps, web platforms, social media, and online payment integration, personalization and real-time communication tools— to interact with, inform, and support customers throughout their service journey. these engagement drivers, when effectively deployed, have the potential to enhance customer satisfaction by improving transparency, responsiveness, and service reliability. however, in nigeria’s port logistics sector—characterized by infrastructural challenges, regulatory complexities, and service delays—the adoption and impact of dce initiatives remain underexplored (etuk, akpan and awah, 2025). understanding the influence of digital engagement drivers—such as ease of access to information, responsiveness to queries, personalized communication, and online service integration—on customer satisfaction is crucial for improving service delivery and competitiveness. this study aims to investigate how these digital engagement mechanisms affect customer satisfaction within nigeria's port logistics ecosystem. by identifying the most impactful drivers, the research seeks to provide actionable insights for policymakers, port authorities and logistics firms striving to modernize operations and meet rising customer expectations in a digital age. statement of the problem in nigeria's rapidly evolving port logistics service ecosystem, digital transformation has become a key priority for enhancing operational efficiency and customer experience. however, despite increasing investments in digital platforms—such as online tracking systems, customer portals, mobile applications, and social media channels— customer satisfaction remains inconsistent and often below expectations. this disconnect suggests that the mere availability of digital engagement tools does not automatically translate into improved customer outcomes. key drivers of digital customer engagement—such as system usability, responsiveness, personalization, reliability, online payment integration and communication—may not be effectively aligned with customer expectations or contextual realities in nigeria's port logistics sector. moreover, there is limited empirical evidence examining how these drivers influence customer satisfaction in this specific environment, where challenges such as infrastructural deficiencies, regulatory inefficiencies, and human capital gaps persist. without a clear understanding of which digital engagement factors significantly affect customer satisfaction, service providers risk misallocating resources or under-delivering value. this study seeks to address this critical gap by exploring the influence of digital customer engagement drivers on customer satisfaction, providing datadriven insights to support more strategic digital transformation efforts within nigeria’s port logistics service ecosystem. objectives of the study the main objective of this study was to examine the influence of digital customer engagement drivers on customer satisfaction of nigeria’s port logistics ecosystem. the specific objectives therefore include to:  examine the influence of port service personalization on customer satisfaction of nigeria’s port logistics service ecosystem.  ascertain how online payment integration influences customer satisfaction of nigeria’s port logistics service ecosystem. research questions this study attempt to provide answers to the following research questions: aniebiet j. etuk, aniekan eyo awah and aniefiok okon akpan (2025) 3 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe  what is the influence of port service personalization on customer satisfaction of nigeria’s port logistics service ecosystem?  to what extent does online payment integration influences customer satisfaction of nigeria’s port logistics service ecosystem? research hypotheses the following hypotheses were postulated to guide the study ho1:port service personalization does not significantly influence customer satisfaction of nigeria’s port logistics service ecosystem. ho2: online payment integration does not significantly influence customer satisfaction of nigeria’s port logistics service ecosystem. review of related literature concept of digital customer engagement drivers the nigerian port logistics sector is undergoing a significant transformation, embracing digital technologies to enhance operational efficiency and customer satisfaction. digital customer engagement drivers—such as online payment integration, real-time tracking, port service personalization and automated services—play a pivotal role in this evolution. understanding these drivers is crucial for stakeholders aiming to improve service delivery and maintain competitiveness in the global maritime industry. digital customer engagement drivers refer to the technological tools and strategies employed to interact with customers, streamline services, and foster long-term relationships. in the context of port logistics, these include:  online service platforms: web-based portals enabling customers to access services such as cargo tracking, payment processing, and documentation.  real-time tracking systems: gps and iot technologies providing live updates on cargo movement, enhancing transparency and trust.  automated communication channels: chat bots and automated emails facilitating timely information dissemination and customer support.  mobile applications: apps offering on-the-go access to port services, improving convenience for users. nigeria has initiated several digital initiatives to modernize its port operations:  digitalization roadmap: the nigerian ports authority (npa) aims to achieve full digitalization of port operations by 2025, focusing on creating a paperless and efficient system .(ship technology)  electronic truck call-up system (eto): implemented to manage truck traffic and reduce congestion at ports, enhancing operational efficiency.  electronic regulatory port portal (erpp): developed by the nigerian shippers’ council to streamline regulatory processes and improve transparency .(shippingposition)  online terminal services: platforms like the one launched by the west africa container terminal (wact) at the port of onne allow customers to manage cargo movements digitally, offering real-time visibility and control .(the guardian nigeria) the adoption of digital customer engagement drivers has led to:  enhanced transparency: real-time tracking systems provide customers with up-to-date information on cargo status, fostering trust.(adubiexpress.com)  improved efficiency: automated processes reduce delays and errors, leading to faster service delivery. https://www.ship-technology.com/news/nigeria-digitalised-port-operations/?utm_source=chatgpt.com https://shippingposition.com.ng/port-digitalization-still-in-hybrid-stage-due-to-economic-challenges-shippers-council/?utm_source=chatgpt.com https://guardian.ng/business-services/firm-launches-digital-platform-to-aid-cargo-movement/?utm_source=chatgpt.com https://adubiexpress.com/the-role-of-technology-in-revolutionizing-logistics-in-nigeria/?utm_source=chatgpt.com aniebiet j. etuk, aniekan eyo awah and aniefiok okon akpan (2025) 4 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe  increased accessibility: mobile applications and online platforms make it easier for customers to access services anytime, anywhere.  personalized services: data analytics enable the customization of services to meet individual customer needs. digital customer engagement drivers can aid to transform nigeria's port logistics ecosystem, offering opportunities for improved efficiency, transparency, and customer satisfaction. while challenges exist, strategic investments in infrastructure, capacity building, and policy development can facilitate the successful integration of digital technologies, positioning nigeria's ports as competitive players in the global maritime industry. port service personalization and customer satisfaction port service personalization involves tailoring port services to meet the specific needs and preferences of individual customers. this approach aims to enhance customer satisfaction, loyalty and operational efficiency by delivering customized experiences. in the context of port logistics, personalization can encompass various aspects, including real-time cargo tracking, customized communication channels and flexible service offerings (taylor and francis, 2025). nigeria's port sector has been undergoing significant reforms aimed at enhancing efficiency and competitiveness. the nigerian ports authority (npa) has embarked on a digitalization roadmap to transform port operations into a fully digital ecosystem by 2025. this initiative includes the deployment of systems such as the oracle enterprise business suite and the billing/revenue and invoice management system (rims) to streamline operations and improve customer service. despite these efforts, the digitalization process remains in a hybrid stage due to economic challenges and infrastructural constraints. many stakeholders still rely on manual processes, which hampers the full realization of personalized services (nwachukwu, 2023). adopting a customer-centric approach is crucial for enhancing user acquisition and retention in the logistics industry. companies like sendy fulfilment have demonstrated the effectiveness of understanding customer pain points and tailoring services accordingly. by focusing on reliable, affordable, and tech-driven delivery solutions, they have been able to build trust and foster loyalty among their clientele. in the nigerian context, implementing loyalty programs and leveraging data analytics can further deepen customer engagement. these strategies enable service providers to offer incentives, understand customer behavior and refine service offerings to meet evolving customers’ needs. the integration of advanced technologies such as artificial intelligence (ai) and machine learning (ml) plays a pivotal role in personalizing port services. these technologies facilitate the analysis of extensive datasets to uncover patterns and insights that inform decisionmaking processes. by continuously learning from customer interactions, ai and ml systems can predict future behaviors and preferences, enabling proactive service customization. furthermore, the adoption of internet of things (iot) technologies can enhance real-time communication with customers, allowing for prompt responses to inquiries and concerns. this capability reinforces a commitment to exceptional service and builds trust with customers (etuk, 2025). port service personalization plays a pivotal role in enhancing customer satisfaction within nigeria's port logistics ecosystem. by aligning services with individual customer needs and expectations, ports can improve service quality and foster customer loyalty. addressing infrastructural, technological, and human resource challenges is essential to fully realize the benefits of personalized services. online payment integration and customer satisfaction aniebiet j. etuk, aniekan eyo awah and aniefiok okon akpan (2025) 5 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe the integration of online payment systems has revolutionized service delivery across various sectors in nigeria, including the port logistics industry. as ports serve as critical nodes in global trade, the efficiency and reliability of their services, including payment processes, significantly impact customer satisfaction. understanding how online payment integration influences customer experiences in nigeria's port logistics sector is essential for enhancing service quality and competitiveness. nigeria has witnessed a significant shift towards electronic payment systems, driven by advancements in information and communication technology (ict) and the central bank of nigeria's cashless policy initiatives. electronic payment methods, such as mobile banking, internet banking, and point-of-sale (pos) systems, have become increasingly prevalent, offering convenience and efficiency to users. a study by fenuga and kolade (2010) highlighted that electronic payments have a substantial impact on service delivery, improving management efficiency and customer satisfaction in nigerian banks. the adoption of online payment systems in the port logistics sector enhances customer satisfaction through several avenues:  convenience and efficiency: online payments eliminate the need for physical presence, reducing transaction times and queues. this convenience aligns with customer expectations for swift and seamless services.  reliability and trust: secure and reliable payment platforms build customer trust. the study by mbamalu (2022) emphasized that reliability and trust are critical determinants of customer satisfaction in e-service contexts.  accessibility: online payments provide 24/7 access to services, catering to customers' needs beyond traditional working hours. however, awah, akpan and affiah (2025) posits that challenges such as network reliability, cybersecurity concerns, and limited digital literacy can hinder the effectiveness of online payment systems, potentially affecting customer satisfaction negatively. in the context of nigeria's port logistics services, integrating online payment systems can streamline operations such as cargo handling fees, customs duties, and other related charges. according to them, efficient payment processes can lead to:  reduced delays: prompt payments facilitate quicker clearance and movement of goods, enhancing overall service delivery.  transparency: digital payment records provide clear transaction histories, aiding in dispute resolution and fostering trust.  customer empowerment: providing multiple payment options empowers customers to choose methods that best suit their preferences, improving their overall experience. the integration of online payment systems holds significant promise for enhancing customer satisfaction in nigeria's port logistics service ecosystem. by offering convenience, reliability, and efficiency, these systems can transform service delivery and customer experiences. however, successful implementation necessitates addressing infrastructural, security, and educational challenges to fully realize the benefits of digital payment integration. customer satisfaction customer satisfaction is a pivotal metric in assessing the performance and competitiveness of port logistics services. in nigeria, the efficiency and quality of port services directly influence trade facilitation, economic growth, and stakeholder confidence. understanding the determinants of customer satisfaction within this sector is essential for implementing improvements and fostering sustainable development. customer satisfaction in port logistics refers to the degree to which port users' expectations are met or exceeded by the services provided. key factors influencing satisfaction include service reliability, responsiveness, assurance, empathy, and tangibility. aniebiet j. etuk, aniekan eyo awah and aniefiok okon akpan (2025) 6 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe these dimensions are often evaluated using models like servqual, which assesses the gap between customer expectations and perceptions of service delivery (inderscience). several studies have explored customer satisfaction within nigeria's port logistics ecosystem. ugboma et al. (2007) employed the servqual model to assess service quality at nigerian ports, their study findings revealed that dimensions such as reliability and responsiveness significantly impact customer satisfaction. sakyi et al. (2020) conducted a terminal-level analysis of service quality across nigerian seaports, their study findings revealed that responsiveness and assurance were the least rated service quality dimensions, indicating areas needing improvement to enhance customer satisfaction. naziah et al. (2020) in their study evaluated stakeholder satisfaction with the performance of selected nigerian seaports, their study findings revealed that while environmental performance was rated high, congestion remained a significant concern affecting overall satisfaction. customer satisfaction is integral to the success and competitiveness of nigeria's port logistics sector. by addressing infrastructural, operational, regulatory, and technological challenges, port authorities and stakeholders can enhance service quality, meet customer expectations and foster economic growth. continuous assessment and improvement of service delivery are essential for achieving sustained customer satisfaction in the evolving maritime industry (inderscience). theoretical framework in this section the theory considered relevant for this study was; technology acceptance model (tam) propounded by fred davis (1986) this is one of the most widely used models in understanding how users come to accept and use technology. it was developed to explain and predict users’ acceptance of new technologies. the model proposes that two major factors influence a person decision to adopt and use technology:  perceived usefulness (pu): the degree to which a person believes that using a particular technology will enhance their performance or make a task easier.  perceived ease of use (peou): the degree to which a person believes that using the technology will be free of effort. tam suggests that when people perceive a technology as useful and easy to use, they are more likely to accept and adopt it. this model has been widely applied in studying technology use across various sectors, including marketing and consumer behavior. review of empirical studies nwidua (2025): electronic payment systems and customer patronage of shopping malls in south-south zone, nigeria. the study aimed to explore the relationship between electronic payment systems and customer patronage of shopping mall. the method for data analysis involved a descriptive survey research method. the finding of the study revealed that card payment system, electronic funds transfer and e-wallet payment system had a significant relationship with customer patronage of shopping malls in south-south zone, nigeria. they recommended that shopping mall operators in the zone who were yet to introduce sustainable electronic payment system should introduce it immediately to promote customer patronage and repeat purchase. amadi and ikeni (2022): digital marketing strategy and customer satisfaction with airline operators in nigeria. the study aimed at empirically exploring the relationship between digital marketing strategy and customer satisfaction of airline operators in nigeria. data obtained were analyzed using the spearman’s rank correlation coefficient statistical tool, the study findings revealed a positive and significant relationship between the https://www.inderscienceonline.com/doi/10.1504/ijbfmi.2019.105344?utm_source=chatgpt.com https://www.inderscienceonline.com/doi/10.1504/ijbfmi.2019.105344?utm_source=chatgpt.com aniebiet j. etuk, aniekan eyo awah and aniefiok okon akpan (2025) 7 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe dimensions of digital marketing strategies (such as mobile website and search engine marketing) and the measures of customer fulfilment(customer engagement and electronic word-word-mouth) they recommended that airline operators should develop corporate web pages and design their websites to be user-friendly, facilitate the process of buying tickets, follow a transparent policy, prepare a web-based campaigns that will surprise, amaze and entertain customers. these will improve customer engagement and electronic word-of-mouth. methodology design of the study the study utilized a survey research design. information on both the independent and dependent variables was collected from different segments of nigeria’s port logistics service ecosystem. this approach allowed the researcher to reach and interact with a large number of customers within the region’s port logistics services. population of the study the study focused on all customers of nigeria’s port logistics services, rendering the target population virtually unlimited. sampling and the sample size determination since the population size for the study was infinite, sample size for this study was determined using the topman formula at 5% level of tolerable error. the formula is given as n = z2.pq e2 where n = required sample size z = the value of z-score associated with the degree of confidence is 95% confidence level being 1.96 from the z-score table. p = 0.7 decimal (positive) q = 0.3 decimal (negative) e = acceptable tolerance level of error (stated in percentage points) n = z2.pq e2 = 1.962. (0.7 x 0.3) 0.052 = 3.8416 x 0.21 0.0025 = 0.806736 0.0025 = 322.6 = 323 therefore, the sample size of the study was 323. sampling procedure aniebiet j. etuk, aniekan eyo awah and aniefiok okon akpan (2025) 8 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe the study adopted a convenience sampling technique to administer the research instrument. this method involved selecting participants who were both accessible and available, and who agreed to participate in the research. methods of data collection the data analysis involved both descriptive and inferential statistical methods. a simple regression analysis was used to evaluate how customer engagement drivers influenced customer satisfaction. all hypotheses were tested at a significance level of p>0.05. sources of data the main source of data employed in this study was the primary data source. the primary data source was a structured questionnaire which was served on respondents. the questionnaire was made up of two sections: section “a” generated data on demography, while section “b” was made up of two subsections which were the independent variable (customer engagement drivers) and the dependent variable (customer satisfaction). data presentation and analysis data analysis test of hypothesis one port service personalization does not significantly influence customer satisfaction of nigeria’s port logistics service ecosystem. table 1: model summary of the influence of port service personalization on customer satisfaction of nigeria’s port logistics ecosystem model r r square adjusted r square std. error of the estimate 1 .717a .791 .713 .81620 a. predictors (constant),port service personalization source: field survey, 2025 analysis of variance of the influence of port service personalization on customer satisfaction of nigeria’s port logistics ecosystem model sum of squares df mean square f sig. regression 1935.941 1 1698.853 25742.749 .000b 1 residual 852.582 3185.731 total 2788.523 319 a. dependent variable: customer satisfaction b. predictors: (constant), port service personalization source: field survey, 2025 the regression in table 1 shows that the coefficient of the constant terms (that is, the explanatory or predictor) variable. payment systems reliability has r-value of (.717) which indicates a positive relationship between the explanatory variable and the criteria variable. the r-square, the coefficient of determination value is (.791). this means that 79.1 percent of the variation on the customer satisfaction can be explained from the independent variable (port service personalization). the table also shows the adjusted r-square for the model as (.713). but adjusted r-square is very useful in multiple regression analysis where it adjusts the r-square by the number of predictor values in the model. this adjustment allows the easy comparison of the explanatory power of the models with different numbers of independent variables. the f-ratio in the anova table shows the overall regression aniebiet j. etuk, aniekan eyo awah and aniefiok okon akpan (2025) 9 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe effect in the model. the f-ratio value is 25742.749 which is significant at 0.000 and is less than 0.05 percent level of significance. therefore we reject the null hypothesis and accept that port service personalization contribute towards customer satisfaction of nigeria’s port logistics service ecosystem. hypothesis 2 online payment integration does not significantly influence customer satisfaction of nigeria’s port logistics service ecosystem. `table 2: model summary of online payment integration on customer satisfaction of nigeria’s port logistics service ecosystem model r r square adjusted r square std. error of the estimate 1 .779 .837 .741.59521 a. predictors: (constant), online payment integration analysis of variance of the influence ofonline payment integration on customer satisfaction of nigeria’s port logistics service ecosystem model sum of squares df mean square f sig. regression 1852.963 1 1572.752 2649.475 .000b 1 residual 864.795 3187.871 total 2717.758s 319 a. dependent variable: customer satisfaction b. predictors: (constant), online payment integration source: field survey, 2025 the regression result in table 2 revealed that the regression coefficient of r-value is (.779) which indicates that there is a strong positive relationship existing between online payment integration and customer satisfaction of nigeria’s port logistics service ecosystem. the model summary table shows that the r-square regression coefficient is (.837), which indicate that online payment integration accounts for 83.7 percent of the total variation on the customer satisfaction of the port logistics service ecosystem in the study area. the anova table shows the f-ratio for the regression model which indicates the statistical significance of the overall regression model. the fratio value is 2649.475 which is statistically significance at 0.000 level, since the probability value (p-v=0.000) is less than 0.05 percent, we reject the null hypothesis and upheld the alternative. this means that there is a significant influence of online payment integration on customer satisfaction in the port logistics service ecosystem. discussion of findings the first hypothesis of this study states that port service personalization does not significantly influence customer satisfaction of nigeria’s port logistics service ecosystem. the findings of the study revealed a significant influence of port service personalization on customer satisfaction of nigeria’s port logistics service ecosystem. the f-ratio in the anova table 1 shows the overall regression effect in the model. the f-ratio was25742.749which was significant at 0.000 and was less than 0.05 percent level of significance. this is in consonance with the study of amadi and ikeni (2022) who found out that there was a significant relationship between digital marketing strategy and customer satisfaction with airline operators in nigeria. the second hypothesis of this study states that online payment integration does not significantly influence customer satisfaction of nigeria’s port logistics service ecosystem. the findings of the study revealed a significant influence aniebiet j. etuk, aniekan eyo awah and aniefiok okon akpan (2025) 10 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe of online payment integration on customer satisfaction of nigeria’s port logistics service ecosystem. the f-ratio in the anova table 2 shows the overall regression effect in the model. the f-ratio was2649.475 which was significant at 0.000 and was less than 0.05 percent level of significance. this is in consonance with the study of nwidua (2025) which revealed a significant relationship between electronic payment systems and customer patronage of shopping malls in south-south zone, nigeria. summary, conclusions and recommendation summary the main thrust of this study has been presented in the preceding sections. this section is concerned with the summary of major findings. the study investigated the influence of digital customer engagement drivers on customer satisfaction in the nigeria’s port logistics service ecosystem. two hypotheses were formulated to guide this study and all the hypotheses were tested at 0.05 level of significance through the use of simple regression analysis. the two null hypotheses were rejected and the alternative hypotheses accepted. this resulted from the fact that the regression results were all significant, the computed f-values for all the two hypotheses show statistical significance of the overall regression model, this means that there was statistical significant influence of digital customer engagement drivers such as (port service personalization and online payment integration) on customer satisfaction in the nigeria’s port logistics service ecosystem. to achieve the objectives, a survey research design was used to reach out to the respondents of the port logistics service firms. the population of the study was infinite. the top man sample size determination formula at 5% level of tolerable error was used to determine the sample size of 323.the convenience sampling technique was employed in the administration of the research instrument for the study. conclusion based on the findings of this study, the following conclusions were established.  port service personalization has significant influence on customer satisfaction in the nigeria’s port logistics service ecosystem.  online payment integration has significant influence on customer satisfaction in the nigeria’s port logistics service ecosystem. recommendations based on the findings of this study, we recommend that nigeria’s port logistics service managers should:  utilize predictive analytics to deliver proactive services by examining historical customer behavior, shipment patterns, and cargo categories to anticipate future customers’ needs.  implement modern, secure and flexible online payment system such as pay portals, mobile money and card payments in order to provide safe, fast and convenient transactions to boost customer trust and satisfaction. refrences agodi, j. e., aniekan e. a., and oladipupo, a. (2016). determinants of customers’ patronage of fast food restaurants in umuahia, abia state, nigeria; journal of economic research and entrepreneurship development. issn 98765432:vol. 2, no. 2. agodi, j. e., ahaiwe, e. o., awah, a. e. (2017). salesman’s personality trait and its effects on sales performance: study of fast moving consumer goods (fmcg) in abia state, nigeria, international journal of economics and sustainable development vol. 8, no. 24. aniebiet j. etuk, aniekan eyo awah and aniefiok okon akpan (2025) 11 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe agodi, j.e., kalu, a.o. and awah, a.e. (2021). impact of service recovery on customer loyalty of selected smes in abia state, nigeria, journal of business administration and management science, alex ekwueme federal university, 1(1), 143-150 akpan, a. b. and abdul, z. (2009). assessment of the impact of the of automated teller machine (atm) on customer satisfaction the nigerian banking industry, academy international journal of nigeria, international headquarters, ahmadu bello university,zaria,nigeria,1(1),64-76. akpan, a. b. (2007). effective of bank capitalization and confidence: an assessment of customers perception in nigeria, abuja journal of business administration, university of abuja,nigeria,1(2),96-110. attih,. o., ikpe, l. and mfon, a. (2017). service marketing: a review. akwa. ibom. state. university (aksu) journal of management sciences, 2(1), 19-22. attih, o. b. (2020). packaging attributes and consumer patronage of beverages in akwaibom state, nigeria, british journal of marketing studies, 8(6), 1-18. awah, a.e., mfon, a. an andibok, n.i. (2024). celebrity endorsement and consumer buying behavior of generation y: a case study of select betting business in uyo metropolis, akwaibom state. advance journal of economics, 9(1), 1-14 awah, a. e., akpan, a. o. and emmanuel, d. o. (2024). service quality dimension and customer patronage of microfinance banks in akwaibom state, nigeria. advance journal of economics and marketing research, 9(2), 2-22. awah, a. e., akpan, a. o. and emmanuel, d. o. (2024). responsiveness and customer patronage of microfinance banks in akwaibom state, nigeria. research journal of marketing and allied studies, 12(1), 42-58. awah a. e. (2015). insurance marketing in tropical issues in marketing vol. i.p. 198-213. awah, a.e., akpan, a.o. and eno, n.a. (2021). pull promotion in the marketing of bank services: among microfinance banks in akwaibom state, advance journal of economics and marketing research, 4(9), 115 awah, a.e, akpan, a.o. and sampson, e.a. (2021). public relations and savings mobilizations drive of microfinance banks in akwaibom state, nigeria. advance.journal of economic and marketing research, 6(7), 11-16 awah, a.e., akpan, a.o. and ele, l.e. (2021). personal selling and saving mobilization drive of uniuyo microfinance bank. international journal of research in finance and marketing, 11(10), 1-9. awah, a.e., akpan, a.o. and mfon, a.a. (2024). an analytical study on the influence of brand associations on customer patronage of smart phones in akwaibom state, nigeria: a consumer behavior perspective, british international journal of business and marketing research, 7(6), 21-37. aniebiet j. etuk, aniekan eyo awah and aniefiok okon akpan (2025) 12 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe edem, u. e. &bassey, a. i. (2022). content marketing strategies and customer loyalty among fuel retailers in akwaibom s tate. journal of strategic marketing in africa, 4(2), 29-41. effiong, m. j. &udo, i.e. (2023). digital communication and consumer behavior in the nigeria oil sector. journal of marketing innovation, 1 1(2), 44-57. etuk, a., awah, e.a. and akpan o.a. (2020). e-markting and savings mobilization drive of selected microfinanace banks in uyometrolopis, akwaibom state. an international journal of business marketing and management. etuk, a., akpan, a.o. and awah, a.e. (2022). factors influencing the adoption of mobile apps among young people in nigeria. a study of university of uyo students, european journal of business and management, 14(3), 65-73 etuk, a., awah, a.e. and akpan, a.o. (2022). e-marketing strategies and savings mobilization drive of selected microfinance banks in uyo metropolis, akwaibom state, international journal of business, marketing and management, 7(3), 1-6 etuk, s.g., udo i.s. and awah a. (2022), customer relationship management and marketing technology, stra mark communication consult etuk, a., akpan, a. o., &awah,a.e. (2023).electronic banking and marketing performance of deposit money banks in uyo, akwaibom state. american interdisciplinary journal of business and economics (aijbe), 10(3), 23-42. https;//doi.org/10.5281/zenodo.8346738 etuk, a., awah, a.e. and akpan, a.o. (2024).physical ambience and customer behavior in selected microfinance banks in uyo metropolis, akwaibomstate,top american journal of marketing.9(1), 1-24. etuk, a., awah, a. e. and akpan, a.o. (2024). assurance and customer patronage of microfinance banks in akwaibom state, nigeria, american journal of information technology and management, 12(2), 1-23. etuk, a., akpan, a. o., &awah, a. e. (2024). e-service reliability and customer loyalty in online shopping in nigeria: the moderating role of age and education, journal of current research in business and management sciences, 12(2), 2-16. etuk, a., awah, a.e. and akpan, a.o. (2024). empathy and customer patronage of microfinance banks in akwaibom state, nigeria. international journal of marketing research and brand management, 12(2), 3650. etuk, a., akpan, a. o., &awah, a. e. (2024). the role of age and education in moderating the relationship between e-service security and customer loyalty: the nigerian online shopping experience, michigan international journal of marketing. new media and communication, 12(2), 50-64. aniebiet j. etuk, aniekan eyo awah and aniefiok okon akpan (2025) 13 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe etuk, a., awah, a. e. and akpan, a.o. (2024). tangibility and customer patronage of microfinance banks in akwaibom state, nigeria. american journal of business and cooperative research, 9(2), 1-19. etuk, a., awah, a.e. and akpan, a.o. (2024).eservice responsiveness and customer loyalty in online shopping in nigeria: the moderating role of age and education, european journal of marketing and management sciences, 7(2), 13-30. etuk, a., awah, a.e. and akpan, a.o. (2024). internal marketing strategies and employee performance of commercial banks in uyo, akwaibom state, american research journal of economics, finance and management, 12 (3), 47-65. etuk, a., akpan, a. o., &awah, a. e. (2024). e-service fulfillment and customer loyalty in online shopping in nigeria: the moderating role of age and education, british international journal of business and marketing research, 7(4), 41-59. etuk, a., awah, a.e. and akpan, a.o. (2024). marketing communication and consumer behaviour of betting firms in uyo metropolis, akwaibom state, nigeria, advanced journal of economics and business research, 12(3), 17-34. etuk, a., akpan, a. o., &awah, a. e. (2024).digital transformation service marketing in nigeria; reshaping strategies and enhancing customer engagement, michigan journal of multidisciplinary research, 12(3), 2945. etuk, a., awah, a.e. and akpan, a.o. (2024). an empirical analysis of customer complaint management systems and their influence on customer satisfaction in the smart phone industry: a case study of uyo, akwaibom state, nigeria, international journal of management communication, 12(4), 1-15. etuk, a., akpan, a. o., &awah, a. e. (2024). advertising budgets and financial performance: analyzing the optimal balance for long-term profit abilityin nigerian startups, american inter disciplinary journal of business and economics, 11(4), 18-30. etuk, a., akpan, a. o., &awah, a. e. (2025). the role of mobile apps in enhancing service marketing effectiveness in nigeria’s financial service sector, holex journal of marketing and mass communication, 13(1, 17-28. etuk, a., akpan, a. o., &awah, a. e. (2025). analysis of the influence of ai-driven services on customer perception in the nigerian e-commerce sector, international journal of interdisciplinary research in marketing and management, 12(1), 1-16. etuk, a., awah, a.e. and akpan, a.o. (2025).analyzing customer perception and customer satisfaction in the hospitality sector: insights from hotels in akwaibom state, research journal of marketing and allied studies,13(1),13-25. aniebiet j. etuk, aniekan eyo awah and aniefiok okon akpan (2025) 14 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe etuk, a., akpan, a. o., &awah, a. e. (2025). the influence of online reviews on brand perception and customer engagement in service marketing in nigeria, international journal of contemporary research in marketing and management sciences.13(1),1-14. etuk, a., &awah, a. e. (2025). the role of technological service innovation in enhancing customer satisfaction: an iot and smart hospitality study of hotels in uyo, akwaibom fenuga, o. j., &kolade, o. r. (2010). the effect of electronic payment on customer service delivery in nigerian banks. international journal of economic development research and investment (ijedri). 