Jibo Stock Return

DETERMINANTS OF STOCK RETURNS OF QUOTED CONSUMER GOODS
COMPANIES IN NIGERIA
BY
MUHAMMAD, Haliru Jibo
NSU/ADM/ACC/2354/17/18
B.Sc. ACCOUNTING
JANUARY, 2023
DETERMINANTS OF STOCK RETURNS OF QUOTED CONSUMER
GOODS COMPANIES IN NIGERIA
BY
MUHAMMAD, Haliru Jibo
BEING A PROJECT SUBMITTED TO THE DEPARTMENT OF ACCOUNTING,

FACULTY OF ADMINISTRATION, NASARAWA STATE UNIVERSITY, KEFFI IN
PARTIAL FULFILMENT OF THE REQUIREMENTS FOR THE AWARD OF
BACHELOR OF SCIENCE (B.Sc.) DEGREE IN ACCOUNTING
DEPARTMENT OF ACCOUNTING
FACULTY OF ADMINISTRATION
NASARAWA STATE UNIVERSITY, KEFFI
NIGERIA
i
DECLARATION
I hereby declare that this research project has been written by me and it is a report of my research
work. It has not been presented in any previous application for Bachelor of Science Degree in
Accounting. All quotations are indicated and sources of information specifically acknowledged
by means of references.
________________________ ________________
JOSEPH Yahaya Uredo Date
ii
CERTIFICATION
This project entitled “Determinants of Stock Returns on Quoted Consumer Goods Companies in
Nigeria” meets the regulations governing the award of Bachelor of Science (B.Sc.) Degree in
Accounting of Faculty of Administration, Nasarawa State University, Keffi for its contribution to
knowledge and literary presentation.
_________________________ ________________
Dr. M. M. Naburgi Date
Supervisor
_________________________ ________________
Dr. I. O. Abdullahi Date
Head of Department
_________________________ ________________
Prof. B. E. Barde Date
Dean, Faculty of Administration
_________________________ ________________
External Examiner Date
iii
DEDICATION
This project is dedicated to Almighty Allah, my creator, my sources of wisdom, knowledge and
understanding, on his wings have I soared. The project is also dedicated to my Parent.
iv
ACKNOWLEDGEMENTS
I would like to thank the Almighty Allah for his love and care for guiding me all through my
studies to this stage without him we wonder what we would have been.
I particularly want to appreciate with special thanks, the role of my supervisor Dr. Musa
Mohammed Naburgi for his input at the planning and execution stages of the work, his efforts in
guiding me all through this research despite his tight schedules. I pray the good Lord reward you
Sir.
I equally appreciate the contributions of the Head of department (HOD); Dr. Ismaila Abdullahi
Olotu all of the staff of Accounting Department.
v
Abstract
Stock returns from investments in equity are subject to vary because changes in stock prices
which are a product of several factors and the impacts could either be positive or negative. Also,
emerging markets such as Nigeria have different structures and institutional characteristics
from developed stock markets, and in view of the fact that investors in these markets are
interested in getting more insights into the activities of companies, it is imperative to find out
whether stock returns in Nigeria respond differently to effects of corporate firm level factors or
not. Hence, this study examined the determinants of stock returns of quoted consumer goods
companies in Nigeria. Specifically, the study examined the effect of firm attributes, ownership
structure and board attributes on stock returns. Stock returns are measured using market price
per share obtained directly from www.cashcraft.com as at the end of each year. In line with
objectives of the study, ex-post facto research design and positive research paradigm were
adopted. The population of the study comprised all the 23 quoted consumer goods firms on the
Nigeria Stock Exchange as at 31st December 2010 on which filters were employed to arrive at
an adjusted population of 16 firms. Panel data were extracted from the annual financial
statements of the firms for the period 2010 – 2019 to examine the effect of firm size, firm age,
profitability, ownership concentration, managerial ownership, institutional ownership, board
independence, size and board financial expertise on stock returns. The result of the pooled
Ordinary Least Square (OLS) regression revealed that the combined influence of corporate
attributes on stock returns of quoted consumer goods firms in Nigeria is significant. The effect
however gets diluted as the variables are considered on individual basis. Profitability,
ownership concentration, institutional ownership, board independence and board financial
expertise is found to have significant and positive effect on stock returns. Firm size, firm age and
board size have insignificant positive effect on stock returns while managerial ownership have
insignificant inverse relationship with stock returns. The study therefore, recommended that the
Security and Exchange Commission (SEC) should continually subject the reported profits of
consumer sector to stress quality tests to insulate the investors and potential investing public
from possible rip off. Also, Board of Directors of consumer goods firms should increase their
monitoring capacity by increasing the number of independent directors and the number of
experts in accounting and finance on the board.
