Al-Amarneh (2014) investigates effect of ownership structure and corporate governance on bank performance (profitability and operating efficiency). The specific objectives of the study were to establish the effect of block-holder ownership and foreign ownership profitability. The study relied much on publicly available data for a sample of the thirteen listed banks in Jordan for the years 2000 to 2012. The study has shown that ownership concentration (block-holders) has a positive and significant effect of bank performance (profitability) while foreign ownership positively affects the bank performance (operating efficiency). The study recommends that good corporate governance standards are imperative to every bank and important to investors and other stakeholders.
2.4 Gap in Literature
The introduction of a third variable as a moderator of the relationship between shareholding structure represented by block-holders and financial performance measured by returns on assets is the widest gap this study fills in literature as a result of the dearth of previous studies that used a moderator.
3 Methodology
This study uses ex-post facto research design because the data are historical in nature having been generated through past corporate activities. The population of the study consist of all the ten (10) commercial banks quoted on the Nigerian Exchange Group (NGX) as of 31st December 2021. The sample size of this study comprises of all the ten (10) commercial banks quoted in Nigeria for 10 years from 2011- 2020 with respect to block-holder ownership and return on asset (ROA) using the Census sampling techniques. The data for this study were sourced from the financial statements of the 10 commercial banks obtainable from their websites. The data were analysed using Descriptive statistics, Correlation coefficients, Shapiro-Wilk normality test for the distribution pattern of the ser and Robust multiple regression to test the null hypotheses formulated. The panel regression will be used because of its BEST linear estimation characteristics.
Model Specification
The study adopts a bi-model approach for clarity. The dependent variable for the study is financial performance proxied by return on asset (ROA), while the independent variables which is ownership structure is represented by block-holder ownership. The specified linear equation for model I as used by Kiruri (2013) is expressed as follows:
ROA= f(BLKOWN)
Econometrically, the above equation is represented as:
ROAit =αo + α1BLKOWNit + μ it …………………………………… Model (I).
The second model which involves the moderating effect of firm size is linearly presented as follows:
ROAit =αo + α1BLKOWNit + α2Frmsz*BLKOWNit + μit ………………Model (II)
Where:
ROA= a predictor representing return on asset (a proxy for financial performance);
αo = a constant;
BLKOWN = a predictor representing block-holder ownership (a proxy for independent variable)
µ = Error term (Residual)
i-firm
t=period and
f = a Functional relationship.
Variable Measurement and Justification.
Table 1 below defines the variables of this study.
Variable Acronym Type Measurement Justification
Return on ROA Dependent Net profit divided by Adamu and Haruna (2020), Ahmed
Asset total assets of the banks et al. (2017) and Ogega (2014).
Block-holder BLKOWN Independent Percentage of shareholders Etale and Yalah (2022), Aribaba et
Ownership holding 5% and above al. (2022) and Kinuri (2013).
Controlling shares.
Firm Size FRMSZ Moderating Logarithm od total assets. Edogbanya and Kamardin (2016).
Source: Researcher’s compilation, 202
4 Results and Discussion
Descriptive Statistics
Table 2 below shows the descriptive statistics of the variables used in this study which summarises the distributional patters of the model.
Table 2 Descriptive Statistics
variable | Obs Mean Std. Dev. Min Max
ROA 100 0.0076 0.0376 -0.2424 0.1064
BLKOWN 100 0.4057 0.2418 0 0.8932
L_FRMSZ 100 9.0503 0.4148 8.1788 9.7916
Source: STATA 13 software output, 2023.
[
Table 2 above reveals that return on asset (ROA) has a low mean value of 0.008 and a standard deviation of o.038 with a negative minimum value of -0.2424 and a maximum of 0.1064. Block-holder ownership and foreign ownership have minimum values of zero (0) which means that some of the banks has no block owners and foreign owners at some points. The standard deviation which depicts the extent of dispersion show that ROA and BLKOWN were more widely dispersed having standard deviations which are greater than their means. However, firm size has a standard deviation of 0.4148 that is less than the mean (9.0503) which implies that firm size was less widely dispersed around its means.
Correlation Matrix
Table 3 below shows the results of the Pearson correlation conducted to determine the presence or otherwise of multicollinearity among the independent variables of the model. The decision rule is to accept the presence of multicollinearity is a pair or more of the independent variables correlate above 0.85 or reject the presence of multicollinearity if no pair of the independent variables correlate above 0.85.
Table 3 Pearson Correlation
ROA BLKOWN L_FRMSZ
ROA 1.0000
BLKOWN -0.1629 1.0000
L_FRMSZ 0.2906 -0.4781 1.0000
Source: STATA 13 software output, 2023.
Results from Table 3 above reveals that the independent variables did not correlate above 0.85 as the highest positive correlation of 0.2906 exist between firm size and ROA. From the decision rule, since no pair of the independent variables correlate above 0.85, there is no multicollinearity in the model specified. Multicollinearity has the potential of over estimating the coefficient of determination.