12(1), 16-28. mbamalu, c. (2022). evaluation of e-service quality and customer satisfaction on point of sales in anambra state, nigeria. global journal of applied, management and social sciences. nwachukwu, c. &okoro, g. (2023). adoption of digital marketing in nigeria’s petroleum downstream sector: opportunities and constraints. african journal of business and digital economy, 5(1), 21-35. naziah, m. s., &naziah, m. s. (2020). evaluating stakeholder’s satisfaction with the performance of selected seaports in nigeria. international journal of sustainable building technology and urban development, 11(3), 142-152. obong, j. a. &ekanem, e. u. (2022). social media usage and marketing effectiveness among sme’s in akwaibom state. nigerian journal of digital marketing, 8(1), 13-28. sakyi, d., appiah, c. k., ayesu, e. k., &baidoo, s. t. (2020). a terminal level analysis of service quality at nigerian seaports. journal of shipping and trade, 5(17). udonde, u.e, akpan, a.o. and awah, a.e. (2022). internal marketing and employee performance in insurance industry in nigeria, british, international journal of business and marketing research, 5(1), 1-22. udonde, u.e., awah, a.e. and akpan, a.o. (2022). effect of communication and empowerment on sales-force performance in the nigerian insurance industry. advance journal of economic and marketing research, 7(11). udoh, i.s., jospeh, u.e. and awah, a. (2022). service experience and passengers’ patronage of transit companies in the south-south region of nigeria. british journal. ugboma, c., ogwude, i. c., ugboma, o., &nnadi, k. (2007). service quality and satisfaction measurements in nigerian ports: an exploration. maritime policy & management, 34(4), 331-346. american interdisciplinary journal of business and economics issn: 2837-1909| impact factor : 6.71 volume. 11, number 2; april-june, 2024; published by: scientific and academic development institute (sadi) 8933 willis ave los angeles, california https://sadijournals.org/index.php/aijbe| editorial@sadijournals.org 58 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe brain drain and performance of state-owned universities in south east, nigeria awoke chigozirim florence, prof n.m. ile, ph.d. and prof t, o. enudu, ph.d. department of business administration, enugu state university of science and technology doi: https://doi.org/10.5281/zenodo.11198422 abstract: the study evaluated brain drain and performance of state universities in south east, nigeria. the specific objectives were to; examine the relationship between leaving of educated staff for quality of life and quality of teaching and learning; evaluate the relationship between migration of high-quality lecturers for high salaries and visibility and identify the relationship between skilled staff movement to access advanced technology and mobility of academic researchers of state-owned universities in south east, nigeria. the study used the survey approach and simple random sampling. the primary source of data was the administration of the questionnaire. the population of the study is three thousand two hundred and fifty (3250) which consists of selected lecturers both male and female of different carders in the selected universities. the sample size of three hundred and forty-four (344) was determined using cochrian (1963) sampling technique at a 5 percent margin of error. two hundred and eighty-one (281) staff returned the questionnaire accurately filled. data were analyzed by mean score and standard deviation. the hypotheses were analyzed using the pearson correlation coefficient (r). the findings indicated there was significance positive relationship between leaving of educated staff for quality of life and quality of teaching and learning in state owned universities in south east, nigeria, ( r=.579 <.869, p<.05). there was significance positive relationship between migration of high quality lecturers for high salaries and visibility of state owned universities in south east, nigeria, ( r=.725 <.841, p<.05). there was significance positive relationship between skilled staff movement to access advanced technology and mobility of academic researchers staff of state owned universities in south east, nigeria, ( r=.390 < .907, p<.05). the study concluded that the departure of educated staff, skilled staff movement, and migration of lecturers had significant negative relationship with quality of teaching and learning, visibility and mobility of academic researcher’s staff in state owned universities in south east, nigeria. keywords: brain drain, mobility, performance, migration staff movement 59 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe section one introduction 1.1 background of the study quality teaching has become an issue of importance as the landscape of higher education has been facing continuous changes. the absence of human capital is a phenomenon that has been of concern to academics and development practitioners. brain drain is a slang term indicating substantial emigration or migration of individuals due to turmoil within a nation, the existence of favorable professional opportunities in other countries, or from a desire to seek a higher standard of living. it represents the loss of highly skilled professionals from a source country to a recipient country. apart from all the damages brain drain causes, it also has positive effects on society, especially for the source countries. in this case, when the possibility of migration is real, the level of education in the country rises. thereby increasing the labour force of skilled and potential workers finding their way to the academic sectors (ehezi, 2021). the economy of a developing country may suffer if there is a large outflow of skilled workers. there are many considerations that a migrant considers when deciding whether or not to relocate to a more developed country. typically, brain drain is referred to as an issue that must be addressed. the phenomenon, on the other hand, has advantages. when people relocate from less developed countries to more developed countries, they acquire new skills and experiences that they can use when they return to their native country. in addition, remittances, which are money that migrants send back to their home countries, can support the economies of such countries (burtler, francis and shinn, 2022). brain drains involves the mass migration of skilled professions from an underdeveloped region to a developed region. it affects various sectors of a nation including the educational aspect. this in turn may be disastrous to the upbringing of young scholars in the depleted nation. a university is an institution of higher learning providing facilities for teaching and research and authorized to grant academic degrees. state owned universities are universities of college that is in state ownership or receives significant public funds through a national or subnational government, as opposed to a private university. whether a national university is considered public varies from one country (or region) to another, largely depending on the specific education landscape. femi, (2009) noted that the case of brain drain seems to be overlooked within the nigerian educational institutions. universities are one of the most important institutions of comprehensive development. they are responsible for preparing and qualifying human resources in the light of scientific and technological progress. faculty members in the universities are the most important elements of the educational process, and the most important reasons for the success of universities in achieving their social goals (abdalmenem, owda, al hila, abu-naser and al shobaki, 2018). the nigerian education industry is surrounded by a mirage of problems; one of such problems is brain drain syndrome. the reason for establishing universities is to help transform the mind and skills of willing youths in order to make them useful to themselves and society at large. lecturers stand as the driving force in which this goal can be achieved. this is because unfolding events in the lecturing profession prove that lecturing as a profession in the modern day goes beyond talk and chalk. the issue of brain drain in some key sectors of the economy is not a new phenomenon. thus, brain drain is a situation where the highly skilled and specialized individuals leave low-paying jobs for highlypaid jobs, usually outside the country. baridam and baridam, (2020) proposed that the mass exodus of highly skilled manpower from nigeria to other enabling environments of the world is a classic definition of brain drain at its most scandalous manifestation. the bad news is that while the benefitting countries of brain drain continue to improve their 60 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe skilled manpower base, the victim countries, such as nigeria, continue to suffer from specialized manpower deficit on all fronts. in view of this backdrop the present study aimed to evaluate the brain drain and performance of state universities in south east, nigeria. 1.2 statement of the problem brain drains of intellectuals emerges not only in the under developed or economically weak countries but also in developed countries. brain drain in academic section is any process that leads to educational institutions losing some or a significant number of its academic staff to other sector of the economy or to other countries. in development circles, there is a growing realization that sustainable development cannot take place without sound human capital, with education being a key component in this regard. it could be noticed that the object of brain drain is practically related to the matters of great concern. performance determines the end product of various activities undertaken by organization, a reflection of the way in which tangible and intangible resources are invested in the organization in order to achieve the desired goals. nevertheless, performance challenges in the universities often leads to brain drain problems and have left a very huge impact on the educational quality. in addition to the weakness of the infrastructure and educational content, which limits the ability of state-owned universities in south east, nigeria to develop educational performance compared to other universities the present study identifies that they encounter problems due to brain drain which includes migration of high-quality lecturers for high salaries, departure of educated staff for quality of life and skilled staff movement to access advances technology. the high level of mass departure of highly skilled and talented individuals from the state-owned universities in south-east, nigeria to other conducive nations of the world is a great and negative result of brain drain in the tertiary institutions. the effects of brain-drain on the higher institutions administration frustrates the administration of tertiary institutions including state owned universities. poor quality education, high studentteacher ratio, shortage of academic staff, poor research development and poor programme development all contributes to the level of performance through which a university would be rated and as such the present study sought to evaluate the brain drain and performance of state-owned universities in south east, nigeria. 1.3 objectives of the study the main objective of the study was to evaluate the brain drain and performance of state universities in south east, nigeria. the specific objectives were to; i. examine the relationship between leaving of educated staff for quality of life and quality of teaching and learning in state owned universities in south east, nigeria. ii. evaluate the relationship between migration of high-quality lecturers for high salaries and visibility of state-owned universities in south east, nigeria. 1.4 research questions the following research question guided the study i. what is the relationship between leaving of educated staff for quality of life and quality of teaching and learning in state owned universities in south east, nigeria? ii. what is the relationship between migration of high-quality lecturers for high salaries and visibility of state-owned universities in south east, nigeria? 1.5 statement of hypotheses guided the study the following null hypothesis guided the study 61 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe i. there is no significance positive relationship between leaving of educated staff for quality of life and quality of teaching and learning in state owned universities in south east, nigeria. ii. there is no significance positive relationship between migration of high-quality lecturers for high salaries and visibility of state-owned universities in south east, nigeria. 1.6 significance of the study the study on brain drains and performance of state universities in south east, nigeria will benefit the following government: it will help the government to look into the nation’s economy in other to identify those areas which are more likely to cause brain drain. lecturers: the study will benefit lecturers as it was carried out mainly on universities. it will to understand specifically those factors that are likely not to favour lecturers that will lead to their departure from the university and address it because once the education system of a nation starts to fall; the nation has a high tendency of falling out. students: students will also benefit from the study as it addresses the challenges facing the university and methods of overcoming them. it would also help in the provision of highly skilled and talented lecturers with good subject knowledge; reduce lecturer’s turnover and increase students and institutions performance. researchers: this present research will serve as a reference material to future researchers, academicians and students. review of the related literature conceptual review 2.1 brain the brain is an organ that is made up of a large mass of nerve tissue that is protected within the skull. it plays a role in just about every major body system. the brain sends and receives chemical and electrical signals throughout the body (susam,2021). collins, (2022) established that a person’s brain is the mind and the way they think and that once an individual stops using his/her brains they go stale. also if someone has brains or a good brain, they have the ability to learn and understand things quickly, to solve problems, and to make good decisions. different signals control different processes and the brain interprets each signal skills such as working memory, planning, organization and attention develop over time with brain maturation and with practice. 2.2 brain drain a brain drains, the term often describes the departure of groups of doctors, healthcare professionals, scientists, engineers, or financial professionals. when these people leave, their places of origin are harmed in two main ways. first, expertise is lost with each emigrant, diminishing the supply of that profession. secondly, the country's economy is harmed because each professional represents surplus spending units. julie, micheal and katrina (2021) ascertained that brain drain causes countries, industries, and organizations to lose a core portion of valuable individuals. organizational and industrial brain drain is usually a byproduct of a rapidly evolving economic landscape in which companies and industries unable to keep up with technological and societal changes lose their best workers to those that can. 2.4 components of brian drain used in the study frederic, (2014) and burtler, francis and shinn, (2022) noted that the brain drain components include migration of high-quality lecturers for high salaries, departure of educated staff for quality of life and skilled staff movement to access advanced technology. 62 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe 2.4.1 departure of educated staff for quality of life lecturers’ productivity can be said to be useful results obtained from efforts made by the lecturers to attain educational goals in the university setting. thus, there is need for motivation because despite the cumbersome workload of lecturers, productivity needs to be attained but how can this be when there is little or no support from government and university management in career development through conference, seminars and constant promotion. lecturers’ productivity is seen in the morality of the students’ performance in internal and external examinations. students who graduated under a productive lecturer are known by the way they comport themselves, speak and write, (amini and okonmah, 2020). 2.4.2 migration of high-quality lecturers for high salaries the best way to improve the quality of instruction would be to lower barriers to becoming a teacher, such as certification, and to link compensation and career advancement more closely with teachers’ ability to raise student performance. mohammadi and karupiah, (2019) noted that managers of universities must pay more attention on the significant dimensions and improve them among the academic staff in order to achieve a high level of work performance. the effect of pay may work through a selection channel (better pay attracts better candidates to teaching) and a pure motivational channel. however, little is known about the impact of wage income on the behaviour and productivity of teachers (and public sector workers in general) particularly in developing countries. grieve and miquel, (2018 & ile, otti, and mbah ,2023)) ascertained that teachers are naturally a vital part of the learning process and interest has recently shifted to focus on how best to ensure that teachers deliver high quality instruction in the classroom. one of the mechanisms through which this can be done could be to offer teachers better pay. 2.4.3 skilled staff movement to access advanced technology technically skilled individuals are often an essential part of the economy because they are responsible for the creation of innovation (chen and rhinehart, 2021). the lack of access to technology and everything it offers is referred to as the digital divide. technology provides students with easy-to-access information, accelerated learning, and fun opportunities to practice what they learn. it enables students to explore new subjects and deepen their understanding of difficult concepts. as advances in technology drive globalization and digital transformation, teachers can help students acquire the necessary skills to succeed in the careers of the future (school of education, 2020). the effective use of digital learning tools in classrooms can increase student engagement, help teachers improve their lesson plans, and facilitate personalized learning. 2.5 performance academic performance is the measurement of student achievement across various academic subjects. teachers and education officials typically measure achievement using classroom performance, graduation rates and results from standardized tests (ballotpedia, 2022). academic achievement is a standard prerequisite for students to progress from one level of study to another, the need for greater efficiency, productivity and quality in the higher education sector has triggered increased governmental interest towards different mechanisms of accountability, especially evaluation and performance measurement (jussi, elias, laila, hanne, lars & anu, 2019). institutions need to develop such a system where a conducive environment is provided to their employees within the existing resources to get better employee performance. 2.6 components of performance used in the study performance is the effective accomplishment of task. effective performance in organizations leads to accomplishing of organizational goals and objectives. armstrong (2010) defines performance as the 63 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe accomplishment, execution, carrying out, working out of anything ordered or undertaken leading to outputs/ outcomes (accomplishment) or achieving of results. performance of academic staffs in universities involves teaching, research and publication, visibility of lecturers innovation, graduate employability and community service. iqbal, rasil & heng (2011) ascertained that academic staff produce development solutions through innovations. 2.6.1 quality of teaching and learning the quality of education depends on the ability, hard work and dedication of the teacher. if a teacher fails to keep himself in touch with the rapid scientific and educational developments then he would become inefficient and ineffective as indicated in the national education policy, that the teacher is considered the most crucial factor in implementing all instructional reforms at the grassroots level. it is a fact that the academic qualifications, knowledge of the subject matter, competence and skills of teaching and the commitment of the teacher have effective impact on the teaching learning process. many factors are responsible for shaping the quality teaching. these include ideological and socio-economic needs, existing structure of education system, and well-defined theories and practices of teaching and learning (ramezanghorbani, hajiabedin rangraz,& heidari, 2019) . without good knowledge of what you are teaching, it is impossible to meet these standards in a meaningful way (ambassador, 2019 & ugwu,2021). 2.6.2 visibility of state-owned universities visibility can be referred as the degree to which something is seen by the public. to achieve visibility in an academic field means that people know your name, think highly of your scientific contributions and are familiar with your work (mauvais, 2016). academic visibility relates to the dissemination, accessibility, and recognition of scholarship produced by college faculty, especially in terms of promotion and tenure criteria and academic rank. traditionally, "visibility" was a function of printed output like books, book chapters, and peer-reviewed journal articles primarily available in academic libraries. 2.6.3 mobility of academic researcher’s staff in recent years, some surveys of the ‘academic profession’ and ‘researchers’ have been undertaken primarily in economically advanced countries or especially in european countries that provide an overview on various modes, e.g. migration prior study, short-term student mobility and mobility for the whole degree programme, mobility in the phase of doctoral education and training, professional mobility in various stages of the professional career and finally shorter visits linked to academic and research work. all available information suggests that substantial differences exist by country and that no signs of convergence are visible. moreover, surveys confirm that international experience is a frequently valuable asset of academic research careers but often is viewed as less beneficial than conventional wisdom suggests (ullberg, 2015 & ugwu,2021). 2.2 theoretical framework the following theories guided the study equity theory by john s. adams (1960s) and expectancy theory by victor h. vroom (1964). the study was anchored on equity theory because it is concerned with people’s perception on how they are being treated i.e fairness in the organizations. equity theory equity theory was first developed in the early 1960s by behavioural psychologist john s. adams equity theory is a theory of motivation that suggests that employee motivation at work is driven largely by their sense of fairness. employees create a mental ledger of the inputs and outcomes of their job and then use this ledger to 64 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe compare the ratio of their inputs and outputs to others. employees will feel frustrated and distressed if they perceive themselves as being underpaid or not being rewarded accordingly. when employees fail to achieve equity, they will target their hostility towards the organisation producing negative behaviour; this is in the hope to restore justice. according to equity theory, in order to maximize individuals' rewards, we tend to create systems where resources can be fairly divided amongst members of a group. inequalities in relationships will cause those within it to be unhappy to a degree proportional to the amount of inequality (adams, 1965). the belief is that people value fair treatment which causes them to be motivated to keep the fairness maintained within the relationships of their co-workers and the organization. the structure of equity in the workplace is based on the ratio of inputs to outcomes. expectancy theory expectancy theory was proposed by victor h. vroom in the year (1964). expectancy theory proposes that an individual will behave or act in a certain way because they are motivated to select a specific behavior over others due to what they expect the result of that selected behavior will be. turnover intention is related to the expectation of a lecturer such as reward, training, working conditions, and recognition. when employees join the organisation with some expectations, the chances of negative behaviours such as absenteeism or turnover intention will increase if those expectations are not met. evaluating employees' performance is one of the most important issues that any organization will face. issues related to evaluating performance engage different aspects, including, but not limited to, employee's behavior in the workplace, the performance appraisal system, and performance appraisal conducting style, the relation between the performance appraisal system and task descriptions and finally, the fairness of the performance appraisal process. vroom's expectancy theory separates effort, performance and outcomes (vroom, 1964). 2.3. empirical review 2.3.1 the relationship between leaving of educated staff for quality of life and quality of teaching and learning in state owned universities in south east, nigeria. voss, roediger, and thorsten (2019). “the desired teaching qualities of lecturers in higher education: a means end analysis”. the study aims to develop a deeper understanding of the teaching qualities of effective lecturers that students desire and to uncover the constructs that underlie these desire expectations and reveal the underlying benefits that students look for. a semi-standardized qualitative technique called laddering was applied that allows researchers to reach deeper levels of reality and to reveal the reasons behind the reasons. the study was conducted amongst teacher education students at a large german university of education and laddering questionnaires were handed out to 53 students enrolled in a business management course the exploratory study gave a valuable first insight into the desired qualities of lecturers. in particular, the study results indicate that students want lecturers to be knowledgeable, enthusiastic, approachable, and friendly. students predominately want to encounter valuable teaching experiences to be able to pass tests and to be prepared for their due to the exploratory nature of the study and the scope and size of its sample, the results outlined are tentative in nature. as the study involved only a single group of university students from one university, the results cannot be generalized to the student population as a whole profession. this study also showed that students are mainly concerned about vocational aspects of their studies and are less interested in their subject. ogunode and ishaya, (2019) effects of brain-drain on higher institutions’ administration in nigeria. braindrain is one of the major problems facing nigerian higher institutions. many higher institutions in nigeria are 65 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe losing their professors daily due to poor working conditions. this paper intends to discuss the effects of braindrain on the administration of higher institutions in nigeria. the paper looked at the concept of brain-drain. the paper identified the causes of brain-drain in the nigerian higher institutions to include but not limited to; poor salary, unconducive working environment, poor staff development, inadequate infrastructural facilities, strike actions, insecurity and inadequate funding while the identified effects of brain-drain on the higher institutions administration to includes; poor quality education, high student-teacher ratio, shortages of academic staff, poor research development and poor programme development. the study in order to ensure higher institutions sustainability in nigeria hereby recommended among others the following: government should increase the motivation of academic staff, implement all reached agreement with trade union groups or civil society organizations in the country, ensure adequate life and job security in all higher institutions and provide more infrastructural facilities 2.3.2 the relationship between migration of high-quality lecturers for high salaries and visibility of stateowned universities in south east, nigeria. amini and okonmah, (2020) lecturers’ workload and productivity in universities in delta state. this study investigated lecturers’ workload and productivity in universities in delta state. six research questions were answered and six corresponding null hypotheses were tested at 0.05 level of significance. the study adopted the correlational research design. the population of the study comprised 164 heads of department (hods) in six public and private universities in delta state. a sample of 115 hods were drawn through stratified random sampling technique and used for the study. two instruments titled ‘lecturers workload scale’ (lws) and ‘lecturers’ productivity scale’ (lps) were used for data collection. face and content validities of the instruments were ensured by experts. the reliability coefficients of the instruments (lws and lps) were determined using cronbach alpha reliability estimate and the reliability coefficient of the lws was 0.72 while that for lps was 0.74. pearson product moment correlation was used to answer research questions 1,2,3,4 and 5. the corresponding hypotheses were subjected to 0.05 alpha level of significance. research question 6 was answered using multiple regression while anova associated with multiple regressions were used to test hypothesis 6. it was found that, there is significant high negative relationship between lecturers teaching workload, marking workload, supervision of students’ project workload, research workload and participation in community service workload and productivity in universities in delta state independently and jointly taken. sousa, gouveia, silva-júnior, ribeiro dos santos and avelino, (2020) promotion of the quality of life of workers in a higher education institution: a scope review”. the present study aimed to map the evidence to provide an overview of actions implemented/executed and scales used in public higher education institutions to promote worker health. a scoping review based on the pcc (population, concept, and context) mnemonic was conducted in pubmed, cinahl, scopus and virtual health library (vhl). population included workers from a higher education institution, the concept referred to studies focusing on the assessment of quality of life and health promotion actions and the context to higher education institutions. electronic searches were held on december 2019. a qualitative synthesis of the data extracted from included studies (i.e. author, year, study design, sample, country, aims, action implemented/performed, thematic focus, evaluation) was performed. electronic searches retrieved 3,330 articles that were screened by tittles and abstracts. of these, 34 studies were fully appraised, of which four reported that actions implemented/executed related to sedentariness, posture and stress. the studies show 49 scales were identified to measuring at least one quality of life item. through this scoping review the available evidence to provide an overview of actions implemented/executed and scales used in public higher education institutions to promote worker health. future studies should consider more rigorous 66 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe designs and objective measures to measure the quality of life of these professionals, and develop target interventions based on factors associated with the work. it is also necessary to evaluate whether the strategies work. 2.4 gap in literature the gap in literature identified by present study was that there were few works on areas of brain drain and performance. the reviewed studies were also mostly done outside enugu state and were also not recent. furthermore, these reviewed literatures were mainly qualitative studies but the present study will also adopt the quantitative and qualitative methods and further be analysed using statistical tools. the empirical reviewed were also mainly in education sector. section three methodology 3.1 research design the study employed survey research design because people’s opinion was sought using questionnaire, and their views used to justify the current practice, and consequently suggest better ways for improvement. the knowledge allows generalization to be made about characteristics, opinions, beliefs, attitudes, etc. of the entire population to be studied. a survey questionnaire was used to collect both quantitative and qualitative data from the selected academic staff of these five universities. the aim is to identify, describe and compare variables to ascertain differences and relationships of the dependent and independent variables to be use for hypotheses with appropriate and amenable test statistics. 3.2. sources of data in the course of carrying out the research, two sources were used to gather the necessary information. these includes: primary and secondary sources of data. 3.2.1 primary sources of data the primary data was collected through systematically planned questionnaire administered to the sampled lecturers of the university under study. 3.2.2 secondary sources of data the secondary sources of data for the study will be collected from published sources like: textbooks, journals, internet and statistical bulletins etc. 3.3. area of the study the field of study includes a political or geographical area including its history, geography, language, and general culture. the field of the present study was (5) states universities in the south east of nigeria. the universities include: enugu state university of science and technology, ebonyi state university, imo state university, anambra state university of science and technology, and abia state university uturu, okigwe. 3.4 population of the study the study was limited to five (5) states universities in the south east of nigeria. the universities include: enugu state university of science and technology, ebonyi state university, imo state university, anambra state university of science and technology, and abia state university uturu, okigwe. the population of the study is three thousand two hundred and fifty (3250) which consists of selected lecturers both male and female of different carders in the selected universities. 67 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe table 3.1 universities and the population for the study. source: field survey, 2022. the study was limited to five (5) states universities in the south east of nigeria. the universities include: enugu state university of science and technology, ebonyi state university, imo state university, anambra state university of science and technology, and abia state university uturu, okigwe. the population of the study is three thousand two hundred and fifty (3250) which consists of selected lecturers both male and female of different carders in the selected universities. 