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Authors
1Egbo, Jude Sunday
2Nnado Ifeanyi Celestine
3Ugwoke, Edith Nkem
4Oshim, Judethadeus Chukwuebuka
5Onah, Chinyere Esther
1,2,3,4&5Department of Accountancy, Enugu State University of Science and Technology, Enugu
2Corresponding Author & email addresses: [email protected]; +2348038113063
ABSTRACT
The study examined the connection between corporate charges and profitability of listed pharmaceutical firms in Nigeria for a period of 10 years 2015-2024. The specific objectives of the study include to: ascertain the effect of advertising cost, audit fees and interest expense on return on equity of these pharmaceutical firms. The study adopted an ex post facto research design. Secondary data was extracted from audited annual reports of the selected pharmaceutical firms in Nigeria. Multiple regression (Panel Least Squares) technique was used for the data analysis. It was revealed that advertising cost has a negative and non-significant effect on return on equity of Pharmaceutical firms in Nigeria judging with (t-cal -0.417840, Coef. -4.098708, p-value = 0.6785 > 0.05), audit fee has positive and non-significant effect on return on equity of Pharmaceutical firms in Nigeria judging with (t-cal 0.509915, Coef. 2.899806, p-value = 0.6132 > 0.05) and interest expense has negative and non-significant effect on return on equity of Pharmaceutical firms in Nigeria judging with (t-cal -0.059236, Coef. -2.317709, p-value = 0.9531 > 0.05).These imply that all the variables cannot be used to predict return on equity of Pharmaceutical firms in Nigeria. The Adjusted R-squared of 0.575126 suggests that the model has a moderate fit, meaning that while the independent variables explain a significant portion of the variability in the dependent variable, there is still about 42.5% of the variation that is not accounted for by the model. It is recommended that pharmaceutical firms in Nigeria should re-evaluate their advertising strategies and ensure that such expenditures are targeted, cost-effective, and aligned with measurable performance outcomes, rather than assuming they will automatically boost profitability. Further, firms should continue to maintain appropriate audit practices for transparency and regulatory compliance, but without over-investing in audit expenditures with the expectation of financial returns; and these firms should adopt prudent debt management practices, limit excessive borrowing, and explore more cost-efficient financing options to safeguard profitability and maintain financial stability.
Keywords: Corporate charges, Profitability, Advertising, Audit, and Interest charges, ROE