Research Article

BUSINESS COMPLEXITY EFFECT ON THE RELATIONSHIP BETWEEN DIRECTORS’ OWNERSHIP AND FINANCIAL PERFORMANCE IN NIGERIAN MANUFACTURING FIRMS

Abubakar Ahmed1*, Hussaini Shuaibu2
1 Department of Accounting, Ahmadu Bello University, Zaria Kaduna-Nigeria
2 Department of Accounting Kaduna State University, Kaduna
* Corresponding author: abuimam1@yahoo.co.uk
Published: Dec, 2015
Pages: 44-59
Views: 29
Downloads: 14

Abstract

Agency theory suggests that higher information asymmetry in complex firms leads to greater agency conflict. The paper examined the role of directors’ ownership on financial performance and the moderating role of business complexity on that effect. Data were collected from secondary source through published annual reports of 22 firms for the period 2007 to 2015. Business complexity was measured by industry-wise Hirfindahl-Hirshman index. Unbalanced panel data were analyzed by way of Ordinary Least Square (OLS) regression with heteroskedastcity corrected standard errors. It was reported that both inside and outside directors’ shareholding have negative and significant effect on financial performance. However, the interaction between executive directors’ shareholding and business complexity has a significant positive effect on financial performance. It is thus recommended that there should be separate code of corporate governance requirement for firms that are complex from those that are not with respect to directors’ shareholding. The outcome of the study provided new evidence on the effect of managerial ownership on corporate performance that may be useful to regulators for policy formulations in order to minimize agency conflict.

Keywords

Directors’ shareholding managerial shareholding non-managerial shareholding business complexity financial performance.

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How to Cite

Ahmed, A., & Shuaibu, H. (2015). BUSINESS COMPLEXITY EFFECT ON THE RELATIONSHIP BETWEEN DIRECTORS’ OWNERSHIP AND FINANCIAL PERFORMANCE IN NIGERIAN MANUFACTURING FIRMS. Nigerian Journal of Accounting Research, 11(2), 44-59.

A. Ahmed, and H. Shuaibu, "BUSINESS COMPLEXITY EFFECT ON THE RELATIONSHIP BETWEEN DIRECTORS’ OWNERSHIP AND FINANCIAL PERFORMANCE IN NIGERIAN MANUFACTURING FIRMS," Nigerian Journal of Accounting Research, vol. 11, no. 2, pp. 44-59, December 2015.

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