3.5 sample size determination considering the relatively large size of the population, using the entire population was cumbersome, hence the need for sampling. in dealing with large population, the sample size can be determined using normal approximation to the binomial distribution. the approximation is premised on the fact that the population is large and the sample is small. for instance, when you are to sample 300 individuals, for the purpose of accuracy, a smaller sample number is required thus using the normal approximation to the binormal. therefore, to determine the sample size for small populations, we use the normal approximation to the hyper geometric distribution. conchram (1977) the sample size formula includes: n = z2npq ne2 (n-1) + z2pq where: n = the required sample size n = the population size p and q = the population proportions. it is set at 0.5 s/n name of university location ass.lect. lecture ii lecturer 1 senior lecturer adj. lecture reader prof. no of staff 1 enugu state university of science and technology enugu state 20 234 189 127 75 35 40 698 2 imo state university, owerri. imo state 8 233 115 113 88 42 34 633 3 abia state university, uturuokigwe, abia state 12 213 138 121 91 38 37 650 4 ebonyi state university, abakaliki, ebonyi state 27 220 128 127 92 29 36 659 5 anambra state university, igbariam, anambra state 9 203 124 121 98 23 32 610 total 3250 68 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe z = the value that specifies the level of confidence. typical levels of confidence for surveys sets are 95%, in which case z is set to 1.96. e = error margin. in this study e is set with an accuracy of plus or minus 5%, that is, e is set to 0.05. n = 1.962 x 3250 x 0.5 x 0.5 = 3.8416𝑥3250𝑥0.5𝑥0.5 = 3121 9.085 = 343.5 3250 ( 0.052) + 1.962 x 0.5 x 0.5 9.085 therefore, the sample size for the study is 344 3.5. sampling technique for the purpose of the study, the actual population was three thousand, two hundred and fifty (3250) staff. however, to ensure that the sample is represented of each university, the proportionate stratified random sampling technique was used to determine the number of selected academic staff from each of the five universities. this was to ensure a fair representation of the respondents in each stratum of the sample for the study. bowley’s (1937) proportional allocation statistic was utilized to ensure equitable representation of the universities. bowley’s (1937) fomular: nh = nxnh n where nh = number of questionnaire allocated to each of the institution n = total sample size nh = number of proposed lecturers to be used from the selected universities n = population size. table 3. 2: questionnaire allocation to each university organisations population calculation sample size 1. enugu state university of science and technology 698 698 𝑥 344 3250 = 74 2. imo state university, owerri. 633 633 𝑥344 3250 = 67 3. abia state university, uturu okigwe, 650 650 𝑥 344 3250 = 69 4. ebonyi state university, abakaliki, 659 659 𝑥 344 3250 = 70 5. anambra state university, igbariam, 610 610 𝑥 344 3250 = 65 total 3250 344 source: author’s field work 2022 1.6 method of data collection and distribution the instrument for data collection in the study was structured questionnaire. the measuring instruments for each of the attitudinal variables were developed and designed on a 5-point likert scale of strongly agree (sa), agree (a), neutral (u), disagree (d) and strongly disagree (sd) with their corresponding weights of 5, 4, 3, 2 and 1 respectively. 3.8. data analyses technique data were analyzed using descriptive statistics such as the mean and standard deviation. the hypotheses were tested using the pearson correlation coefficient(r). section four 69 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe data presentation, analyses and interpretation table 4.1: distribution and returned questionnaire 4.1 distribution and returned questionnaire the chapter presents and analyzes the data collected for the study. the presentation and interpretation of data were based on the questionnaire administrated to the staff of the universities in southeast, nigeria. table 4.1 distribution and return of the questionnaire firms distributed no returned percent no not returned percent 1. enugu state university of science and technology 74 56 21 18 5 2. imo state university, owerri. 67 60 17 7 1 3. abia state university, uturu okigwe, 69 53 15 16 4 4. ebonyi state university, abakaliki, 70 62 18 8 1 5. anambra state university, igbariam, 65 46 13 19 5 total 344 281 84 63 16 source: from the questionnaire administration, 2022 three hundred and forty four (344) copies of the questionnaire were distributed to the respondents and two hundred and eighty one (281) copies were returned representing eighty-four (84%) percent, while sixty three (63) copies of the questionnaire were not returned representing sixteen percent (16%). this shows a high rate of the respondents. 4.2 the relationship between leaving of educated staff for quality of life and quality of teaching and learning in state owned universities in south east, nigeria. table 4.2.1 shows the relationship between leaving of educated staff for quality of life and quality of teaching and learning in state owned universities in south east, nigeria. table 4.2.1: responses to research question one on the relationship between leaving of educated staff for quality of life and quality of teaching and learning in state owned universities in south east, nigeria. 5 sa 4 a 3 n 2 da 1 sd ∑fx x sd decision 1 there is loss of value added which could have be achieved in the country 600 120 42.7 364 91 32.4 51 17 6.0 32 16 5.7 37 37 13.2 1084 281 100% 3.86 1.374 agree 2 quality labour or workforce is reduced in the university 575 115 40.9 352 88 31.3 57 19 6.8 44 22 7.8 37 37 13.2 1065 281 100% 3.79 1.392 agree 3 limited access to resources and drawbacks are investable 320 64 22.8 584 146 52.0 51 17 6.0 40 20 7.1 34 34 12.1 1029 281 100% 3.66 1.246 agree 4 bringing a candidates knowledge of a subject may decline 765 153 54.4 160 40 14.2 81 27 9.6 52 26 9.3 35 35 12.5 1093 281 100% 3.89 1.458 agree 5 the movement of lecturers for economic factors creates knowledge vaccum 450 90 32.0 540 135 48.0 45 15 5.3 30 15 5.3 26 26 9.3 1091 281 100% 3.88 1.188 agree total grand mean and standard deviation 3.816 1.3316 70 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe source: field survey, 2022 table 4.2.1, 211 respondents out of 281 representing 75.1 percent agreed that there is loss of value added which could have be achieved in the country with mean score of 3.86 and standard deviation of 1.374. quality labour or workforce is reduced in the university with 203 respondents representing 72.2 percent agreed with mean score of 3.79 and standard deviation of 1.392. limited access to resources and drawbacks are invetable with 210 respondents representing 74.8 percent agreed with mean score of 3.66 and standard deviation of 1.246. bringing a candidate’s knowledge of a subject may decline with 193 respondents representing 68.6 percent agreed with mean score of 3.89 and 1.458. the movement of lecturers for economic factors creates knowledge vacuum with 225 respondents representing 80.0 percent agreed with a mean score of 3.88 and standard deviation of 1.188. 4.2.2 the relationship between migration of high-quality lecturers for high salaries and visibility of stateowned universities in south east, nigeria. table 4.2.2 shows the relationship between migration of high-quality lecturers for high salaries and visibility of state-owned universities in south east, nigeria table 4.2.2: responses to research question one the relationship between migration of high-quality lecturers for high salaries and visibility of state-owned universities in south east, nigeria 5 sa 4 a 3 n 2 da 1 sd ∑fx x sd decision 1 the departure of educated lecturers makes teaching unaccessible 340 68 24.2 480 120 42.7 48 16 5.7 106 53 18.9 24 24 8.5 998 281 100% 3.55 1.275 agree 2 there is discouragement of viable career path to range of graduates 400 80 28.5 412 103 36.7 36 12 4.3 124 62 22.1 24 24 8.5 996 281 100% 3.54 1.333 agree 3 the actual knowledge lecturer is expected to teach is lost 305 61 21.7 404 101 35.9 78 26 9.3 128 64 22.8 29 29 10.3 944 281 100% 3.36 1.321 agree 4 making things easier and understandable for students becomes difficult 255 51 18.1 520 130 46.3 15 5 1.8 124 62 22.1 33 33 11.7 947 281 100% 3.37 1.322 agree 5 loss of good lecturer reduces model for interactions among students and other lecturers 350 70 24.9 396 99 35.2 27 9 3.2 124 62 22.1 41 41 14.6 938 281 100% 3.34 1.430 agree total grand mean and standard deviation 3.432 1.3362 source: field survey, 2022 table 4.2.2, 188 respondents out of 281 representing 66.9 percent agreed that the departure of educated lecturers makes teaching inaccessible with mean score of 3.55 and standard deviation of 1.275. there is discouragement of viable career path to range of graduates with 183 respondents representing 65.2 percent agreed with mean score of 3.54 and standard deviation of 1.333. the actual knowledge lecturer is expected to teach is lost with 162 respondents representing 57.6 percent agreed with mean score of 3.36 and standard deviation of 1.321. 71 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe making things easier and understandable for students becomes difficult with 181 respondents representing 64.4 percent agreed with mean score of 3.37 and 1.322. loss of good lecturer reduces model for interactions among students and other lecturers with 169 respondents representing 60.1 percent agreed with a mean score of 3.34 and standard deviation of 1.430. 4.3 test of hypotheses 4.3.1 hypothesis one: there is no significance positive relationship between leaving of educated staff for quality of life and quality of teaching and learning in state owned universities in south east, nigeria. table 4.3.1.1 shows the correlations between leaving of educated staff for quality of life and quality of teaching and learning in state owned universities in south east, nigeria correlations there is loss of value added which could have bee achieved in the country quality labour or workforce is reduced in the university limited access to resources and drawbacks are invetable bringing a candidates knowledge of a subject may decline the movement of lecturers for economic factors creates knowledge vaccum there is loss of value added which could have bee achieved in the country pearson correlation 1 .869** .819** .698** .631** sig. (2-tailed) .000 .000 .000 .000 n 281 281 281 281 281 quality labour or workforce is reduced in the university pearson correlation .869** 1 .813** .733** .637** sig. (2-tailed) .000 .000 .000 .000 n 281 281 281 281 281 limited access to resources and drawbacks are investable pearson correlation .819** .813** 1 .746** .579** sig. (2-tailed) .000 .000 .000 .000 n 281 281 281 281 281 bringing a candidates knowledge of a subject may decline pearson correlation .698** .733** .746** 1 .615** sig. (2-tailed) .000 .000 .000 .000 n 281 281 281 281 281 the movement of lecturers for economic factors creates knowledge vaccum pearson correlation .631** .637** .579** .615** 1 sig. (2-tailed) .000 .000 .000 .000 n 281 281 281 281 281 **. correlation is significant at the 0.01 level (2-tailed). table 4.3.1. showed the pearson correlation matrix on the leaving of educated staff for quality of life and quality of teaching and learning in the instutition showing the correlation coefficients, significant values and the number of cases. the correlation coefficient shows .579 <.869. this value indicates that the correlation is significant at 0.05 level (2 tailed) and implies that there was significance relationship between leaving of educated staff for quality of life and quality of teaching and learning in state owned universities in south east, nigeria, (r= .579 <.869). the computed correlations coefficient is greater than the table value of r = .000 with at alpha level for a two-tailed test (r= .579 <.869, p<.05). decision rule the decision rule is to accept the null hypothesis if the computed r is less than the tabulated r otherwise reject the null hypothesis. decision 72 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe since the computed (r =.579 <.869) is greater than the table value of .000, we reject the null hypothesis. therefore, we concluded that there was significance relationship between leaving of educated staff for quality of life and quality of teaching and learning in state as reported in the probability value of ( r=.579 <.869, p<.05). 4.3.2.1 hypothesis two: there is no significance positive relationship between migration of high quality lecturers for high salaries and visibility of state owned universities in south east, nigeria. table 4.3.2.1 shows the correlations between migration of high quality lecturers for high salaries and visibility of state owned universities in south east, nigeria correlations the departure of educated lecturers makes teaching unaccessible there is discourageme nt of viable career path to range of graduates the actual knowledge lecturer is expected to teach is lost making things easier and understandable for students becomes difficult loss of good lecturer reduces model for interactions among students and other lecturers the departure of educated lecturers makes teaching unaccessible pearson correlation 1 .841** .723** .806** .749** sig. (2-tailed) .000 .000 .000 .000 n 281 281 281 281 281 there is discouragement of viable career path to range of graduates pearson correlation .841** 1 .764** .781** .830** sig. (2-tailed) .000 .000 .000 .000 n 281 281 281 281 281 the actual knowledge lecturer is expected to teach is lost pearson correlation .723** .764** 1 .866** .725** sig. (2-tailed) .000 .000 .000 .000 n 281 281 281 281 281 making things easier and understandable for students becomes difficult pearson correlation .806** .781** .866** 1 .821** sig. (2-tailed) .000 .000 .000 .000 n 281 281 281 281 281 loss of good lecturer reduces model for interactions among students and other lecturers pearson correlation .749** .830** .725** .821** 1 sig. (2-tailed) .000 .000 .000 .000 n 281 281 281 281 281 **. correlation is significant at the 0.01 level (2-tailed). table 4.3.2. showed the pearson correlation matrix on migration of high quality lecturers for high salaries and visibility of the institutions showing the correlation coefficients, significant values and the number of cases. the correlation coefficient shows .725 <.841. this value indicates that the correlation is significant at 0.05 level (2 tailed) and implies that there was significance relationship between migration of high quality lecturers for high salaries and visibility of state owned universities in south east, nigeria., (r= .725 <.841). the computed correlations coefficient is greater than the table value of r = .000 with at alpha level for a two-tailed test (r= .725 <.841, p<.05). decision rule the decision rule is to accept the null hypothesis if the computed r is less than the tabulated r otherwise reject the null hypothesis. decision since the computed (r =.725 <.841) is greater than the table value of .000, we reject the null hypothesis. therefore, we concluded that there was significance positive relationship between migration of high quality 73 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe lecturers for high salaries and visibility of state owned universities in south east, nigeria as reported in the probability value of ( r=.725 <.841, p<.05). 4.4 discussion of findings 4.4.1 the relationship between leaving of educated staff for quality of life and quality of teaching and learning in state owned universities in south east, nigeria. from the result of hypothesis one, the computed (r =.579 <.869) is greater than the table value of .000, we reject the null hypothesis. therefore, we concluded that there was significance relationship between leaving of educated staff for quality of life and quality of teaching and learning in state owned universities in south east, nigeria as reported in the probability value of ( r=.579 <.869, p<.05). in the support of the result, in the literature review, ogunode and ishaya, (2019) effects of brain-drain on higher institutions’ administration in nigeria. brain-drain is one of the major problems facing nigerian higher institutions. many higher institutions in nigeria are losing their professors daily due to poor working conditions. the paper identified the causes of brain-drain in the nigerian higher institutions to include but not limited to; poor salary, unconducive working environment, poor staff development, inadequate infrastructural facilities, strike actions, insecurity and inadequate funding while the identified effects of brain-drain on the higher institutions administration to includes; poor quality education, high student-teacher ratio, shortages of academic staff, poor research development and poor programme development. the study in order to ensure higher institutions sustainability in nigeria hereby recommended among others the following: government should increase the motivation of academic staff, implement all reached agreement with trade union groups or civil society organizations in the country, ensure adequate life and job security in all higher institutions and provide more infrastructural facilities 4.4.2 the relationship between migration of high-quality lecturers for high salaries and visibility of state-owned universities in south east, nigeria. from the result of hypothesis two, the computed (r =.725 <.841) is greater than the table value of .000, therefore, we concluded that there was significance positive relationship between migration of high quality lecturers for high salaries and visibility of state owned universities in south east, nigeria as reported in the probability value of ( r=.725 <.841, p<.05). in the support of the result, in the literature review, amini and okonmah, (2020) lecturers’ workload and productivity in universities in delta state. this study investigated lecturers’ workload and productivity in universities in delta state. it was found that, there is significant high negative relationship between lecturers teaching workload, marking workload, supervision of students’ project workload, research workload and participation in community service workload and productivity in universities in delta state independently and jointly taken. it was recommended among others that lecturers should always ensure that their teaching activities are well prioritized so as to give adequate attention to the learning needs of students. summary of findings, conclusion, recommendation 5.1 summary of findings i. there was significance positive relationship between leaving of educated staff for quality of life and quality of teaching and learning in state owned universities in south east, nigeria, ( r=.579 <.869, p<.05). ii. there was significance positive relationship between migration of high quality lecturers for high salaries and visibility of state owned universities in south east, nigeria, ( r=.725 <.841, p<.05). 74 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe 5.2 conclusion the study concluded that the departure of educated staff, skilled staff movement, and migration of lecturers had significant negative relationship with quality of teaching and learning, visibility and mobility of academic researcher’s staff in state owned universities in south east, nigeria. thus, brain drain is a situation where the highly skilled and specialized individuals leave low-paying jobs for highlypaid jobs, usually outside the country. baridam and baridam, (2020) noted the mass exodus of highly skilled manpower from nigeria to other enabling environments of the world is a classic definition of brain drain at its most scandalous manifestation. the bad news is that while the benefitting countries of brain drain continue to improve their skilled manpower base, the victim countries, such as nigeria, continue to suffer from specialized manpower deficit on all fronts. 5.3 recommendations based on the findings of the study, the following recommendations were proffered. i. the government should endeavor to have good economic environment that can sustain the educated personal in the country for retention of quality workforce. ii. to reduce the most highly skilled and competent individuals leaving the country, and contributing their expertise to the economy of other countries, government should try and motivate the lecturers by paying them well. references abdalmenem s.a.m., owda r.o., al hila a.a., abu-naser s.s., and al shobaki m.j., (2018) performance efficiency of university education from students perspective international journal of engineering and information systems (ijeais) 2 (11) 10-24 adams, j.s. (1965). "inequality in social exchange". advanced experimental psychology. 62: 335–343. ambassador c., (2019) subject knowledge -10 things every teacher educator should know'https://www.teachfirst.org.uk/blog/subject-knowledge-10-things-every-teacher-educator-shouldknow-series amini p., and okonmah a.n., (2020) lecturers’ workload and productivity in universities in delta state. international journal of education, learning and development 8 (3) 111-136 ballotpedia (2022)academic performancehttps://ballotpedia.org/academic_performance baridam d.m., and baridam l.d., (2020) university administration and the challenges of brain drain in nigeria. iosr journal of business and management 22 (1) 57-65 bhasin h., (2021) brain drain-definition, types, factors and reasons https://www. marketing91. com/braindrain/ burtler j., francis j., and shinn j., (2022) what is brain drain? https:// study.com/ academy/ lesson/what-isbrain-drain-in-economics-definition-causes-effects-examples.html collins d., (2022) brainhttps://www.collinsdictionary.com/dictionary/english/brain https://www/ 75 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe dreeric d., and hilel r., (2006) the brain drainhttps://www. researchgate.net /publication/228394436_the_brain_drain ehezi h., (2021) the effect of brain drain on educational quality https://www.yonkerstribune.com/2021/11/the-effects-of-brain-drain-on-educational-quality femi s.a., (2009) infleunce of brain drain syndrome on learning outcome among undergraduates in nigerian universities https://www.researchgate.net/publication/ 342624484_ influence_of_ brain_drain_ syndrome_on_learning_ outcome_among_ undergraduates_in_nigerian_universities frederic d., (2014) the brain drain from developing countries https://wol.iza.org/ uploads/articles/31/pdfs/brain-drain-from-developing-countries.pdf future learn, (2021) subject knowledge and pedagogy for new teachers https://www.futurelearn.com/ info/courses/preparing-for-teaching/0/steps/55074 grieve c., and miquel p., (2018) the impact of teacher pay on the quality, retention and productivity of teachers in zambia https://www.theigc.org/project/the-impact-of-teacher-pay-on-the-quality-retentionand-productivity-of-teachers-in-zambia/ iravani m., and blvd d., (2011)brain drain problem: a review https://www.semanticscholar. org/paper/braindrain-problem%3a-a-review-iravani-blvd/5dae4d3d2733a0db93a972b4b78270068edd6993 julie y., micheal j. b., and katrina m., (2021) brain drain https://www. investopedia.com /terms/b/brain _drain.asp jussi k., elias p., laila n.b., hanne f.h., lars g., & anu l., (2019) performance in higher education institutions and its variations in nordic policyerformance in higher education institutions and its variations in nordic policy. in: pinheiro, r., geschwind, l., foss hansen, h., pulkkinen, k. (eds) reforms, organizational change and performance in higher education. palgrave macmillan, cham. https://doi.org/10.1007/978-3-030-11738-2_2 khan j., (2021) european academic brain drain: a meta-synthesis. european journal of education 56 (2) 265278 maciej d., (2022) organizational skills: definition & examples for your resume https://zety.com/blog/ organizational-skills mohammadi s., and karupiah p., (2019)quality of work life and academic staff performance: a comparative study in public and private universities in malaysiahttps://doi.org/10.1080/03075079.2019.1652808 mukelabai m.m., jackson p., (2021) the effects of effective communication on organizational performance based on the systems theory. open journal of business and management 9 (2)7-20 https://www.researchgate.net/publication/ https://wol.iza.org/ https://www.semanticscholar/ https://www/ https://zety/ 76 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe n.m.ile, otti, j.o., and mbah p.c., (2023) talent management practices and organizational performance of state-owned universities in south east, nigeria. british international journal of business and marketing research 6 (4) 18-42 ogunode n. j., and ishaya s.a., (2019) effects of brain-drain on higher institutions’ administration in nigeria. pindus journal of culture, literature, and elt vol. (8)33-41 ramezanghorbani, rangraz, m. h., & heidari, r..n (2019). some effective factors on the webometric status of selected universities of medical sciences: lessons learned from iran. iranian journal of public health, 48(6), 1116–1123. salary explorer, (2022) quality control and compliance average salaries in nigeria 2022http://www.salaryexplorer.com/salary-survey.php?loc=158&loctype=1&job=44&jobtype=1 schoof of education (2020) how important is technology in education? benefits, challenges and impact on students https://soeonline.american.edu/blog/technology-in-education seied h.m., saeed y.m., akbar h., (2011)investigating the relationship between life quality and productivity in physical education office employees in zanjan province procedia social and behavioral sciences 15 (2011) 3665–3668 skillsyouneed, (2022) communication skills https://www.skillsyouneed.com/ ips/communication-skills.html sousa, i., m. . gouveia, t. r., silva-júnior f. l., ribeiro dos santos a. m. ., and avelino f. v. (2020) promotion of the quality of life of workers in a higher education institution: a scope review”. international journal for innovation education and research, 8,(9) pp. 254-6, doi:10.31686/ijier.vol8.iss9.2626. susam w.l., (2021) all about the brain: anatomy, conditions and keeping it healthy https://www.healthline.com/human-body-maps/brain ugwu, f.i. (2021) an evaluation of the effect of strategic planning on management of selected hospitality industry in south east nigeria. international journal of research in management 11 (5) 1-17. ugwu, f.i. (2021). effect of employee career development and performance of lectures in state universities in south east, nigeria. contemporary journal of social science and humanities 2 (4) 119. ullberg, e. (2015). new perspectives on internationalization and competitiveness: integrating economics, innovation and higher education. cham: springer.a1` https://www.skillsyouneed.com/ 77 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe voss r., and gruber t., (2006) the desired teaching qualities of lecturers in higher education: a means end analysis https://www.researchgate.net/publication/235299998 _the_desired_teaching_qualities_of_lecturers_in_higher_education_a_means_end_analysis american interdisciplinary journal of business and economics issn: 2837-1909| impact factor : 8.87 volume. 12, number 1; january-march, 2025; published by: scientific and academic development institute (sadi) 8933 willis ave los angeles, california https://sadijournals.org/index.php/aijbe| editorial@sadijournals.org 1 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe corporate governance and bankruptcy risk: an empirical analysis of nigerian banks 1ezekwere uzochukwu and 2amahi uchechukwu fidelis department of accounting, kingsley ozumba mbadiwe university, ideato, imo state department of accounting and finance, university of delta, agbor, delta state email: uzochukwu.ezekwere@komu.edu.ng doi: https://doi.org/10.5281/zenodo.14629040 abstract: this study determined the effect of corporate governance on bankruptcy risk in commercial banks in nigeria, using audit committee independence, and remuneration committee. ex post facto research design was adopted for the study. a sample of eight deposit money banks was used for the study. data were obtained from the annual reports and audited accounts of the banks under assessment. altman's original model for public companies was used to extract data and the formulated hypotheses were tested with regression analysis with aid of e-view 9.0. the analysis and hypotheses tested shows that audit committee independence has no significant effect on bankruptcy risk commercial banks in nigeria. however, the study revealed that remuneration committee has a positive significant effect on bankruptcy risk commercial banks in nigeria. based on the results, the study recommended among others that since the board of director serves as internal control mechanism in the corporate governance, banks policy makers should provide adequate regulations on the specific number of boards to be working with, hence, audit committee independence is likely to reduce the probability of bankruptcy as they bring wider knowledge and better expertise to the bank. keywords: corporate governance, audit committee independence, remuneration committee and bankruptcy risk introduction sturdy corporate governance (scg) practice ensures transparency and consistency in monetary statements. companies can approach outside sources at low prices once they have the self-belief of investors (tricker & tricker, 2015). additionally, the implementation of scg exercise guarantees using the top-of-the-line enterprise approach to maximize company price and mitigate associated risks inside the destiny (hussontraore, 2009; manzaneque et al., 2016). the collapse of groups as a consequence of the financial crisis of 2008 is proof of the ramifications of weak corporate governance (wcg) implementation (kumar & singh, 2013; mehran et al., 2011; strouhal et al., 2012). scg policies shield corporations from the hazard of monetary misery or insolvency, which are amongst the biggest reasons of financial ruin. the position of scg adoption in mitigating economic distress has been nicely diagnosed in advanced countries. many researchers have performed empirical research at the impact of true company governance (cg) implementation on the mailto:uzochukwu.ezekwere@komu.edu.ng ezekwere uzochukwu and amahi uchechukwu fidelis (2025) 2 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe opportunity of monetary misery. this research has homogenously verified the unfavourable consequences of top cg practice on the chance of misery threat (bravo-urquiza & moreno-ureba, 2021; miglani et al., 2015). even though developing international locations respect the significance of cg, the advantages of cg, which have functioned simplest with precise cg adoption, have no longer been a concern. therefore, cg implementation in transitional economies is lacking (nurunnabi, 2020). furthermore, emerging countries are inherently affected by firms that practice family ownership, so they suffer from high levels of corruption and absenteeism among eminent directors. consequently, adopting scg policies in emerging countries is more of a hurdle than in developed countries because firms are hesitant to adopt scg (mcgee, 2009). the advantages of good cg adoption, such as low capital costs, effective management and risk mitigation, are hardly understood in emerging countries (nurunnabi, 2020). financial distress is a broad concept used to describe situations in which firms face financial difficulty. the most common terms used interchangeably for financial distress are ‘failure’, ‘default’, ‘insolvency’, and ‘bankruptcy’ (geng, bose, and chen, 2015). however, bankruptcy is the extreme and irredeemable outcome of financial distress and as such many financially distressed firms escape bankruptcy due to early reconstruction of operations. there are many definitions of financial distress because different countries have different accounting procedures and rules. it is generally believed that it is a situation where operating cash flow does not exceed negative net assets (li et al., 2014). geng et al. (2015) state that some of the methods that have been used for financial distress prediction include discriminant analysis, logit or probit regression model, linear conditional probability models, neural network, decision trees, case-based reasoning, genetic algorithm, rough sets, support vector machine, and others. however, the assumptions underlying the majority of these methods are far from real world situation. extant research has focused on the discovery of better models for financial distress prediction (ayoola & obokoh, 2018). in the beyond, instability within the nigerian monetary system and the banking quarter especially turned into blamed on institutional disasters. however, this trend has shifted to generalized failure that's presently sweeping the banking area. ogunleye (2006) as mentioned in olaniyi (2007) corroborating this fact categorized the reasons of financial institution failure into institutional, financial and political elements in addition to regulatory and supervisory inadequacies. a number of those generalized failure styles have institutional, economic, political and socio-cultural dimensions. mainly, factors like mismanagement, useless equipment for debt healing, bad credit score policy and administration, greed, corruption and fraud are a number of the worst culprits (ifeyinwa, 2012). the importance and relevance of the banking industry to any economy is based on its main intermediary role expected to be professionally, morally, legally and statistically played as a central position in the financial system. farinde (2013) documented that banks act as intermediaries for efficient transfer of resources from surplus to deficit units. for the banks to be able to perform efficiently and contribute meaningfully to the development of the economy, the industry must be safe, sound and stable. nowadays, models that can predict the bankruptcy of a company are of interest to various economic entities, such as banks, credit agencies, governments, and financial analysts, not to mention customers and suppliers. although bankruptcy detection models have been gradually developing since the 1960s (altman, 1968), the vast majority of them are still based only on accounting and financial variables as explanatory factors. however, despite the increase in the amount of research on corporate governance variables, which covers multiple disciplines, scholarly literature on the topic is still limited and fragmented (martín-de castro et al., 2019), ezekwere uzochukwu and amahi uchechukwu fidelis (2025) 3 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe especially with regards to the role and impact of corporate governance on companies’ turnarounds. research tends to instead remain focused on the analysis of the impact of financial variables in predicting corporate defaults. studies on the bankruptcy prediction were carried out both locally and internationally using altman z score model. in foreign countries; begum, sarker and nahar (2023); khiem (2022); handriani et al. (2021) and safrida et al. (2021) tested the effect of corporate governance on bankruptcy prediction risk. in nigeria, okoye and okoye (2022); ayoola and obokoh (2018) investigated the effect of corporate governance on bankruptcy prediction in nigerian banks. from the prior studies, majorities of the studies on corporate governance and bankruptcy risk were conducted in foreign countries, the only recent studies carried out in nigeria was the research carried out by okoye and okoye (2022) which data ended in 2020, thereby created a geographical and periodic gap. in addition, none of these previous studies included remuneration committee and risk management committee in their corporate governance variable, thereby created variable gap. the study therefore fills these gaps via determined the effect of corporate governance on bankruptcy risk on nigerian deposit money banks from 2012 to 2023. the main objective of this study is to ascertain the effect of corporate governance on bankruptcy risk in commercial banks in nigeria. the specific objectives are to: 1. determine the effect of audit committee independence on bankruptcy risk deposit money banks in nigeria. 