Ownership structure and loan quality of deposit money banks in Nigeria

Daniya Adeiza Abdulazeez*  -  Department of Entrepreneurship and Business Studies, Federal University of Technology Minna, Nigeria

(*) Corresponding Author

Purpose - This study examined the effect of Ownership Structure (Management Shareholding and Ownership Concentration) on the loan quality (LDR) of banks in Nigeria for a period of 10 years (2008-2017). The study utilized data extracted from the annual reports of the fourteen (14) studied banks.

Method - Robustness tests were carried out to determine: the existence or otherwise of multi-collinearity, fitness of the model and appropriate regression analysis for the study. Descriptive statistics, correlation and Fixed Effect GLS regression were used to describe and analyze the data.

Result - The study found that, ownership structure (ownership concentration and management shareholding) has significant negative effect on loan quality of banks in Nigeria.

Implication - The implications of this research is that increased ownership concentration as well as management shareholding can strengthen banks’ loan quality owing to reduced proportion of depositors funds used to finance loan. This could spur confidence in the bank by the general public with regards to the safety of their deposits.

Originality - This study is different from other studies that concentrated on the use of ownership structure in relations to various financial performance measurements such as ROA, ROE, NPM among other. In this study, effort was made to consider the financial health of banks owing to the nature of their business (loan).

Keywords: ownership structure; management shareholding; ownership concentration; loan and deposit money bank

