Performance Assessment And Investment Decisions Of Small And Medium Scale Enterprises In Nigeria (A Case Study Of Some SMEs In Delta State)

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Performance Assessment And Investment Decisions Of Small And Medium Scale Enterprises In Nigeria (A Case Study Of Some SMEs In Delta State)


Abstract


This study was carried out on the Performance assessment and investment decision of small and medium scale enterprises in Nigeria. The study focused on of some SMEs in Delta State. This study employed a descriptive research design method. The study will be based on survey and questionnaire will be used to gather information. There is a total population of 70 personnel but the sample size is 60 using Taro Yamane’s formula. The methods used in to analyze this study were simple percentage and chi-square. The study revealed from the test of hypotheses that performance assessment is relied upon in investment decision making and performance assessments are useful for forecasting company’s performance. Concluded was drawn based on the findings that performance assessment plays a vital role in investment decision making and recommends that no investment decision should be taken without the consideration of a company’s performance assessments.


Table Of Contents


Preliminary Page(s)

  • Title page
  • Certification page
  • Dedication
  • Acknowledgement
  • Abstract
  • Table of content

Chapter One

Introduction

  • 1.1 Background to the study
  • 1.2 Statement of the problem
  • 1.3 Objectives of the study
  • 1.4 Research questions
  • 1.5 Research hypotheses
  • 1.6 Significance of the study
  • 1.7 Scope/ Limitations of the study
  • 1.8 Definition of terms

Chapter Two

Literature Review

  • 2.1 Introduction
  • 2.2 Conceptual framework
  • 2.3 Theoretical Review
  • 2.4 Empirical review
  • 2.5 Summary of Literature Review

Chapter Three

Research Methodology

  • 3.1 Research design
  • 3.2 Area of the study
  • 3.3 Population of the study
  • 3.4 Sample size and sample technique
  • 3.5 Instruments for data collection
  • 3.6 Sources of data collection
  • 3.7 Methods of data collection
  • 3.8 Method of data presentation and analysis
  • 3.9 Validity of instrument used
  • 3.10 Reliability of the instrument used

Chapter Four

Data Presentation And Analysis

  • 4.1 Data presentation
  • 4.2 Data analysis
  • 4.3 Test Of Hypotheses

Chapter Five

Summary Of Findings, Conclusion And Recommendations

  • 5.1 Summary of findings
  • 5.2 Conclusion
  • 5.3 Recommendations
  • References
  • Appendix
  • Questionnaire

Chapter One


Introduction

1.1 Background To The Study

Researchers all over the world has advocated the need for manager or consultant to constantly examines and evaluates an employee’s work behavior and productivity by comparing it with preset standards, document the results of the comparison, and use the results to provide feedback to the employee to show where improvements are needed and why (Miles, 2002). This therefore enables managers to know the areas to invest in for optimal performance.

Performance assessment is employed to determine who needs what training, and who will be promoted, demoted, retained, or fired. It also determines which section of the organization needs maintenance and upgrading. Investment decisions involve the thought process of selecting a logical choice from the available options.When trying to make a good decision, the decision maker must weigh the positives and negatives of each option, and consider all the alternatives. For effective decision making, a person must be able to forecast the outcome of each option as well, and based on all these items, determine which option is the best for that particular situation most importantly the previous performance will be a proper guide in the choice of where to invest (Child, 2002).

Dean and Sharfman (2006) observe, the following two assumptions must hold to prove a link between investment decision process and performance assessment. Firstly, it must be assumed that investment decision processes are related to choices determine by previous achievements; or, more specifically, that the investment decision process was influencedby the quest for better performance and productivity. Although this assumption appears intuitively obvious, many academics have argued that the operating environment shapes organizational and individual choices (for example, Aldrich, 2009; Pfeffer and Salancik, 2008). Others, however, claim that despite the existence of these external factors, managers retain a substantial degree of control over choices (for example, Miles, 2002; Child, 2002). One argument made in favour of this position by Dean and Sharfman (2006) is that some managers make very poor choices with devastating consequences for their firms, while others in very similar circumstances make much better choices (for example, Bourgeois, 2004). Such variation, the authors assert, could not exist if performance assessment has been the driving force for such investment decisions. Hence, Dean and Sharfman (2006) conclude that it appears likely that viable outcomes are a product of the decision process used. Leading on from this, the second assumption is that choices relate to outcomes, and that all outcomes are not equally good. Once again there can be very little doubt that external forces also influence decision effectiveness (Hitt and Tyler, 2001; Pfeffer and Salancik, 2008). However, Dean and Sharfman (2006) note that it is unlikely that the influence of such forces as performance assessment eliminates the impact of choice on decision effectiveness as it is hard to imagine a decision in which all potential choices will be equally successful or unsuccessful. The researcher seeks to examine the influence of performance assessment on investment focusing on SMES in Nigeria.


1.2 Statement Of The Problem

Many empirical studies have investigated the existence of a relationship between the performance evaluation or assessment and investment decision. None have concentrated on the use of decision analysis in the investment decision-making processes of organisations. However, several have explored the effects of comprehensiveness, rationality, formality and consensus in the decision-making process on organisational performance.