2. ascertain the effect of remuneration committee on bankruptcy risk deposit money banks in nigeria literature review corporate governance the set of guidelines and rewards referred to as "cg" are used to direct and regulate a business enterprise's management (ehiedu, 2022; adeusi, akeke, aribaba & adebisi, 2017). ehiedu and ogbeta, (2014) opined that company governance is an institutional setup that restrains the excesses of commanding managers. making sure that the enterprise is operated efficaciously and traders earn a fair go back is the middle reason of company governance (kajola, 2018). if a business enterprise is administered with diligence, openness, accountability, and obligation with the aim of maximizing shareholders' wealth, that corporation is taken into consideration to have complied with the cg rule (pandy, 2018). corporate governance is concerned with how all parties (stakeholders) involved in the firm's success try to guarantee that managers and other insiders are always taking proper actions or implementing procedures that protect the stakeholders' interests. corporate governance tools assure shareholders of adequate returns on investments. corporate governance was created to defend the interests of shareholders but has increasingly gained importance for other stakeholders and society (mohammad, aly, dixon, & startling, 2014). for corporate governance systems, another key aspect for a company is the presence of internal and external auditors. in this sense, literature has shown that the presence of internal and external audit systems can have a significant impact on changes to a company’s financial performance and on its probability of default (guo et al., 2016 and cenciarelli et al., 2018, among others). internal and external auditors can guarantee the quality of the information of the financial reports provided by the company for investors (bratten et al., 2013), and their role has relevant consequences during a financial crisis (cenciarelli et al., 2018). in this sense, also the presence of the audit committee can have a significant positive impact in preventing the risk of frauds and irregularities (beasley et al., 2000). for distressed firms in particular, statutory auditors and external auditors are obliged to judge the ability of the company to operate as a going concern entity for the following 12 months. in this sense, ezekwere uzochukwu and amahi uchechukwu fidelis (2025) 4 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe with the european union’s 2015/848/eu regulation, auditors were required to promptly communicate to the top management of a company the presence of indicators of financial distress. in this field, research has shown auditors’ ability to anticipate the emergence of a financial crisis (bhimani et al., 2009). therefore, their presence helps a company to prevent triggering this event. research on this issue is still limited, especially in european countries (cenciarelli et al., 2018). committee of independent board refers to the percentage of impartial administrators inside the board. primarily based on clarke (2007), the definition of unbiased director is: “person who has no want or inclination to stay inside the precise grace of management, and who will be able to speak out, inside and outside the boardroom, in the face of management’s misdeeds with a purpose to protect the pursuits of shareholder”. independent director has two roles inside the board, monitoring roles and provision of sources roles, in line with their role, their presupposed to growth the tracking effectiveness and aid the corporation with advices (hillman & dalziel, 2003). the rc is evolving to become one of the most prominent issues of the global economy. the rc is recognizing the importance of growth and profitability of a company by focusing on the rc of the company and reporting its’ performance, there have been many discoveries of the possible benefits that companies may receive (chung & wei, 2017; mintah, 2015). many studies show that in firms with better governance, there are less instances of opportunistic behaviour by managers. better governance, indeed, helps to align the interests of managers and shareholders boosting the corporate financial performance. remuneration committee (rc) is very important to any organization, particularly quoted companies. concerns for corporations to make profit have received several attentions based on the numerous amounts of scholarly works available, directed at improving firms’ profitability. for example, yahaya (2014) examined social disclosure and profitability. igbal and kakakhel (2016) examined the role of remuneration committee in financial performance. also, agyemang-mintah (2016) examined the role of rc in firm performance. yahaya, kutigi, and ahmed (2014) examined country-specific characteristics and profitability. gregory-smith (2012) examined ceo pay and rc. furthermore, słomka-gołębiowska (2016) examined the effect of remuneration committee independence on pay among banks in poland. yahaya and awen (2021) related asset structure with profitability. safari (2015) assessed the role of remuneration committee in firm dividends in malaysia. similarly, yahaya and alkasim (2021) examined the influence of sustainability on profitability among listed insurance firms in nigeria. cameron (2005) examined the role of remuneration committees in executive pay determination and firm financial performance. yahaya and ogwiji (2021) related risk committee traits with profitability among banks in nigeria. rahayu, harymawan, nasih, and nowland, (2022) looked at the influence of remuneration committee in firm financial performance and directors’ pay. opeyemi, popoola and yahaya, (2020) related firm specific characteristics with profitability among listed consumer goods firms in nigeria. nigerian corporate governance codes and reforms in nigeria have centered upon assisting the executive management and the board of a company to make the right decisions in order to achieve their stakeholders' objectives. so, among the subcommittees noted in the settings, the remuneration committee, as compared to other committees, has received the least attention from researchers to the knowledge of the researcher. for this reason, the researcher conducted this study to fill the gaps in the theoretical framework and to indicate the importance of this committee (eulaiwi, al-hadi, taylor, al-yahyaee, & evans, 2016). bankruptcy risk the term “chance” comes from arabic, and expresses an unexpected event. threat is generally defined as something risky, indefinite that is associated with the direction of phenomenon and disturbs its behavior. key ezekwere uzochukwu and amahi uchechukwu fidelis (2025) 5 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe definition of threat turned into added by šoti´c and raji´c (2015) who stated that “chance is the measure of possibility and the weight of undesired consequences”. in line with cunderlík (2004), danger is the expression of the diploma of uncertainty in various bureaucracy. the risk is described as the state of imperfect know-how when the decision-maker is aware about the numerous feasible consequences of his selection and is able to estimate the degree of opportunity that this or that result happens (buganová & hudáková 2012). businesses have to face certain risks, whether financial, commercial, informational or personal. according to fetisovová et al. (2004), for each financial decision, it is necessary to consider not only its expected return, but also the risk associated with it. risk is one of the most important limits that define the scope of financial decision-making (mariniˇc 2008). special attention should be paid to the risk of long-term financial decisions. risk is the chance to achieve above-average return on investment (kluˇcka 2006). tranchard (2018) provided the following definition of risk: “risk is the effect of uncertainty on objectives”. risk is the probability. bankruptcy risks show the possibility of losses arising from the failure to achieve financial objectives. the financial risks related to the financial operation of a business may take many different forms: market risks determined by the changes in commodities, stocks and other financial instruments prices, foreign exchange risks, interest rate risks, credit risks, financing risks, liquidity risks, cash flow risk, and bankruptcy risk. these financial risks are not necessarily independent of each other, the interdependence being recognized when managers are designing risk management systems (woods & dowd 2008). the importance of these risks will vary from one firm to another, in function of the sector of activity of the firms, the firm size, development of international transactions, etc. altman prediction models of bankruptcy enterprise failure fashions may be extensively divided into two agencies: quantitative models that are based totally largely on posted financial statistics; and qualitative models, which might be primarily based on an internal assessment of the agency involved. both kinds attempt to identify characteristics, whether or not economic or non-monetary, which could then be used to distinguish between surviving and failing businesses (robinson & maguire, 2001). a. qualitative models this category of model rests on the premise that the use of financial measures as sole indicators of organizational performance is limited. for this reason, qualitative models are based on non-accounting or qualitative variables. one of the most notable of these is the a score model attributed to argenti (2003), which suggests that the failure process follows a predictable sequence: (i) defects (ii) mistakes (iii) symptoms of failure b. quantitative models quantitative models identify financial ratios with values which differ markedly between surviving and failing companies, and which can subsequently be used to identify companies which exhibit the features of previously failing companies (argenti, 2003). commonly-accepted financial indicators of impending failure include: low profitability related to assets and commitments low equity returns, both dividend and capital poor liquidity high gearing high variability of income. edward altman’s z – score model most credit score managers use traditional ratio analysis to become aware of destiny failure of companies. altman (1968) is of the opinion that ratios measuring profitability, liquidity, and solvency are the maximum massive ratios. but, it's far hard to understand that's extra important as different research indicate unique ratios ezekwere uzochukwu and amahi uchechukwu fidelis (2025) 6 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe as indicators of capability problems. as an example, a company may have bad liquidity ratios and may be heading for liquidation. that identical enterprise’s top profitability may additionally undermine the potential hazard that is highlighted via the bad liquidity ratios. as a end result, interpretation the usage of conventional ratio analyses can be wrong (odipo & sitati, 2008). altman set out to mix some of ratios and evolved an insolvency prediction model the z–score model. this method was advanced for personal production firms and eliminated all firms with belongings much less than $1 million. this unique model turned into no longer meant for small, nonmanufacturing, or 255fb4167996c4956836e74441cbd507 corporations, but many credit granters today nevertheless use the unique z score for all types of customers. two in addition prediction models had been formulated through altman (from time to time known as model ‘a’ and model ‘b’) to the original z score (altman, 1968). the formula's approach has been used in a variety of contexts and countries, although it was designed originally for publicly held manufacturing companies with assets of more than $1 million. later variations by altman were designed to be applicable to privately held companies (the altman z'-score) and non-manufacturing companies (the altman z"-score). altman's 1968 model took the following form -:z = 1.2a + 1.4b + 3.3c + 0.6d + .999e z < 2.675; then the firm is classified as "failed" where: a = working capital/total assets b = retained earnings/total assets c = earnings before interest and taxes/total assets d = market value of equity/book value of total debt e = sales/total assets altman’s revised z-score model rather than simply inserting a proxy variable into an existing model to calculate the z-scores altman advocated for a complete re-estimation of the model, substituting the book values of equity for the market value in d. this resulted in a change in the coefficients and in the classification criterion and related cut-off scores. the revised z score model took the following form: z' = 0.717t1 + 0.847t2 + 3.107t3 + 0.420t4 + 0.998t5 where: t1 = (current assets-current liabilities) / total assets t2 = retained earnings / total assets t3 = earnings before interest and taxes / total assets t4 = book value of equity / total liabilities t5 = sales/ total assets zones of discrimination: z' > 2.9 -“safe” zone 1.23 < z' < 2. 9 -“grey” zone z' < 1.23 -“distress” zone financial ratios in z score the z-score is calculated by multiplying each of several financial ratios by an appropriate coefficient and then summing the results. the ratios rely on working capital, total assets, retained, ebit, market value of equity, net worth. working capital is equal to current assets minus current liabilities (milkkete, 2001). total assets is ezekwere uzochukwu and amahi uchechukwu fidelis (2025) 7 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe the total of the assets section of the balance sheet. retained earnings is found in the equity section of the balance sheet. ebit (earnings before interest and taxes) includes the income or loss from operations and from any unusual or extraordinary items but not the tax effects of these items. it can be calculated as follows: find net income; add back any income tax expenses and subtract any income tax benefits; then add back any interest expenses. market value of equity is the total value of all shares of common and preferred stock. the dates these values are chosen need not correspond exactly with the dates of the financial statements to which the market value is compared (milkkete, 2001). net worth is also known as shareholders' equity. similarly, stepanyan (2014) used the model to analyze the us airline business and found the model to be very useful. edward z score working capital to total assets mehmet and eda (2009) indicated that working capital is the whole current assets owned by a firm. akindele and odusina (2015) defined working capital as basically the portion of assets required by a business in current operation. in its gross form, it is the investment in current assets. the ratio provides information about the shortterm financial position of the business that is referred to as the liquidity. the more the working capital there is compared to the total assets the better the liquidity situation. according to agha (2014) the most important items inside determination of working capital are inventories of the corporations, its accounts receivable and payables. empirical review dalia (2023) examined the relationship between corporate governance and intellectual capital. it also investigates the impact of intellectual capital and corporate governance mechanisms on the bankruptcy risk of egyptian companies listed on the egx 100 index. design/methodology/approach– this study depended on a sample of 355 observations of 71 companies listed on the egx 100 index during 2017-2021. the modified altman z score model was used to measure bankruptcy risk, and the value-added intellectual coefficient (vaic) model was used to measure intellectual capital. corporate governance mechanisms, such as board characteristics and audit committee are presented as independent variables. the results also show an insignificant influence of board independence and audit committee size on intellectual capital efficiency. moreover, this study finds that companies with intellectual capital efficiency are less likely to go bankrupt. furthermore, the results indicate that board size, independence, and meetings have a significant negative effect on bankruptcy risk. thus, good corporate governance improves a company's financial health. khiem (2022) determined the effect of company governance on the relationship among the macro and micro factors inflicting financial misery in 240 vietnamese indexed non-financial firms. this paper contributes empirical proof at the essential benefit of strong company governance practices and marginal gain in danger mitigation in improving company governance. the article indicates that vietnamese firms have to implement sturdy corporate governance to overcome the hazard of economic misery. handriani et al. (2021) explored the effect of board length, board independence, and institutional ownership on financial misery for a pattern of nine production agencies indexed on the indonesia stock trade with three hundred observations for the duration of the duration 2010-2018. they determined that institutional ownership and board independence have a tremendous effective impact on averting monetary distress. but board length became found to have a trifling wonderful effect on monetary misery. safrida et al. (2021) tested the effect of corporate governance on bankruptcy prediction for a sample of 20 companies listed on the indonesia stock exchange for the period 2016-2020. the results demonstrated a significant positive effect of the board of directors, board of commissioners, independent commissioners, and audit committee on the prediction of bankruptcy. the results also revealed a significant negative influence of institutional ownership and managerial ownership on bankruptcy prediction. joshua, efiong, and imong (2019) examined corporate governance and financial performance of listed deposit money ezekwere uzochukwu and amahi uchechukwu fidelis (2025) 8 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe banks (dmbs) in nigeria from 2007–2016 and data were obtained from their annual financial reports. data were presented using tables and analyzed using panel data regression. the corporate governance mechanisms of board size (bsize), board composition (bcom) and audit committee (acom) were used as independent variables. the findings of this study revealed that board size had a positive but insignificant relationship with performance. it was also observed that audit committee, board composition and bank size all had positive and significant relationships with return on asset. the study therefore concludes that board composition and audit committee are good predictors of performance as measured by return on assets (roa). ahmad and masoumeh (2016) investigated the relationship between earnings management and quality of earnings for the bankrupt and non-bankrupt firms listed in the tehran stock exchange from 2007 to 2012. the results of estimating unbalanced panel data technique for 55 firms subjected to bankruptcy of altman's model, and 198 non-bankrupt firms, shows that the bankrupt firms tend to use opportunistic earnings management, and the non-bankrupt choose efficient earnings management. gnyana (2015) in his research on prediction of financial distress using altman z score for selected companies in india concluded that, z score is one of the popular and effective models and all investors should analyze the z score of company before investment decision to avoid financial loss due to financial failure. campa, del mar and miñano (2014) conducted a study on the response to the question whether spanish companies go bankrupt, compared to their counterparts, during the years prior to the procedure of bankruptcy law tend to manage earnings or not? in the analysis of a sample matched bankrupt companies, it became clear that earnings management of bankrupt companies is more than those in nonbankrupt them. findings showed that management tools profit operates by industry in which the company and the years of pre-bankruptcy are changed. in zimbabwe, ncube (2014) on altman’s z score for nonmanufacturing firms and financial institutions listed in zimbabwe stock exchange recommended the use of the model in predicting corporate failure in the financial services and banking sector. from the above, despite altman’s model being old and despite of its limitations, it has remained to be the most globally used model. arguably that various equations now exists but they all follow the concepts of the original one derived by professor altman in 1968. methodology due to the nature of the study, ex post facto research design was adopted. the study analyzed the audited accounts of banks. this involves use of financial accounts of the banks under assessment for the period, 20122023 to generate the financial ratios that discriminated the most in prediction of healthy banks using altman model. population and sample size this population of this study consists of the deposit money banks quoted on the nigerian exchange group. the study covered ten years annual reports and accounts of these banks from 2012 to 2023. the "purposive sampling technique was applied (non-random sample). in this method, the sample is chosen based on what the researcher thinks is appropriate for the study. the banks licence with international authorization was chosen which consist a total of eight (8) out of the twenty-two (22) deposit money banks which was inevitably excluded during the data collection process due to incomplete data, hence majority of the other banks are those that either emerged or acquired during the period the study covered without international authorization (see appendix for details). source of data collection data were collected from only secondary sources. this data was obtained from the annual reports and audited accounts of the banks under assessment model specification the study employed altman model given as zeta “z” z=1.2x1 + 1.4x2+ 3.3x3 + 0.6x4 + 1.0 x5, where: x1 = working capital to total assets ezekwere uzochukwu and amahi uchechukwu fidelis (2025) 9 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe x2 = retained earnings to total assets x3 = earnings before interest and taxes to total asset x4 = value of equity to total book debt x5 = gross earnings to total assets the decision rule is that: (i). for z<1.81 bankruptcy region (ii). for 1.81<z>2.675 high bankruptcy potential (iii). for 2.675<z<2.99 low bankruptcy potential (iv). for z>2.99 strong (no sign of bankruptcy at all). the altman model will be modified thus to incorporate corporate governance: atmnit = a0 + β1aci +β2acdit + β3recit+β4rmcit +β5bindit + it urt …………………. …..…....(i) where; atmn= altman prediction model aci= audit committee independence rec = remuneration committee method of data analysis data were analyzed with descriptive statistics, and the hypotheses will be tested with pearson correlation, and multiple regression analysis. since the focus of the study is to examine the effect of asset composition on financial performance, regression analysis becomes appropriate tool for it. descriptive statistics employed to summarily describe the mean, median, standard deviation, kurtosis and skewness of the study variables. inferential statistics will also be utilized with the aid of e-views 9 using: i. coefficient of correlation: which is a good measure of relationship between two variables that tell us about the strength of relationship and the direction of the relationship as well? ii. regressions analysis: regression analysis predicts the value the dependent variable based on the value of the independent variable and explains the impact or effect of changes in the values of the variables. decision rule accept the alternative hypothesis, if the probability value (p-value) of the test is less than 0.05 (5%). otherwise reject. data analysis and results table 1: descriptive analysis atmn aci rec mean 2.913370 0.377978 85.49554 median 3.023000 0.330000 88.70000 maximum 6.598000 1.780000 99.94000 minimum 0.399000 0.100000 61.34000 std. dev. 1.547708 0.313757 12.04400 skewness 0.121996 2.775521 -0.659108 kurtosis 2.306899 11.63645 2.372738 jarque-bera 2.069699 404.0422 8.169404 probability 0.355280 0.000000 0.016828 sum 268.0300 34.77400 7865.590 sum sq. dev. 217.9815 8.958382 13200.26 observations 96 96 96 table 1 shows the mean (average) for each of the variables, their maximum values, minimum values, standard deviation and jarque-bera (jb) statistics (normality test). the results in table 1 provided some insight into the nature of the nigerian banks that were used in this study. it was observed that on the average over the twelve (12) years periods (2012-2023), the sampled banks in nigeria were characterized by positive altman bankruptcy prediction model (2.770944). in this table, the ezekwere uzochukwu and amahi uchechukwu fidelis (2025) 10 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe jarque-bera (jb) which test for normality or the existence of outliers or extreme values among the variables shows that most of the variables are normally distributed at 5% level of significance. this means that any variable with outlier is not likely to distort our conclusion and are therefore reliable for drawing generalization. this also implies that the least square estimate can be used to estimate the pooled regression model. correlation analysis in examining the association among the variables, we employed the pearson correlation coefficient (correlation matrix) and the results are presented in table 2: table 2: correlation matrix analysis atmn aci rec atmn 1 aci -0.09191 1 rec -0.21482 -0.44006 1 the use of correlation matrix in most regression analysis is to check for multi-collinearity and to explore the association between each explanatory variable; aci, and rec, and the dependent variable (altman). finding from the correlation matrix table shows that all our independent variables, (aci -0.092 and rec -0.215) were observed to be negatively associated with dependent variable. in checking for multi-collinearity, we notice that no two explanatory variables were perfectly correlated. this means that there is no problem of multi-collinearity between the explanatory variables. multi-collinearity may result to wrong signs or implausible magnitudes in the estimated model coefficients, and the bias of the standard errors of the coefficients. test of hypotheses hypotheses one ho1: audit committee independence has no significant effect on bankruptcy risk deposit money banks in nigeria. table 3: regression analysis between altman predicting model and audit committee independence dependent variable: atmn method: least squares date: 10/21/24 time: 11:47 sample: 1 103 included observations: 96 variable coefficient std. error t-statistic prob. c 3.045741 0.264154 11.53017 0.0000 aci -0.546169 0.538699 -1.013868 0.3133 r-squared 0.111050 mean dependent var 2.837883 adjusted r-squared 0.001300 s.d. dependent var 1.615218 s.e. of regression 1.614976 akaike info criterion 3.817564 sum squared resid 239.9496 schwarz criterion 3.871677 log likelihood -177.4255 hannan-quinn criter. 3.839422 f-statistic 1.027928 durbin-watson stat 0.556648 prob(f-statistic) 0.313305 in table 3, a simple least square regression analysis was conducted to test the relationship between audit committee independence (aci) and altman bankruptcy predicting model (atmn). the r-squared is ezekwere uzochukwu and amahi uchechukwu fidelis (2025) 11 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe coefficient of determination which tells us the variation in the dependent variable due to changes in the independent variable. from the findings in the table 3, the value of r squared was 0.111, an indication that there was variation of 9% on atmn due to changes in aci. this implies that 11% changes in atmn of the economy could be accounted for by aci, while 89% was explained by unknown variables that were not included in the model. the probability of the slope coefficients indicates that; p (0.313 >0.05). the co-efficient value of; β1= -0.546 implies that aci is negatively related to atmn, and this is statistically significant at 5%. the durbin-watson statistic of 0.556648 suggests that the model does not contain serial correlation. the fstatistic of the atmn regression is equal to 1.027928 and the associated f-statistical probability is equal to 0.313305, so the null hypothesis was rejected and the alternative hypothesis was accepted. decision since the prob (f-statistic) of 0.313305 is higher than the critical value of 5% (0.05), then, it would be upheld that audit committee independence has no significant effect on bankruptcy risk deposit money banks in nigeria, thus, ho is preferred over hi. hypothesis two ho2: remuneration committee has no significant effect on bankruptcy risk deposit money banks in nigeria table 4: regression analysis between altman predicting model and remuneration committee dependent variable: atmn method: least squares date: 10/21/24 time: 11:55 sample: 1 103 included observations: 96 variable coefficient std. error t-statistic prob. c 4.741432 1.192578 3.975783 0.0001 rec -0.022318 0.013847 -1.611698 0.1105 r-squared 0.027459 mean dependent var 2.837883 adjusted r-squared 0.016888 s.d. dependent var 1.615218 s.e. of regression 1.601521 akaike info criterion 3.800832 sum squared resid 235.9681 schwarz criterion 3.854945 log likelihood -176.6391 hannan-quinn criter. 3.822690 f-statistic 2.597571 durbin-watson stat 0.573432 prob(f-statistic) 0.110453 in table 4, a simple least square regression analysis was conducted to test the significant effect between remuneration committee (rec) and altman bankruptcy predicting model (atmn). the r-squared is coefficient of determination which tells us the variation in the dependent variable due to changes in the independent variable. from the findings in the table 4, the value of r squared was 0.027, an indication that there was variation of 3% on atmn due to changes in rec. this implies that only 3% changes in atmn of the economy could be accounted for by rec, while 97% was explained by unknown variables that were not included in the model. the probability of the slope coefficients indicates that; p (0.111>0.05). the co-efficient value of; β1= --0.022318 implies that rec is negatively related to atmn, and this is not statistically significant at 5%. ezekwere uzochukwu and amahi uchechukwu fidelis (2025) 12 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe the durbin-watson statistic of 0.573432 which is less than 2 suggests that the model does not contain serial correlation. the f-statistic of the atmn regression is equal to 2.597571 and the associated probability fstatistic is equal to 0.110453, so the null hypothesis was accepted and the alternative hypothesis was rejected. decision since the prob (f-statistic) of 0.110453 is higher than the critical value of 5% (0.05), then, it would be upheld that remuneration committee has no significant effect on bankruptcy risk deposit money banks in nigeria, thus, ho is preferred over hi. discussion of findings the study examined the effect of corporate governance on bankruptcy risk in deposit money banks in nigeria. however, audit committee independence, and remuneration committee have no statistically significant effect on bankruptcy risk commercial banks in nigeria. these results are in line with the study of boo and sharma (2008) observe no association between audit committee independence and audit fees indicating that auditors will minimize their effort in the presence of independent audit committee. jensen and meckling (1976) argued that the relationship between managerial share ownership and corporate debt is complex. it is argued that managerial share ownership can reduce managerial incentives to consume perquisites, expropriate wealth and to engage in other non-maximizing behavior. conclusion and recommendations this study investigated the effect of corporate governance on bankruptcy risk in commercial banks in nigeria, using audit committee independence and remuneration committee. data were obtained from the annual reports and audited accounts of the banks under assessment. altman's original model for public companies was used to extract data and the formulated hypotheses were tested with regression analysis with aid of e-view 9.0. the analysis and hypotheses tested shows that audit committee independence has no significant effect on bankruptcy risk commercial banks in nigeria. however, the remuneration committee study revealed that has a significant effect on bankruptcy risk commercial banks in nigeria. this study therefore concluded that corporate governance has effect on bankruptcy risk in commercial banks in nigeria based on the results, the study recommended the followings; 1. since the board of director serves as internal control mechanism in the corporate governance, banks policy makers should provide adequate regulations on the specific number of boards to be working with, hence, audit committee independence is likely to reduce the probability of bankruptcy as they bring wider knowledge and better expertise to the bank. 2. remuneration committee should be encouraged hence it creates an avenue for collective deliberates on financial issues that are significant to the banks such as straighten their operations, as well preventing it from going bankruptcy. . references agyemang-mintah, p. (2016). the remuneration committee and firm performance: an empirical investigation of uk financial institutions during the pre/post financial crisis. corporate board: role, duties and composition,11(3), 176-190. adeusi, s., akeke, n., aribaba, f. &adebisi, o. (2017). cg and firm fp: do ownership and board size matter. academic journal of interdisciplinary studies, 2(3), 251-258. ezekwere uzochukwu and amahi uchechukwu fidelis (2025) 13 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe argenti, m. (2003). financial ratios as predictors of failure, empirical research in accounting: selected studies, university of chicago, chicago, ill., 71-111. agha, h. (2014). impact of working capital management on profitability. european scientific journal. akindele, j. & odusina, o. (2015). working capital management and firm profitability: evidence from nigeria quoted companies. journal of finance and accounting. altman, e., (1968). financial ratios, discriminant analysis and the prediction of corporate bankruptcy, the journal of finance, september, pp 589-609. ayoola t. j. & obokoh , l. o. (2018). corporate governance and financial distress in the banking industry: nigerian experience. journal of economics and behavioral studies vol. 10(1); pp. 182-193, (issn: 2220-6140) ahmad a. & masoumeh s. (2016). earnings management and the effect of earnings quality in relation to bankruptcy level (firms listed at the tehran stock exchange) buganová, k., & mária, h. (2012). manažment rizika v podniku, 1st ed. žiline: edis. isbn 978-80554-04592. bravo-urquiza, f., & moreno-ureba, e. (2021). does compliance with corporate governance codes help to mitigate financial distress? research in international business and finance, 55, 101344. https://doi.org/10.1016/j.ribaf.2020.101344 bhimani, a., gulamhussen, m., & lopes, s. (2009). the effectiveness of the auditor’s going-concern evaluation as an external governance mechanism: evidence from loan defaults. the international journal of accounting, 44(3), 239–255. https://doi.org/10.1016/j.intacc.2009.06.002 bratten, b., gaynor, l. m., mcdaniel, l., montague, n. r., & sierra, g. e. (2013). the audit of fair values and other estimates: the effects of underlying environmental, task, and auditor-specific factors. auditing: a journal of practice & theory, 32(sp1), 7–44 beasley, m. s., carcello, j. v., & hermanson, d. r. (2000). fraudulent financial reporting: 1987–1997. an analysis of u.s. public companies. new york: committee of sponsoring organizations of the treadway commission (coso) cenciarelli, v., greco, g., & allegrini, m. (2018). external audit and bankruptcy prediction. journal of management and governance, 22, 863–890. https://doi.org/10.1007/s10997-018-9406-z campbell, j.y. hischer, j.d. & szikgyi, j. (2011). predicting financial distress and performance of distressed stocks. journal of investment management. https://ijms.ut.ac.ir/?_action=article&au=316082&_au=ahmad++ahmadpour https://ijms.ut.ac.ir/?_action=article&au=324471&_au=masoumeh++shahsavari https://ijms.ut.ac.ir/article_55036_f47c0571a3241ad2b0a853c35ebbf0f9.pdf https://ijms.ut.ac.ir/article_55036_f47c0571a3241ad2b0a853c35ebbf0f9.pdf https://doi.org/10.1016/j.intacc.2009.06.002 https://doi.org/10.1007/s10997-018-9406-z ezekwere uzochukwu and amahi uchechukwu fidelis (2025) 14 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe chung, l. h., & wei, c. c. (2017). the impact effect of corporate governance and corporate social responsibility oncompany performance after the financial tsunami. asian journal of economic modelling, 5(4), 465-479. clarke, c. j. (2007). the xx factor in the boardroom: why women make better directors. directors monthly 24: 8-10 cunderlík, d. (2004). rizikovýmanažment a riadenie kontinuity podnikatel’skej ˇ cinnosti podniku. available online: http://fsi.uniza.sk/kkm/old/publikacie/pp/pp_kap_12.pdf (accessed on 12 august 2018). ehiedu, v.c. (2022). external debt (ed) and growth nexus (gn) in nigeria. international journal of academic management science research (ijamsr), 6(7), 58-68. ehiedu, v.c, onuorah, a. c. & osakwe, f.c. (2022). corporate governance (cg) and its implication on performance of deposit money banks (dmbs) in nigeria. international journal of applied research in social sciences. 4(9), 353-369, p-issn: 2706-9176, e-issn: 2706-9184. doi: 10.51594/ijarss. v4i9.411 ehiedu, v. c. (2014). the impact of liquidity on profitability of some selected companies: the financial statement analysis (fsa) approach. research journal of finance and accounting, 5(5), 81-90. ehiedu, v.c. & ogbeta, m. (2014). an investigation into the internal control system in the banking industry. european journal of business and management 6(9), 149-155. eulaiwi, b., al-hadi, a., taylor, g., al-yahyaee, k. h., & evans, j. (2016). multiple directorships, family ownership and the board remuneration committee: international evidence from the gcc. emerging markets review, 28, 61-88. farinde, d.a., (2013). statistical prediction of likely distress in nigeria banking sector using a neural network approach. world academy of science, engineering and technology international journal of mechanical and industrial engineering (7)10, 2013. gregory-smith, i. (2012) chief executive pay and remuneration committee independence. oxford bulletin of economics and statistics, 74 (4). 510 531. issn 0305-9049 https://doi.org/10.1111/j.14680084.2011.00660.x gnyana, r. b. (2015). prediction of financial distress using altman z score; indian journal applied research vol.5 guo, j., huang, p., zhang, y., & zhou, n. (2016). the effect of employee treatment policies on internal control weaknesses and financial restatements. the accounting review, 9(4), 1167–1194 ezekwere uzochukwu and amahi uchechukwu fidelis (2025) 15 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe handriania, e., ghozalib, i. & hersugodob (2021). corporate governance on financial distress: evidence from indonesia. management science letters 11 1833–1844 contents lists available at growing science. management science letters homepage: www.growingscience.com/msl hillman, a. j., & dalziel t. (2003). boards of directors and firm performance: integrating agency and resource dependence perspectives. academy of management review, 28(3): 383-396. husson-traore, a.