  1. Abdul Latif, A., Anthony, K. & Charles, A. (2013). Asset quality in a crisis period: An empirical examination of Ghanaian banks. Review of Development Finance 4, retrieved from; www.sciencedirect.com.
  2. Abdullatif, A., Freeman, O. & Michael, E. (2014). Does Asset quality persist on bank lending behaviour? Empirical evidence from Ghana. Global Journal of Management and Business Research Finance, 13(4) 12-22.
  3. Ahmad, B. (2013). Corporate governance and risk exposure of banks in Nigeria, British Journal of Arts and Social Sciences, 12(1), 38-51.
  4. Alfaki. M. (2007). Global Trend in Corporate Governance and Social Responsibility. A paper presented at the 31st conference of institute of chartered secretaries and administrators of Nigeria (ICSAN). Sheraton hotels a towers banquette hall. September 5th & 6th, Ikeja.
  5. Alireza, F. (2011). The examination of the effect of ownership structure on firm Performance in listed firms of Tehran stock exchange based on the type of the industry. International Journal of Business and Management, 6(3).
  6. Asma’a, A. (2014). Corporate governance, ownership structure and bank performance in Jordan. International Journal of Economics and Finance, 6(6).
  7. Ben, E., Olufemi, O., Patrick, S. & James, U. (2010). Poor corporate governance and its consequences On the Nigerian banking sector. Serbian Journal of Management, 5(2).
  8. Berger, A., Imbierowicz, B. & Rauch, C. (2013). The role of corporate governance in bank failure during the recent financial crisis, retrieved from: www.ibierwic.com.
  9. CBN code of corporate governance (2006).
  10. Daniya, A. A., Tajudeen, L. & Mohammed, Y. (2019). Board Structure and Asset Quality of Listed Deposit Money Bank In Nigeria. Jurnal Riset Akuntansi dan Keuangan, 7(1), 1-18.
  11. Demaki, G.O. (2011). Proliferation of codes of corporate governance in Nigeria and economy development. Business Management Review, 1(6). Available @http://www.businessjournal.org/bmv.
  12. Drehman, M., Sorensen, S. & Stringa, M. (2008). The integrated impact of credit and interest rate risk on banks: an economic value and capital adequacy perspective, Bank of England working paper no.339 .
  13. Eduardus, T., Hermeindito, K., Putu, A. & Supriyatna (2007). Corporate Governance, Risk Management, and Bank Performance: Does type of ownership matter?,Eadn working paper no. 34.
  14. Ezugwu, C. & Itodo, A. (2014). Impact of Equity Ownership Structure on the Operating Performance of Nigerian Banks (2002-2011). Standard Global Journal of Business Management, 1(4), retrieved from; www.standardglobaljournals.com.
  15. Fawad, A. (2013). Ownership structure and non-performing loans: Evidence from Pakistan. Asian Journal of Finance & Accounting, 5(2), available at; www.macrothink.org/ajfa.
  16. Giuliano, I., Giacomo, N. & Andrza, S. (2006), Ownership structure, risk and performance in the European banking industry, Italy, Markets and financial institutions.
  17. Hifza, I. & Aqeel, M. (2014). Corporate governance and its impact on performance of banking sector in Pakistan. International Journal of Academic Research in Applied Science, retrieved from; www.ijaras.isair.org.
  18. Isenmila, P. & Afensimi, E. (2012). Earnings management and ownership structure: evidence from Nigeria. Research Journal of Finance and Accounting, 3(7), retrieved from; www.iiste.org.
  19. John, O. (2010). Perspectives on corporate governance challenges in a sub-saharan African economy. Journal of business & policy research, 5(1).
  20. Khalid, A. C. (2012). The impact of asset quality on profitability of private banks in India: A case study of JK, ICICI, HDFC & YES banks. Journal of African Economic Review, 2(1), 19-27.
  21. Kolapo, T., Ayeni, R. & Oke, M. (2012). Credit risk and commercial banks’ performance in Nigeria: a panel model approach. Australian Journal of Business and Management Research, 2(2) 46-53.
  22. Mabvure, T., Gwangwava, E., Faitira, M., Mutibvu, C. &Kamoyo, M. (2012). Non-performing loans in commercial banks: A case of CBZ bank limited in Zimbabwe. Interdisciplinary Journal of Contemporary Research in Business, 4(7), retrieved from; Ijcrb.webs.com.
  23. Mohammed, F. (2012). Impact of corporate governance on banks performance in Nigeria. Journal of Emerging Trends in Economics and Management Sciences, Jetems.scholarlinkresearch.org.
  24. Muhammad, A., Sheila, H., Hafiz, M. & Ahmed, K. (2011). A panel data analysis on the relationship between corporate governance and bank efficiency. Journal of Accounting Finance and Economics, 1(1) 34-41.
  25. Nasir, A., Najeeb, M. & Saqlain, L. (2014). The Effect of Corporate Governance on Capital Structure Decisions – A Case of Saudi Arabian Banking Sector. Oeconomica. 10(2).
  26. Obembe, O., Adebisi, S. & Adesina, A. (2011). Ownership Structure and Efficiency of Listed Manufacturing Firms in Nigeria. International Scientific press.
  27. Olayinka, M. (2010). The impact of board structure on corporate financial Performance in Nigeria. International Journal of Business and Management, 5(10).
  28. Parvash, K. &Afroze, N (2014). An Empirical Analysis of the Capital Adequacy in the Indian Private Banks. American Journal of Research Communication, 3(2) 14-20.
  29. Ping-fu, L. (2014). Corporate governance and financial performance of bank in Asian regions and recommendations. Asian Journal of Finance & Accounting, 6(2), available @www.macrothink.org/ajfa.
  30. Ravi, P. & Martin, H. (2013). Corporate Governance and Efficiency in Nepalese Commercial Banks. International Review of Business Research Papers 9(4) 6-11.
  31. Rong, G,. Vicky, L. & Linda, H. (2011). Corporate Governance and Performance in the Wake of the Financial Crisis: Evidence from us Commercial Banks. Research in Business and Economics Journal, 2(4), 23-34.
  32. Sanda, A., Mikailu, S. &Garba, T. (2005). Corporate Governance Mechanisms and Firm Financial Performance in Nigeria. African Economic Research Consortium, Nairobi – Kenya.
  33. Sehrish, G., Faiza, I. & Khalid, Z. (n.d.). Factors affecting bank Profitability in Pakistan. The Romanian Economic Journal, 1(3), 11-22.
  34. Sekar, V. & Balachandran, V. (2014). Asset quality of Indian banks in 2013-2014 - a big challenge. International Journal of Advanced Research, 4(2), 19-28.
  35. Shehzad, C., De Haan, J. & Scholten, B. (2010). The impact of Ownership Concentration on Impaired Loans and Capital Adequacy. Journal of Banking and Finance, 3(3), 65-69.
  36. Vincent, O. & Gemechu, B. (2013). Determinants of financial performance of commercial banks in kenya. International Journal of Economics and Financial Issues, 3(1), retrieved from; www.econjournals.com.
  37. Wei, R., Wei, S. & Carol, W. (2011). Board Governance and Performance of Chinese Banks. Banks and Bank Systems, 6(1), 22-29.
  38. Yizhe, D., Claudia, G. & Jing-Ming, K. (n.d) Board Governance, Efficiency and Risk Taken: The case of Chinese banking sector.

Journal of Islamic Accounting and Finance Research
Published by Department of Sharia Accounting, Faculty of Islamic Economics and Business, Universitas Islam Negeri Walisongo Semarang, Indonesia
Jl Prof. Dr. Hamka Kampus III Ngaliyan Semarang 50185
Phone: +62 852-2589-5726
Website: https://febi.walisongo.ac.id/
Email: jiafr@walisongo.ac.id

ISSN: 2715-0429 (Print)
ISSN: 2714-8122 (Online)

This work is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License

View My Stats