The Causality between Employees’ Economic Rewards and Sustainable Performance of Nigerian Quoted Manufacturing Firms

Fatai Abiodun Atanda, Taiwo Olufemi Asaolu, Adewale Atanda Oyerinde


This study examines the causal relationship between employees’ economic rewards and sustainable performanceof the Nigerian quoted manufacturing firms. The study uses 400 firm-year data, involving 50 companies,purposively selected over the period 2006-2009. The data were sourced from the annual audited reports andaccounts of the companies, obtained from the Nigerian Stock Exchange. The study uses correlation and grangercausality econometric techniques to analyze the data, after carrying out diagnostic tests such as unit roots andcointegration tests. The study found that relative economic value added (WETREL) was stationary (?² = 176.425,p<0.01) at level and relative employees’ economic rewards (SENREL) stationary (?² = 317.882, p<0.01) at firstdifference, using the Philips-Perron Fisher asymptotic chi-square criterion while both WETREL was stationary(Z=-9.8012, p<0.01) and SENREL stationary (Z=-7.2612, p<0.01) at first difference, using Philips-Perron ChoiZ-statistics criterion. Also, there was at least one cointegrating equation between SENREL and WETREL of thecompanies, indicating a long-run equilibrium relationship between the two variables. In addition, WETREL(?²=7.623, p<0.01) significantly Granger causes SENREL and SENREL (?²=3.744, p<0.05) also significantlyGranger causes WETREL. Thus, a bi-directional causality existed between the variables, indicating that thedirection of the causality runs two ways, from WETREL to SENREL, and vice versa. The study concluded thatthe two variables are good predictor of each other though employees’ economic reward is a better predictor ofsustainable performance of quoted manufacturing firms in Nigeria.

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International Journal of Business and Management   ISSN 1833-3850 (Print)   ISSN 1833-8119 (Online)

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