vi
vii
TABLE OF CONTENTS
Page
Cover page……………………………………………………………………….……...…………i
Title page………………………………………………………………………………………….ii
Declaration……………………………………………………………………………..………...iii
Certification ………………………………………………………………………..…….………iv
Dedication ……………………………………………………………………………….….….....v
Acknowledgments…………………………………………………………….…….………..….vi
Abstract ………………………………………………………………………………………....vii
Table of contents……………………………………………………………………………..…viii
CHAPTER ONE: INTRODUCTION:
1.1 Background to the Study………………………………….………….………………………1
1.2 Statement of the Problems……………………………………………………………………4
1.3 Research Questions……………………………………….………………………………......7
1.4 Objectives of the Study………………………………………….…………………………....8
1.5 Statement of the Hypotheses……………………………………………..…………….……..8
1.6 Significance of the Study …………………………………………………………….………9
1.7 Scope of the Study…………………………………………………………..………..………9
viii
CHAPTER TWO: LITERATURE REVIEW
2.1 Conceptual Framework ………………………………………………..……………..……10
2.1.1 Firm Attributes…………………………..……………………………..….…….………10
2.1.2Ownership Structure …………………………………………………...……….………16
2.1.3 Board Attributes….…………………….………….…………………...………..………22
2.1.4 Stock Returns…….……………………….…...…..…………………………….……….30
2.2 Empirical Review…………………………………………………………………….……34
2.2.1 Firm Attributes and Stock Returns…….………………………………………………..34
2.2.2 Ownership Structure and Stock Returns……………....……….……….………..…...….42
2.2.3 Board Attributes and Stock Returns …………………………………….…...…………51
2.3 Theoretical Framework……….………………………………….……..……………..…...60
2.3.1 Arbitrage Pricing Theory………………..………………….………...…………...…….60
2.3.2 Agency Theory …………………………….……………………….………………........63
2.3.3 Stakeholder Theory …….……………………………………………………..…...……..67
2.3.4 Stewardship Theory……………..…………………………….………….…………….. 70
CHAPTER THREE: RESEARCH METHODOLOGY

3.1 Research Design……………………………………………………………….………..….73
3.2 Population, Sample and Sampling Techniques ……………………….……….…………...73
3.3 Methods of Data Collection………………………………………...……….…………..….77
3.4 Technique for Data Analysis and Model Specification………….……….......................….77
3.5 Justification of Methods………………………………………..………………………..….81
ix
CHAPTER FOUR: DATA PRESENTATION AND ANALYSIS
4.1 Data Presentation…………………………………………………………………………...82
4.2 Data Analysis and Results………….………………………………………………………92
4.2.1 Firm Attributes and Stock Returns……………………….. ………………………….….93
4.2.2 Ownership structure and Stock Returns ………. ……………….……………….………95
4.2.3 Board Attributes and Stock Returns………………………….………….………….…….97
4.3 Discussion of findings ……………………………………………………………………..99
CHAPTER FIVE: SUMMARY, CONCLUSION AND RECOMMENDATIONS
5.1 Summary ………………………………………………………………………………….107
5.2 Conclusion ………………………………………………………………………..……….108
5.3 Recommendations ………………………………………………………………….……..109
5.4 Limitation of the Study…………………………………………………………………….110
5.5Suggestions for Further Studies …………………………………………...…………..…..111
References ………………………………………………………………………………..112
x
LIST OF TABLES
Table 3.1 Population of the Study…………………….………………….………………..73
Table 3.1 Sample Size of the Study…………………..………………….………………..73
Table 3.1 Measurement of Variables ………………..………………….………………..77
Table 4.1 Descriptive Statistics…………………………………………………………..82
Table 4.2 Pearson correlation Statistic…………..……………………….……………...…86
Table 4.3 Tolerance and Variance Inflation Values…… …………………………...……89
Table 4.4 Test for Heteroscedasticity…………………..…………………….…………….90
Table 4.5 Hausman Specification Test…………………….. …...………………….……...91
Table 4.6 Pooled OLS Regression Result (firm attributes) …………….………………….92
Table 4.7 Pooled OLS Regression Result (Ownership structure) …….…………………..96
Table 4.8 Pooled OLS Regression Result (Board attributes) ……….………..…………....88
xi
CHAPTER ONE
INTRODUCTION
1.1 Background to the Study
In order to meet the operational needs, companies obtain funds through money markets and
capital markets. Through the capital market the company can obtain funds by selling shares and
bonds. For investors, capital market is a means to invest in the hope of getting a profit. Gitman
(2015) states that investment in the form of shares will provide benefits in the form of dividends
and capital gains. Information that is relevant to the conditions of the capital market is something
that capital market players need to look for in an effort to make investment decisions.
One of the information needed in the capital market is the company policy on distribution of
returns. Announcement of returns due to investors contains information on company profits in
the future. For managers, payment of returns due to investors can be used as a positive signal to
the company's prospects to the market, while for investors; stock returns provide a great way of
seeing how much volatility and what return rates can be expected overtime (Ali, 2017). Stock
Market Returns are the returns or gain that the investors generate out of the stock market. The
most common way of generating stock market return is through trading in the secondary market.
In the secondary market an investor could earn stock market returns by buying a stock at lower
price and selling it at a higher price.
Also, all investors, either institutional or individual, hold one common goal when they invest in
shares and hope to maximize expected return at some preferred level of risk. Researchers have
tried to use different types of information to explain firm value. For example, the changes in
economic and financial factors have been commonly used to explain the behavior of different
1
stock markets around the world. As suggested by signaling theory, the stock price should reflect
the expectation of corporate performance. Consequently, stock returns from investments in
equity are subject to vary because changes in stock prices which are a product of several factors
and the impacts could either be positive or negative. These factors could be internal/firm specific
or external/macro. The internal factors are such as firm attributes, ownership composition, board
composition and a host of others. The external factors are interest rate, world oil prices, foreign
reserve, inflation rate, money supply, gross domestic product and output production. Internal
factors can be controlled, altered, and perfected by the company and therefore, it is probable to
offer benefits for the stakeholders (Kazeem, 2015).
This study therefore, provides measurement of stock returns variation that is caused by firm
attributes, ownership structure and board composition. For instance, firm attributes such as size,
leverage and profitability can be used to predict the variations in stock returns. Firm size is one
of the first empirically documented firm characteristics associated with realized stock returns
(Banz 1981). This is because the size of the company matters, as in all countries dividends are
paid by the biggest and most profitable firms (Denis &Osobov, 2008). Large firms use their
assets to generate much income and such performance would send a good signal to the market.
However, this factor is related to profitability, as bigger and more profitable firms are more
likely to guarantee higher returns (Consler&Lepak, 2016). Firm age is widely added as a
determinant of stock returns (e.g. Custódio& Metzger, 2014; Lin & Chang, 2011), As firms grow
older, they are characterized by lower rate of failure and low costs to obtain capital (Koh,
Durand, Dai, & Chang, 2015), and they have experience to negotiate favorable debt capital to
increase returns. The reverse is true for young firms in the birth stage (Stepanyan, 2012).
2
Also, the ownership composition of a firm is considered to have a strong ontology with stock
returns. For instance, institutional ownership has an effect on stock returns, because the higher
institutional ownership, the stronger the external control of the company, so that it can encourage
managers to increase dividend payments. Again, in an early study done by Demsetz and Lehn
(1985), they realize with empirical evidence that ownership concentration is normally associated
with high stock price volatility. The closed corporate governance system associated with high
ownership concentration means that the outside investors have little information and there is a
high probability of insider trading. Again, Managerial ownership refers to the percentage of
equity owned by insiders, where insiders are defined as the officers and directors of a firm.
Managerial ownership may affect firm performance positively as it is expected that directors will
make good decisions because they partly own the firm hence their interest in the decisions made.
The stock price should thus increase with more shares being held by directors. Managerial
ownership reduces agency costs for a firm because there is no longer a need for an incentive
system to lure the management into performing well. Thus, such incentives like bonuses pegged
on profit achievement can easily be eliminated because at the end of the day, the directors will
share in the dividends.
On the other hand, the composition of the board is of great importance in determining stock
returns. This is because the board is one the most reliable tools within the organization that can
be used to predict the performance of firm and its reporting capabilities. For example, Fama&
Jensen (1983) stated that non-executive directors are able to act as mediators in disputes that
occur between managers, oversee policies, and provide advice to management. The independent
board is a monitoring function in order to create a company that is good corporate governance.
