THE IMPACT OF CAPITAL STRUCTURE, OWNERSHIP AND CORPORATE GOVERNANCE ON THE PERFORMANCE OF QUOTED NIGERIAN COMPANIES
ABSTRACT
The problem of how firms choose and adjust their strategic mix of financing securities and the impact such mix has on corporate performance has called for attention and debate among corporate financial experts. This is so because the choice made should ordinarily aim at improving firm value. This is however not always so, as existing literature show that the owners of firm and managers of such firm might have different objectives. Most observers have the belief that the difficulty facing firms in Nigeria has much to do with financing and management issues; that is choosing the appropriate mix of debt and equity and then who manages what. These issues are quite important to the survival of firms and as such require further empirical investigation. Notably also, Nigerian stock market is still developing, and so are the standards and practices of corporate governance, so it is of interest to assess whether the agency and information problems usually studied and found in more active markets have also a bearing on the functioning of a much thinner one, like ours. It was against this background that we decided to examine the impact of capital structure, ownership and corporate governance on firm performance, using a sample of fifty five non-financial quoted companies from five sectors only, operating in Nigeria from 1994 to 2013. The study adopted ex-post facto design and time series data analysis. The target population of the study was all the non-financial quoted companies in the Nigerian Stock Exchange, and then a stratified non-probability sampling technique was used to identify firms. Panel data for the selected firms were generated and analysed using descriptive and multivariate regression, as method of estimation. The result obtained indicates that leverage level of quoted firms in Nigeria has a significant positive or negative impact on performance, depending on the measure of leverage adopted. Ownership structure also has a significant impact on firm performance in Nigeria, though the individual effect of the various explanatory and control variables are generally mixed. Moreover, corporate governance variables measured by firm board size and firm board composition was found to have significant positive impact on firm performance, whereas CEO-Chair duality has negative but not significant impact on performance. The study concludes then, that the position of the Chief executive officer of a company in Nigeria and that of the Board chairman should be separated and occupied by different persons, to reduce agency problem. Nigeria should also encourage diverse ownership of shares, as concentrated ownership, contrary to free-riders notion may negatively impact on performance, due to their undue influence on the managers of firms.