Corporate Governance, Ownership Structure and Firm Performance in Nigeria

Abstract

This paper examines the relationship between two patterns of ownership structures (concentrated and foreign) and their impact on firm performance in Nigeria. The paper seeks to ascertain whether cross-sectional variations between concentrated and foreign ownership structures result in systematic variations in performance among Nigerian firms. The sample comprises a panel of 72 non-financial firms listed on the Nigerian Stock Exchange (NSE), covering the period 2003 to 2007. The combination of 72 firms for a five-year period provides a balanced panel of 360 observations which can be analyzed using panel data methodology. The performance measures used in this study are market price and earnings per share. The postulated hypotheses were tested, using the Ordinary Least Squares (OLS) method of data analysis. The empirical results suggest that concentrated ownership has significant negative impact on firm performance. The results do not, therefore, lend credence to government’s unremitting emphasis on ownership concentration as a governance mechanism that can address the dismal performance of the state-owned enterprises (SOEs). The results however, show that foreign ownership has significant positive impact on firm performance. The findings resonate with policy initiatives that promote foreign ownership investments.

Keywords: Corporate Governance, Ownership Structure, Concentrated Ownership, Foreign Ownership, Firm Performance, State-owned-enterprises, Nigeria.