ABSTRACT

Capital accumulation and its structure are major pre-requisites for agribusiness investment and its subsequent development. Also, capital decisions of a firm will affect the capital structure, investment behaviour and general returns to firm investment. Therefore, this study was designed to examine capital mobilization and investment behaviour of selected agribusiness firms in South Eastern States of Nigeria. Specifically, to examine capital channel preferences by bakery and fast food firms, firm investment behaviours, determinants of capital structure preferences of the firms and the and determinants of investment. The periods covered are 2005-2008. Panel data sets from firm records were used and a total of 180 agribusiness firms comprising 90 bakeries and 90 fast foods firms were selected for study. The analytical techniques were the use of descriptive statistics, ordinary least square (OLS) multiple regression analysis and translog production cum profit stochastic model. The results of the analyses about the firm features showed that fast food firms are more recent development interventions than bakery firms which are older. The percentage equity capital level of bakery firms were consistently lower relative to that of fast foods which was high over the years studied. The capital structure pattern consistent with bakery and fast food firms showed that bank debts (short and long terms), informal debts (comprising debts from cooperative or unions, money lenders, and managers or owners of firms), trade credit (comprising credit purchases, trade accounts and payable notes) and equity capital (comprising owners contributions and retained earnings) were the structures held in part or fully by the finns. The investment patterns maintained at different optimums corresponding to the firms capital availability within years 2005 — 2008 comprised fixed assets investment, investment in account receivable, cash at hand and inventory investment. The corresponding rates of change in investment in each of the investment structures above gave an indication of inconsistent or unsteady growth behaviour in the firm factors investment over the years. The determinants of capital structure of bakery and fast food firms found J significant included business experience, asset depreciation allowance, corporate size, nature of firm ownership, technology, dependency on equity finance, dependency on trade credit, interest rate, firm profitability and the number of supervisory visits. The significant determinants of investment established 4 by this work included lagged investment, firms capital structure component (in form of bank debts, trade credits and informal debts), availability of internal funds captured with return on assets (profitability) and cash flow (in form of total sales), cost of capital, business risk and depreciation allowances. The income statement of the two firm categories showed that the firms are profitable. Further, the determinants of return on equity invested into the firms included lagged return on equity, return on sales, asset turn over ratio, asset to equity ratio, business risk, times interest earned and firm size. The determinants of profit in bakery firms were price of flour, sugar, fat, fuel and unit cost of transportation. Also price of food stuff, flour, milk, fuel, interest rate and unit cost of transportation were the factors affecting profitability in fast 4 food finns. Complete interdependence among investment, reserved capital and debt financing decisions was not observed rather there was a two- way interaction and inverse relationships among the variables. interdependence was only observed between investment and reserved capital decisions of bakery firms. The policy implications of these findings include making inputs needed by these firms available at affordable prices from the various sourcing points. Also, regulating cost of capital consistent with each capital structure component and encouraging greater reliance on reserved capital than debt finance will enhance the firms' investment performances.