Advocates of performance assessments maintain that every task must have performance criteria for at least two reasons:

The criteria define for performance and others the type of behavior or attributes of a product which are expected, and

A well-defined scoring system allows the managers, the employees, and others to evaluate a performance or product as objectively as possible. If performance criteria are well defined, another person acting independently will award an employee essentially the same score.

Furthermore, well-written performance criteria will allow the managers to be consistent in scoring overtime which will definitely reshape the decision making process of the management. However, the researcher is examining the relationship between performance assessment and decision making of SMES in Nigeria.


1.3 Objectives Of The Study

The general objective of this study is to analyze the relationship between performance assessment and investment decision of SMES in Nigeria and the following the specific objectives:

  1. To examine the relationship between performance assessment and investment decision of SMES.
  2. To investigate strategies that can be adopted in conducting an effective performance assessment.
  3. To find out the factors that can influence investment decisions.

1.4 Research Questions

  1. What is the relationship between performance assessment and investment decision of SMES?
  2. What are the strategies that can be adopted in conducting an effective performance assessment?
  3. What are the factors that can influence investment decisions?

1.5 Research Hypothesis

HO; There is no significant relationship between performance assessment and investment decision of SMES

HA; There is significant relationship between performance assessment and investment decision of SMES


1.6 Significance Of The Study

The following are the significance of this study:

This study will educate the stakeholders and management of small and medium enterprises on the need for performance assessment as a guide to investment related decision making.

This research will be a contribution to the body of literature in the area of the relationship between performance assessment and investment decision, thereby constituting the empirical literature for future research in the subject area.


1.7 Scope / Limitations Of The Study

This study on the relationship between performance assessment and investment decision will cover some selected small and medium scale enterprises in Ikeja, Lagos state of Nigeria by carefully examining the influence of performance assessment on investment decision in an organization with a view to attain the organizational goal. The study will also cover an overview of the strategies that can be adopted in conducting an effective performance assessment.

Limitation Of Study
Financial constraint

Insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection (internet, questionnaire and interview).

Time constraint

The researcher will simultaneously engage in this study with other academic work. This consequently will cut down on the time devoted for the research work.


1.8 Definition Of Terms

Performance:

The accomplishment of a given task measured against preset known standards of accuracy, completeness, cost, and speed. In a contract performance is deemed to be the fulfillment of an obligation, in a manner that releases the performer from all liabilities under the contract.

Organization:

A social unit of people that is structured and managed to meet a need or to pursue collective goals. All organizations have a management structure that determines relationships between the different activities and the members, and subdivides and assigns roles, responsibilities, and authority to carry out different tasks. Organizations are open systems–they affect and are affected by their environment.

Investment:

Money committed or property acquired for future income.

Decision:

A choice made between alternative courses of action in a situation of uncertainty.

SME:

Small and Medium Scale Enterprise


Chapter Five


Summary of Findings, Conclusion and Recommendations

5.1 Summary of findings

This study set out to study the performance assessment and investment decision of small and medium scale enterprises in Nigeria (A case study of some SMEs in Delta State).

From the test of hypotheses, we discovered the following;

  1. Performance assessment is used to be relied upon in investment decision making.
  2. Performance assessments are useful for forecasting company’s performance.
  3. There is a positive and significant relationship between performance assessment and investment decision making.
  4. Performance assessments provide various facts of a business such as, accurate records of its income and expenses and also its assets and liabilities.
  5. The respondents agree that the performance assessment plays an important role in investment decision making.

Finally, the basic aim of this study is to determine the role of performance assessment in investment decision making. This is because prospective investor’s uses performance assessment of concerns as a major parameter for assessing the profitability and the risk of investing in such ventures and the aim of performance assessment is to provide financial information about an entity to interested parties.

The information can become meaningful through financial interpretations and decisions unveil the essence of performance assessment as the major custodian of financial information necessary for any investment decision. Investment are not made on a vacuum hence, there are bedrocks on which they will stand.


5.2 Conclusion

The researcher concludes by saying that performance assessment plays a vital role in investment decision making; for instance, where companies invest hundreds of billions of naira every year in fixed assets. By their nature, these investment decisions have the potential to affect the firm’s fortunes over several years. For a good decision can boost earning sharply and dramatically increase the value of the firm. This financial information can be subjected to various scrutiny and analysis depending on the investors before making their investment decisions. This is quickly appreciated in the banking sector as one of the major criteria’s the demand from their borrowers at the performance assessments of the concern for various years. This is subjected to their analysis and interpretations before they can go ahead in the loan negotiation concerning any company. Hence it is opined that companies should try as much as possible to posit performance assessments that reflects a true and fair view of what is propose to represent as a way of appreciating their companies the more.


5.3 Recommendations

Having gone through this study the researcher recommend the following as a way of incurring that performance assessment plays a vital rule in investment decisions

  1. Every company should ensure that all material fact is reflected in their performance assessment.
  2. These should be prompt provision of the performance assessment at the end of each financial year.
  3. Investment decision should not be on a vacuum or rule of thumb rather, the performance assessments should be used as bedrock.
  4. Every company should adhere to the demand of subjecting their performance assessments to statutory audit as a way of authenticating their contents
  5. No investment decisions on a company should be taken without the consideration of a company’s performance assessments.

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