Fundamental Factors Influencing Individual Investors to Invest in Shares of Manufacturing Companies in the Nigerian Capital Market

Abstract

In a bid to diversify theeconomy and shore up the revenue base of the country, the Nigerian Governmenthas shifted its attention to the manufacturing sector which it believes has thegreatest potential to realize this objective. This paper aims at identifyingthe fundamental factors that influence individual investors to invest in theshares of manufacturing companies quoted on the Nigerian capital market. Astructured questionnaire was used to obtain primary data from 130 respondentswhich were analyzed using descriptive statistical techniques employing meanscores and standard deviation to assess the relative importance of each factorthat influence investment decisions. The results showed that the five mostinfluencing factors are past performance, expected bonus issue, growthpotential, future dividend and the profitability of the company. Five principalfactors were extracted using factor analysis which showed that accountinginformation and company growth potential accounted for the larger percentage ofvariance. This study has shown that investors place more importance on thoseeconomic factors which are commonly classified in literature as wealthmaximizing criteria. High price of manufacturing shares and lack of access toborrowed funds were found to be the most limiting factors to investing inmanufacturing shares. This reflects the low level of income in the countrywhich could have adverse consequences on the level of funds that willultimately be channeled to the capital market and subsequently made availableto the manufacturing sector which remains the most promising sector for thediversification of the economy.     Keywords:Fundamental factors influencing investment, Individual investors, Manufacturingcompanies, Nigerian capital market.