Residual Test for Normality Test
Table 4 below presents the results of the normality test for the model residuals using the Shapiro-Wilk test for normal data. The decision rule is to recognize that the residuals were normally distributed if the model has a p-value higher than the critical 0.05, or that the residuals were not normally distributed if the p-value of the model is lower than or equal to 0.05.
Table 4 Shapiro-Wilk Normality Test
Variable | Obs W V z Prob>z
residuals | 100 0.9638 2.993 2.432 0.0075
Source: STATA 13 software output, 2023.
Table 4. above indicates that the model has a p-value of 0.0078 that is lower than the critical value of 0.05 which implies based on the decision rule the residuals were not normally distributed. This result implies that the estimation of the models cannot be carried out with the aid of ordinary least square (OLS) regression as one of the basic assumption of OLS that requires normality of distribution has been violated. The models were estimated with robust regression which is most suitable for unusual data (abnormal distributed data) because robust regression is less susceptive to the behavior of such anomalies.
4.2.4 Heteroskedasticity Test
Table 5 below is the result of the heteroskedasticy test conducted with the aid of Breusch-Pagan / Cook-Weisberg test to determine the stability of the residual variance of the variables in the model. The decision rule is to accept the null hypothesis that residual has constant variance if the model has a p-value higher than 0.05 or reject the hypothesis if the p-value is lower than or equals to 0.05.
Table 5Heteroskedasticy Test
Breusch-Pagan / Cook-Weisberg test Variables: fitted values of roa
Ho: Constant variance
chi2(1) = 65.66
Prob > chi2 = 0.0852
Source: STATA 13 software output, 2023.
Table 5 above shows that the model has a p-value of 0.0852 which is higher than the critical value of 0.05 signifying that, based on the decision rule, the model residuals with constant variance and so the null hypothesis is accepted.
4.2.5 Regression Analysis (Model I)
Table 6 below presents the regression analysis of model I which captures effect of the independent variables on the dependent variables with the moderating variable in a direct relationship. The analysis was conducted with the aid of robust regression. The results from this model were used to test hypothesis 1.
Table 6 Regression Analysis of Model I
Robust
roa Coef. Std. Err. z P>|z| BLKOWN -0.0211 0.0174 -1.28 0.224 L_FRMSZ 0.0257 0.0103 2.52 0.002 _cons -0.0207 0.0156 -1.37 0.215
R-sqd overall = 0.3318
Wald chi2(4) = 322.63
Prob > chi2 = 0.000
Source: STATA 13 software output, 2023.
Table 6 above reveals that the model has a coefficient of determination of 33 which means that the independent variable and the moderating variable namely BLKOWN and FRMSZ jointly have approximately 33% effect on the firm performance of the sampled commercial banks in Nigeria from 2011-2020. The model also has a Wald chi2 and p-value of 322.63 and 0.000 indicating that it is fit and results obtained were not by chance
Regression Analysis (Model II)
The regression analysis which tests both the direct relationship without moderation and the indirect relationships between the independent variables and the dependent variable moderated by firm size using the robust regression method. The result from the indirect moderated relationship was used to test hypothesis 2.
Table 7 Regression Analysis (Model II) Robust
roa | Coef. Std. Err. z P>|z|
BLKOWN -0.2254 0.2852 -0.79 0.429
L_FRMSZ_BLKOWN 0.0024 0.0022 3.47 0.000
_cons 0.0093 0.0058 1.60 0.111
R-sqd overall 0.2582
Wald chi2 = 601.21
Prob chi2 = 0.0000
Source: STATA 13 software output, 2023.
Table 7 above shows that the model has an R-squared overall which represents the coefficient of determination of 0.2582 which means that the combine effect of the BLKOWN both in its free-state and moderated form on firm performance of Nigerian quoted commercial banks is approximately 26%. The model displays a Wald chi2 of 601.21 and prob chi2 of 0.000 indicating that the model is fit.
5 Test of Hypotheses
T
he decision rule here is that if the calculated p-value is lower than or equals to the critical value of 0.05, the null hypothesis formulated should be rejected or if the calculated p-value is higher than the critical p-value of 0.05, the hypothesis should be accepted.
Ho1: There is no significance effect between block-holder ownership and firm performance
of quoted commercial banks in Nigeria.
From the result on table 6 above, block-holder ownership has an insignificant negative (-1.28) effect on firm performance of Nigerian quoted commercial banks measured by return on asset (ROA) with a p-value of 0,224 which is higher than the critical p-value of 0.05. Based on the decision rule, the null hypothesis one (Ho1) is accepted and the alternate hypothesis rejected.
Ho2: Firm Size has no significant moderating effect on block-holder ownership and firm performance of quoted commercial banks in Nigeria.
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