-c. (2009). more effective corporate governance. organisation for economic cooperation and development. the oecd observer, 50. ifeyinwa, o.a., (2012). bank failure in nigeria, its causes and effects on the nigeria economy, available at: http://spgsportal.imsu.ed.ng/ joshua, efiong, e. j. & imong, n. r. (2019). effect of corporate governance on financial performance of listed deposit money banks in nigeria. global journal of social sciences vol 18, 2019: 107-118 kajola, s. (2018). cg and firm performance: the case of nigerian listed firms. european journal of economic, finance and administrative sciences, 14, 16-28. khiem dieu truong (2022) corporate governance and financial distress: an endogenous switching regression model approach in vietnam, cogent economics & finance, 10:1, 2111812, doi: 10.1080/23322039.2022.2111812 kumar, n., & singh, j. p. (2013). global financial crisis: corporate governance failures and lessons. journal of finance, accounting and management, 4(1), 21. lee, t., & yeh, y. corporate governance and financial distress: evidence from taiwan. (2004). corporate governance: an international review, 12(3), 378–388. https://doi.org/10.1111/j.14678683.2004.00379.x li, z., crook, j., andreeva, g., & tang, y. (2021). predicting the risk of financial distress using corporate governance measures. pacific-basin finance journal, 68, 101334. https://doi.org/10.1016/j.pacfin.2020.101334 mcgee, r. w. (ed.). (2009). corporate governance in developing economies. in corporate governance in developing economies (pp. 3–22). springer mehran, h., morrison, a. d., & shapiro, j. d. (2011). corporate governance and banks: what have we learned from the financial crisis? frb of new york staff report, 502. http://dx.doi.org/10.2139/ssrn.1880009 mariniˇc, p. (2008). plánovaní a tvorba hodnoty firmy. praha: grada publishing, a. s. isbn 978-80-2472432-4. mintah, p. a. (2016). remuneration committee governance and firm performance in uk http://www.growingscience.com/msl http://spgsportal.imsu.ed.ng/ ezekwere uzochukwu and amahi uchechukwu fidelis (2025) 16 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe manzaneque, m., priego, a. m., & merino, e. (2016). corporate governance effect on financial distress likelihood: evidence from spain. revista de contabilidad, 19(1), 111–121. https://doi.org/10.1016/j.rcsar.2015.04.001 miglani, s., ahmed, k., & henry, d. (2015). voluntary corporate governance structure and financial distress: evidence from australia. journal of contemporary accounting & economics, 11(1), 18–30. https://doi.org/10.1016/j.jcae.2014.12.005 menhet, s.& edda, o. (2009). relationship between efficiency level of working capital management and return on total assets in ise: international journal of business & management 4(10). mohammad, i., aly, s., dixon, r., & startling, r. (2014). corporate governance and corporate social responsibility disclosure: evidence from the us banking sector. journal of business ethics, 125(4), 601615. mwawughanga, c.w & ochiri, g (2017). application of edward altman’s z score model on measuring financial health of commercial banks in kenya. journal of management. (4) 2 (41), pp 722 741, www.strategicjournals.com, ©strategic journals. ncube,t. (2014). predicting corporate failure; insights from the financial sector in zimbabwe. international journal of economics commerce & management united kingdom. 11(11). nurunnabi, m. (2020). corporate governance in emerging economies will have to change. lse covid, blog, 19. https://blogs.lse.ac.uk/covid19/(open in a new window) opeyemi, a. m., popoola, a., & yahaya, o. a. (2020). firm specific attributes and financial performance of listed insurance companies in nigeria. gusau journal of accounting and finance, 1(2), 16-16. odipo, m.k & sitati, a. (2008). evaluation of applicability of altman’s reviewed model in prediction of financial distress; a case of companies quoted in nairobi stock exchange. international journal of finance &accounting, 325-338. okoye, n. j. & okoye p. v.c. (2022). effect of corporate governance on bankruptcy risk of deposit money banks in nigeria. research journal of management practice. 2(12) issn: 2782-7674 (december, 2022) | www.ijaar.org/rjmp olaniyi, t.a., (2007), predicting potential of failure in nigeria banking sector: a comparative analysis of first bank plc and trade bank plc, babcock journal of management and social sciences 6(1), pp 64-76. pandey, i.m. (2018). financial management (12th edtn), vikas publishing house rt ltd, india. rahayu, n. k., harymawan, i., nasih, m., & nowland, j. (2022). director pay slice, the remuneration committee, and firm financial performance. cogent https://doi.org/10.1016/j.rcsar.2015.04.001 https://doi.org/10.1016/j.jcae.2014.12.005 https://blogs.lse.ac.uk/covid19/ ezekwere uzochukwu and amahi uchechukwu fidelis (2025) 17 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe safrida, e., napitupulu, ih, & gultom, sa (2021). the effect of good corporate governance on the prediction of bankruptcy in retail trade sub-sector in indonesia. international journal of economics, business and management research, 5(11), 93–100. https://doi.org/10.36555/almana.v5i1.1579 słomka-gołębiowska, a. (2016). the effect of remuneration committee independence on the pay–performance relationship: evidence from the banking industry in poland. eastern european economics, 54(1), 71-89. strouhal, j., bonaci, c., & mustata, r. (2012). corporate governance and financial crisis. international advances in economic research, 18(1), 122–123. https://doi.org/10.1007/s11294-011-9332-1 šoti´c, aleksander, and radenko raji´c. 2015. the review of the definition of risk. journal of apllied knowledge management 3: 17–26. tricker, b., & tricker, r. i. (2015). corporate governance: principles, policies, and practices. oxford university press. woods, m., & kevin d. (2008). financial risk management for management accountants, management accounting guideline. toronto: the society of management accountants of canada (cma canada), durham: the american institute of certified public accountants, inc. (aicpa), london: the chartered institute of management accountants (cima), available online: https://www.cimaglobal.com/documents/ imported documents/cid_mag_financial_risk_jan09.pdf (accessed on 25 november 2019). yahaya, o. a., kutigi, u. m., & ahmed, m. (2014). country-specific characteristics as determinants of financial performance: evidence from listed deposit money banks in nigeria. journal of accounting, 3(2), 77-101. yahaya, o. a., ogwiji, j. (2021). risk committee traits and profitability of nigerian banking sector. in accounting, finance and management: texts and applications. https://doi.org/10.36555/almana.v5i1.1579 https://doi.org/10.1007/s11294-011-9332-1 https://www.cimaglobal.com/documents/ american interdisciplinary journal of business and economics issn: 2837-1909| impact factor : 8.87 volume. 12, number 1; january-march, 2025; published by: scientific and academic development institute (sadi) 8933 willis ave los angeles, california https://sadijournals.org/index.php/aijbe| editorial@sadijournals.org 18 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe internal audit functions and profitability of deposit money banks in benin-city edo state 1eke robert ike, phd, fca and 2glory eghoghon ihunde, aca 1department of accounting and finance school of management and social sciences, wellspring university benin city, edo state. 2department of accounting and finance school of management and social sciences, wellspring university benin city, edo state. email: robbyeke19@yahoo.com; robert.eke@wellspringuniversity.edu.ng; (+2348034712733)/ gloryihunde@yahoo.com (+2348038813134). doi: https://doi.org/10.5281/zenodo.14679693 abstract: this research is aimed to examine the effect of internal audit functions on the profitability deposit money banks in edo state. specifically, it examined the impact of internal auditors' roles in risk management, compliance with internal controls and asset safeguarding on the profitability of these banks. a survey research design was employed, collecting data from staff members of deposit money banks in benin city. responses were obtained from 334 participants, and regression method were used to do the data analysis and anova to test the hypotheses. the findings indicated that the role of internal auditors in risk management had a positive and high impact on the profitability of d banks that accept deposits in nigeria. additionally, the enforcement of internal control compliance and the application of auditing standards by internal auditors were found to significantly influence bank profitability in edo state. from the results result generated, it is recommended that banks should employ internal auditors who report directly to the managing director and effectively carry out their assigned roles. this approach would help mitigate various losses and enhance the banks' profitability. keywords: internal audit, risk management, asset safeguard, profitability, deposit money banks introduction the duties of the internal auditor have become extensively vital due to the evolving business environment and the complexities of modern challenges. these shifts necessitate a heightened awareness of the role of internal auditor's in demonstrating the value of the internal audit function. in nigeria, banks open to commercial transactions, also known as deposit money banks, bear the responsibility of safeguarding customer deposits and protecting shareholder interests. however, this duty has been undermined in recent years by numerous fraud cases reported within the banking sector. the financial crises and collapse of institutions like afribank nigeria plc in 2009 and intercontinental bank (ajani, 2012; saidu & aifuwa, 2020) have cast doubt on the integrity of financial institutions in fulfilling these responsibilities. eke robert ike and glory eghoghon ihunde (2025) 19 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe to address these challenges, bank management aims to enhance shareholder wealth while demonstrating competence in executing their duties (egolum & uchegbu, 2021). achieving sustainable performance requires robust and well-maintained internal control systems. these systems consist of policies and procedures designed to safeguard organizational assets, ensure credible financial reports, promote compliance with laws and regulations, and facilitate efficient operations. internal auditors play a pivotal role in establishing and maintaining effective internal control systems in banks. their responsibilities include providing assurance that is objective and conducting activities that add value and improve organizational operations. internal auditing is essential for the smooth and efficient functioning of an organization (alashe & bello, 2021). despite these efforts, fraudulent practices remain rampant in the nigerian banking sector, significantly tarnishing the reputation and undermining the potential of many banking institutions, particularly deposit money banks. according to a report by the nigeria deposit insurance corporation (ndic), the value of documented fraudulent activities rose by ₦3.33 billion, rising from ₦8.68 billion in 2016 to ₦12.01 billion in 2017. the report revealed that internet and card-related fraud accounted for 92% of all reported cases and 63.66% of industry losses in 2017. other reported fraudulent activities included unauthorized transfers, cash suppression, unauthorized credits, and fraudulent cheque conversions. the quality of internal auditors significantly influences an organization's financial performance. high-quality internal auditors positively impact financial outcomes (heil, 2012). their primary tasks include tackling corruption, analyzing financial activities, safeguarding assets, determining adherence to policy and compliance with, and enhancing financial and administrative performance (staciokas & rupsys, 2005). internal audit practices add value when they effectively improve board rules, management of risk, and internal controls systems. the work of auditors within is considered only when identified malpractices are fully resolved and remain corrected (sawyer, 1995). additionally, there is a notable literature gap as it relates to the link between internal auditors and how banks in benin city, edo state, nigeria makes their profits. existing studies, such as those by changwony & rotich (2015), awdat (2015), kerazan (2016), and nansamba (2019), have not specifically examined the effect of internal auditors on the how banks make profit in this region. the main objective of this research was to ascertain impact of internal auditors on profitability in deposit money banks in benin city. specifically, it is to; i. determine the impact of internal auditor’s risk management role on profitability of deposit money banks in edo state; ii. examine the impact of internal auditor’s control compliance role and profitability of deposit money banks in edo state; iii. examine the effect of internal auditor’s asset safeguarding roles on profitability of deposit money banks in edo state; flowing from the research questions and specific objectives above, the hypotheses of the study was stated in null of form as follows: i. risk management roles of internal auditors do not have significant impact on profitability in deposit money banks; ii. there is no significant relationship between control compliance roles of internal auditors and profitability of deposit money banks; iii. asset safeguarding roles of internal auditors do not have high impact on profitability of deposit money banks; eke robert ike and glory eghoghon ihunde (2025) 20 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe literature review 2.1 conceptual review internal audit reports internal auditing is an independent and objective activity aimed at providing assurance and consulting services to enhance an organization's operations (iia, 2022). it involves collecting, analyzing, and evaluating data (audit evidence) to determine compliance with applicable standards. the process relies heavily on the quantity and quality of evidence gathered to support opinions or recommendations (rensburg & coetzee, 2016; alqudah et al., 2023). through a dynamic and organized approach, internal auditing evaluates and improves how risk is managed, controlled, and governed in a system to help organizations achieve their objectives. effective auditing is integral to corporate governance, supporting management and the board in adding value and meeting organizational goals (el-sayed ebaid, 2011). the role of internal auditing gained prominence following some companies that has scandals in the us and uk and the financial crises in asia during the late 1990s. more recently, corporate failures in africa, such as algeria’s carrefour, egyptian sainsbury, uchumi supermarkets in tanzania & uganda, crane bank, gtb and nbc in uganda, have highlighted concerns about internal audit effectiveness (mindra, 2017; kapner, 2001; muhereza, 2012; auditor general’s report, 2014). mindra (2017) criticized auditors for failing to detect issues, while roussy and brivot (2016) described them as “watchdogs” tasked with identifying weaknesses in internal controls. internal auditors typically issue reports summarizing their findings, recommendations, and management's action plans. these reports often include an executive summary, detailed findings with recommendations, and appendices containing additional data or charts. recommendations aim to enhance governance, risk management, and control processes to meet operational, financial, and compliance objectives (makuza, 2014). internal audit quality audit effectiveness is closely tied to the standard exhibited in internal audits. according to institute of internal audit (iia), they must plan and implement their plan to deliver meaningful results and make recommendations for increasing the standard. the ability of the audit unit to effectively plan, implement, and make known their audit results is often used as a measure of quality of audit. key factors influencing this quality include experience of staff, the appropriateness of the audit coverage, and the effectiveness of audit plan, implementation, and reporting. additionally, auditing standard no. 65 (aicpa, 1991) identifies key quality indicators such as auditor competence (measured by educational and professional credentials), objectivity (assessed by who reviews the audit and who appoints the auditor), and the precision and comprehensiveness of audit assignments. the iia (2003) further emphasizes independence, objectivity, and proficiency as critical factors. internal auditors roles internal audit serves as a vital developmental tool within organizations by operating as an independent function designed to assess their internal control systems. despite its significance, many organizations fail to recognize how an effective internal audit can enhance resource management, efficiency, and performance (demarco, 1980). in contrast, banking institutions have established internal audit departments as independent appraisal units to evaluate their control systems. the primary goal of these departments is to support institutional members in fulfilling their responsibilities by providing recommendations, advice, and insights based on the reviewed activities. to ensure effectiveness, audit processes must adhere to professional standards. auditors carry out eke robert ike and glory eghoghon ihunde (2025) 21 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe routine tasks such as verifying assets and liabilities, inventory, cash receipts, cash payments, and conducting surprise checks on items like petty cash, bills, and vouchers (douglas, 2003). risk management roles the concepts of managing risk are central to the success and performance of banking operations. in any business, managing risk is crucial, as it is often noted that avoiding risks entirely can itself be a risk (aifuwa, enehizena & osazebvaru, 2020). egolum et al. (2021) define management of risk as a procedure aimed at protecting and safeguarding the net worth and income of persons and corporations, serving as an managerial function that employs practical strategies to address risks. in banking, kerazan (2016) emphasizes the importance of establishing a risk database, fully implementing banking governance principles, and ensuring the complete independence of the internal audit department. internal auditors perform a critical duty in ascertaining organizational risks and devising effective strategies to manage them. major risks faced by banks include risks affecting credit, market, operations, risks from electronic banking activities, strategic risk, compliance risk, legal risk, and regulatory risk (basel committee, n.d.). risk management typically involves four main phases: identifying risks, assessing them, prioritizing them, and planning responses, followed by a final stage of evaluation (irm, 2002; iso 31000, 2009; bs 31100, 2008; coso erm, 2004; moller, 2011). according to standards risk management (irm, 2002; bs 31100, 2008; coso erm, 2004), internal audit should support the evaluation phase. almost all standard-setting bodies emphasize the need for separate and quality assurance in evaluating risk management operations, emphasizing that internal audit goal must align with these principles (hopkin, 2012; moller, 2011; bsi, 2008; coso erm, 2004; irm, 2002). internal control compliance role oshisanmi (2007) described the internal control system as the administrative function of outlining and allocation of duties while establishing reporting lines to oversee all aspects of operations, ensuring the organization achieves its corporate objectives. okwoli (2004) outlined key objectives of an internal control system, including document approval and control, reporting, reconciliation reviews and approvals, restricting access to properties and documents, comparison of external and internal information, and maintaining control accounts and trial balances. shehu (2004) and jenfa (2002) referenced the operational auditing guideline on internal control, which categorizes internal control systems into various components such as organizational structure, separation of duties, physical controls, authorization and approval processes, financial recording procedures, personnel management, and supervision. an effective internal control system incorporates these elements, enabling auditors to rely on them. internal control compliance is a key responsibility of internal auditors, who are tasked with performing control audits. these audits aim to confirm that effective software and system are in place, ensuring the effectiveness of internal controls (didier, 2016). control audits may incorporate organs to prevent or detect fraudulent transactions, making such activities challenging or impossible. while these audits try to provide proof that controls function in the way it was intended do not necessarily identify fraudulent activities. assets safeguarding roles through financial reporting to analyze the key financial performance of banks and achieve defined objectives, it was essential to establish a financial infrastructure guided by 5 "golden principles" outlined by the imf and the world bank: open, a robust financial mechanism, private sector involvement, carefully planned capital flow liberalization, and modernization eke robert ike and glory eghoghon ihunde (2025) 22 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe of international markets. financial reports prepared in alignment with these principles serve as a vital tool for managers to communicate effectively with users of financial information. in today's dynamic business environment, there is an increasing number of stakeholders interested in the data presented in financial statements. these stakeholders are being categorized into external and internal users. internal users include managers and people who makes decision within the organization. external users, the primary audience for financial statements, are divided into two groups: those that has financial stakes, such as current and potential owners and lenders, and those may not have financial stakes, including tax authorities, regulatory bodies, clients, and economic managers. to provide a reliable foundation for decision-making, financial statements must adhere to specific qualitative standards (bierstaker & pacini, 2006). 2.1.5. profitability egolum, ugonabo, and okonenwa (2021) assert that a firm is considered successful when it effectively accomplishes its goals and strategically executes tasks to achieve them. performance is defined as the capability to operate efficiently, remain profitable, sustain improvement, and respond to opportunities and challenges. therefore, growth can be measured by how effective an organization utilizes resources to meet its objectives. it serves as a measure of achievement individually, as a team, as an institution, or a process. consequently, a company’s growth strategy can be evaluated through various means, depending on its goals and objectives. for some companies, achieving all set objectives by the end of a financial period may indicate excellent performance, while for others, maximizing profit may serve as the sole indicator of success. 2.1.6 deposit money banks the primary objective of deposit money banks in nigeria is to generate profit and enhance the value of shareholders' investments. profitability can be defined as the difference between sales revenue and the costs of raw materials, labor, and capital incurred over an accounting period (pettinger & richard, 2006). kimetto (2019) emphasized that in a free market system, achieving profitability is vital, as it is the core goal of a profit-driven enterprise, which can only be achieved by addressing consumer needs. profit is typically measured in quantitative terms, whereas non-profit organizations focus on resource utilization and cost efficiency rather than profitability (kimetto, 2019). deposit money banks offer services like accepting deposits, providing business loans, and delivering basic investment products (beyanga, 2011). they generate profit through loan services and associated fees. according to pandey (1995), without profitability, a business cannot thrive in the long term. as such, the profitability of commercial banks is critical to their survival within the financial sector. a business's survival is considered a secondary goal, with profit maximization being the primary objective for any profit-driven enterprise. the profits generated by banks serve as an important source of equity, particularly when reinvested into the business (diedier, 2016), thereby enhancing its financial stability. 2.2.theoretical review to offer a comprehensive theoretical framework for understanding the role of internal auditors in improving profitability in commercial banks, this study is based on agency theory. proposed by jensen and meckling (1976), the agency theory outlines the relationship between the principal (the owners of organizations) and the agents (the managers or administrators of these organizations). internal auditors are responsible for verifying the accuracy of financial and statistical records presented to management, evaluating the effectiveness of current internal controls and systems, and recommending improvements. the functions of internal auditors, such as safeguarding assets, ensuring compliance with internal controls, and managing risks, directly influence the financial performance of eke robert ike and glory eghoghon ihunde (2025) 23 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe organizations. the work of internal auditors is focused on serving the interests of the principal or the bank's owners (egolum et al., 2021). furthermore, their role helps in the early detection and prevention of fraud, ensuring strict adherence to the organization’s standard accounting practices. 2.3.empirical review natalia, salwa, and nurliyana (2023) provided empirical evidence on the factors that influence the quality of financial reports, focusing on variables such as internal audits, internal control system implementation, and corporate governance practices. they developed a conceptual model to analyze the quality of financial reports based on the role of these variables, drawing on established theories. the aim was to make a scientific contribution to the field of public sector auditing and address challenges related to improving financial report quality through internal audits, internal controls, and corporate governance. additionally, the findings of this study can assist regulators in enhancing financial report quality, ultimately helping to prevent fraudulent financial reporting. in nigeria, alashe and bello (2021) examined the impact of internal audits on the financial performance of money deposit banks. the study employed a survey research design, administering 360 questionnaires to bank staff using a judgmental sampling method. the research utilized ordinary least squares (ols) regression to test the hypotheses and found a significant relationship between internal audits and the profitability of money deposit banks in nigeria. furthermore, they discovered that internal audit reporting channels positively influence the financial performance of these banks. the study concluded that internal audits have a positive impact on the financial performance of money deposit banks in nigeria. in yemen, hazaea, tabash, zhu, saleh, and farhan (2021) explored the impact of internal audits on the financial performance of commercial banks. the study used a survey research design and distributed 90 questionnaires across nine commercial banks in yemen (23 branches), all under the supervision of the central bank of yemen. descriptive, correlation, and regression analyses were employed to summarize the data and test the study's hypotheses. the findings revealed that internal auditing (ia) significantly affects the overall performance of yemeni commercial banks. additionally, the results showed that the efficiency of auditors, along with their financial and accounting knowledge, positively and significantly impacts financial performance. however, the independence and objectivity of internal auditors were found to have no significant effect on financial performance. on the other hand, the size of the internal audit function and the frequency of auditors' meetings were shown to negatively and significantly affect financial performance. kimetto (2019) examined the effect of internal auditing on the profitability of banking institutions in kenya using a descriptive survey research design. data were gathered through questionnaires and interviews. the study sampled 30 employees from various commercial banks in kericho town, selected using a stratified random sampling method. the findings indicated that internal auditors primarily contribute to profitability by detecting fraud and advising management on internal control systems. however, the study identified challenges to the effectiveness of internal auditing, such as lack of independence and inadequately qualified audit staff. furthermore, the profitability of commercial banks was influenced by factors such as high tax liabilities, low employee productivity, and rising production costs. in uganda, nansamba (2019) investigated the effect of internal auditing on the financial performance of commercial banks using a survey research design. the data analysis involved quantitative methods and regression analysis, employing descriptive statistics like mean, standard deviation, and frequency distribution. tables were used to present the data for better clarity. the study concluded that internal audit standards, independence, eke robert ike and glory eghoghon ihunde (2025) 24 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe professional competence, and internal control positively impact the financial performance of commercial banks. specifically, increases in these factors were linked to corresponding improvements in financial performance. in syria, kerazan (2016) studied the role of internal auditing in risk management within both public and private banks. the study used a survey research design, distributing 117 questionnaires. descriptive statistics were used to summarize the data, while a t-test was applied to assess the hypotheses. the findings showed that internal auditing plays a significant role in risk management across all syrian banks, with no significant differences between public and private banks. the study recommended training programs for internal audit staff and the implementation of regulations to better organize internal audit functions in banks. in kenya, changwony and rotich (2015) examined how internal auditing contributes to improving corporate governance within commercial banks. using a descriptive research approach, the study selected 89 participants through stratified random sampling. data was gathered using structured questionnaires and analyzed using pie charts, graphs, and percentages. the findings indicated that factors such as the placement of the internal audit function, risk identification, assessment and prioritization, audit independence, and adequate staffing have a significant positive impact on corporate governance in commercial banks. summary of empirical literature and gap identified from the above review carried out, they dwelt mainly on the link between quality of accounting report and internal audit, board governance, risk management and financial performance. other researchers in other countries dwelt on the internal audit as it relates to bank profitability but no study has examined that of banks in nigeria more so edo state which this study focused in. 3. methodology this study utilized a survey research design. this type of design is defined as "the collection of information from a sample of individuals through their responses to questions" (check & schutt, 2012, p. 160). the population comprised of staff of listed deposit money bank operating in benin city, edo state. nigeria. the total number of banks in benin city, edo state as at november 1st 2023 is eleven (11) listed deposit money banks (cbn finance and admin department, 2023). however, the target population of the study covered 3,453 core staff these banks (cbn benin office, 2023). the study utilized taro yamane's (1967) formula to calculate the sample size, as the population size and proportion were known. once the sample size was determined, it was allocated to various ministries and departments using a stratified sampling technique. the formula is as follows: n=n/1+n(e)2 where:  n represents the required sample size from the population under study,  n is the total population under study,  e denotes the margin of error or precision, typically set at 0.05 for management sciences. therefore; = 346 n= 346 (rounded) eke robert ike and glory eghoghon ihunde (2025) 25 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe a sample of 346 was arrived at after the computation. therefore, the study comprised of three hundred and fortysix (346) staff from selected banks in benin city, edo state, nigeria. the questionnaire, comprising two sections, gathered responses from study participants. section one captured respondents' bio-data, while section two focused on study variables. a structured questionnaire was chosen for its anonymity and standardized questions. responses were recorded on a five-point likert scale, ranging from 'strongly agree' to 'strongly disagree', facilitating quantitative analysis. this study employed content validity, which was ensured by soliciting feedback from accounting lecturers at wellspring university, benin city. the study also adopted the internal consistency approach, using cronbach's alpha to measure the consistency of responses. a cronbach's alpha value of 0.7 was gotten after the test, confirming that the questionnaire items effectively captured the variables under study. method of data analysis this study utilized a combination of descriptive and inferential statistical methods. descriptive statistics, presented in tables, included frequency and percentage distributions. to examine relationships between variables, the study employed a deductive approach using inferential statistics. specifically, linear regression analysis was conducted to test hypotheses and draw inferences. data analysis was facilitated by statistical package for social sciences (spss) software, version 21. model of the study the study adapted the model of alashe and bello (2021) in investigating the effect of internal audit on profitability of banks. this study added internal auditing standard as an independent variable of the study. therefore, the model of the study will be specified as; profitability = f (internal auditors roles) ------------------------------------------------------(4) profitability = (risk management roles, internal control compliance roles; and assets safeguarding roles; internal audit standards) -------------------------------------------------(5) profi = b0i + b1rmi + b2icci + b3asti + ei------------------------------------(6) where: pft = profitability of commercial banks; b0 – constant; rkm = risk management; icc = internal control compliance ast = asset safeguarding e = error term b1 – b4 = coefficient of variables 4.data presentation, analysis and results 4.1 data presentation the summary of the responses for the analysis were presented in the appendix. table 4.1: questionnaires distribution and returned states no of questionnaires distributed no of questionnaires returned no of questionnaires unreturned percentage of questionnaires returned total 346 334 52 eke robert ike and glory eghoghon ihunde (2025) 26 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe source: computed and compiled by the researcher, 2024 table 4.2 summary of responses for dependent variable s\n statements sa a d sd profitability in commercial banks 1 there is a link between internal audit quality and profitability 120 36 % 146 44% 60 18% 8 2% 2 disclose of problems in internal control by firms leads to a significant increase in cost of capital reflected in the market. 110 33% 135 40% 75 22% 14 4% 3 banks are facing increased cost of acquiring raw materials 119 36% 125 37% 75 22% 15 4% 4 auditing standards practices in related services affects bank performance. 122 37% 142 43% 65 19% 5 1% 5 the independence of the internal auditors affects the profitability of the bank 115 34% 125 37% 89 27% 5 1% 6 professional competence of the internal auditors affects the profitability of the bank 100 30% 145 43% 74 22% 15 4% source: field survey, 2024 from the above analysis, majority of the respondents agreed that internal audit functions can impact on profitability of deposit money banks. table 4.3: summary of responses for independent variable1 statements sa a d sd risk management roles 7 the appointment of skilled and competent internal auditors lies with the management of a company. 108 32% 152 46% 69 21% 14 4% 8 qualification and experience play a key role in the appointment of auditors in deposit money banks. 111 34% 151 45% 61 18% 11 3% 9 effective internal audit reduces on fraud and embezzlement in banks 201 60% 78 23% 24 7% 31 9% 10 internal audit plays a key role in risk management through proper evaluation. 