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    • dgat inhibitor br Conclusion and discussion br Introduction

    2018-10-22


    5. Conclusion and discussion
    Introduction We investigate whether ownership structure, a corporate governance determinant, play an important role for bank profitability. More specifically, we examine whether different levels of ownership concentration can explain differences in bank profitability. The question whether ownership structure influences the profitability of firms is examined by a fairly large literature with rather mixed results depending on the context examined (Arun & Turner, 2004; Choi & Hasan, 2005; Chen, Harford & Li, 2007), and such studies focus largely on foreign ownership (Greenaway, Guariglia & Yu, 2014), family ownership (De Massis, Kotlar, Campopiano & Cassia, 2013), state ownership (Cornett, Guo, Khaksari & Tehranian, 2010) and institutional ownership (Elyasiani & Jia, 2010), with little focus on direct equity holding of majority shareholders. In this dgat inhibitor study, we focus on a different ownership structure categorisation involving direct equity ownership concentration. Our contribution to the literature is two-fold. First, we contribute to the literature that explores the relationship between ownership concentration and firm profitability. By focussing on banks, our analyses provide insights on how different levels of bank ownership concentration affect bank profitability, we show that high ownership concentration has positive effects for ROA while dispersed ownership has positive effects for ROE while we observe no significant effect for moderate ownership in a developing country context. This insight gained can improve our understanding of specific ownership structures that improve bank profitability in developing countries. Secondly, our analyses contribute to the rich literature that explores the impact of ownership structure on firm performance, we show that apart from institutional ownership, family ownership and foreign bank ownership, direct equity ownership concentration is also a determinant of bank profitability for developing countries like Nigeria although this depends on the profitability metric employed. Thirdly, we contribute to the literature that explores the relationship between firm profitability and corporate governance determinants. By investigating a developing country context, we show that ownership concentration, a corporate governance determinant, is a possible corporate governance factor affecting bank profitability for developing countries. Finally, in contrast to prior Nigerian studies (Tsegba & Herbert, 2013; Uwuigbe & Olusanmi, 2012; Gugong, Arugu & Dandago, 2014), we investigate Nigerian banks and divide banks into three ownership categories to detect how concentrated ownership, moderate ownership and dispersed ownership affects bank profitability, an approach that has not being adopted by prior studies. This is our main contribution to the literature on ownership concentration and bank profitability in developing countries. The rest of the paper is organised as follows. Section 2 discusses the theoretical and conceptual framework. Section 3 presents the relevant literature. Section 4 describes data, sample selection and ownership structure categorisation. Section 5 describes the methodology. Section 6 discusses the results regarding the impact of ownership concentration on bank profitability. Section 7 concludes.
    Theoretical and contextual framework Agency theory shows that managers use their discretion to pursue strategies that enrich themselves at the expense of shareholders (Jensen & Meckling, 1976). Managers can appropriate profits for personal use or to enhance their non-salary income and this practice leads to the misallocation of profits (Gedajlovic & Shapiro, 1998). Jensen and Meckling (1976) demonstrate that when large shareholders are involved in firm decision making, as is the case in Nigeria, the conflict of interest shifts from managers versus shareholders to controlling shareholders versus non-controlling (or minority) shareholders. When the conflict of interest shifts to controlling shareholders versus non-controlling (or minority) shareholders, internal corporate governance mechanisms may become less effective to reduce the agency problems between controlling shareholders and non-controlling shareholders because controlling shareholders wield significant power to influence the decisions and actions of top management compared to non-controlling shareholders.