Jiraporn and Ning (2006) state that the strength of the board of directors is more indicated by the
3
composition of the board of directors who are independent. Also, Agency theory states that the
board size, which is one of the variables that predicts if corporate governance can prevent the
tendency of managers to behave in an opportunistic manner, by distributing free cash flow to
shareholders as cash dividends (Eisenhardt, 1989). Board financial expertise is also, considered a
good predictor of stock returns variation. This entails having a member on the board that is
financially, literate. Kirkpatrick (2009) and Walker (2009) argue that the lack of financial
expertise on corporate boards played a major role during the financial crisis. Therefore, the
presence of more financial expertise on a board ultimately influences the board’s decisions,
including dividend policy. Having financial expertise on the board will keep them from being
accused of failure in their watchdog role and will better serve the shareholders’ interests.
Given that Nigeria as a developing market has diverse structure and institutional features from
developed stock markets, and in view of the fact that investors are interested in getting more
insights into the activities of consumer goods companies in the country because of the
indispensability of their products in the Nigerian market it is imperative to find out whether stock
returns in Nigeria respond differently to effects of firm level attributes. This study, therefore
examines the determinants of stocks returns of quoted consumer goods companies in Nigeria.
1.2 Statement of the Problem
The need to ensure a steady return on stocks for publicly traded companies cannot be
overemphasized. This is based on the fact that returns on stock do not only give investors an
indication of managerial and market performance but also, enable them to predict future earnings
of the company. However, the global corporate scandals at the start of the century and the global
financial crisis that started in 2007/2008 as well as the most recent collapses of carillion,
4
Patisserie Valerie and London Capital and Finance in the UK, failings in South Africa’s state
owned entities Transnet, Eskom, and South African Airways and the 1MDB scandal in Malaysia
to name a few have dwindled the confidence of investors worldwide. Investors no longer have
confidence in reported earnings of public companies and so do not rely on them to make
investment decisions.
Also, the problem of how firms choose and adjust their strategic mix of securities to maximize
stock return has called for a great deal of attention and debate among corporate financial
literature. Identifying the factors that influence stock returns is a major concern for practice and
academic research. This topic has been the focus of numerous studies in empirical finance
(Dimitrov & John 2008; Korteweg, 2009). Research work which is aimed at determining the
factors influencing stock returns of firms will provide a conceptual backdrop necessary to guide
the financial manager in financial structure planning and decision in order to increase the
shareholders’ wealth. The market value of firm may also be affected by the stock return decision.
The issue of stock return has been identified as an important reason for business growth or
failure. It is imperative for firms to be able to finance their operations and growth over time if
they are ever to remain and play an increasing and predominant role in creating value added,
providing employment as well as income in terms of profits, dividends, and wages to
households, expanding the size of the direct productive sector in the economy, generating tax
revenue for the government and facilitating poverty reduction through fiscal transfers and
income from employment and firm ownership.
Over the past few years, there are increasing researches surrounding the issues related to the
determinants of stock returns. Limited empirical studies analyses this issue. Existing empirical
evidence is based mainly on data from developed countries. For example, kim and Sorensen
5
(1986), Bhandari (1988), Friend and Lang (1988), Titman and wassels (1988), Lucas and Mc
Donald (1990), La Porta, Lopez-de-Silanes, Shleifer and Vishny (2000), HovaKimian et al
(2001), Baker and Wurgler (2002), Welch (2004), Dimitrov and John (2008), Korteweg (2009)
focus on united states and Japanese manufacturing corporations without serious empirical review
in developing economies. Thus, there is a conspicuous gap in the empirical research on stock
returns of corporate firms especially in Nigeria.
In Nigeria, the area of firm level attributes and its effect on stock returns has attracted interest by
researchers. Many researchers have attempted to examine the determinants of stock returns of
quoted firms (Amadi&Odubo, 2002; Osamwonyi, 2003; Uwabanmwen&Obayagbona, 2012;
Umar & Musa, 2013; Olowoniyi&Ojenike, 2013; and Kazeem, 2015). The studies focused
predominantly on the financial sector in exclusion of manufacturing sector and specifically,
consumer goods companies in spite of their strategic importance to the Nigerian economy. This
study considered in entirety the consumer goods quoted on the Nigerian stock exchange from
2010 to 2019.
Another difference this study makes with other previous domestic studies is in respect to the
choice of variables used. The combination of factors affecting the level of stock returns has not
been thoroughly addressed by many Nigerian studies. The factors mostly considered are macro-
economic factors and firm level factors such as firm size, leverage, profitability, market to book
value and other performance ratios. No study to the best of researchers’ knowledge and as extent
literature reveals have employed a combination of attributes such as firm characteristics,
ownership attributes and board attributes to investigate their combined individual effects on
stocks returns. Governance and ownership structures have been neglected by most Nigerian
6
studies. Meanwhile, literatures have shown that governance and ownership structures are critical
in determining the level of frequency and stability of stock returns to investors.
Also, periods covered by previous studies in Nigeria creates a gap in scope in this area of study.
For example, the previous works of Adedoyin (2011) covered the period from 2004 to 2009,
Uwubanmwen and Obayagbona (2012) covered the period from 1996 and 2010, Bala and Idris
(2015) covered the period between 2007 and 2013, Kazeem (2015); Akwe, Garba and Dang
covered the period from 2006 to 2013.Akwe, Garba and Dang (2018) covered the period 2007 to
2016. The periods of study as used by the aforementioned researchers can be regarded as not too
recent. This is because a lot of activities in terms of adoption of International Financial Reporting
Standards (IFRSs), and introduction of new corporate governance codes have occurred that
might render previous findings ineffective. Therefore, this study adds to existing literature in this
area by taking into account estimation period from 2010 to 2019.
Consequently, the financial management of firms in developing countries and particularly,
Nigeria is altogether an ignored area of research. Keeping this in view, and the recognition of the
potential contribution of the quoted consumer goods companies to the economy of developing
countries, this study will no-doubt contributes significantly to knowledge in the field of financial
management. It will also, shed light on the determinants of stock return of quoted consumer
goods companies in Nigeria.
1.3 Research Questions
i. What is the effect of firm attributes on stock returns of quoted consumer goods
companies in Nigeria?
7
ii. To what extent do ownership attributes affect stock returns of quoted consumer goods
companies in Nigeria?
iii. How do board attributes affect stock returns of quoted consumer goods companies in
Nigeria?