119 36% 145 43% 62 19% 8 2% source: field survey, 2024 the above analysis from respondents it is evident that majority agreed that internal auditor’s risk management role can have high effect on deposit money bank profitability. table 4.4: summary of responses for independent variable 2 internal control compliance roles 11 one of the critical role of internal auditor of deposit money banks evaluation of internal control system of the bank. 91 27% 161 48% 61 18% 21 6% 12 in deposit money banks internal auditors perform their duties without interference 100 30% 138 41% 91 27% 5 1% 13 internal auditors of deposit money banks follows up on their reports and recommendations. 109 33% 146 44% 69 21 10 3% 14 few intentional errors are detected during routine audit by internal auditors and they are predictable. 121 36% 142 43% 60 18% 11 3% 15 professionalism is highly emphasized in the bank 118 146 63 7 eke robert ike and glory eghoghon ihunde (2025) 27 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe 35% 44% 19% 2% source: field survey, 2024 the summary of the reponses above showed that majority agreed that auditor’s compliance role has significant effect on the profitability of deposit money banks. table 4.5: summary of responses for independent variable 3 asset safeguarding roles 16 independence of an internal auditor is guaranteed by shielding him from the personnel and activities of the banks. 119 36% 145 43% 62 19% 8 2% 17 the internal audit department in a deposit money bank must be guaranteed of independence for it to function properly. 109 33% 146 44% 69 21 10 3% 18 internal auditors should not have anything that will conflict with his own interest in course of working for the bank. 91 27% 161 48% 61 18% 21 6% 19 the internal auditor report issue of fraud and error to management frquently 110 33% 135 40% 75 22% 14 4% 20 there is reduce fraud occurrence in the bank 115 34% 125 37% 89 27% 5 1% source: field survey, 2024 the above responses as regards the effect of asset safeguarding role of internal auditors showed that majority of the respondents agreed or strongly agreed that the positively affect profitability. data analysis the table below is the descriptive statistics that was computed to show the mean, median, standard deviation, minimum, and maximum values, statistics, etc. table 4.6 descriptive statistics n minimum maximu m mean std. deviation skewness kurtosis statisti c statistic statistic statistic statistic statist ic std. error statis tic std. error pft 4 62.00 818.00 501.0000 332.36727 -.847 1.014 -.272 2.619 rkm 4 33.00 448.00 252.7500 180.15803 -.316 1.014 1.312 2.619 icc 4 54.00 733.00 417.5000 289.73379 -.417 1.014 -.438 2.619 ast 4 40.00 752.00 414.0000 304.70204 -.292 1.014 -.760 2.619 valid n (listwise) 4 interpretation the descriptive statistics for the independent variables, including profitability (pft), are presented in table 4.2.1. the mean serves as a baseline measure, while the maximum and minimum values help identify potential data issues. the standard deviation indicates the variation from the mean and acts as a risk measure; a higher standard deviation implies greater risk. this metric, widely regarded as the most reliable and commonly used, reflects how eke robert ike and glory eghoghon ihunde (2025) 28 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe much each data point deviates from the mean. for the firms analyzed, the standard deviations for pft, rkm, icc, and ast 332.37, 180.16, 289.73, and 304.70, respectively. regression result the research model was estimated using multiple regression analysis, and the resulting finding were then used to test the study's hypotheses table 4.7 regression model summary model summaryb model r r square adjusted r square std. error of the estimate 1 .991a .981 .972 55.42474 a. predictors: (constant), risk management, internal control compliance, asset safeguarding, b. dependent variable: profitability of deposit money banks source: regression output, 2024 the table above provides the model summary of the study. the adjusted r-squared value is 0.972, indicating that approximately 97.2% of the systematic variation is explained by the study's independent variable. meanwhile, 2.9% of the variation is attributed to other variables not included in the model but is adequately addressed by the regression's standard error, se = 55.42474. table 4.9: model fitness anovaa model sum of squares df mean square f sig. 1 regression 325260.197 1 16245.140 105.401 .009b residual 6143;803 2 3071.901 total 331404.000 3 a. dependent variable: profitability of deposit money banks b. predictors: (constant), risk management, internal control compliance, asset safeguarding, . source: regression output, 2024 the anova table showed that the model was statistically fit, f = 105.401, df = 1, p = 0.009 < 0.05. table 4.10: coefficient summary model unstandardized coefficients standardized coefficients t sig. b std. error beta 1 (constant) 39.053 52.758 .740 .536 risk management 1.828 .178 .991 10.290 .009 control compliance 1.138 .100 .992 11.404 .008 asset safeguarding, 1.079 .113 .989 9.578 .011 eke robert ike and glory eghoghon ihunde (2025) 29 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe source: regression output, 2024 the table of coefficient shows how the independent variables are related. from the table above, it shows that risk management role, internal control compliance, asset safeguarding role, have positive impact on profitability of deposit money banks in benin city, edo state. test of hypotheses 1. risk management roles of internal auditors do not have significant impact on profitability in deposit money banks; table 4.3.3 indicates that the p-value of 0.009 is highly significant at the 5% significance level, as it is less than the alpha value (0.009 < 0.05). the regression results in the same table reveal that the risk management roles of the explanatory variable have a positive and statistically significant impact. this is evidenced by the coefficient value of 0.991 and a t-statistic of 10.290, indicating a significant positive relationship between risk management roles and bank profitability at the 5% significance level. decision: since the p-value of the test statistic is less than or equal to the alpha value, the null hypothesis is rejected, and the alternative hypothesis is accepted. this confirms that the risk management roles of internal auditors significantly impact the profitability of deposit money banks. hypothesis two ho2: there is no significant relationship between control compliance roles of internal auditors and profitability in deposit money banks; table 4.3.3 shows that the p-value of 0.008 is statistically significant at the 5% significance level, as it is less than the alpha value (0.008 < 0.05). the regression results further indicate that the control compliance roles of the explanatory variable have a positive and statistically significant effect. this is supported by a coefficient value of 0.992 and a t-statistic of 11.404, demonstrating a significant positive relationship between control compliance roles and bank profitability at the 5% significance level. decision: since the p-value is less than the alpha value, the null hypothesis is rejected, and the alternative hypothesis is accepted. this confirms that the control compliance roles of internal auditors have a significant impact on the profitability of deposit money banks. hypothesis three ho3: asset safeguarding roles of internal auditors do not have significant impact on profitability in deposit money banks. table 4.3.3 shows that the p-value of 0.011 is statistically significant at the 5% significance level, as it is less than the alpha value (0.011 < 0.05). the regression results further demonstrate that the asset safeguarding roles of the explanatory variable have a positive and statistically significant effect. this is reflected in a coefficient value of 0.989 and a t-statistic of 9.578, indicating a significant positive relationship between asset safeguarding roles and bank profitability at the 5% significance level. decision: since the p-value is less than the alpha value, the null hypothesis is rejected, and the alternative hypothesis is accepted. this confirms that the asset safeguarding roles of internal auditors significantly impact the profitability of deposit money banks. discussion of findings a. b. dependent variable: profitability of deposit money banks eke robert ike and glory eghoghon ihunde (2025) 30 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe hypothesis one: the first hypothesis posits that the risk management roles of internal auditors significantly impact on deposit money banks profit. this aligns with the findings of aifuwa, enehizena, and osazebvaru (2020), who emphasized that management of risk is crucial for the good performance of banking operations. risk management is essential in any business, as failing to address risks is itself risky. similarly, egolum et al. (2021) highlighted that risk management safeguards assets and income while serving as an administrative function that employs practical strategies to mitigate risks. changwony and rotich (2015) further demonstrated that factors such as the positioning of internal audit functions, risk identification, measurement and prioritization, audit independence, and staffing significantly contribute to effective corporate governance. in syria, kerazan (2016) found that internal audit functions do not contribute significantly in managing risk to both national and private banks. hypothesis two: the second hypothesis asserts that the control compliance roles of internal auditors significantly influence the profitability of deposit money banks. this finding is consistent with didier (2016), who noted that control audits can incorporate mechanisms to detect or prevent fraudulent transactions, enhancing corporate income by ensuring the effectiveness of control systems. however, such audits primarily assure functionality rather than detecting fraud or corruption. alashe and bello (2021) similarly concluded that internal audits positively correlate with the financial performance of nigerian deposit money banks. hypothesis three: the third hypothesis states that the asset safeguarding roles of internal auditors have a significant effect on the profit of deposit money banks. bierstaker and pacini (2006) observed that financial statements must meet qualitative criteria to provide a reliable foundation for decision-making processes, highlighting the importance of safeguarding assets. 5. summary of findings from the analysis of the study and hypotheses tested, the following findings were drawn; 1. the outcome showed that risk management roles of internal auditors have significant impact on profitability in deposit money banks. 2. the study found that control compliance roles of internal auditors have significant impact on profitability in deposit money banks. 3. it was also found that asset safeguarding roles of internal auditors have significant impact on profitability in deposit money banks. conclusion the main objective of the research was to ascertain impact of internal auditors on profitability in deposit money banks in benin city, using risk management roles of internal auditors, control compliance roles of internal auditors, asset safeguarding roles of internal auditors and internal audit standards compliance as a proxy for internal auditors. a sample of 386 staff of the deposit money banks in benin city. the research data were generated from the questionnaires distributed to the respondents. hypothesis testing was done using rregression analysis via spss. the study found that risk management roles of internal auditors, control compliance roles of internal auditors, asset safeguarding roles of internal auditors and internal audit standard compliance has significant impact on profitability in deposit money banks. we therefore conclude that internal auditors play a significant role in determining bank’s profitability. recommendations eke robert ike and glory eghoghon ihunde (2025) 31 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe from the outcome of the study, we make the following recommendations; 1. the banks internal auditors should continue with their risk management strategy presently being implemented as it has impacted positively to their profitability. 2. internal auditor should continue with their compliance roles and should step up the role as it goes a long way in improving the profitability of banks. 3. internal auditors should continue to uphold auditing standards and should regularly update themselves with new developments in auditing standard issued from time to time and ensure it is implemented in the bank. this will provide a conducive atmosphere for external auditors when they carryout out end of the year audit of banks. 4. internal auditor’s role in safeguarding the assets of the organization should be strengthened to ensure there is no loss and enhance company’s performance. references aifuwa, h. o., enehizena c. o. & osazebvaru, a. (2020). accounting information and lending decision: does sustainability disclosure matter? copernican journal of finance & accounting, 8(4), 61-89. alashe a.k., bello a.o. (2021). the impact of internal audit on financial performance of deposit money banks in nigeria. african journal of accounting and financial research 4(3), 139-149. ajani, s. a. (2012). auditing as a tool for enhancing the principal agent relationship. study guide: masters in business administration, ahmadu bello university, zaria awdat, a. a. (2015). the impact of the internal audit function to improve the financial performance of commercial banks in jordan. research journal of finance and accounting, 6(3), 217-225. basel committee on banking supervision, (2012). the internal audit function in banks: principles for enhancing corporate governance in banks. bierstaker, j. & pacini, c. (2006), accountants perceptions regarding fraud detection and prevention methods. managerial auditing journal, 21(5), 520-535. beyanga m. (2011). a contribution to the theory of economic growth. the quarterly journal of economics 70(1), 65-75. changwony, m. k. & rotich. g. (2015). the role of internal audit function in promoting effective corporate governance of commercial banks in kenya. international journal of business & law research 3(1),1533 de marco, (1980). an examination of internal auditor objectivity, new york : university press. didier h. (2016). internal audit and financial performance in banking institutions: a case study of ecobank rwanda. mount kenya university douglas, k., (2003). a critical analysis of the independence of the internal audit function. national book trust. eke robert ike and glory eghoghon ihunde (2025) 32 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe egolum, p. u & uchegbu, c. u. (2021). effect of internal audit on the financial performance of deposit money banks (dmb) in nigeria. international journal of southern economic light, 9(2), 1-15. egolum, p. u., ugonabo, c. u., & okonenwa, o. (2021). corporate governance determinants of financial statement fraud likelihood: evidence from quoted international licensed banks in nigeria. international journal of academic management science research (ijamsr); 5(4), 62-70. ebaid, e. (2011) ‘internal audit function: an exploratory study from egyptian listed firms,’ international journal of law and management, 53(2), 108-128, doi: 10.1108/17542431111119397. fraser, i. & henry, w. 2007, "embedding risk management: structures and approaches", managerial auditing journal, [online] 22(4)392-409. available from: http://www.emeraldinsight.com/journals.htm?issn=02686902&volume=22&issue=4&articleid=1600843&show=html&phpsessid=o9d5u2blsfd58nvkhbu54fb tf4 [accessed 9july 2012] fraser, j. & simkins, b.j. (2010), enterprise risk management, today’s leading research and best practices for tomorrow’s executives, usa, john wiley & sons ltd. heil, d. (2012). the influence of the auditor on the earnings quality of their clients (master’s thesis). retrieved from https:// thesis.eur.nl/pub/10237/ma006heil_306477.docx iia (2013), the iia global internal audit competency framework, iia, available at: https:// na.theiia.org/aboutus/public%20documents/the%20iia%20global%20internal%20audit%20 co mpetency%20framework.pdf (accessed 29 march 2017). iia (2017), international standards for the professional practice of internal auditing, iia, available at: https://na.theiia.org/standards-guidance/mandatoryguidance/pages/standards.aspx (accessed 29 march 2017). jensen, m. c., & mackling, w. h. (1976). theory of the firm: managerial behaviour, agency costs and ownership structure. journal of financial economics, 1(1), 305-360. kapner, s. (2001), “grocer ends egypt expansion to rebuild its british market”, the new york times. kimetto, r. (2019). internal audit and profitability of banking institutions in kenya: a case study of commercial banks in kericho county, kenya. scientific research journal (scirj), 7(5), 46-62. kerazan, f. h. (2016). the contribution of the internal audit function in risk management. journal of management research, 8(3), 178-202. mashayekhi, b., jalali, f., & rezaee, z. (2022). the role of stakeholders’ perception in internal audit status: the case of iran. journal of accounting in emerging economies, 12(4), 589–614. https://doi.org/10.1108/jaee-03-2020-0064. https://na.theiia.org/standards-guidance/mandatory-%20guidance/pages/standards.aspx https://doi.org/10.1108/jaee-03-2020-0064 eke robert ike and glory eghoghon ihunde (2025) 33 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe mindra, k.r. (2017). too big to fail: the sleeping gatekeeper”. new vision, wednesday, july 19, 15 muhereza, r. (2012), “bou takes over management of national bank of commerce”, daily monitor natalia h., salwa z. & nurliyana, h. k. (2023). the role of internal audit, internal control systems, and corporate governance practices toward financial report quality mahsa international journal of business and social sciences e-issn: 2811-4302 03(02) nkundabanyanga, s.k. (2016),” board governance, intellectual capital and firm performance importance of multiplicative effects “, journal of economic and administrative sciences, 32(1),. 20 – 45. nansamba, j. (2019). effect of internal audit on financial performance of commercial banks in uganda: a case study of stanbic bank kansanga branch. bsc thesis, kampala international university. pandey i.m. (1995). financial management, (7th revised edition), vikas publishing house. pettinger and richard. (2006). profit motive.uk business consultants pwc (2014), “2014 state of the internal audit profession study” https://www.pwc.co.za/en/assets/pdf/ sotp-africabrochure-sa-may-2014.pdf accessed 6/8/2017 pwc. (2022). protecting the perimeter: the rise of external fraud. in www.pwc.com/fraudsurvey. retrieved september 20, 2023, from https://www.pwc.com/gx/en/forensics/gecsm-2022/pdf/pwc’s-globaleconomic-crime-and-fraud-survey-2022.pdf rensburg, j. o., & coetzee, p (2016). internal audit public sector capability: a case study. journal of public affairs, 16 (2), 181–191. roussy, m. (2013), “internal auditors’ roles: from watchdogs to helpers and protectors of the top manager”, critical perspectives on accounting, 24(7-8), 550-571. roussy, m. and brivot, m. (2016) “internal audit quality: a polysemous notion?”, accounting, auditing & accountability journal, vol. 29 no. 5, pp.714-738 saddam a. hazaea, mosab i. tabash, jinyu zhu, saleh f. a. khatib and najib h. s. farhan (2021). internal audit and financial performance of yemeni commercial banks: empirical evidence. banks and bank systems, 16(2), 137-147 saidu, m. & aifuwa, h. o. (2020). board characteristics and audit quality: the moderating role of gender diversity. international journal of business & law research, 8(1), 144-155. sawyer, l. b. and dittenhofer, m. a. (1996). internal auditing, 4h ed. (altamonte springs. fl: the institute of internal auditors. california state university, fresno-craig school of business. https://www.pwc.co.za/en/assets/pdf/ eke robert ike and glory eghoghon ihunde (2025) 34 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe staciokas, r., & rupsys, r. (2005). internal audit and its role in organizational government. management of organizations systematic research, 12(33), 169181. soh, d. and martinov-bennie, n. (2011),” the internal audit function: perceptions of internal audit roles, effectiveness and evaluation”, managerial auditing journal, 26(7), 605-622. aifuwa, h. o., enehizena c. o. & osazebvaru, a. (2020). accounting information and lending decision: does sustainability disclosure matter? copernican journal of finance & accounting, 8(4), 61-89. alashe a.k., bello a.o. (2021). the impact of internal audit on financial performance of deposit money banks in nigeria. african journal of accounting and financial research 4(3), 139-149. ajani, s. a. (2012). auditing as a tool for enhancing the principal agent relationship. study guide: masters in business administration, ahmadu bello university, zaria awdat, a. a. (2015). the impact of the internal audit function to improve the financial performance of commercial banks in jordan. research journal of finance and accounting, 6(3), 217-225. basel committee on banking supervision, (2012). the internal audit function in banks: principles for enhancing corporate governance in banks. bierstaker, j. and pacini, c. (2006), accountants perceptions regarding fraud detection and prevention methods. managerial auditing journal, 21(5), 520-535. beyanga m. (2011). a contribution to the theory of economic growth. the quarterly journal of economics 70(1), 65-75. changwony, m. k. & rotich. g. (2015). the role of internal audit function in promoting effective corporate governance of commercial banks in kenya. international journal of business & law research 3(1),1533 de marco, (1980). an examination of internal auditor objectivity, new york : university press. didier h. (2016). internal audit and financial performance in banking institutions: a case study of ecobank rwanda. mount kenya university douglas, k., (2003). a critical analysis of the independence of the internal audit function. national book trust. egolum, p. u & uchegbu, c. u. (2021). effect of internal audit on the financial performance of deposit money banks (dmb) in nigeria. international journal of southern economic light, 9(2), 1-15. egolum, p. u., ugonabo, c. u., & okonenwa, o. (2021). corporate governance determinants of financial statement fraud likelihood: evidence from quoted international licensed banks in nigeria. international journal of academic management science research (ijamsr); 5(4), 62-70. eke robert ike and glory eghoghon ihunde (2025) 35 american interdisciplinary journal of business and economics | https://sadijournals.org/index.php/aijbe heil, d. (2012). the influence of the auditor on the earnings quality of their clients (master’s thesis). retrieved from https:// thesis.eur.nl/pub/10237/ma006heil_306477.docx jensen, m. c., & mackling, w. h. (1976). theory of the firm: managerial behaviour, agency costs and ownership structure. journal of financial economics, 1(1), 305-360. kimetto, r. (2019). internal audit and profitability of banking institutions in kenya: a case study of commercial banks in kericho county, kenya. scientific research journal (scirj), 7(5), 46-62. kerazan, f. h. (2016). the contribution of the internal audit function in risk management. journal of management research, 8(3), 178-202. nansamba, j. (2019). effect of internal audit on financial performance of commercial banks in uganda: a case study of stanbic bank kansanga branch. bsc thesis, kampala international university. pandey i.m. (1995). financial management, (7th revised edition), vikas publishing house. pettinger and richard. (2006). profit motive.uk business consultants saddam a. hazaea, mosab i. tabash, jinyu zhu, saleh f. a. khatib and najib h. s. farhan (2021). internal audit and financial performance of yemeni commercial banks: empirical evidence. banks and bank systems, 16(2), 137-147 saidu, m. & aifuwa, h. o. (2020). board characteristics and audit quality: the moderating role of gender diversity. international journal of business & law research, 8(1), 144-155. sawyer, l. b. and dittenhofer, m. a. (1996). internal auditing, 4h ed. (altamonte springs. fl: the institute of internal auditors. california state university, fresno-craig school of business. staciokas, r., & rupsys, r. (2005). internal audit and its role in organizational government. management of organizations systematic research, 12(33), 169181. american interdisciplinary journal of business and economics issn: 2837-1909| impact factor : 6.71 volume. 11, number 3; july-september, 2024; published by: scientific and academic development institute (sadi) 8933 willis ave los angeles, california https://sadijournals.org/index.php/aijbe| editorial@sadijournals.org american interdisciplinary journal of business and economics | 35 https://sadijournals.org/index.php/aijbe empirical evaluation of oil price volatility and stock market returns in nigeria ikemenogo, eze solomon department of economics, faculty of social sciences, university of lagos, akoka, nigeria doi: https://doi.org/10.5281/zenodo.13236955 abstract: the study is on empirical evaluation of the impact of oil prices volatility on stock market returns in nigeria from 1986 to 2021. with the understanding that energy runs like a bloodstream of any business of which oil is a major source, it becomes imperative to explore the incessant oil price fluctuations and its effects on critical indicators of the economy like stock market performance. the objectives include to examine the patterns of oil price volatility and stock market returns in nigeria, analyse the influence of oil price fluctuations on nigeria's economic growth, and investigate the causal relationship between oil price volatility and the stock market returns in nigeria. arbitrage pricing theory (apt) was employed as the framework while the methodology adopted the all-share indices (asi) as the dependent variable, then, oil prices (oprice), exchange rate (exch), inflation rate (infl), gross domestic growth rate (gdpgr), and interest rate (int) as explanatory variables. secondary data sourced from unctad, etc. were analysed with aid of eviews 2021. the generalised autoregressive conditional heteroscedasticity (garch) and granger causality were the estimation techniques used. the study used unit root test to check the stationarity of the variables, the ardl bound test to check for long-term relationships between the variables, and the ardl model to estimate both shortand long-term relationships between the variables. a normality test revealed that the study's variables are all typical. breuseeh-gdfrey serial correlation revealed no association between the study's variables. the heteroscedasticity test showed there was no outlier’s effect on the output of the result. it was found that inflation and exchange rate volatility are positive and statistically significant; inflation and interest rate are equally positive related to private consumption during the period under investigation. it found out inflation, oil price, exchange rate, and real gross domestic product have positive effect on stock market performance in nigeria. the work concludes oil price is a major determinant of economic growth in nigeria. it was recommended that all brokerage firms and investment advisors need to conduct periodic research on macroeconomic environment and advise their clients accordingly on the best counters to invest in owing to the various influences by macroeconomic environment on the stock market performance. keywords: oil, prices, volatility, stock, market, returns ikemenogo, eze solomon (2024) american interdisciplinary journal of business and economics | 36 https://sadijournals.org/index.php/aijbe introduction 1.1 background of the study oil plays a significant role in the global economy, hence there has been a lot of research done to understand the financial and economic effects of fluctuations in oil prices. there is controversy about the relationship between the oil price and the stock market returns, making it an unpredictable factor in economic growth (ndlovu, 2019). oil is a major source of energy globally and a crucial element of nigeria's economy, significantly influencing its economic and political landscape. although nigeria’s oil industry dates to the early 20th century, it was not until after the nigerian civil war (1967-1970) that oil began to dominate the economic sphere. the discovery of crude oil has had both positive and negative impacts on nigeria's economy. the oil sector contributes approximately 90% of nigeria’s total revenue. it generates employment opportunities, boosts foreign exchange reserves, and supplies energy to various industries and commerce. nigeria joined the organization of petroleum exporting countries (opec) in 1971 and established the nigerian national petroleum corporation (nnpc) in 1977, a statecontrolled entity involved in both the upstream and downstream sectors (blair, 1976), following the discovery of crude oil by shell d’arcy petroleum, pioneer production commenced in 1958 from an oil field in oloibiri, eastern niger delta. on the negative side, oil exploitation has led to significant environmental degradation in surrounding communities. this has caused a loss of livelihood and other economic and social challenges. despite nnpc’s efforts to maximize capacity and improve petroleum product distribution, inefficiencies persist, leading to inconsistent supply and allocation issues. crude oil prices have experienced significant volatility over time. according to olayungbo and ojeyinka (2021), the first major global oil price shock occurred from 1973 to 1974, when prices surged from $3 to $12 per barrel due to the arabian embargo. the second shock occurred between 1978 and 1979 during the iranian revolution, with prices rising from $12 to $18 per barrel. the third shock took place during the iraq-iran conflict (19801990), which saw oil prices increase from $28 to $40 per barrel. the 2008-2009 global financial crisis caused oil prices to plummet from $100 to $47 per barrel. the nigerian stock exchange (nse), established in 1960 and renamed in 1977, is a critical institution in nigeria's capital market. it has branches in major cities, with its head office in lagos and another office in abuja (akigbo, 1996). the nse opened in 1961 with 19 listed equities. today, it lists 328 securities with a total market value of approximately n28.26 trillion as of january 2020 (akigbo, 1996). the nse and the securities & exchange commission (sec), which enforces the investments & securities decree 1999, regulate transactions on the exchange. the deregulation of nigeria's capital market in 1993 and the repeal of foreign participation restrictions in 1995 allowed foreigners to engage as operators and investors. since 1987, the nse has been a part of the reuters electronic contributor system, facilitating global distribution of stock market data, trade statistics, and company news. the primary objectives of the nse include developing a system for capital formation, offering efficient resource allocation, providing unique financing options, maintaining market discipline, and broadening share ownership (akigbo, 1996). the influence of oil price volatility on the capital market is significant. oil price fluctuations impact the stock market by reflecting the market's expectations of future profitability (akigbo, 2014). the stock market absorbs the current and expected future impacts of oil price shocks, which are reflected in stock prices and returns. with oil production and exportation playing a crucial role in driving economic growth and development, the volatility of oil prices has been a subject of great importance in the country's ikemenogo, eze solomon (2024) american interdisciplinary journal of business and economics | 37 https://sadijournals.org/index.php/aijbe financial landscape (wang et al, 2022). over the period from 1990 to 2022, nigeria experienced notable fluctuations in oil prices, which, in turn, had a profound impact on the performance of its stock market. the effect of oil price volatility on the economy is complex and unsettled, with no consensus on the relationship between financial variables and oil prices. researchers like salisu and oloko (2015), babatunde et al. (2013), and fowowe (2013) argue that there is a direct relationship between oil prices and stock market performance. this study aims to link these variables, examining the impact of oil price volatility on stock market returns using disaggregated data. the nigerian stock exchange serves as a catalyst for mobilizing and utilizing private and public savings for productive uses (akigbo, 1996). fluctuations in oil prices can pose threats to the stock market, given the oil industry's critical role in providing foreign exchange and total revenue for nigeria's socio-political and economic wellbeing. 1.2 statement of the problem oil discovery in nigeria has driven economic growth and infrastructural development but has also caused significant environmental harm, particularly water pollution that has devastated aquatic life and stripped local fishermen of their livelihood. as a mono-economy heavily reliant on oil, nigeria's macroeconomic stability is highly sensitive to fluctuations in oil demand and supply. the 1970s oil boom led to the neglect of non-oil revenues, an expanding public sector, and poor financial discipline, exposing nigeria to oil price volatility and financial instability. despite the efforts by various governments to revive agriculture and diversify the economy which include initiatives like operation feed the nation (ofn), green revolution, and national economic empowerment and development strategy (needs), etc., the economy remains vulnerable. nigeria's open economy is highly susceptible to crises, which significantly impact its volatile stock market, posing challenges for investors and financial analysts. the nigerian stock market experiences high volatility due to risks and price shocks. risk-averse investors often avoid the market due to the uncertainty and volatility in expected returns (ashamu et al., 2017). high volatility increases unfavourable market premiums, and investors demand higher returns on investments (atoi, 2014). oil price fluctuations induce large variations in stock market returns, making oil prices a significant concern for scholars. most research focuses on developed economies, with limited studies on developing economies like nigeria, despite its significant stock exchange. 1.3 objectives of the study the broad objective of this research study is to examine the causality between oil price volatility and stock market returns. to achieve the broad objectives, it is pertinent to streamline the specific objectives which are to: i) determine effect of oil price fluctuation on the economic growth in nigeria. ii) establish the nexus trend between oil price volatility and stock market in nigeria. iii) determine the impact of oil price volatility on stock market returns in nigeria. 1.4 research questions in line with the research objectives, the study aims to provide the answers to the following research questions. i. i. does oil price volatility have an impact on stock market returns? ii. what is the effect of oil price fluctuation on the economic growth in nigeria? iii. is there any nexus between oil price fluctuations and economic growth in nigeria? 1.5 research hypothesis to carry out this study, the following hypothesis must be tested: h01. oil price volatility has no significant impact on stock market returns. ikemenogo, eze solomon (2024) american interdisciplinary journal of business and economics | 38 https://sadijournals.org/index.php/aijbe h02. there is no significant effect of oil price volatility on stock market returns. h03. there is no significant nexus of oil price fluctuation and economic growth. 1.6 scope of the study this research study focused on oil price volatility effect and stock market returns in nigeria from 1986 2021. the study starts in 1986, a year prior to 1987 because there was a world stock market crash called ‘black monday’ with worldwide losses of about us$1.71trillion and this significantly affected the world’s market, and it ends with 2021 because of the difficulty in finding accurate and verified data. the study will not cover other african countries who may be facing similar challenges. but the findings of this study can be used as a guide. literature review 2.1 conceptual review oil price changes affect numerous economic variables such as interest rates, investment decisions, economic growth, investors' confidence etc. these variables have been documented to affect both the stock market and exchange rate market (hamilton, 1983; amano & van norden, 1995). again, oil prices are expressed in us dollars in the international market; hence, the dollar exchange rate may affect the price perceived by oil producing nations (roubaud & arouri, 2018). this study reviews the connection between these variables (oil price, exchange rate and stock market returns) using a bivariate and multivariate approach. to some economists, there is a positive correlation between crude oil price and stock market performance (cong, weiy, jiao & fan, 2008; boyer & filion, 2007; sadorsky, 2001). according to babatunde (2013) while the initial effects were contained due to low levels of exposure to complex financial instruments, the large swings in oil prices, combined with the resulting depreciation of the naira and drop in investor confidence led to growing pressures about the oil price volatility which was supported with exposure of oil subsidy frauds by importers of fuel products, who had a high foreign currency obligations owing to the high fuel prices in 2008, the subsequent falling oil prices and devaluations of naira added to the shocks experienced in the nigerian stock market. 