Managerial ownership and performance of listed non-financial firms in Nigeria

Abstract

The ongoing debate relating to the impact of managerial ownership on performance of firms has centred on whether managerial ownership has an incentive or entrenchment effect on performance of firms. In addition, the debate has also been extended to whether a nonlinear estimation method is appropriate for modelling the relationship rather than the linear specification adopted by earlier scholars. This study examined these issues in the context of a developing country using generalised method of moment (GMM) estimation on 63 non-financial firms quoted on the Nigerian Stock Exchange between 1998 and 2010. Our study found that managerial ownership did not have any significant impact on the performance of firms in both the linear and nonlinear specifications. Factors impacting on firm performance include the first lag of performance which is return on assets (ROAs) and index of monopoly power. These two factors had a positive and significant impact on ROA and therefore we conclude that managerial ownership may be a weak mechanism for mitigating agency problems among firms listed on the Nigerian Stock Exchange.