EFFECT OF INSTITUTIONAL AND FOREIGN OWNERSHIP ON THE FINANCIAL PERFORMANCE OF LISTED FIRMS IN NIGERIA

Edwin, FASHOLA; Ogechi Eberechi ALPHEAUS; John Uzoma IHENDINIHU

Authors

Edwin, FASHOLA Department of Accounting, Michael Okpara University of Agriculture, Umudike Abia state
Ogechi Eberechi ALPHEAUS Department of Accounting, Michael Okpara University of Agriculture, Umudike Abia state
John Uzoma IHENDINIHU Department of Accounting, Michael Okpara University of Agriculture, Umudike Abia state

Abstract

This study examines the effect of institutional and foreign ownership on the financial performance of listed firms in Nigeria, measured by Return on Equity (ROE). Ownership structure is increasingly recognized as a crucial determinant of corporate governance and firm profitability, particularly in emerging markets characterized by agency conflicts, regulatory challenges, and managerial opportunism. Institutional investors, including pension funds and insurance companies, are expected to enhance oversight, improve decision-making, and strengthen accountability, while foreign ownership is presumed to introduce international governance standards, advanced technologies, and superior managerial practices. Grounded in Agency Theory, which emphasizes the alignment of managerial actions with shareholder interests, the study investigates how these ownership types mitigate agency problems and influence firm performance. Using a panel dataset of 62 listed Nigerian firms covering the period 2011–2024, descriptive statistics, correlation analysis, unit root, and cross-section dependence tests were conducted to ensure data robustness. The Generalized Method of Moments (GMM) regression technique was employed to analyze causal relationships. The results indicate that institutional ownership negatively and significantly affects ROE, suggesting that passive investment strategies or short-term profit focus may limit governance benefits. Conversely, foreign ownership exhibits a positive and significant effect on ROE, reflecting the contribution of external shareholders to improved monitoring and operational efficiency. The findings underscore the need for policies that encourage active institutional engagement and facilitate foreign participation while strengthening transparency and accountability in corporate governance. This study contributes to the literature by simultaneously assessing institutional and foreign ownership effects in the Nigerian context, offering insights for regulators, investors, and corporate managers aiming to optimize ownership structures for enhanced financial performance.

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EFFECT OF INSTITUTIONAL AND FOREIGN OWNERSHIP ON THE FINANCIAL PERFORMANCE OF LISTED FIRMS IN NIGERIA

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