Ownership structures and firm performance in Nigeria: A canonical correlation analysis

Abdul Adamu,Joel Haruna

doi:10.30585/jrems.v2i4.537

Abdul Adamu, Joel Haruna

Open Access

https://doi.org/10.30585/jrems.v2i4.537

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Abstract

This study examined the relationship between ownership structure and performance of listed non-financial firms in Nigeria. Secondary data on managerial ownership, ownership concentration, foreign ownership, institutional ownership, Tobin q, return on assets, return on equities, and earnings per shares were collected from forty (40) sampled firms. The data were analyzed using canonical correlation and the findings showed that managerial and foreign ownerships are the dominant ownership structures while Tobin q, EPS, and ROA are the dominant performance measures. The study also found that ownership concentration, foreign ownership, and institutional ownership are positively correlated with firm performance, while managerial ownership is negatively correlated with firm performance. The study recommended that listed non-financial firms should encourage foreign investments in their firms and rewards performing managers with shares in the firm.

Highlights

One of the primary corporate governance mechanisms is ownership structure and that is why the relationship between ownership structure and firm performance has been an important subject and ongoing debate in the corporate finance literature
The minimum and maximum value of the performance variables shows the presence of outliers as there is a larger difference between these values for all variables
This study examined the relationship between ownership structure and performance of listed non-financial firms in Nigeria using the canonical correlation to estimate the overall relationship

Summary

Introduction

One of the primary corporate governance mechanisms is ownership structure and that is why the relationship between ownership structure and firm performance has been an important subject and ongoing debate in the corporate finance literature. The fundamental insight into this debate dates back to Berle and Means (1932), who argued that the separation of ownership and control of modern corporations naturally reduces management incentives to maximize corporate efficiency. In a related study by Demsetz and Lehn (1985), they stated that the ownership structure concept indicates that ownership is often endogenously determined for the maximization of the performance of the company as this benefits all owners Since these early insights into this relationship, it has been extensively examined by analysts as well as scholars throughout the years. The concentration of ownership is considered as the tool for aligning the CEO self-intrinsic behavior to reduce the agency conflict and achieve the value maximization objective of the firms

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