1.4 Objective of the Study
The broad objective of this study is to examine the determinants of stock returns of quoted
consumer goods companies in Nigeria?
. The specific objectives are to:
i. Ascertain the effect of firm attributes on stock returns of quoted consumer goods
companies in Nigeria.
ii. Assess the effect of ownership attributes on stock returns of quoted consumer goods
iii. Ascertain the effect of board attributes on stock returns of quoted consumer goods
1.5 Statements of the Hypotheses
HO1 Firm attributes have no significant effect on stock returns of quoted consumer goods
HO2Ownership attributes have no significant effect on stock returns of quoted consumer goods
8
HO3Board attributes have no significant effect on stock returns of quoted consumer goods
1.6 Significance of the Study
The significant contributions of this paper will include the following: first, it will expand
literature and add to the existing body of knowledge on the various factors that determine stock
returns of companies quoted on the Nigerian Stock Exchange (NSE) and specifically, consumer
goods firms.
Furthermore, the study will provide additional knowledge on the factor that rank as the most
efficient in predicting and explaining the behavior and variations of stock returns in Nigeria so
this will be of immense significance in adjusting their operations to that effect. In addition,
prospective investors should not only focus on huge returns for investing in smaller capitalized
or high levered firms; rather, further analysis need to be carried out to tradeoff between risk and
returns.
Again, it will provide policy directions for the regulators and/or policy makers, particularly the
Securities and Exchange Commission (SEC) and the Central Bank of Nigeria. This will be in
respect to regulating the composition of these variables to achieve better management,
governance and performance standards. This study will provide insight to the aforementioned
stakeholders in respect to design and implement more stringent rule where firms will be
compelled and monitored on providing high quality financial reporting, so as to be reporting
9
earnings that reflect their actual performance. This would prevent investors from falling on to the
trap of earnings manipulation (as it happened to shareholders of Cadbury Nigeria plc.).
Finally, it will guide capital market operators in their investment advisory services to interested
and prospective investors on the stocks that promise better returns. This study is associated with
the provision of a thorough financial picture of the Nigerian Stock Market and of the listed
consumer goods firms’ behaviour to investors and other market participants, in order to assist
them to evaluate firms’ financial performance more efficiently and better structure their
investment strategies.
1.7 Scope of the Study
The crux of this study is to examine the determinants of stock returns of quoted consumer goods
companies in Nigeria. The factors considered in this study are limited to firm attributes,
ownership attributes and board attributes. Stock returns are explained in this study using market
price per share for the sampled firms. The study is restricted to consumer goods companies in
Nigeria. The twenty-three (23) consumer goods companies quoted on the floors of the Nigerian
stock exchange was adopted in totality as population while a sample size of sixteen (16)
companies was used for data collection. Data was elicited strictly from the annual financial
statements of consumer goods within the period covered by the study. The study covered a
period of ten (10) years from 2010-2019.
10
CHAPTER TWO
LITERATURE REVIEW
2.1 Conceptual Framework
2.1.1 Firm Attributes
Goodluck, Okoye and Nwoye (2022) conceptualized firm characteristics as variables that affect a
firm’s decisions both internally and externally. Firm characteristics are also termed firm structure
or firm attributes which is often considered to be a major determinant of firm value and
performance in modern business management. Firm characteristics refer to all the factors such as
demographic factors and managerial attributes which encompass part of the internal environment
of a given firm (Ali, Yassin & Ramia, 2020). Firm characteristics therefore entail all the
attributes that a particular firm possesses which define its activities and back the decisions of the
firm (Abdullahi, Enemali, Duna & Ado, 2019).
Furthermore, firm characteristics entails a number of attributes or features that differentiate a
firm from another firm in the same sector or across sectors (Adekoya, Nwaobia & Siyanbola,
2022). It is a term used by policy-makers, researchers and other stakeholders to refer to internal
firm mechanisms that make a company unique from other companies (Ezekwesili & Ezejiofor,
2022). Firm attributes are those inducement variables which are relatively sticky at firms’ level
across time such as firm size, leverage, profitability, liquidity, firm growth, among others, which
can contribute positively or negatively to firm performance since they influence investment and
financing decisions (Olowofela, Tonade & Lisoyi, 2021). They are those factors that are
endogenous to a firm and are capable of influencing their financial decision (Abdulkarim,
11
Mohammed, Mohammed & Abubakar, 2019). These factors are within the control of the
management because they are firm attributes or characteristics which are financial in nature.
Firm characteristics make up the internal environment of the firm using managerial and
demographic variables (Mwebia, 2017). Firm characteristics refers to the managerial as well as
demographic fickle which comprises the factors that surrounds a company (Muema & Abdul,
2021). Firm characteristics are those attributes which affect firm’s operations.
Firm Size
Almashhadani and Almashhadani, (2022) firm size can be concluded as how large a company is
reflected by its total asset, sales, or market equity capitalization. According to Cahyanti te al.,
(2022) Firm size is a picture of large or small companies that appear in the value of total assets,
and it’s measured by logarithm of total assets. From the statement above, Fujianti and Satria
(2020) conclude that firm size is describes how large or small of a company measured by its total
assets or by its total equity capitalization.
The issue of business size is critical to an economy's financial sector's stability. It has always
been in the forefront of debates. It was prominent during the global financial crisis of 2007/2008.
Large banks were clearly responsible for a significant share of the economic damage. Following
the upheaval, the debate over the ideal firm size has exploded (Hernández et al., 2020). This
debate has intensified in response to the significant changes in financial structure that have
occurred in recent years as a result of financial regulation.
Profitability
12
Profitability of the firm is another dimension of the firm’s characteristics focused in this study.
EPS (Earning per share) usually have significant positive influence on market return as shown in
many past researches. This indicates that the higher the firm’s EPS, the higher market adjusted
return and abnormal return that can be resulted by firm’s stock, because a higher EPS means
higher profit obtained from every naira price earned by the firm. Investors/shareholders consider
current earnings, future earnings, and earnings stability are important, thus they focus their
analysis on firm’s profitability. They concern about financial condition which will affect firm’s
ability to pay dividend and avoid bankruptcy.
