ABSTRACT

This study examined the effect of directors’ tunneling on assets utilization in Nigerian manufacturing sector. The study employed ex post facto research design. Data for analysis was gotten from the published financial reports of 14 listed manufacturing firms spanning a period of 5 years (2015 to 2019). The multiple linear regression model using Panel data regression technique was used to analyze the data generated with the aid of Econometric View (E-View Version 9). Findings from the study revealed that directors’ pay has a positive insignificant effect on asset utilization of listed manufacturing firms in Nigeria. Further findings revealed that concentrated ownership has a positive insignificant effect on asset utilization of listed manufacturing firms in Nigeria and finally, it was revealed that managerial ownership has a negative insignificant effect on asset utilization of listed manufacturing firms in Nigeria. Based on the findings the study recommends that, listed manufacturing firms should develop a policy that continuously fix directors’ pay at a level it will not encourage tunneling. In line with the agency theory, directors interest should be protected through setting adequate pay package for them that will spur their performance but discourage tunneling activities. Also, that more shares be appropriated to managers such that their bonuses be paid through share allotment.  This will enable the managers interest be tied to that of the firm since they form part of the owners of the firm thus will instigate a drive for them to properly utilize the assets of the firm. Lastly, it is recommended that majority of shares be allotted to competent shareholders. This will further encourage adequate utilization of the firms asset and discourage tunneling activities by such concentrated owners of shares.