Ownership Concentration and Financial Performance of Quoted Building Materials Firms in Nigeria

International Journal of Research and Scientific Innovation (IJRSI) | Volume VI, Issue V, May 2019 | ISSN 2321–2705

Ownership Concentration and Financial Performance of Quoted Building Materials Firms in Nigeria

Yakubu Abubakar¹, Ese Theresa Esenohor² and Dangana Umaru³

¹Department of Accounting, Ahmadu Bello University, Zaria, Nigeria.
²College of Education, Warri, Nigeria.
³College of Education, Gidan Waya, Nigeria.

Abstract:-This study examines the impact of ownership concentration on financial performance of quoted building material firms in Nigeria. The population of the study consists of six (6) firms quoted on the Nigerian stock exchange as at 31st December 2017 out of which four (4) firms were selected using two criteria as the sampling technique which are Cement Company that made available their annual report of fourteen (14) years and Cement Company quoted on the Nigerian stock exchange before 2004. The study uses multiple regressions as a tool for analysis. The study reveals that ownership concentration showed a positive significant impact on financial performance of building materials firms in Nigeria. The study concludes that ownership concentration affects financial performance of building materials firms in Nigeria and therefore recommends that Security and Exchange Commission should encourage more potential concentrated owners to invest in long term investment in building materials industry.

Keywords: Ownership concentration, financial performance, firm size and leverage.

I. INTRODUCTION

Monitoring is one of the weapons used to prevent misappropriation of funds by managers and that is what concentrated owners used in enhancing financial performance of a firm. A huge amount of stock owned by individual shareholders gives them control over the Managers of a firm. Concentrated ownership can improve monitoring and reduce agency costs, but on the other hand, large shareholders can expropriate smaller investors or harm performance by monitoring managers in an excessive manner.

Ownership concentration is related to firm financial performance due to the fact that traditional theories argued that when ownership of a firm is concentrated in the hand of large shareholders, they have incentive to monitor the managers’ action through direct intervention to reduce agency problem (Chen & Swan, 2010). Also, in the studies of diversification strategy, it was found that ownership concentration enhance corporate diversification and performance of a firm because it constitute the largest investment in a corporate firm (Genc & Angelo 2012).

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