Also, profitability, which is frequently used as measure of financial performance, is one of the
main objectives for the existence of many companies. Profit is an essential prerequisite for any
company operating in today’s increasingly competitive and globalized market. In addition, profit
does not only serve as a means of attraction to investors; it also improves the level of solvency,
and thus, strengthens consumers’ confidence (Ismail, 2013). The concept of profitability is
fundamental to both accounting and economic theories. Since it is an offshoot of income, it also
has its foundation form the famous Hicks’ concept of income. Using the Hicksian approach,
profit can be explained as the maximum value which can be consumed at a given period of time
without tempering with “well-offness” (Glautier, Underdown& Morris, 2011). This definition
has been staunchly supported by economists. It provides a sound basis for appreciation of what
actually constitutes income and hence, profit.
Again, profitability refers to the difference between the profit amount obtained from the assets
and expense of the liabilities. In the literature, profitability is stated as a function of both micro
and macro determinants. Micro variables consist of the accounts in the balance sheet and income
statement. Therefore, they are also named as bank-specific variables. On the other hand, macro
13
variables are not related to the internal process of the banks, but they affect profitability in a
significant way. Size, capital, risk management, expense management, marketable securities etc
are generally considered micro variables (Gungor, 2007). Profit can also be conceived as the
residual arising from netting revenue realized against cost consumed (Igben, 2009). Again, this
definition suffers general acceptance as economists do not subscribe to what they call arbitrary
allocation of cost to realize revenues as accountants do. The implication of this is that
profitability can be explained in various ways.
The concept of profitability depicts the financial success of a venture. It is used to refer to the
ability of an entity to make profit. Profit is what is left of the revenue a business generates after it
pays all expenses directly related to the generation of the revenue, such as producing a product
and other expenses related to the conduct of the business activities. According to the Institute of
Chartered Accountants of Nigeria (ICAN) (2014), profit refers to the total income earned by the
enterprise during the specified period of time, while profitability refers to the operating
efficiency of the enterprise. It is the ability of an enterprise to make profit on sales. This also
implies the ability of an enterprise to get sufficient return on capital and employees used in
business operation. To the financial manager, profit is the test of efficiency and measure of
control (Oko, Ugwunta&Agu, 2013). To the owners, it is a measure of the worth of their
investment; to the creditors, it is used as the margin of safety; to the government, it is a measure
of taxable capacity and a basis of legislation; and to the country, profit is an index of economic
progress, national income generated and the rise in the standard of living (Oko, Ugwunta&Agu,
2013).
Firm Age
14
Firm age is defined as the length of time that a firm has existed, which is usually expressed in
years (Adekoya, Nwaobia & Siyanbola, 2022) and considered as important determinant of firm
performance. Firm age is the difference between a particular year of interest and the year the
firm was established (Kartiningsih & Daryanto, 2020). It is expected that the older a food and
beverages firms is, the more financially sustainable it attains more because length of time in
operation may be associated with learning curve (Kisengo & Kipchumba, 2015). This argument
gains more supporters because of the notion that older firms most probably have learned much
from their experiences than newcomers. Firm age therefore was defined by McDonald, Senaji
and Orero (2020) as the experience of an organization in the market which is computed as
number of years the firm has been in operations in that particular industry.
In a more encompassing term, firm age is used to denote the length of life of a firm since it was
established until the period of time as long as the company is still in existence. Firm age
determines financial performance as it is believed that the risk rate of a firm will fall with time
and firm survival increases with age of the firm. Thus, new firms are believed to be unable to
achieve economies of scale and they rarely have the sufficient managerial resources and
expertise (Irom, Okpanachi, Ahmed & Tope, 2018). “Age of firm” (also “firm age”; both phrases
are used interchangeably) is used with an alarming regular frequency in various studies in the
fields of organizational behavioral, accounting and corporate finance, law and law and
economics, corporate governance, industrial economics and the like. Age is deemed to open new
windows of research opportunity in the field of diversification, and especially in well-known
topics like integration/specialization in horizontally- or vertically-related industries, as being new
in a given industry can also be moderated with age.
15
A long-established firm would have more experience in carrying out business activities in its
industry and it is better known to the broader community rather than newly-established firms
(Adekoya, Nwaobia & Siyanbola, 2022). The experienced garnered by older firms over the years
helps them to standardize, coordinate and speed up their operation with the purpose of increasing
firm operational results and financial performance (Uzoka, Ifurueze & Anichebe, 2020). This
will make older firms to leverage on the standard set for most activities and well-established
policy for various aspect of operations to perform better than young firms. However, a strand of
literature argues that older firms stand the chance of not being flexible enough to make rapid
adjustment that would have reduced barriers to innovation (Ali, Yassin & Ramia, 2020). The
rigidity of older food and beverages firms towards adapting with the rapid changes in its business
environment makes firm age to have a negative effect on the financial performance of the firms.
2.1.2 Ownership Attributes
The ownership structures of firms illustrate the structure and composition of the shareholders of
that firm. It is widely believed by many economic analysts that the type of ownership can also
affect corporate performance, control methods of manages as well as the impact of each type of
ownership on financial reporting quality and hence, the audit quality (Daniel, Nuraddeen &
Ahmed, 2021). Therefore, ownership structure in this study includes institutional, concentrated
ownership, foreign ownership and block ownership.
Managerial Ownership
Managerial ownership signifies the interest of managers in the equity shareholding of a firm.
The motive behind the rise of this corporate governance variable is rooted in the agency theory,
16
which assumes that manager’s equity holdings inspires them to act in a way that maximizes the
value of the firm. Warfield (1995) suggest that the interest of both shareholders and management
starts to converge as the management holds a portion of the firm’s equity ownership. This
implies that the need for intense monitoring by the board should decrease (Jensen &Meckling,
1976).Rudiger and Rene (2007) in their study reviewed theories of the determining factor of
managerial ownership and their insinuations for the relation between firm value and managerial
ownership. They deliberate three notions: the agency notion, the contracting notion, and the
managerial discretion notion.
Agency idea predicts that low managerial ownership indicates poor alignment interest among
managers and shareholders (Jensen &Meckling, 1976). This insider with low equity ownership
manages earnings for better compensation and avoids debt covenants (Healy, 1985; Houlthausen,
1995). It is suggested that they will be more involved in the firm when they own larger
ownership, thus, the need for outside monitoring will be reduced, as long as the interest of
insider and outsider converge. There are two views concerning managerial ownership. The
convergence assumption states that managerial ownership will be seen as monitoring device
when they acquire some portion of the company equity, they will prevent manager’s
opportunistic behavior, and the magnitude of discretionary accruals is predicted to be negatively
associated with insider ownership (Warfield, 1995).
On the other hand, when there is little separation between managers and owners’ management
face less pressure from capital markets to signal the firm value to the market and they pay less
attention to the short-term financial report (Jensen, 1986; Klassen, 1997). Then highly invested
managers are more likely to influence earnings, since the lack of market discipline, may lead
managers to make accounting choice that is out of self-serving interest.
