DOES INTELLECTUAL CAPITAL AFFECTS COST OF EQUITY? A STUDY OF FAST-MOVING CONSUMER GOODS (FMCG) FIRMS

The broad objective of this study is to investigate the influence of intellectual capital management on cost of equity of fast-moving consumer goods firms in Nigeria by focusing on three key proxies of intellectual capital, adopted from prior related literature. Specifically, this study evaluates how human capital, structural capital and relational capital affects cost of equity. Anchored on the resource-based view theory, this study ideology aligns with the position that intangible assets, including structural capital, is a critical driver of sustainable competitive advantage. Ex-post facto research design was adopted to examine a sample of twelve (12) out of a population of thirteen (13) fast moving consumer goods firms listed on the Nigerian Exchange Group. The sample size was achieved based on certain criteria to include consistent listing of sampled firms during the 2014 to 2023 period and availability of annual financial reports where the data were sourced. Descriptive and inferential statistical methods were employed to analyze the data, with preliminary diagnostic tests to include descriptive statistics, while fixed effect with clustered standard error regression procedure was used to test the stated hypotheses. The findings clearly reflect the perception of equity investors of fast-moving consumer goods firms in Nigeria indicating that structural capital investments while it may be beneficial for long-term efficiency and innovation, in the immediate term, it signals increased operational complexity or higher capital expenditures, leading to heightened risk premiums. Based on these outcomes, this study carefully recommends that stakeholders in the fast-moving consumer goods industry in Nigeria should prioritize strategic structural capital investments that will not only enhance operational efficiency but also mitigate perceived investor risk. This can be achieved by integrating risk-adjusted capital allocation strategies and demonstrate tangible returns on structural capital investments to help align investor perceptions with the firm’s true financial stability, ultimately fostering more favorable equity financing conditions.