Ani W. C., Ilo J. V., Adegbayibi A. T. & Eneje B. C. (2014). The Impact of Directors’ Equity Ownership on Bank Profitability in Nigeria: The Triumph of Quality over Quantity. Advance Journal of Business Management and Entrepreneurship, 2 (1), 1

Abstract

The study investigates the impact of directors’ equity ownership on bank profitability using three quarter of quoted banks on the Nigerian Stock exchange. Econometrically evaluating data from one hundred and eighty bank-level observations gathered from a ten year period, the paper sheds new light on the nature of the relationship between managerial share ownership and bank profitability in Nigeria. The results show a surprisingly negative and insignificant relationship between directors’ ownership and bank profitability, contrary to the popular priori hypothetical expectation. This unusual outcome is believed to be informed by the sudden requirement of deposit in banks to shore up their capital base by over one thousand one hundred percent within a short period of eighteen months. Several options were used to achieve this, including the use of nominee directors and creation of special purpose investment vehicles. Quality of directors was thus leverage just to get the right quantity of shareholding to satisfy the requirement of the monetary authorities during the study period.

Key words: Bank capitalization, corporate governance, Directors share ownership, operating performance.

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