Corporate Ownership, Corporate Control and Corporate Performance in Sub-Saharan African: Evidence from Nigeria

Abstract

This paper investigates the relation between corporate ownership and corporate performance of listed companies in Nigeria, a foremost Sub-Saharan African country during the period [2002][2003][2004][2005][2006][2007]. The data is obtained from the firms" annual reports and accounts and the Nigerian Stock Exchange daily performance reports. The combination of 70 firms and six-year period studied provides a balanced panel with 420 observations for panel data analysis. The results from the ordinary least square (OLS) regression analyses show that there is a strong connection between foreign ownership structure and firm performance. Foreign ownership structure is found to exhibit significant improvements in firm performance; it adumbrates eclectic competitive advantages in ownership, control and internalization respects over other types of ownership structure. We find no statistically significant relation between concentrated ownership and firm performance. Insider or managerial ownership, however, exhibits significant decline in firm performance. These findings are consistent with the view that firm performance is a negative predictor of insider ownership. We also find support for the notion that management is apathetic to holding equity stakes in their underperforming firms.

Firm Performance, Corporate Governance Mechanisms and CEO Turnover: Evidence from Nigeria

“…A similar finding was documented by Ruan and Tian (2011) that, at a higher level of managerial ownership, the CEOs become entrenched and are not likely to be replaced in the events of poor performance. The difference in the outcome of this study with the previous studies might have been due to the low proportion of managerial ownership in the Nigerian corporate market which is dominated by a high concentration of blockholders and foreign ownership (Sanda et al, 2010;Tsegba et al, 2014).…”

“…The Nigerian corporate environment is characterised by concentrated shareholding mostly by family and foreign ownerships (Adegbite, Amaeshi, & Nakajima, 2013;Sanda, Mikailu & Garba, 2010). The concentration of ownership by family and foreign ownership in Nigeria has been due to the liberalization of the economy embarked upon by the federal government through the promulgation of the legislations which removed all obstacles on the free flow of capital from abroad into the economy (Tsegba & Herbert, 2013;Tsegba et al, 2014). Hence, this paper attempts to investigate the influence of foreign ownership and managerial ownership being the dominant shareholder in the Nigerian PLCs on the CEO turnover.…”

“…Foreign ownership is perceived to have a more informed board and well experienced management with commensurate training and expertise that distinguishes such firm from the local counterparts, hence, it has better performance. Foreign ownership is simply the percentage of shares owned by foreign individuals (Tsegba, Herbert, & Ene, 2014).…”

“…However, several studies have considered foreign ownership in various aspects of corporate governance and corporate performance (Ezeoha, & Okafor, 2012;He et al, 2014;Tsegba et al, 2014). But few studies had examined the relationship between the foreign ownership and the CEO turnover to the best of the researcher's knowledge.…”

“…Managerial ownership otherwise referred to as insider ownership or director shareholding is the total shares held by members of the board of directors of the company (Tsegba et al, 2014). Managerial ownership reduces agency costs as it aligns the managerial interests with that of the shareholders, however, higher ownership by the mangers could lead to the entrenchment of the management which will ultimately affect firm performance and weaken the governance mechanisms of the corporation (Tsegba et al, 2014).…”