17
More so, the contracting agency sight portrays that shareholders face trade off. As the managers
stake in the firm increases, their incentives become better aligned with those of shareholders in
that, if they increase firm value by one naira, their wealth increases by a greater portion of that
naira. However, when managers have a large stake in the firm, they are exposed to the risk of the
firm. It follows that owners benefit from an increase in managerial ownership because of better
alignment of incentives but incur additional costs because they have to pay managers more.
When managers hold shares, they also control votes. As managers control more votes, they
become more embedded and can use their position to further their interests even when doing so
does not benefit stockholders. Demsetz (1983), Demsetz and Lehn (1985), and Himmelberg,
Hubbard, and Palia (1999) find support for the guesses of the contracting model of managerial
ownership. The third theory suggested by Rudiger and Rene (2007) is managerial discretion
theory approach. The theory suggests that managers make their decisions subject to limitations
imposed by shareholders. If stockholders solve their collective action problem in such a way that
they behave as a group and choose the optimal compensation contract for managers, there is no
difference between the managerial discretion approach and the contracting approach.
Ownership Concentration
Ownership concentration is an amount of the existence of large block holders in a firm (Thomsen
&Pedersan, 2000). Usually, a stockholder who holds 5% or more of company equity is reflected
a major stockholder. The shareholding of an owner should be significant enough to provide for
monitoring the action of the management. The major shareholder can be an individual, a
domestic foreign corporation, an institutional investor and or the state. Large block holders have
greater incentive to monitor management as the costs involved in monitoring is less than the
benefits to large equity holdings in the firm. Ramsey and Blair (1993) pointed out that increased
18
ownership concentration provides large block holders with sufficient incentives to monitor
managers. Demsetz and Lehn (1983) and Stiglitz (1985) found that large block holders have the
incentive to bear fixed cost of collecting information and to engage in monitoring mechanisms.
In contrast dispersed ownership leads to weaker management monitoring. That is in a situation
where the shareholders hold lower stock in a firm the incentive to monitor management is low
because the costs involved in monitoring outweigh the benefits to be derived. Therefore,
Pedersen and Thomsen (1999) as cited in Wen (2010) defined ownership concentration as the
share of the largest owner and are influenced by absolute risk and monitoring costs. Composition
of Ownership of a firm is one of the main dimensions of corporate governance and is widely
seen to be a determining factor in ascertaining good corporate performance as well as ensuring
qualitative financial reporting. The problem generated by concentrated ownership in the firm
among managers and minority shareholders has been very difficult to mitigate within agency
problem, this was as a result of the tightness of ownership that allowed self-interest behaviour of
manager to go internally unopposed by the board of directors which give room to the managers
to determine how the company may be run and use the opportunistic behaviour to expropriate
minority shareholders’ wealth.
Ownership concentration refers to the spreading of the shares owned by a certain number of
individuals or institutions; the ownership mix on the other hand, is related to certain institutions
or groups such as government, private company or foreign partners among the shareholders
(Claessens&Djankov, 1998). The role of ownership structure in the setting of concentrated
ownership is to assess the cash flow contents with regards to block holder’s role in the
perspective of diffused ownership. The accounting literature contains extensive research on how
19
the agency problem between owners and managers affects earnings quality as well as the quality
of accounting information of firms.
Institutional ownership
Institutional ownership is shares owned by other organisations or institutions such as insurance
companies, banks, investment companies and other organized owners. Institutional ownership is
important in monitoring management because with institutional ownership it will encourage
more optimal supervision. Jensen and Meckling (1976) claimed that institutional ownership has a
very significant role in minimizing agency conflicts between managers and shareholders. The
existence of institutional ownership is considered capable of being an effective monitoring
device in any decision taken by the manager. Agency concept suggests that monitoring by
institutional ownership can be an important governance mechanism. In fact, institutional
investors can provide active monitoring that is difficult for smaller, more passive or less-
informed investors (Almazan, Hartzell & Starks, 2005). Moreover, institutional investors have
the opportunity, resources, and ability to monitor managers. Therefore, the efficient monitoring
suggest that institutional ownership is associated with a better monitoring of management
activities, reducing the ability of managers to opportunistically manipulate earnings. The
efficient monitoring assumption suggests an inverse relationship between a firm’s earnings
management activity and its institutional share ownership. In this vein, numerous studies
documented that institutional ownership prevents managers to opportunistically engage in
earnings management (Bange & De Bondt, 1998; Bushee, 1998; Chung et al., 2002; Cornett et
al., 2008; Ebrahim, 2007; Koh, 2003).
20
Considering the importance of corporate governance in firm’s management, shareholder’s active
participation in monitoring management functions is important to ensure good corporate
governance practices. To date, institutional investors’ participation has emerged as important
force in corporate monitoring to serve as mechanisms to protect minority shareholder’s interest.
The significant increase in the institutional investors’ shareholdings has led to the formation of a
large and powerful constituency to play a significant role in corporate governance. Earnings
information, as part of accounting information, provides investors with relevant information that
would help them in making correct asset pricing and investment decisions (Yuan &Jaing, 2008).
The active monitoring hypothesis views institutional investors as long-term investors with raving
incentives and motivations to closely monitor management action (Jung &Kown, 2002).
However, some argue that institutional investors do not play an active role in monitoring
management activities (Claessens& Fan, 2002; Porter, 1992). According to Duggal and Millar
(1999), institutional investors are passive investors who are more likely to sell their holdings in
poorly performing firms than to expend their resources in monitoring and improving their
performance. Institutional investors may be incapable of exerting their monitoring role and vote
against managers because it may affect their business relationships with the firm. Accordingly,
institutional investors may collude with management (Pound, 1988; Sundaramurthy, Rhoades
&Rechner, 2005). It is also argued that institutional owners are overly focused on short-term
financial results, and as such, they are unable to monitor management (Bushee, 1998; Potter,
1992). So, there will be a pressure on management to meet short-term earnings expectations.
These arguments indicate that institutional investors may not limit managers’ earnings
management discretion and may increase managerial incentives to engage in earnings
management.
21
2.1.3 Board Attributes
The concept of the board is derived from the attributes or incentives and variables that play a
significant role in monitoring and controlling managers and can be described as a bridge
between company management and shareholders (McIntyre, 2007; Bonn, 2004; Kiel &
Nicholson, 2003). To understand the role of the board, it should be recognized that boards
consists of a team of individuals, who combine their competencies and capabilities that
collectively represent the pool of social capital for their firm that is contributed towards
executing the governance function (Westphal, 2001).
