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The main objective of the study was to examine the effect of insider ownership, concentrated ownership and Block ownership on corporate performance of Information Communications Technology [ICT] quoted in the Nigeria Stock Exchange.Applying a purposive sampling technique, a sample of 4 out of a population 13 listed ICT firms and a correlational design was adopted. Secondary data were collected from annual reports and accounts were analysed using linear regression model (with SPSS 20). Performance was measured by return on assets, return on equity and earnings per share.The findings are that insider ownership, concentrated ownership, Block ownership have joint significant positive effect on corporate performance measured by return on assets and return on equity, while insignificant positive effect was found on earnings per share and performance growth as a performance indicator. Individually, insider ownership has insignificant negative influence on all the performance indicators used, concentrated ownership has insignificant positive influence on all the performance measures used, and Block ownership has significant positive influence on return on equity and insignificant positive influence on return on assets and earnings per share. We suggested that corporate organization should promote insider ownership (inside, concentrated, and block ownership) to send positive signals to potential investors. The Securities and Exchange Commission and Corporate Affairs Commission should not relent in ensuring best ownership structure by the boards of Nigeria listed ICT firms.
Keywords: Block ownership; concentrated ownership; corporate performance; insider ownership; Listed ICT.
Background and problems to the Study
From the late 1960s, Nigeria has adopted different and, sometimes, conflicting corporate ownership structures in an attempt to address, inter alia, the dismal performances of the state owned enterprises (SOEs). Ownership structure is one of the most vital subjects that have drawn the attention of researchers, policy makers, managers, investors and potential investors because of many high profile corporate failures such as well-publicized cases of Enron Corporation, Adelphia, Health South, Tyco, Global Crossing, Cendant and WorldCom, Parmalat, Vivendi, Hollinger, Ahold, Adecco, TV Azteca, Royal Dutch Shell, Seibu, China Aviation and that of Nigerian Banking Sector and also because of the decline in the profits of firms around the globe, therefore the credibility and influence of the existing insider ownership has been put to question. Today, it is one subject that is widely studied by researchers in order to find succour for firm performance. It have been agreed by various authorities that if corporate ownership is well structured by organizations there is a guarantee that the firm performance will greatly be enhanced (Shehu and Musa 2014).
The plan by the CBN in its reform agenda to limit government’s ownership in any bank to a maximum of 10 percent may not be unconnected with the apex banks’ belief that ownership of financial firms matter (Ezugwu and Itodo 2014). Besides, the possible impact of initial public offers, conversion to Plc, and mergers on ownership structure and the subsequent impact on the operating performance of companies, is an issue which has not received sufficient conclusive empirical attention in Nigeria. The consequences of these ownership restructuring exercises on the ownership structure and its impact on listed ICT firm’s Performance are the major issues addressed by this dissertation.
The literature on this subject, voluminous as it is, does not present conclusive evidence (see, for example, Demsetz& Lehn 1985; McConnel&Servaes 1990; Demsetz&Villalonga 2001; Pivovarsky 2003; Welch 2003; Chu &Cheah 2006; Farooqueet al. 2007; Aman (2011);Erni (2014); Ongore and K’Obonyo, (2011); Ongore, et al (2011); Sebastian et Al (2011); Nora and Anis (2015); Eric (2011); Roman and Persida (2012); Georgeta and Stefan (2014); Hakim and Reza (2013); Andreou, et al (2014); and Te-Kuang (2015), and many more). The majority, however, find either no relationship, positive or negative relationship or at best, conflicting results. Thus, an objective conclusion from the results of the vast research effort undertaken to date suggests that there is no strong, robust, and uniform support for the theoretical argument about the relationship between ownership and firm performance. Besides, it is generally conceded that the nature of the relationship between ownership and firm performance remains a major governance concern.
Most empirical assessments of this relationship have been predicated on data from developed countries, notably Anglo-American, Europe and Japan. Thus, studies espousing the relationship between ownership structure and firm performance in developing or emerging economies have been rather sparse. Notable exceptions include Shehu and Musa (2014), Ioraver Wilson (2013), Isenmila and Afensim (2012), Uwuigbe, and Olusanmi, (2012), Ioraver et al (2014), Ioraver and Wilson (2011), Ani et al (2014), Gugong et al (2014), Ezugwu and Alex (2014), and Obembe (2011). Despite the geopolitical and economic significance of Nigeria as an emerging nation and, in particular, as the second largest economy in the Sub-Saharan Africa, the scanty empirical assessment of the phenomenon of interest begs the question. The reported Nigerian studies on the listed non-financial sector are the studies of Ioraver Wilson (2013), Ioraver and Wilson (2011), Ioraver et al (2014) and Obembe (2011). Furthermore all the studies of Ioraver (et al) measures performance using non accounting performance measure (market value of a firm were used as performance measure) while that of Obembe (2011) studies manufacturing listed firm. Even then the results of the relationship between ownership concentration, insider ownership and firm performance, yielded conflicting results. We seek to mitigate the contrasting evidence by using a single sector, adopting various firm performance measures which utilise earning per share, ROA and ROE, and applying rigorous methodologies than earlier Nigerian studies.
Objectives of the Study
The specific objectives of the study are to examine:
The effect of insider ownership, concentrated ownership, and block ownership on corporate
performance measured by ROA
The effect of insider ownership, concentrated ownership, and block ownership on corporate performance measured by return on equity
The effect of insider ownership, concentrated ownership, and block ownership on corporate performance measured by earning per share
For the purpose of this study, the following research null hypotheses were formulated:
Insider ownership, concentrated ownership, and block ownership has no significant relationship with corporate performance measured by ROA
Insider ownership, concentrated ownership, and block ownership does not significantly affects corporate performance measured by return on equity
Insider ownership, concentrated ownership, and block ownership has no significant effect on corporate performance measured by earning per share
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