Ownership Structure and Performance of Selected Quoted Manufacturing Companies in Nigeria

International Journal of Research and Innovation in Social Science (IJRISS) | Volume V, Issue XII, December 2021 | ISSN 2454–6186

Ownership Structure and Performance of Selected Quoted Manufacturing Companies in Nigeria

Kazeem Toyin Cynthia¹, Omole Ilesanmi Isaac^2
1Department of Business Administration and Management, School of Business and Management Studies, Federal Polytechnic, Ile-Oluji, Ondo State, Nigeria
²Department of Accountancy, School of Business and Management Studies, Federal Polytechnic,
Ile-Oluji, Ondo State, Nigeria

Abstract
This study evaluated the effect of equity ownership structure on the financial performance of selected quoted manufacturing companies in Nigeria. The focus of the evaluation is on the relationship between ownership structure variables (managerial, institutional and foreign) on firm performance (Return on Equity and Return on Asset). Data were collected for this study through secondary source for the period 2011 – 2020. 60 manufacturing firms listed on the Nigerian Stock Exchange were purposively sampled. Data were collected on variables such as institutional owners’ equity, managerial ownership equity, foreign ownership equity, Total Assets, shareholders’ fund and earnings after interest and tax was collected from the Annual Reports of companies. Data collected was analyzed using tables, descriptive statistics, correlation and regression analysis. Also, the data collected were subjected to pooled General Least Square, Random and Fixed Effects regression model in testing the hypotheses of the study. It was discovered that all the variables i.e. (ROTA, ROE, MON, LEV, LASSET, ION, FON and AGE) had correlation coefficients that were very low and less than 0.9 having either positive or negative values. It was discovered that all the series showed high level of consistency because all mean and median values were within the maximum and minimum values of the series. The deviation of the actual data from their mean value were exceptionally high, typically demonstrated by the relatively high value of the standard deviations. The study recommended that improvement should be made on corporate governance to focus on sound equity ownership structure to attract foreign investors. Likewise, Industrial investors should emphasize the importance of inclusion of institutional investors in companies ownership structures and collisions between the directors and dominant shareholders should be prevented.

1.1 Introduction:

The performance of an entity is of importance to shareholders and institutional investors Ahmed and Hadi, 2017). Hence, it is the responsibility of business managers to ensure that corporate resources are optimized to ensure commensurate returns. Moreover, given that the going concern of an entity largely relies on its performance, managers are constraints to make investments in tasks and funding that are worthwhile. Despite the discretionary power of managers, the preference of investment regularly relies on the stage of resources on hand and the ownership of such investment fund. A firm may additionally source funds internally or externally however, the utilization of such fund is typically accompanied with the interest of its provider. As evident in the literature, the composition of an entity’s finance alternatively known as possession shape is important for management decisions. Therefore, the ownership structure of any organization is a serious issue affecting a company’s monetary performance. A firm’s ownership shape is composed of investors, monetary institutions, mutual funds, global firms, block holders, family members and managers (Kluiver, 2017). The influence of ownership structure on firm performance is derived from the agency theory. The separation of administration from control creates a “principal-agent problem” in which managers (agent) might make decisions that are not in the first-rate interest of the owners (principal). Managers may use non-public records for their advantage and act towards shareholders’ interests and views (Mudi, 2017). This managerial opportunism, in which managers search for self-interest via deceit,

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