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Purpose The purpose of this paper is to examine the asymmetric behavior between CEO pay and firm performance in Nigeria. Design/methodology/approach The study adopts a two-step dynamic panel generalized method of moments (GMM) to reveal asymmetric responses of CEO pay to positive and negative shocks in firm performance. Findings The research outcomes of a two-step dynamic panel GMM) adopted reveal asymmetric responses of CEO pay to positive and negative shocks in firm performance. This implies that CEOs are handsomely compensated for good performance, but not punished for poor performance. Originality/value The study, therefore, suggests that CEO pay fails to serve as an internal corporate governance mechanism to alleviate agency problem in Nigeria’s listed firms.

Purpose The purpose of this paper is to re-examine the determinants of bank profitability in Nigeria. Specifically, the study investigates the effect of managerial cost efficiency on bank profitability. Also, since there exist mixed results and controversies in the literature, in both developed and developing countries, regarding the effect of efficiency on bank profitability, this study employs the standard measure of efficiency. In addition, the work incorporates the role of persistence, which is often neglected in the literature in developing countries. Design/methodology/approach This study employs system generalized method of moments. Findings The findings, using the case of Nigeria, show that cost efficiency is a strong determinant of bank profitability in developing countries. In addition, the profitability of banks in Nigeria persists over time; hence, the industry is fairly competitive. Research limitations/implications The recent policies of banking industry recapitalization meant to increase profitability and stability in Nigeria and other African countries’ banking industry will not be effective if the issue of managerial efficiency is not properly addressed. Practical implications Improving the banking managerial efficiency will positively reduce bad loans, hence leading to the stability in the banking system. Originality/value The authors introduce efficiency using standard measure of stochastic frontier analysis for its measurement. Also, this study introduces the role of persistence in the literature in developing countries.

The bulk of extant studies on the relationship between firm size and profitability focus on the effect of former on the latter, neglecting the possibility of feedback effect. This research work re-examines the direction of causality between firm size and profitability for 63 listed non-financial Nigerian firms for the period 1998–2010, using an innovative econometric methodology of a dynamic panel generalized method of moments to resolve the problem of endogeneity inherent in the relationship. The results establish a bidirectional relationship between firm size and profitability of firms in Nigeria. While firm size positively Granger-causes profitability, profitability, on the other hand, negatively Granger-causes firm size. This study therefore rebuts the popular assumption that causation only runs from firm size to profitability and not vice versa. The emerging conclusion drawn from this study is that profitability might be a vital tool to make firms grow faster if well managed as the economies of scale could also be induced.

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