Effects of equipment investment and debt capitalization among fast foods enterprises in South Eastern Nigeria: a simultaneous equation approach

摘要

The study investigated the interrelationship between equipment investment and debt capitalization policy of fast foods firms in South Eastern Nigeria using a simultaneous equation approach, especially as increased global competition among agribusinessfirms has triggered massive investment in modern technologies, product development and promotions. The data for this study were culled from enterprise records of the ninety fast food enterprises studied. The technique employed for data analysis involveddescriptive statistics (such as percentages and graphs) and simultaneous equation. The study identified an annual mean capitalization of 5.6 mill .on naira in the last three years of the firms business operations covering years 2005- 2008. There is no direct relationship observed between equipment investment and debt capitalization policy of the firms, rather an inverse relationship existed between the variables. Also some factors that simultaneously affect both debt capitalization policy and equipmentinvestment were analysed and were found significant at the recommended risk levels (1% and 5%) but they differ in signs. The significant factors were past debt policies, equipment investment expenditures and return on asset variables. Thus it is concluded that debt capitalization has inverse relationship with equipment investment amongst fast foods firms and as such debts should be minimized in the capital portfolio of the firms. However, it is recommended that other sources of capital sueh as equity capital in its various forms should be harnessed by the firms.