Investigating the Investment Profiles of Nigerian Small and Family Business Owners

Abstract

Individual investors make portfolio investments along with various alternatives for the purpose of increasing their profit. Unlike the financial sector that is heavily regulated with coherent risk policy, the small and medium enterprises do not have central oversight or guidance for managing risk taking behavior of decision makers in order to ensure that approaches being taken are efficient, effective, and account for risk-risk tradeoffs. In this work, the investors risk appetite survey was conducted with the aim of exploring and profiling the Nigeria small business owners and managers’ risk appetite that drives their investment decisions and portfolio formation. The study adapted the investment personality questionnaire developed by the Canada Life Assurance Company. Hundreds of small business including family owned businesses were surveyed to examine the relationship between personalities and investment decisions. The five investment risk personality considered are conservative, moderate, balanced, advanced and aggressive. The data profiled reflects a diverse range of investor attitudes, with a general preference for balanVolcing security with growth, and a notable inclination toward long-term goals and investments. Results indicate that Nigerian small business owners are largely moderate and balanced in their risk appetite classification with over 70 percent across four major areas of investment. This finding is similar for all sex and age categories. The results findings of the study will provide traders with information useful in formulating net portfolio and hedging policies in line with the investors’ risk appetite. The expected impact of the outcome of this research will improve access to market information and investors’ risk appetite profiles; guide informed portfolio formation for investors; and ensure financial stability and institutional resilience.