2.1.1 oil price and exchange rate theories generally posit that crude oil prices and exchange rates are positively correlated in oil-exporting countries, with higher crude oil prices leading to currency appreciation and vice versa. crude oil price shocks affect exchange rates through two primary channels: the terms of trade channel and the wealth effect channel. the terms of trade channel suggests that a negative shock to the terms of trade drives down the price of nontradable goods in the domestic economy, causing the real exchange rate in oil-exporting economies to depreciate and vice versa. the wealth effect channel indicates that a drop in crude oil prices results in losses for oil exporters but gains for oil importers, shifting current account balances and leading to portfolio reallocations between oil trading companies (akigbo, 2014). a negative oil price shock transfers wealth from oil exporters to oil importers, or higher oil prices lead to higher production costs and inflation, which have contractionary effects on the economy and trade balances. to restore or improve trade balances, the exchange rate must adjust. the impact of oil prices on exchange rates can vary between advanced and emerging market economies. hamilton (2009) notes that oil price shocks respond directly to economic or geopolitical events and economic downturns (demand-side shocks). supply-side shocks are driven by disruptions in oil production, such as the iranian invasion of the u.s. embassy in 1978, the iraq invasion of ikemenogo, eze solomon (2024) american interdisciplinary journal of business and economics | 39 https://sadijournals.org/index.php/aijbe kuwait in 1980, the arab spring in 2000, and the iranian attack on saudi oil fields in 2019. these events disrupted oil production without corresponding reductions in demand, driving up prices. demand-side shocks, on the other hand, are influenced by global economic movements. for example, the economic growth in china and other developing economies significantly increased oil demand without a matching supply increase, leading to high oil prices. conversely, during the 2007-2009 global financial crisis, a dramatic reduction in oil demand led to a collapse in oil prices. kilian (2009) identifies three types of oil price shocks: supply-side shocks, aggregate demand shocks, and precautionary demand shocks. geopolitical unrest often triggers precautionary demand shocks, causing uncertainty about future oil availability and driving up prices. for instance, geopolitical events lead economic agents to expect shortages in oil supply, which results in high oil prices. according to salisu and oloko (2015), crude oil price shocks affect exchange rates through the terms of trade and wealth effect channels. a negative oil price shock transforms wealth from oil exporters to importers, leading to higher production costs and inflation, which adversely affects trade balances. to improve trade balance, the exchange rate must adjust. the relationship between exchange rates and oil prices can differ between advanced and emerging market economies. 2.1.2 exchange rate and stock market returns aruori (2011) emphasized that the relationship between the movement of exchange rate and stock returns could be explained with several perspectives. the flow-oriented model of exchange rate behaviour posits that depreciation in the exchange rate for instance would lead to improved trade balance as exports become cheaper. this would result in upward shift in aggregate demand (ad), hence overall expansion in real gross domestic product with the attendant positive effect on stock market performance. the stock-oriented model, on the other hand, emphasizes the role of capital accounts in the determination of a country's exchange rate. in this theory, the exchange rate equates the demand and supply of financial assets (stock and bonds). thus, expectation of future exchange rates affects the current price of financial markets (aruori. 2011). from another perspective brown & yucel, (2002) aligning with the arbitrage price theory argued that a rise in real interest rate will reduce the present value (pv) of the future cash flow which consequently make stock returns to fall. as the real interest rate rises, capital flows increase, causing the domestic currency to appreciate and fall in stock returns, they argued. 2.1.3 oil price and stock price oil price may impact stock performance through several channels such as uncertainty, fiscal, output and stock variation channels (degiannakis, filis & arora, 2018). oil price is susceptible to high volatility due to supply shocks and therefore, the risk of uncertainties occasioned by oil price volatility usually affect investors' portfolio, particularly, portfolio managers seeking to make optimal portfolio allocations (arouri, 2011); cited in salisu and oloko (2015). also, uncertainty channels views explain that rising crude oil prices heightens uncertainty in the real economy (firms and households) due to its effect on inflation, consumption, and output (brown & yucel, 2002). for a firm, it tends to reduce the demand for irreversible investment and consequently, expected cash flow declines. on the household, increased uncertainty, resulting from higher cost of crude oil also increases the households' ability to save rather than consume. (brown & yucel, 2002). given the above, the value of postponing investment and consumption decisions rises and hence, economic growth and stock market returns stifles. oil prices also impact stock performance through a more direct channel— that is, the stock variation channel. the nexus suggests that stock returns are impacted by factors that can alter expected cash flows and discount rates. however, this depends on whether the firm is an oil user or oil producer. ikemenogo, eze solomon (2024) american interdisciplinary journal of business and economics | 40 https://sadijournals.org/index.php/aijbe given that oil is a major production factor, any increase in oil price will result in an increased production cost (assuming a case of absence of substitution effect between production factors). this leads to reduced profit levels and future cash flows. for the oil producer, increase in crude oil prices results in increased profit margins and thus, increased future cash flows (basher & sadorsky, 2006). furthermore, higher interest rate response by the monetary authority to an inflationary pressure from the rising oil prices also affect the discount rate; an important factor in stock price formulation (basher, haug & sardosky, 2012). 2.2 theoretical review theory-based framework from various ideas have been used in the past to support analyses of the impact of oil price volatility on stock markets. as a result, the theoretical foundation for this study comes from the arbitrage pricing theory (apt). 2.2.1 arbitrage pricing theory (apt) the arbitrage pricing theory is a multi-factor asset pricing model which assumes that an asset's returns may be forecasted using a linear relationship between the assets expected return and several other macroeconomic variables that influence risk. stephen ross, an american economist, created this idea in 1976. the apt provides a multi-factor pricing model for securitized assets to analysts and investors. the apt provides analysts and investors with a multi-factor pricing model for securities that is based on the link between the projected return of a financial asset and its risk characteristics. the goal of apt is to determine the fair market price of a security that has been temporarily mispriced. apt is a more flexible and complicated alternative to the capital asset pricing model (capm). the theory allows investors and analysts to tailor their studies to their specific needs. arbitrage is the practice of the simultaneous purchase and sale of an asset on different exchanges, taking advantage of slight pricing discrepancies to lock in a risk-free profit for the trade. apt provides traders with a model for calculating an asset's theoretical fair market value. having determined that value, traders then look for slight deviations from the fair market price and trade accordingly. for example, if the apt pricing model determines the fair market value of a company's stock to be ₦50, but the market price drops to ₦45, the trader will buy the shares in the idea that additional market price action will rapidly "correct" the market price back to ₦50/share. thus, this study uses the apt to link crude oil prices and other selected macroeconomic variables (such as the exchange rate, inflation rate, and interest rate) to stock market performance in nigeria from 1981 to 2019. its theoretical underpinning is derived from the apt. 2.2.2 capital asset pricing model (capm) the capital asset pricing model was pioneered by notable authors including sharpe (1964), umer (1965), mossin (1960). the capm is a single factor model, quantifies the expected rates of return of an asset with level of market systematic risk. the capm has variously been lead among others by chen (2003) and kim et al. (a) 2017. it is a finance model that establishes a linear relationship between the required return on an investment and risk. capm evolved to measure this systematic risk. it is widely used throughout finance for pricing risky securities and generating expected returns for assets, given the risk of those asset and cost of capital. algebraically, capm is presented as 𝑅𝑖 = 𝑅𝑓 + 𝛽𝑖(𝑅𝑚 − 𝑅𝑓) 2.1 𝑊ℎ𝑒𝑟𝑒: 𝑚 = 𝑚𝑎𝑟𝑘𝑒𝑡 𝑝𝑜𝑟𝑡𝑓𝑜𝑙𝑖𝑜, 𝑅𝑚 = 𝐸𝑥𝑝𝑒𝑐𝑡𝑒𝑑 𝑟𝑒𝑡𝑢𝑟𝑛 𝑜𝑛 𝑝𝑜𝑟𝑡𝑓𝑜𝑙𝑖𝑜, 𝑅𝑓 = 𝑅𝑖𝑠𝑘 𝑓𝑟𝑒𝑒 𝑟𝑒𝑡𝑢𝑟𝑛 𝑅𝑖 = 𝑅𝑒𝑡𝑢𝑟𝑛 𝑜𝑛 𝐴𝑠𝑠𝑒𝑡, 𝛽𝑖 = 𝐶𝑂𝑉(𝑅𝑖,𝑅𝑚) 𝛿𝑚 2 2.2 ikemenogo, eze solomon (2024) american interdisciplinary journal of business and economics | 41 https://sadijournals.org/index.php/aijbe equation 2.2 is called the beta of the asset (𝑖) and (𝑚) is the variance of the market portfolio. for any portfolio < = (<1---<n) of ranky assets, its beta can be constructed as a weighted average of individual asset betas as follows: 𝐸(𝑅𝑖) = 𝑅𝑓 + 𝛽𝜆(𝐸(𝑅𝑚) − 𝑅𝑓 2.3 𝑊ℎ𝑒𝑟𝑒: 𝐸(𝑅𝑖) = 𝑐𝑎𝑝𝑖𝑡𝑎𝑙 𝑎𝑠𝑠𝑒𝑡 𝑒𝑥𝑝𝑒𝑐𝑡𝑒𝑑 𝑟𝑒𝑡𝑢𝑟𝑛, 𝑅𝑓 = 𝑟𝑖𝑠𝑘 − 𝑓𝑟𝑒𝑒 𝑟𝑎𝑡𝑒 𝑜𝑓 𝑖𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝛽𝜆 = 𝑠𝑒𝑛𝑠𝑖𝑡𝑖𝑣𝑖𝑡𝑦, 𝐸(𝑅𝑚) = 𝑒𝑥𝑝𝑒𝑐𝑡𝑒𝑑 𝑟𝑒𝑡𝑢𝑟𝑛 𝑜𝑓 𝑡ℎ𝑒 𝑚𝑎𝑟𝑘𝑒𝑡 𝛽𝜆 = ∑ 𝛼𝑖𝛽𝑖 𝜌 𝑖=1 2.4 the beta value indicates a measure of risk for individual assets/portfolio. it measures the non-diversifiable or transferable part of risk known as systematic risk. according to this model, the expected return of an asset depends on its stand-alone risk. however, the capm has unrealistic assumptions for example, the perfect competitive market environment does not hold as forces of demand and supply often guide investors decision making as they affect prices of assets. also, tax liabilities affect the level of investment and the type of asset to invest in. the model also assumes that at the risk-free rate, borrowing will be unlimited. however, individual investors cannot borrow at the same rate with government and its agencies. 2.2.3 the discount cash flow model (dcf) the relationship between oil price shocks and stock market return can also be theoretically explored or viewed through the discounted cash flow model (equity pricing model) developed by huang et al (1996). the model has been adopted in several literature (sek, 2015; basher, 2014; zakanya and abdala, 2013; abeng, 2017; degiannakis, 2017). according to this model, macroeconomic variables including commodity prices can exert a significant effect on stock returns of firms. the price of equity at a given point in time is equal to the expected present value of the discounted future cash flows as follows: 𝑃𝑉 = ∑ 𝐸(𝐶𝑡) (1+𝑟)𝑡 𝑛 𝑡=1 2.5 where: p = stock price, c = cash flow, r = discount rate (interest rate), e (.) = expectation operator. the realized stock returns r can be expressed approximately as 𝑅 = 𝑑(𝜌) 𝑃 2.6 where d(.) is the difference operator. stock returns, r, are determined by the systematic movements in expected cash flows and discount rates, which can be affected by changes in oil prices in several ways. for cash flows, it is assumed that oil, together with labour, capital and other inputs, represents import components in the production friction of most goods and services. therefore, changes in the prices of these inputs including oil, affect cash flows of firms. i.e. rising oil prices increases production costs leading to dampened cash flows which ultimately translates to a reduction in stock prices. it however depends on whether a particular firm is a net producer or net consumer of oil. the discounted rate can also be affected by oil price changes. according to huang et al (1996), expected discount rate consists of two components; expected inflation and expected real interest rate. higher oil prices will lead to a negative effect the trade balance in oil importing economics. imposing upward pressure on domestic prices (inflation) which leads to higher discount rate culminating in lower stock returns. as an important resource in the economy, oil prices can affect real interest rates. high oil price is expected to raise the rates of real interest rates which may likely lead to increases in stock returns. ikemenogo, eze solomon (2024) american interdisciplinary journal of business and economics | 42 https://sadijournals.org/index.php/aijbe 2.3 empirical review in a study of 22 emerging economies (nigeria not included), maghyereh and al-kandari (2004) findings implied that oil shocks have no significant impact on stock index returns in emerging economies. agren (2006) argued that the stock market's own shocks, which are related to other factors of uncertainty than the oil price, are more prominent in explaining stock price movements. similarly, in ghana, findings by adjasi (2009) showed that higher volatility in cocoa prices and interest rates increased volatility of the stock prices, whilst higher volatility in gold prices, oil prices, and money supply reduced volatility of stock prices. other studies, however, found the existence of a weak relationship among the variables. for instance, sujit and kumar (2011) evaluated the dynamic relationship among gold price, oil price, exchange rate and stock market returns. the authors used daily data from january 2, 1998, to june 5, 2011, constituting 3,485 observations and adopted the vector autoregressive and cointegration techniques. the results showed that exchange rate was highly affected by changes in the other variables, while stock market plays a minor role in affecting the exchange rate. the study suggested that there is weak long-term relationship among the variables. also, sahu, bandopadhyay, and mondal (2015) investigated the dynamic relationships between oil price, exchange rate and the indian stock market from 1993 – 2013. results from the johansen's cointegration test and vector error correction model showed that although there is a long run cointegrating relationships between crude oil price and indian stock indices, no sufficient evidence existed to conclude that the direction of the relationship in the long run was from oil price to the sensex. however, the granger causality test showed that the volatility of stock prices in india granger caused the movement in oil price and exchange rate in the short-run. the study further showed that the observed relationship between oil price and stock indices was not because of exchange rate fluctuations, because the change in exchange rate had no significant impact on oil prices or stock prices in india during the study period. in nigeria, attempts have also been made to examine the relationship among oil price, exchange rate and stock market returns. the findings from the study by fowowe (2013) on the dynamic relationship between oil prices and stock market returns in nigeria, using the garch-jump model showed the existence of a negative, but insignificant effect of oil prices on stock returns in nigeria. another study was conducted by mechri, ben hamad, de peretti and chart (2018) on the impact of exchange rate volatilities on stock markets dynamics in tunisia and turkey, using the garch estimation method. the variables used were stock market price returns, exchange rates, inflation rates, interest rates, gold prices and petrol prices index. the results indicated that exchange rate volatility has a significant effect on stock market fluctuations. alzyoud, wang and basso (2018) also examined the dynamics of canadian oil price and its impact on exchange rate and stock market performance. the authors adopted the cointegration technique and used stock index, exchange rate, and crude oil price as variables in the study. the findings indicated that oil price, exchange rate, and their variations had a positive and significant impact on the canadian stock market returns. 2.3.1 trend analysis in oil price and stock performance. before 2012, the movement of crude oil prices and the all-share index (asi) in nigeria was inconsistent. as crude oil prices increased, stock behaviour was often bearish, suggesting other factors influenced stock prices. from march 2012 to may 2014, the stock market was mostly bullish, with capital market indicators pushing positively except for a decline from june to september 2013 due to concerns over the us federal reserve's adjustment of its quantitative easing policy. this period saw higher and stable crude oil prices and increased ikemenogo, eze solomon (2024) american interdisciplinary journal of business and economics | 43 https://sadijournals.org/index.php/aijbe economic activities. however, during the recession in nigeria from september 2014 to april 2017, both the asi and crude oil prices declined significantly (iyoha, 2017). despite the recession, the nigerian stock market was listed among the best performing globally. the nse asi increased by 47.19% and crossed the 38,000 points mark by the end of the year, driven by strong corporate earnings from blue-chip companies, increased capital inflow, and portfolio investments (central bank of nigeria economic and financial review, december 2020). in 2014, the market started positively, but activities turned bearish due to foreign investors' withdrawal, currency risks, and the recovery of developed economies. the bearish sentiment worsened in the second half of 2014 due to the global economic recession, which saw crude oil prices crash from $110 to $40 per barrel. attacks on oil installations by militants in the niger delta region led to a loss of about one million barrels of crude oil exports per day, further impacting the stock market. other macroeconomic factors, such as declining foreign reserves and weak corporate earnings, contributed to the market's decline. investors adopted a 'flight to quality' strategy amidst the uncertainty (salisu & oloko, 2015). in 2015, the bearish trend continued, with the nse asi falling by 17.4% to 28,642 points by year-end. the market's poor performance was due to political risk, currency volatility, and uncertainty in global crude oil prices. this bearish trend persisted into 2016, with the stock market recording a 16.05% loss in january. however, in may 2016, the market saw a slight improvement with a 0.38% gain, the highest monthly gain that year. by december 19, 2016, the market recorded a 5.33% gain, but the nse asi remained negative on most trading days, ending the year with an 18.0% year-to-date loss. in 2017, the market gradually recovered from the economic recession, with the nse asi index increasing by 42.0%, making it the third best-performing market globally. this improvement was partly due to the central bank's monetary policies that increased liquidity in the foreign exchange market. in 2018, as the nigerian economy continued its recovery, the nse equities market started strongly, with the asi reaching a ten-year peak of 45,092.83 in january. however, the market began to decline in the second quarter, with the asi falling by 17.81% to 31,430.50 points by year-end. macroeconomic factors, including political risks, oil price volatility, and rising global yields, contributed to the bearish sentiment. in the first half of 2019, market sentiments were driven by uncertainty in oil prices and the 2019 general elections. post-election stability dampened the volatility in the equities market. with the approval and implementation of the 2019 budget, positive impacts on company earnings and consumer spending were expected to boost market activity in the second half of 2019. these periods also experienced higher and stable crude oil prices and increased economic activities (central bank of nigeria economic and financial review, december 2020). for the purpose, of this study, a simple stock return series is specified as a function of exchange rate and crude oil price: 𝐴𝑆𝐼 = 𝑓(𝐸𝑅, 𝑃) where er is the bureau-de-change exchange rate and p is the crude oil price. to determine if volatility in these series matters more than the crude oil price and exchange rate return series themselves, a variation of this equation is specified such that all-share index is a function of volatilities in crude oil price and exchange rate: 𝐴𝑆𝐼 = 𝑔(𝑠). theoritical framework and methodology 3.1 theoretical framework 3.1.1 arbitrage pricing theory (apt) the study adopted arbitrage pricing theory (apt) as the theoretical framework. this was developed by stephen ross in 1976. the arbitrage pricing theory is a general theory of asset pricing that holds that the expected returns ikemenogo, eze solomon (2024) american interdisciplinary journal of business and economics | 44 https://sadijournals.org/index.php/aijbe of a financial asset can be modelled as a linear function of various macroeconomic factors or theoretical market indices, where the sensitivity to change in each factor is represented by a factor specific beta coefficient (alexander, sharpe, and bailey, 2001). the model’s derived rate of return will then be used to price the financial asset correctly; this asset price should be equal to the expected end of period return discounted at the rate implied by the model. in an event that the prices diverge then arbitrage actions should bring the price back to its correct level. apt assumes that asset returns are related to an unknown number of macroeconomic factors (alexander, sharpe, and bailey, 2001). the model attributes the expected return of a capital asset multiple risk factors, and in the process measures the risk premiums associated with each of these risk factors. apt addresses the question of whether the risk associated with the macroeconomic variable is reflected in the expected market returns. according to (chen, roll, & ross, 1986), economic variables have a systematic consequence on stock market returns because economic forces affect discount rates, the ability of the firm to generate cash and future dividend payments. the core idea of apt is that only a small number of systematic influences affect the long-term average returns of securities. 3.2 method of analyses garch model was employed measure the volatility in exchange rate, oil prices, inflation and interest rate using the garch as developed by robert (1982). the approach to estimate volatility in financial markets; we can think of heteroskedasticity as time-varying variance (i.e., volatility). conditional implies a dependence on the observations of the immediate past, and autoregressive describes a feedback mechanism that incorporates past observations into the present. garch then is a mechanism that includes past variances in the explanation of future variances. more specifically, garch is a time series modelling technique that uses past variances and past variance forecasts to forecast future variances. the principal method employed to analyse the time series behaviour of the data involves unit root test, co-integration test, normality test, heteroskedasticity, and the estimation of an error correction model (ecm). specifically, we employ unit root test to detect the order of integration of the variables using the dickey fuller and augmented dickey fuller (adf) test by dickey and fuller (1979) the unit root test is necessary because research has shown that non-stationary data leads to spurious regression. we employ cointegration test to examine whether there is long-run co-movement in the variable using the engle and granger two stage technique. the ecm measures the short run dynamic adjustments towards long run equilibrium. we commence by testing for unit root in the data. the first step is to determine the order of integration of the variables before testing for co-integration. 3.2.1 model specification to examine the impact of macroeconomic variables on stock return in nigeria, a model anchored on the theory as used by ray, (2012) is adapted as follows. 𝐴𝑆𝐼 = 𝑓(𝐶𝑃𝐼, 𝐼𝑃, 𝑀𝑆, 𝐸𝑋𝐶𝐻) 3.1 where asi represents stock market performance, cpi represents consumer price index, ip represents industrial production, ms represents money supply and exch represents exchange rate while f represents the functional relationship. however, the model is modified to intr, infl, oilp, and inv as in equation 3.2. 𝐴𝑆𝐼 = 𝑓(𝐸𝑋𝐶𝐻, 𝐼𝑁𝑇𝑅, 𝐼𝑁𝐹𝐿, 𝑂𝐼𝐿𝑃, 𝑅𝐺𝐷𝑃) 3.2 the reason for the inclusion of oil price as one of the explanatory variables and variable of interest is that. it is said that increase in oil price led to an appreciation of the naira as more foreign currencies are generated through https://www.investopedia.com/terms/v/volatility.asp https://www.investopedia.com/terms/v/volatility.asp ikemenogo, eze solomon (2024) american interdisciplinary journal of business and economics | 45 https://sadijournals.org/index.php/aijbe improved oil revenue as further shown by growth in value of oil export as a percentage of total export. however, contrary to expectation nigeria, an oil exporting country still experiences the golden rule“oil up, stock down” which should be applicable to oil importing countries. this may be an indication the country’s failure to translate its huge foreign exchange earnings from oil into an improved industrial sector productivity. it also an indirect manifestation of the deleterious effect of huge annual foreign exchange expenditure on importation of petrol/diesel for energy supply bothering on the inability to locally refine a substantial part of its crude oil and the apparent collapse of power supply by the power holding company of nigeria (phcn) for domestic and industrial use. it is recommended that the most viable solution towards improved economic performance lies in refining the nigerian crude oil locally so that the huge benefits of the naturally endowed oil can be fully realized rather than developing the economies of other nations. also, the inclusion of investment as control variable, it is simply because there is a close relation between the stock market and investment. that is fluctuations in the stock market can affect investment of firms. the relationship between stock market prices and firms’ investment in physical capital is captured by the “q theory of investment”, developed by james tobin (1969). that is, an increase in the prospective return on capital or a decrease in the market’s discount rate raises q and thereby increases investment. with a simple form of adjustment cost for changing the capital stock, the optimal amount of current investment depends only on the current value of q. definition of variables the variables used in the model are defined below: i. dependent variable asi = all shares index ii. independent variables: exch = exchange rate, intr = interest rate, infl = inflation, oilp = oil price, rgdp = real gdp expressing equation 3.2 in linear form yields equation 3.3. 𝐴𝑆𝐼 = 𝛽0 + 𝛽1(𝐸𝑋𝐶𝐻)1 + 𝛽2(𝐼𝑁𝑇𝑅)2 + 𝛽3(𝐼𝑁𝐹𝐿)3 + 𝛽4(𝑂𝐼𝐿𝑃)4 + 𝛽5(𝑅𝐺𝐷𝑃)5 3.3 where β0 = constant, β1 to β5 represents various slope coefficients while exch, intr, infl, oilp and rgdp remain as defined above. putting the variables in the sane scale of measurement and adding the stochastic disturbance term yields equation 3.4. 𝐿𝐴𝑆𝐼 = 𝛽0 + 𝛽1𝐿(𝐸𝑋𝐶𝐻)1 + 𝛽2𝐿(𝐼𝑁𝑇𝑅)2 + 𝛽3𝐿(𝐼𝑁𝐹𝐿)3 + 𝛽4𝐿(𝑂𝐼𝐿𝑃)4 + 𝛽5𝐿(𝑅𝐺𝐷𝑃)5 + 𝜇 3.4 where, l represent the natural log of the variables. this is necessary to avoid large fluctuation in the variables. all other variables remain as defined above. on a-priori β1, β2, β3, β5 > 0 and β4 > or < 0 exchange rates supposed to have positive relationship with stock market: due to globalization, businesses are affected either directly or indirectly by international trade activities. 3.2.2 data analysis research has shown that most time series data poses unit root i.e. they are not stationary. thus, research carried out with them is likely to be spurious or non-sense. a test of stationarity in time series data is very important because since the 1970s, macroeconomic aggregates in nigeria have been fluctuating greatly. the consequence of using non-stationarity is so grave that well established models are breaking down as they continuously fail to predict outcomes. the problem according to granger and newbold, (1974) is that regression results on nonikemenogo, eze solomon (2024) american interdisciplinary journal of business and economics | 46 https://sadijournals.org/index.php/aijbe stationarity series may, most times be “spurious or nonsensical” to the extent that a relationship would be accepted as existing between two variables as measured by their co-efficient of determination when in fact no relationships exist. inference from non — stationary time series apart from being spurious, violate the classical econometric assumption, thus making the result unreliable for policy making. also, pre-estimation test such as unit root tests and cointegration test were carried out while, post estimation tests such as stability test, normality test, auto correlation test etc. were also carried out to establish the consistency and reliability of the models adopted in this study.  unit root/stationarity test adopting the engel — granger (1987) and engel and yule, (1987), we proceed to modelling a framework by first testing for stationarity to provide a more definitive answer to the non-stationarity, in each time series, the dickey – fuller (1979) regression is estimated as follows for unit root. ∆𝑌𝑡 = 𝜆𝑌𝑡−1 + 𝑉𝑡 3.5 if λ equals 0, 𝑌𝑡 is non-stationary, as a result 𝑌𝑡 and 𝑋𝑡 are not co-integrated. in order words, if λ is significantly different from 0, 𝑌𝑡and 𝑋𝑡 are found integrated individually. given the inherent weakness of the unit root to distinguish between null and the alternative hypotheses, it is desirable that the augmented dickey — fuller (adf), 1981 test be applied. to be co-integrated; both 𝑌𝑡 and 𝑋𝑡 must have the same order of integration (engel and granger, 1987, and granger, 1986). the adf regression is specified as follows: ∆𝑌𝑡 = 𝛼 + 𝛽1𝑡 + 𝛿𝑋𝑡−1 + ∑ 𝛽𝑖∆𝑋𝑡−𝑖 𝑚 𝑡=1 + 휀𝑡 3.6 ∆ is the first difference operator, 6.466.486.406.506.526.566.546.426.44 akai ke infor mati on criteri a (top 20 models) is the new random error term, m is the optimum number of lags needed to obtain “white noise’. this is approximated when the dw values approaches 2.0 numerically. the null hypothesis of non-stationarity is rejected if the estimated adf statistic is found to be larger in absolute term or more negative than its critical values at 1 or 5 percent level of significance.  concept of co-integration co-integration among the variables is used to determine the existence of a long run equilibrium relationship between the variables. the concept of co-integration (granger, 1986, mill 1990) creates the link between integrated processes and the concept of steady state equilibrium. the idea behind co-integration is that ‘although two different series may not themselves be stationary, some linear combination of them may be indeed stationary with the generalization to more than two series” (komolafe, 1996). economic variables are inherently nonstationary and thus, could meander without any tendency to return to equilibrium in the long run. implicit in the co-integration theory is the fact that there exists a linear combination of these non-stationary variables that is stationary. the traditional approach to the modelling of short-run disequilibrium is the partial adjustment method. however, an extension of this in the co-integration technique is the error correction mechanism (ecm) (granger and newbold, 1977). the original co-integration relationship is specified as follows: 𝑌𝑡 = 𝛽0 + 𝛽1𝑋𝑡 + 𝜇𝑡 3.7 analysing the long-run behaviour of 𝑌𝑡 implies investigating co-integrating relationship in (1). if µt is stationary then, the 1(1) variables in 𝑋𝑡 may be thought of as capturing the long run component of 𝑌𝑡 while 휀𝑡 captures the short run or temporary movements.  error correction technique if the 𝑌𝑡 and 𝑋𝑡 are found to be co-integrated, then there must exist an associated error correction model (ecm), according to engel and granger (1987). the usual ecm may take the following form: ikemenogo, eze solomon (2024) american interdisciplinary journal of business and economics | 47 https://sadijournals.org/index.php/aijbe ∆𝑌𝑡 = 𝛼0 + 𝛽1𝑡 ∑ ∆𝑋𝑡−1 𝑚 𝑡=1 + 𝛿𝑖 ∑ ∆𝑌𝑡=1 𝑚 𝑡=1 + 𝛾𝑡휀𝑡−1 + 𝜑 3.8 where, ∆ denotes first difference operators, 휀𝑡−1 is the error correction term, m is the number of lags necessary to obtain “white noise” and 𝜑𝑡 is another random disturbance term. if /δ/ is significantly different from zero, then 𝑌𝑡 and 𝑋𝑡 will have longer run relationship. the (ecm) error correction term (휀𝑡−1) depicts the extent of disequilibrium between 𝑌𝑡 and 𝑋𝑡. the ecm, reveals further that the change in 𝑌𝑡 not only depend on lagged changes in 𝑋𝑡 but also on its own lagged changes. the estimate of the parameters of the ecm are generally consistent and efficient (hendry and richard, 1983). inference about the long run granger causality can be drawn from the ecm model. the presence of co-integration will indicate at least, unidirectional long run causality from ∆𝑋𝑡−1, if statistically significant will indicate a short run causality from ∆𝑋𝑡−1 to ∆𝑌𝑡−1. the statistically significant non-zero co-efficient of ∆𝑌𝑡−1will indicate feedback to ∆𝑌𝑡 from its own lagged values. it may be noted that even in the absence of co-integration, the error correction model may be estimated to detect if there is any short run granger causality. 3.2.3 nature and sources of data the data used in the study are collected from various publications of the central bank of nigeria and (cbn), world development indicator (wdi), national bureau of statistic (nbs). specifically, the data used are time series data, which includes the exchange rate (exch), interest rate (intr), inflation (infl), oil price (oilp) and real gdp(rgdp). 