Free Cash Flows and Intangible Investment Decisions: Evidence from the Nigerian Banking Industry

Abstract

The study examines the impact of free cash flows on intangible investment decisions of the listed deposit money banks in Nigeria. Previous studies of free cash flows mainly focused on capital expenditures and ignored intangible investments as a class of investment. However, with recent shifts to digitalization, and aim to achieve efficient banking operations, Intangible investment is an important aspect of investments to deposit money banks. This study therefore concentrates on FCF and intangible investments. The objective of the study was to establish the impact of free cash flows on intangible investment of listed deposit money banks in Nigeria, during the period of 2009 – 2018. The population of the study was the listed deposits money banks in Nigeria, which were fifteen (15) in number as at 2015, and the whole population was used as sample. The study made use of secondary data obtained from annual reports and used quantitative techniques in analyzing the data using STATA 13.0. The study found out that free cash flow has a negative impact on intangible investments of listed deposit money banks in Nigeria to a significant level. The more free cash flows of deposit money bank have the less intangible investments it ventures into. However, the period under study have been reported to be an abnormal one. The study therefore recommends intangible assets to be considered and given importance to by deposit money banks, as the financial sector is fast transcending to a digitalized one.