Board composition can reflect various degrees of heterogeneity (Bhagat & Black, 2002).
Common measures of board composition include the ratio of independent non-executive
directors and board size (Rashid, 2011), which is the measure used in this research. Other
measures of board composition in the literature include gender and age diversity. However, to
date there have been inconclusive findings as regards the relationship between board
composition and firm performance (Finegold et al., 2007; Bermig& Frick, 2010; Rashid, De
Zoysa, Lodh&Rudkin, 2010). Other differences in board composition are considered here to
represent 'board diversity'. More independent board composition can result in enhanced decision
making through increased information flows, although this may entail a cost (Sanda et al., 2011).
In light of this, Eklund, Palmberg and Wiberg (2009:8) stress board heterogeneity entails a trade-
off between "information efficiency" in the case of heterogeneous boards, which typically are
better informed on 'outside' issues, versus "decision efficiency" of homogenous boards deriving
from higher trust, shared experience and values.
22
The board is the supreme decision-making unit in the company, as the board of directors has
responsibility to safeguard and maximize shareholder’s wealth, oversee firm performance, and
assess managerial efficiency. Daltoni, Catherine, Alan and Jonathan (1998) pointed out four
actions of initiation, ratification, implementation, and monitory, undertaken by the board in the
decision-making processes. Therefore, the main role of the board is seen as the ratification and
monitoring of decisions, overseeing the actions of managers/ executives. From the above
concept, the role of the board is quite daunting as it seeks to discharge diverse and challenging
responsibilities. The board should not only prevent negative management practices that may
lead to corporate failures or scandals but ensure that firms act on opportunities that enhance the
value of all stakeholders. Given this, it is important to identify the board characteristics that
make one board more effective from the other. Therefore, this study is set to identify and
examine the board characteristics that make it effective and contribute towards enhancing stock
returns of consumer goods companies in Nigeria.
Board Size
Dozie (2003) defined board size as the number of members that form the board. There is no
agreed number of members that make up an ideal board size. There have been diverging
opinions by various researchers on the number of persons that should make up an ideal board.
Some school of thought are of the opinion that a small board is more effective because it
enhances fast decision making and cannot be manipulated by management. Dozie (2003) also
argued that a smaller board may be less encumbered with bureaucratic problems, more
functional and is able to provide better financial reporting oversight. Some of the disadvantages
associated with a large board are high cost of coordination and delay in passing information. It
is also associated with weak monitoring. Dalton et al. (1999) argue that a large board is
23
overcrowded and hence does not give room for each member’s input; it is also less organized
and unable to reach a decisive conclusion on time. The study measured the board size by the
number of directors serving on such boards and expected this to have a negative relationship
with stock returns.
John and Senbet (1998) argue that large boards are less effective and are easily controlled by the
CEO. When a board gets too big, it becomes difficult to coordinate and for it to process and
tackle strategic problems of the organization. Role of Board size has been a matter of continued
debate from different perspectives (Jensen 1993; Yermack, 1996; Dalton et al., 1999;
Hemalin&Weisbach, 2003). While some have suggested smaller boards enhance financial
reporting quality (Lipton & Lorsch, 1992); Jensen 1993); Yermack, 1996) others have
suggested larger boards are better for improving financial reporting quality (Pfeffer, 1972;
Klein, 1998; Adam & Mehran, 2003; Anderson., 2004; Coles 2008). Scholars have argued for
smaller boards on grounds of easy co-ordination, (cohesiveness and communication Jensen,
1993) and to avoid social loafing and freeriding (Lipton & Lorsch, 1992). As the size of the
board increases, interpersonal communication becomes less effective. As the board size
increases, problems of communication and coordination manifest and are likely to develop
factions and conflict (Charles, Reilly & Jennifer,1989).
Klein (1998) argues that the need for advice for CEO will increase with organizational
complexity. Klein (1998) further suggests that the advisory needs of CEO increases with the
extent of firm’s dependence on environmental resources. So, increasing board size helps
businesses to manage the environment (Pfeffer, 1972; Pearce & Zahra, 1992). From an agency
theory perspective, larger boards allow for effective monitoring by reducing the domination of
the CEO within the board and protect shareholder’s interests (Singh &Harianto, 1989).
24
According to Hermalin and Weishbach (1998), board effectiveness is a function of its
independence. The independence of a board depends on the negotiations between the board and
the CEO. A larger board improved the bargaining position of the board vis-à-vis the CEO and
thus, make the board more effective in monitoring the management. Further, a larger board will
also make it easy to create committees to delegate specialised responsibilities.
Meanwhile, resource dependency theory suggests that boards are chosen to maximise the
provision of important resources to the firm. Pfeffer (1972); Pfeffer and Salancik (1978); Klein
(1998), for instance, suggests that advisory needs of the CEO also increase with the firm’s
dependence on the environment for resources. So, increasing board size links the organization to
its external environment and secures critical resources. In response to resource dependencies and
regulatory pressures, organizations create large boards to encompass directors from different
backgrounds (Pfeffer, 1972; Pearce & Zahra, 1992). In short, while the smaller boards allow
domination of board by CEO resulting in agency costs, larger boards benefit firms by providing
effective oversight of management, making available necessary resources and allowing for
representation of different stakeholders in the firm.
As the firm increases in complexity, the board size also increased (Boone et al., 2007). The more
the representation, the larger will be the size of the board. It implies that the diversity of board is
made possible by increasing the board size. When the board size is increased by increasing
representation to outsiders, it is likely that there will be more qualified board members in
general, and those with PhDs in particular, to acquire the talent and skills required for both
monitoring and boundary spanning. Such highly qualified members are considered a strategic
resource and provide a link to different external resources (Ingley& Walt, 2001). A larger board
25
will provide a more conducive environment for more educated members to contribute than a
smaller board.
Board Independence
In terms of this tension, however, agency theory is in favour of a majority of independent non-
executive directors (Huse, 2007; Rashid, 2011). King III stresses that the board should include a
balance of executive and non-executive directors, with a majority of independent non-executive
directors, as this reduces the possibility of conflicts of interest (IOD, 2009). The corporate
governance literature tends to advocate expanding the independent/outsider elements on
corporate boards (Sanda et al., 2011). Sahin, Basfirinci and Ozsalih (2011), however, observe
that previous literature does not offer consistent evidence on the impact of the proportion of non-
executive to executive directors on financial performance.