3.2.4 criteria for model evaluation to analyse the model, we employed the economic criteria which is used to measure the sign and size of the parameters in the model. statistical criteria: this includes the t-statistic, f-statistic, and 𝑅2 co-efficient of determination (𝑹𝟐) coefficient of determination also known as r square (𝑅2) or goodness of fit tells the proportion of the total variable in the dependent variable y that is explained by the regression line or the explanatory variables x. in a single / simple regression model, it is the square of the correlation coefficient in a simple regression model. the value of the 𝑅2 lies between 0 and 1 i.e. 0< 𝑅2<1 when the 𝑅2 = 0, it means the explanatory variable do not explain the dependent variable and when the 𝑅2 = 1, it means the model is best fit. if the 𝑅2 is multiplied by 100, then it shows the percentage of total variation in y the dependent variable that is explained by variation / changes in x. the closer the 𝑅2 is to one. the stronger is the explanatory power of the estimated regression line, and thus the closer are the observation to the line. if 𝑅2 = 0.56 it means that 56% of total variation in y is explained by the regression line / changes in x and the other 44 remains unexplained by x. test of individual statistics of the slope coefficient (t. test) this tests the individual significance of the co-efficient, to do this, we test the null hypothesis that bi= 0 against the alternative hypothesis that bi. ≠0 in employing the t test, we compare the computed t-value with the value read from the student’s t table at given level of significance, (α) and n-k degree of freedom/ if the absolute value of the computed t value is greater than the absolute value of the theoretical, t value, we reject the null hypothesis (h0) at the given level of significance i.e. if 𝑡𝑐𝑎𝑙>𝑡𝑡𝑎𝑏, reject h0; accept h1 𝑡𝑐𝑎𝑙<𝑡𝑡𝑎𝑏 , accept h0, reject h1. alternatively, the rule of thumb can be used, which state that if the 𝑡𝑐𝑎𝑙 is greater than 2 at the 5 percent level of significance, we reject the null hypothesis and conclude that the parameter is statistically significant in explaining the dependent variables. ikemenogo, eze solomon (2024) american interdisciplinary journal of business and economics | 48 https://sadijournals.org/index.php/aijbe the f statistic (test for overall significance of the model) this is used to test for the statistical significance of the entire slope coefficient jointly on the dependent variable using a level of significance. the f statistic is done by comparing the 𝐹𝑐𝑎𝑙with the f tabulated. when the 𝐹𝑐𝑎𝑙 is greater than the 𝐹𝑡𝑎𝑏 we reject the null hypothesis and conclude that the entire variable put together is statistically significant in explaining the dependent variable. econometric criteria this includes the test for serial correlation. d.w statistic durbin – watson test it is the most popular test for serial/autocorrelation. the durbin-watson statistic is used to test the presence of serial correlation in a model, to determine whether there is serial correlation in the model, we compare the durbin watson value from the model to the durbin-watson critical value at 5%. if the value of durbin watson lies between the upper limit and four minus upper limits (i.e. u<dw<4-du), we reject the null hypothesis at the 5 percent level of significance and conclude that there is no autocorrelation (positive or negative autocorrelation) in the model. table 3.2.5: definitions and measurement of variables s/n variable symbol measurement 1 all shares index asi obtained by multiplying the price/share by the no. of shares outstanding 2 exchange rate exch the price of one country’s currency expressed in another country currency 3 inflation rate infl the rate of inflation reported in cbn statistical bulletin 4 interest rate intr an accrued amount that includes principal plus interest 5 real gdp rgdp real gross domestic product 6 oil prices oilp the price of bulk oil, usually quoted in us dollars per barrel presentation and analysis of results 4.1 presentation of results 4.1.1 trend analysis in this section, graphical illustrations of the various variables that were used within the time to see their direction were conducted and this helps to show whether they are increasing or not and see their cyclical pattern. thus, a graphical sketch of each of the variable over time was made as shown in figures 4.1 to 4.6. figure 4.1: all-shares index source: author’s analysis using eviews 12 4 5 6 7 8 9 10 11 12 1990 1995 2000 2005 2010 2015 2020 log asi ikemenogo, eze solomon (2024) american interdisciplinary journal of business and economics | 49 https://sadijournals.org/index.php/aijbe figure 4.1 shows the level of all-shares index in nigeria and the trendline pattern during reviewed period. the asi was fluctuating frequently for the periods, at some points it was above trendline while other times below trendline, which makes the capital market unstable. in conclusion, the nigerian asi reflects the volatility of the country's stock market, influenced by various domestic and global economic factors. it underscores the economy's sensitivity to external shocks, like oil price volatility. the data highlights the importance of economic diversification to reduce reliance on oil and promote overall economic stability. figure 4.2: oil price source: author’s analysis using eviews 12 figure 4.2 shows the trend of oil price and the trend line pattern during reviewed period. oil prices were stagnant for some years and skyrocketed for some years and went back to the initial price before it skyrocketed again. this can be because of demand and supply. this invariably affects cost of running business and business performance upon which stock market indicators are driven. nigeria's heavy reliance on oil also made it vulnerable to external shocks, highlighting the need for policies that encourage non-oil sectors and other sources of energy to reduce the level of dependence on oil. figure 4.3: exchange rate source: author’s analysis using eviews 12 2.0 2.5 3.0 3.5 4.0 4.5 5.0 1990 1995 2000 2005 2010 2015 2020 log oprice 0 50 100 150 200 250 300 350 400 1990 1995 2000 2005 2010 2015 2020 exch ikemenogo, eze solomon (2024) american interdisciplinary journal of business and economics | 50 https://sadijournals.org/index.php/aijbe figure 4.3 shows exchange rate volatility trend during the reviewed period. from 1986 to 1996, it was essentially zigzagging and varied frequently, but it was still somewhat steady. however, starting in 1997, it was no longer stable. between 2000 and 2020, it was extremely volatile. of course, this can negatively impact nigeria's stock market performance. the data suggests that the nigerian economy has faced significant volatility over the years, influenced by various internal and external factors such as oil prices, volatile exchange rates, and high dependence of importation of consumable goods, etc. this implies that, if serious action is not taken, this trend may have adverse impact on economic growth and development. figure 4.4: gdp growth rate source: author’s analysis using eviews 12 figure 4.4 shows the real gdp trend during reviewed period. overall, nigeria's gdp growth rate indicates a mixed economic performance, with periods of growth and recession. the heavy reliance on oil revenues has made the economy susceptible to fluctuations in global oil prices, which significantly influenced growth rates. to achieve sustained and stable economic growth, nigeria has been working towards economic diversification and addressing structural challenges. nonetheless, economic growth is influenced by numerous factors, and achieving long-term sustainability requires continuous efforts in various sectors of the economy. figure 4.5: inflation rate source: author’s analysis using eviews 12 -4 0 4 8 12 16 1990 1995 2000 2005 2010 2015 2020 gdpgr 0 10 20 30 40 50 60 70 80 1990 1995 2000 2005 2010 2015 2020 infl ikemenogo, eze solomon (2024) american interdisciplinary journal of business and economics | 51 https://sadijournals.org/index.php/aijbe figure 4.5 shows the trend of inflation rate during reviewed period. interest rate was very high in 1986-1990, skyrocketed in 1986 and 1987 as well as 1992 to 1997; but went below trendline from 1997 to 2020. in summary, the inflation trend in nigeria's economy has been characterized by fluctuations over the years. several factors have influenced inflation, including oil price volatility, global economic conditions, monetary and fiscal policies, and structural challenges within the economy. to achieve more stable inflation rates, nigeria needs to implement effective monetary and fiscal policies, diversify its economy, address structural issues, and promote sustainable economic growth. figure 4.6: interest rate source: author’s analysis using eviews 12 figure 4.6 shows interest rate trend within reviewed period. from 1986 to 2021, nigeria's interest rates have exhibited a notable fluctuation, reflecting the country's economic situation and monetary policies. the late 1980s and early 1990s saw high volatility, with interest rates ranging from approximately 0.7% to over 9%, while the early 1990s experienced several peaks, reaching around 10.77%. subsequently, there was a gradual decline in rates until the mid-2000s, followed by a period of rising rates from 2006 to 2009 due to inflation and global financial challenges. from 2010 to 2016, rates showed a moderate decline, stabilizing in the range of 6% to 7.5% since then. the effect of interest rates on stock market returns appears insignificant and suggests that changes in interest rates may not have a notable impact on the nigerian stock market. 4.1.2 descriptive statistics table 4.1 presents the statistical properties of the variables under study. the emphasis is on the mean, skewness, jarque-bera statistics, and its probability for the variables involved. 0 2 4 6 8 10 12 1990 1995 2000 2005 2010 2015 2020 int ikemenogo, eze solomon (2024) american interdisciplinary journal of business and economics | 52 https://sadijournals.org/index.php/aijbe table 4.1 descriptive statistics log(asi) log(oprice) exch infl int gdpgr mean 8.918784 3.593225 126.3965 19.63280 7.089196 4.302662 median 9.899855 3.458244 126.0951 13.18114 7.344341 4.396731 maximum 11.09213 4.928412 359.8946 72.83550 11.06417 15.32916 minimum 4.902307 2.231089 1.754523 5.388008 0.724167 -2.035119 std. dev. 1.791551 0.716557 107.1580 16.17657 2.011650 3.430461 skewness -0.946079 0.167757 0.739581 1.707700 -1.081472 0.253667 kurtosis 2.552464 1.659073 2.629395 4.592789 4.800631 2.868568 jarque-bera 68.04994 34.39179 41.85480 255.6347 142.5708 4.943913 probability 0.000000 0.000000 0.000000 0.000000 0.000000 0.084420 sum 3852.915 1552.273 54603.30 8481.370 3062.533 1858.750 sum sq. dev. 1383.362 221.2984 4949100. 112784.7 1744.143 5072.036 observations 432 432 432 432 432 432 source: author in the study, the means of the variables: all-share index, (asi), oil price (oprice), interest rate (int), exchange rate exch, inflation rate (infl) and gross domestic product (gdpgr) are the variables employed. table 4.1 shows that, apart from asi and int, other variables are positively skewed. the asi, oprice, exch and gpgr are said to be platykurtic because they are less than 3, while infl and int are leptokurtic because they are greater than 3. the jarque-bera statistics for all the variables are all significant at 5 percent level. this implies that the variables of this model are not normally distributed. 4.1.3: the pairwise correlation matrix table 4.2 moves further from descriptive statistics to examine the degree of correlation of the variables employed. table 4.2: correlation matrix log(asi) log(oprice) exch infl int gdpgr log(asi) 1.000000 log(oprice) 0.773029 1.000000 exch 0.748965 0.646874 1.000000 infl -0.530124 -0.484548 -0.419091 1.000000 int 0.535660 0.289268 0.324882 -0.138592 1.000000 gdpgr 0.178544 0.229906 -0.068930 -0.358411 -0.081446 1.000000 source: author the explanation here is based on dependent variable and explanatory variables alone. the correlation matrix as shown in table 4.2, shows the degree of relationship among the variables used. the asi and oprice have a positive and strong relationship together at 0.773029. the asi and exch also have strong and positive relations together. the infl rate as expected has a negative but average relationship with asi. the int rate has a positive but moderate relationship with asi. finally, gdpgr has a positive but a very weak relationship with asi. 4.2 analysis and interpretation of results 4.2.1 stationary test ikemenogo, eze solomon (2024) american interdisciplinary journal of business and economics | 53 https://sadijournals.org/index.php/aijbe the study considered the unit root before estimating cointegration equation to choose appropriate econometric estimation to be used. testing the stationarity of economic time series is critical since typical econometric approaches assume that the time series are stationary when they are not. as a result, traditional statistical tests are likely to be ineffective, and not co-integrated, the ordinary least squares (ols) estimate of regressions in the presence of non-stationary variables produce misleading regressions (granger and newbold, 1974). table 4.3: the results of unit roots test variables adf p-value (level) adf p-value (1st difference) remark log (asi) -1.447325 0.5595 -8.829806 0.0000 i (1) log oprice) -2.328190 0.1636 -13.85884 0.0000 i (1) exch -0,014796 0.9558 -3.825417 0.0029 i (1) gdpgr -3.244426 0.0242 -3.349441 0.0134 i (0) infl -4.085014 0.0011 -4.117710 0.0000 i (0) int -4.441870 0.0003 -4.374314 0.0004 i (0) source: author’s computation from eviews 12 nb: i (1) stationarity of the variables at first difference, *unit root hypotheses are tested at 1%, **unit root hypotheses are tested at 5% and ***unit root hypotheses are tested at 10% the stationarity of the variables was evaluated using the augmented dickey-fuller (adf) test, which involved unit root tests to examine the trends of all variables. the outcomes of the unit root tests are presented in table 4.3. according to the results from the augmented dickey-fuller test, gdp growth rate, inflation rate and interest rate exhibited stationarity at the level. however, the all-share index, oil price and exchange rate stationarity at the 5 percent significance level after undergoing first-order differencing. because of the objectives of this study emphasizing on volatility of oil price on stock market returns, this study adopts the generalized auto-regressive conditional heteroskedasticity (garch) model. the trend analysis also showed us that there is volatility clustering of the series in virtually all the variables employed for this study. table 4.4: estimation of garch model dependent variable: log(asi) method: ml arch normal distribution (marquardt / eviews legacy) date: 07/27/23 time: 20:42 sample (adjusted): 1986m02 2021m12 included observations: 431 after adjustments convergence achieved after 51 iterations presample variance: backcast (parameter = 0.7) garch = c(8) + c(9)*resid(-1)^2 + c(10)*garch(-1) variable coefficient std. error z-statistic prob. c -0.010566 0.013897 -0.760309 0.4471 log(oprice) 0.011365 0.005524 2.057201 0.0397 exch -0.000176 3.01e-05 -5.839223 0.0000 infl 0.000284 0.000158 1.800160 0.0718 int -0.000789 0.001344 -0.586612 0.5575 gdpgr 0.002072 0.000781 2.651872 0.0080 log(asi(-1)) 0.999486 0.002535 394.3313 0.0000 variance equation c 0.000271 7.17e-05 3.775402 0.0002 resid(-1)^2 0.440670 0.090984 4.843394 0.0000 garch(-1) 0.581494 0.054501 10.66942 0.0000 r-squared 0.998726 mean dependent var 8.928103 adjusted r-squared 0.998708 s.d. dependent var 1.783120 s.e. of regression 0.064091 akaike info criterion -2.951745 sum squared resid 1.741669 schwarz criterion -2.857404 log likelihood 646.1010 hannan-quinn criter. -2.914496 durbin-watson stat 1.634520 ikemenogo, eze solomon (2024) american interdisciplinary journal of business and economics | 54 https://sadijournals.org/index.php/aijbe the estimation output as shown in table 4.4, shows the results of the regression for the variables used to capture oil price volatility and stock market returns in nigeria. the lagged value of all-share indices has a positive and significant impact on the current value of asi. the response of the current value of asi to the previous value of asi is 0.999486 with a probability value of 0.0000 meaning that it is significant at 1 percent level. the economic implication is that a 1 percent increase in asi (-1) may lead to 0.999486 percent increase in the current value of asi or stock market returns in nigeria. the oil price also exhibits a positive and significant effect on all-share indices in nigeria. the coefficient of response of asi to oprice is 0.011365 with a probability of 0.0397 revealing that it is significant at 5 percent level. by implication, a 1 percent increase in the oil price leads to 0.011365 increase in all-share indices in nigeria. the exchange rate (exch) has a negative and significant impact on all-share indices. the response of asi to exch is -0.000176 with a probability value of 0.0000 showing that it is significant at 1 percent level. the economic intuition is that a 1 percent increase in exch will lead to 0.000176 decrease in all-share index or stock market returns in nigeria. the inflation rate (infl) has a positive and significant on all-share indices or stock market returns in nigeria. the response of asi to infl is 0.000284 with a probability of 0.0718 meaning that it is significant at 10 percent level. this implies that a 1 percent increase in infl will lead to a 0.000248 percent increase in stock market returns or allshare index. the interest rate has a negative but insignificant effect on all-share index or stock market returns in nigeria. the response of asi to int is -0.000789 with a probability of 0.5575. the economic intuition is that a one percent increase in int may not have any significant impact on stock market returns or asi in nigeria. the gross domestic product growth rate (gdpgr) has a positive and significant impact on all-share index or stock market returns in nigeria. the response of asi to gdpgr is 0.002072 with a probability of 0.0080 which shows that it is significant at 5 percent level. the economic implication is that a 1 percent increase in gdpgr will lead to 0.002072 percent increase in asi of stock market returns in nigeria. the estimated variance equation is as follows: ℎ̂𝑡 = 0.000271 (3.775402) + 0.581494ℎ̂𝑡−1 (10.66942) + 0.440670�̂�2 𝑡−1 (4.843394) the coefficient of constant variance term, the arch and garch parameters are positive and statistically significant at 1 percent level. this gives the result of the garch model. the time-varying volatility includes a constant (0.000271) plus its past ( 0.581494ℎ̂𝑡−1 ) and a component which depends on past errors 0.440670�̂�2 𝑡−1. these findings clearly established the presence of time-varying conditional volatility of returns of the stock. this, result also indicates that the persistence of volatility shocks, as presented by the sum of arch and garch parameters (𝑏1 + 𝜃1), is very large. it denotes that the effect of today’s shock remains in the forecast of variance for many periods in the future. ikemenogo, eze solomon (2024) american interdisciplinary journal of business and economics | 55 https://sadijournals.org/index.php/aijbe table 4.5: granger causality pairwise granger causality tests date: 07/27/23 time: 06:10 sample: 1986m01 2021m12 lags: 2 null hypothesis: obs f-statistic prob. log(oprice) does not granger cause log(asi) 430 0.65586 0.5195 log(asi) does not granger cause log(oprice) 9.24011 0.0001 exch does not granger cause log(asi) 430 7.54490 0.0006 log(asi) does not granger cause exch 1.27020 0.2818 infl does not granger cause log(asi) 430 2.37528 0.0942 log(asi) does not granger cause infl 4.71790 0.0094 int does not granger cause log(asi) 430 4.63126 0.0102 log(asi) does not granger cause int 4.67642 0.0098 gdpgr does not granger cause log(asi) 430 0.59304 0.5531 log(asi) does not granger cause gdpgr 0.30950 0.7340 exch does not granger cause log(oprice) 430 4.86593 0.0081 log(oprice) does not granger cause exch 1.94615 0.1441 based on the results of the granger causality test conducted as shown in table 4.5, the following conclusions can be drawn. at a 5% level of significance, there is evidence of a unidirectional causal relationship between oil price (oprice) and stock market returns proxy by all-share index. however, the reverse relationship does not hold true, suggesting that changes in asi granger causes oil price in nigeria. on the other hand, exchange rate granger causes asi, but asi does not granger cause exch. this is also an example of a unidirectional relationship. additionally, there is a bi-directional causal relationship between inflation rate (infl) and real asi in nigeria. infl granger causes stock market returns (asi) while stock market returns also granger causes infl. the interest rate int also has a bi-directional causality with all-share index or asi. that is inf granger causes all-share indices while asi. in conclusion, based on these findings, it can be stated that there is a significant causal relationship between oil price volatility and stock market returns in nigeria. ikemenogo, eze solomon (2024) american interdisciplinary journal of business and economics | 56 https://sadijournals.org/index.php/aijbe 4.2.2 statistic and postdiagnostic results table: 4.6 garch models and diagnostic tests normal dist. student t’s ged significant coefficients all all all arch significant? yes yes yes garch significant? yes yes yes log likelihood 646.1010 667.0322 664.3149 adjusted r-squared 0.998708 0.998767 0.998756 schwartz ic -2.857404 -2.940460 -2.927848 heteroscedasticity no no no autocorrelation no no no source: author’s computation (2023) from eviews 9 from a statistical standpoint as shown in table 4.6, the r-squared value of 0.998308 indicates that approximately 99.8 percent of the variation in the stock market is accounted for by the explanatory variables used in the model. the remaining 0.02 percent is attributed to the error terms. this suggests that our model fits the data well. the f-statistic (82.40192) indicates that the combined effect of the explanatory variables is statistically significant, implying a linear relationship among the variables. the durbin-watson statistic of 1.626636, which is approximately 2, indicates that there is no significant autocorrelation in the residuals according to the rule of thumb. additionally, a diagnostic test was performed on the residuals of the model, revealing that they exhibit no significant serial correlation. however, it is worth noting that the residuals are not normally distributed, although they exhibit constant variances (heteroskedasticity). 4.3: discussion of results the above table 4.5 discusses the results according to the objectives earlier stated in the chapter one. this result provides answer to objective one and three: objective one: the impact of oil price volatility on stock market returns in nigeria. to achieve this stated objective, our result from ardl model regression provides profound empirical answer to the objective. thus, oil price (oilp), is positive and statistically significant at 5% level of significance. this indicates that a unit increase in oil prices will eventually lead to 0.295814 increase in stock market performance in the short run, at the same time, it was equally observed from the outcome that oil price is also positive and statistically significant in the long run. it equally suggests that one percent increase in oil price will bring about 0.047514 increase in stock market performance in nigeria during the period under investigation. this result also corroborates with the study by alamgir and amin, (2021) who examined the nexus between oil price and stock market, and it was found out that, there is positive relationship between the oil price and stock market index, and the response of the stock market index to positive. second objective is to also determine effect of oil price fluctuation on the economic growth in nigeria. to achieve the objective two, we investigate the coefficient and p-value from above table 4.5, however, it was revealed from the outcome that the real gross domestic product is positively and statistically significant at 5% level of significance. this suggests that both short and long run, it was observed that a unit rise in real gross domestic product (which is economic growth) will bring about 2.235216 and 2.358845 increase in oil price in both short and long run respectively. thus, this study’s outcome undoubtedly corroborates with the study by erdem, ikemenogo, eze solomon (2024) american interdisciplinary journal of business and economics | 57 https://sadijournals.org/index.php/aijbe gozbasi, ilgun and nazlioglu, (2010) who investigated stock market and economic growth nexus in emerging markets, with findings that there is a close relationship between stock market performance and economic growth in the long-run and that stock market performance is an impetus for economic growth in the short run. the third objective is to ascertain the nexus between oil price volatility and stock market returns: to achieve this, the outcome of granger causality test result from the table 4.5 will salvage this. thus, the granger causality estimate indicates that oil price (oilp) does granger caused all shares index (asi), while oilp does not granger caused asi. we therefore accept the hypothesis that oil price does granger caused all shares performance, and we fail to accept the hypothesis that asi does granger caused oilp. this suggests that there is a unidirectional relationship that exist between stock market performance and economic growth in nigeria. this equally suggest that an increase in oil price will amount to a rise in all-shares performance in nigeria. the result above also, reveals the inflation (inf) does granger caused stock market performance (asi), whereas stock market performance does not granger caused inflation. owing to this fact, we fail to accept the hypothesis that inflation does granger caused stock market performance, and accept the hypothesis that asi does not granger caused inf. this indicates that, there is a unidirectional found for asi and inf in nigeria during the period under investigation. the result equally, shows that the interest rate (intr) does granger caused asi, while asi does not granger caused intr. on this note, we fail to accept the hypothesis that intr does granger caused asi, and accept the hypothesis that asi does not granger caused intr. this implies that, there is a unidirectional found for intr and asi in nigeria over the period under review. above result indicates that real gross domestic product (rgdp) does granger caused asi, while asi does not granger caused rgdp. on this note, we fail to accept the hypothesis that rgdp does granger caused asi and accept the hypothesis that asi does not granger caused rgdp. this implies that, there is a unidirectional found for rgdp and asi in nigeria during the period investigation. the study further suggests that there is unidirectional causality which occurring from exchange rate (exr) and stock market performance (asi) which does not granger caused asi does not granger caused exr. on this note, we fail to accept the hypothesis that exr does granger caused asi and accept the hypothesis that asi not granger caused exr. this indicates that, there is a unidirectional found between exr and asi during the investigation of this research in nigeria. 5.1 summary of findings the primary objective of this study was to examine the influence of oil price volatility on nigeria stock market returns using time series data spanning from 1986 to 2021. the all-share index (asi), oil price (oprice), exchange rate (exch), inflation rate (infl), interest rate (int), real gdp growth rate (gdpgr) are the variables used to capture this topic efficiently. the unit roots were conducted through augmented dickey-fuller (adf) and then used generalized autoregressive conditional heteroskedasticity (garch) model and granger causality. the estimation output provides valuable insights into the relationship between various economic factors and stock market returns in nigeria. the findings are outlined in this section based on the research objectives guiding the study. i) to determine effect of oil price fluctuation on the economic growth in nigeria. the study findings revealed that the oil price volatility studied have a varying effect on the stock market returns. the estimation output reveals the complex interplay of economic factors on nigerian stock market returns. the lagged asi indicates strong autocorrelation, suggesting past performance has a significant influence on current returns. oil prices, exchange rates, inflation, interest rates, and gdp growth rate all have significant effects on stock market returns. inflation influences investor behavior and expectations, while interest rates may not have a ikemenogo, eze solomon (2024) american interdisciplinary journal of business and economics | 58 https://sadijournals.org/index.php/aijbe significant impact. gdp growth rate positively correlates with stock market performance, leading to increased investor confidence and higher returns. time-varying conditional volatility indicates that stock market returns in nigeria are subject to changing levels over time. the granger causality test reveals a unidirectional causal relationship between oil price and stock market returns (asi), with changes in asi granger causing oil price. the inflation rate causes real asi, while interest rate has ab bi-directional causality with the all-share index. the rsquared value of 0.998308 indicates that explanatory variables account for 99.8% of stock market variation, with 0.020% due to error terms. risk management strategies are needed to navigate the dynamic nature of the nigerian stock market. 5.2 conclusion: the findings from this study provide valuable insights into the intricate relationship between economic factors and stock market returns in nigeria. these implications hold significance for investors, policymakers, and market participants in shaping investment decisions and economic policies. the strong positive impact of the lagged all-share index (asi) on the current asi indicates significant autocorrelation in stock market returns. past performance holds a substantial influence over present stock market returns. investors and policymakers must consider historical market trends to make well-informed investment choices and devise effective economic strategies. the substantial and significant effect of oil prices on the all-share indices reveals the nigerian stock market's sensitivity to oil price fluctuations. fluctuations in exchange rates can affect various sectors, particularly import-dependent companies listed on the stock exchange and should be carefully managed by policymakers. the positive and significant effect of the inflation rate on stock market returns indicates that inflation plays a pivotal role in shaping investor behavior and expectations. as inflation erodes purchasing power, investors may seek refuge in the stock market to counter the impact of rising prices. policymakers should adopt measures to control inflation, as it can influence stock market dynamics. the positive and significant impact of the gdp growth rate on stock market returns underscores the positive correlation between economic growth and stock market performance. a thriving economy fosters a conducive environment for businesses, leading to heightened investor confidence and increased stock market returns. investors and policymakers should consider these insights to make informed decisions that bolster stock market performance and foster economic growth. additionally, the presence of time-varying volatility necessitates proactive risk management strategies to effectively navigate market uncertainties. by incorporating these advanced economic implications, nigeria can work towards a more robust and sustainable stock market that contributes to overall economic prosperity. 5.3 recommendations the study recommends the following based on the findings. i given the significant positive impact of lagged all-share indices (asi) on current asi, investors and policymakers should place emphasis on monitoring market sentiment and historical performance trends. a comprehensive analysis of market sentiment can help in making informed investment decisions and developing effective economic policies to bolster stock market returns. ii considering the positive and significant effect of oil prices on all-share indices, it is crucial for investors to closely monitor oil price fluctuations. policymakers should also keep a close eye on oil market dynamics, as nigeria's status as a major oil producer can make the stock market susceptible to oil price changes. implementing measures to mitigate the impact of oil price volatility on the stock market is essential for sustainable economic growth. ikemenogo, eze solomon (2024) american interdisciplinary journal of business and economics | 59 https://sadijournals.org/index.php/aijbe iii government should institute mechanisms like benchmarking, through policy instruments that flags sensitivity of internal and eternal risk elements that interferes against natural flow of the domestic economy. this will guide for prompt mitigation measures. iv to enhance decision-making processes, continuous data analysis and research should be conducted to better comprehend the causal relationships between economic variables and stock market returns. data-driven insights will assist in formulating effective economic policies and investment strategies that align with market dynamics. v the presence of time-varying conditional volatility, as evidenced by arch and garch parameters, necessitates the adoption of robust risk management strategies by investors. diversification, hedging, and other risk mitigation techniques should be employed to navigate the dynamic nature of the nigerian stock market. vi the positive and significant impact of the gdp growth rate on stock market returns indicates the importance of fostering economic growth. policymakers should prioritize economic policies that stimulate growth and create a conducive environment for businesses to thrive, ultimately boosting investor confidence and stock market performance. suggestions for future research: 1) future studies could broaden their scope by examining the influence of oil price shocks on stock market returns in various regions, including west africa, sub-saharan african countries, or the entire african continent who are members of opec. 2) researchers may explore alternative estimation techniques, such as dynamic ols or generalized methods of moment (gmm), to complement the current ardl model and strengthen the findings. 3) delving deeper into the complex dynamics between oil price volatility and stock market returns, future research could incorporate additional factors like education, technological advancements, and government policies. this would offer a more comprehensive analysis of the subject matter. references agren, m. (2006). does oil price uncertainty transmit to stock markets? (no. 2006: 23). working paper. the gulf corporation council countries? akigbo, s. (2014). macroeconomic uncertainty and conditional stock-price volatility in frontier african markets: evidence from ghana. the journal of risk finance, 10(4), 333349. alamgir, f., & amin, s. b. (2021). the nexus between oil price and stock market: evidence from south asia. energy reports, 7, 693-703. alzyoud, h., wang, e. z., & basso, m. g. (2018). dynamics of canadian oil price and its impact on exchange rate and stock market. international journal of energy economics and policy, 8(3), 107-114. arouri, m., & rault, c. (2009). on the influence of oil prices on stock markets: evidence from panel analysis in gcc countries. ikemenogo, eze solomon (2024) american interdisciplinary journal of business and economics | 60 https://sadijournals.org/index.php/aijbe arouri, m., & rault, c. (2010). oil prices and stock markets: what drives what in the gulf. arouri, m. e. h. (2011). does crude oil move stock markets in europe? a sector investigation. economic modelling, 28(4), 1716-1725. ashamu, s. o., adeniyi, o., & kumeka, t. (2017). the effects of oil price volatility on selected banking stock prices in nigeria. ndic quarterly, 32(34), 35-53. atoi, n. v. (2014). testing volatility in nigeria stock market using garch models. cbn journal of applied statistics (jas), 5(2), 4. babatunde, o. a. (2013). stock market volatility and economic growth in nigeria (1980-2010). international review of management and business research, 2(1), 201-209. basher s. a., haug, a. a., & sadorsky, p. (2012). oil prices, exchange rates and emerging stock markets. briggs, a. p. (2015). stock market and economic growth of nigeria. research journal of finance and accounting; vol.6, no.9, 2015. basher, s. a., & sadorsky, p. (2006). oil price risk and emerging stock markets. global finance journal, 17(2), 224-251. boyer, m. m., & filion, d. (2007). common and fundamental factors in stock returns of canadian oil and gas companies. energy economics, 29(3), 428-453. brown, s. p., & yucel, m. k. (2002). energy prices and aggregate economic activity: an interpretative survey. the quarterly review of economics and finance, 42(2), 193-208. cong, r. g., wei, y. m., jiao, j. l., & fan, y. (2008). relationships between oil price shocks and stock market: an empirical analysis from china. energy policy, 36(9), 3544-3553. degiannakis, s., filis, g., & arora, v. (2018). oil prices and stock markets: a review of the theory and empirical evidence. energy journal, 39(5). erdem, e., gozbasi, o., ilgun, m. f., & nazlioglu, s. (2010). stock market and economic growth nexus in emerging markets: cointegration and causality analysis. international journal of business forecasting and marketing intelligence, 1(3-4), 262-274. fowowe, b. (2013). jump dynamics in the relationship between oil prices and the stock market: evidence from nigeria. energy, 56, 31 38. granger, c. w., & newbold, p. (1974). spurious regressions in econometrics. journal of econometrics, 2(2), 111-120. ikemenogo, eze solomon (2024) american interdisciplinary journal of business and economics | 61 https://sadijournals.org/index.php/aijbe hamilton, j. d. (1983). oil and the macroeconomy since world war ii. journal of political economy, 91(2), 228-248. hamilton, j. d. (2009). causes and consequences of the oil shock of 2007-08 (no. w15002). national bureau of economic research. iyoha, o. m. (2017). oil price volatility, exchange rate movements and stock market reaction: the nigerian experience (1985-2017). american finance & banking review, 3(1), 12-25 kilian, l. (2009). not all oil price shocks are alike: disentangling demand and supply shocks in the crude oil market. american economic review, 99(3), 1053-1069. kumar, b. r. (2014). study on dynamic relationship among gold price, oil price, exchange rate and stock market returns. international journal of applied business and economic research, 9(2), 145-165. ndlovu, i. (2019). commodity price volatility, stock market performance and economic growth: evidence from brics countries (doctoral dissertation). olayungbo, d. o., & ojeyinka, t. a. (2022). crude oil prices pass-through to retail petroleum product prices in nigeria: evidence from hidden cointegration approach. economic change and restructuring, 55(2), 951-972. salisu, a. a., & oloko, t. f. (2015). modeling oil price–us stock nexus: a varma–bekk–agarch approach. energy economics, 50, 1-12. stock market index in china and india, international journal of economics and finance, vol. 3, no. 6, pages 233-243. su, c. w., khan, k., tao, r., & umar, m. (2020). a review of resource curse burden on inflation in venezuela. energy, 204, 117925. tobin, and shiller. isbn 9781137292216. wang, g., sharma, p., jain, v., shukla, a., shabbir, m. s., tabash, m. i., & chawla, c. (2022). the relationship among oil prices volatility, inflation rate, and sustainable economic growth: evidence from top oil importer and exporter countries. resources policy, 77, 102674. 