On the one hand, certain studies (Weisbach, 1988; Pearce & Zahra, 1992; Daily & Dalton, 1993;
Rosenstein & Wyatt, 1994; MacAvoy& Millstein, 1999; Krivogorsky, 2006) suggest a positive
relationship between board composition and firm performance. Others, on the other hand, have
found no relationship between firm performance and board composition (Daily & Johnson, 1997;
Bhagat & Black, 1999; Dulewicz& Herbert, 2004).In support of the latter camp, Finegold et al.
(2007:867) note that no consistent empirical evidence has been found to suggest increasing
percentages of outsiders on boards will enhance performance, but "pushing too far to remove
insider and affiliated directors may harm firm performance by depriving boards of the valuable
firm and industry specific knowledge they provide."
An argument challenging the role of independent non-executive directors’ rests on the
information asymmetry between executive directors and independent non-executive directors
26
(Rashid, 2011). Executive directors are nested within the company they govern and may
therefore have a better understanding of the business than independent non-executive directors
and may, in addition, be better able to make useful decisions (Sanda et al., 2011). By contrast,
independent non-executive directors may lack day-to-day inside knowledge of the company and
therefore may play a reduced control role in the firm (Nicholson & Kiel, 2007; Rashid et al,
2010). Nevertheless, this debate is set to continue, as there are no empirical findings to tilt the
argument in any particular direction (Rashid, 2011).
There are several explanations for the inconclusive results on the relationship between executive
versus independent non-executive directors and firm performance. One such explanation is that
the simultaneity between key variables of interest confounds the interpretation of the results in
studies that focus on direct relationships (Finegold et al., 2007). Yet another explanation is that
performance and board characteristics are jointly endogenous, and thus firm performance is not
only a function of past board independence, but also influences board structure (Panasian,
Prevost &Bhabra, 2008).
Board Financial Expertise
Unlike the size criteria that was specified by CAMA (2004), the expertise criteria were specified
in Nigeria by the 2011 and 2018 SEC Codes, 2006 Post consolidation CBN code amongst other
codes. These codes specify that at least, a member of the audit committee must possess financial
management and accounting knowledge. The US SEC also has a similar condition as it expects
that firms must have at least one person with financial expertise. Juhmani (2017) asserted that the
availability of an accounting and financial knowledge in the audit committee would enhance its
efficiency and its ability in detecting and preventing earnings management. Kibiyaa, Ahmada
27
and Amran (2016) also buttressed in their study that the presence of a member with financial
literacy or knowledgeable in accounting, finance or financial management will enhance the
quality of the financial report. However, Dhaliwal et al. (2006) noted that the expertise criterion
given is broad in terms of definition. They claim that persons with financial expertise can mean
any of the following (1) certified public accountant, auditor, financial officers, or controllers (2)
anyone that has worked in a supervisory role that involves financial statement preparation. Thus,
expertise can be technical or supervisory in nature but the contention is that which of this nature
of expertise is fundamental to financial reporting quality? Is it technical/accounting or
supervisory/financial management? Livingston (2003) provides evidence that supervisory
expertise does not translate to effective understanding of accounting issues and may not ensure
reporting quality.
Generally, companies prefer to have more financial experts on the corporate board, but this
demand for financial experts on the board increased after the Sarbanes-Oxley Act (SOX) of
2002. Expertise can be defined as “skillfulness by virtue of processing special knowledge.” It is
evaluated based on standards discussing the aptitude to perform a task. The corporate governance
reports of CalPERS in 1997, Blue Ribbon Commission report in 1998, SOX in 2002 and NYSE
in 2004 also suggest some guidelines regarding the expertise of board members. These reports
were issued in response to various accounting scandals that have occurred since the 1990s, such
as Enron, HealthSouth, Tyco, WorldCom and different financial crises. Reports further include
the significance of financial expertise of directors in performing their central function of
monitoring the firm’s financial performance. According to the SOX (Section 407), a financial
expert is a person who has experience in accounting or finance or has supervisory expertise.
28
DeFond. (2005) and Krishnan and Visvanathan (2008) use SOX of 2002 to explain financial
expertise.
The confidence of shareholders has been shaken by various accounting scandals and financial
crises since the 1990s, such as Enron, HealthSouth, Tyco, WorldCom and the financial crisis of
2007-2008, which has stressed the regulators and market makers to the need for board members
to have financial expertise. Kirkpatrick (2009) and Walker (2009) argue that the lack of financial
expertise on corporate boards played a major role during the financial crisis. Therefore, the
presence of more financial expertise on a board ultimately influences the board’s decisions,
including dividend policy. Having financial expertise on the board will keep them from being
accused of failure in their watchdog role and will better serve the shareholders’ interests. Second,
there is a growing body of literature on how financial expertise on boards improves the board ’s
efficiency (Karamanou&Vafeas, 2005; Agrawal & Chadha, 2005; Krishnan, 2005; Beasley,
1996; Dechow et al., 1996; Anderson, 2004), leads to better corporate practices (Krishnan, 2005;
Robinson, 2012) and improves firm performance (Dionne &Triki, 2005; Francis, 2012;
Fernandes &Fich, 2013). Li and zhan. (2012) argued that audit committees having members with
requisite financial expertise are in a better position to have knowledge of capital market
implications of decisions and disclosures in financial statement. Such disclosures are expected to
improve reporting quality and reduce information asymmetry on firm’s value.
2.1.4 Concept of Stock Returns
In simple terms a stock refers to a share in the ownership of a company. Stock represents a
claim on the company’s assets and earnings. The percentages take that an investor holds is
reflected in the number of stocks the investor acquires from the company’s stocks. Thus, the
29
more shares that one acquires, the greater his/her ownership rights in the company. When one
holds a company’s stock, it means that person is one of the many owners (shareholders) of the
company and as such has a claim (albeit usually very small) to everything the company owns.
An investor’s share ownership is represented by a stock certificate. That is a piece of paper
which serves as a proof to one’s ownership. According to Beni and Alexander (1999), ordinary
stock simply represents an ownership interest in a corporation. In this modern age of business
however, such certificates are rarely given the shareholder because the brokerage firms keep
these records electronically otherwise known as holding shares’ in street name. This is done in
an attempt to make the stock easily tradable. Unlike in the past where one has to physically take
a share certificate to the broker age in order to sell, now with just a click on the mouse or even
a phone call; stocks can easily be traded.
Return refers to the financial rewards gained as are suit of making an investment. The nature of
the return depends on the form of the investment. For instance, accompany that invests in fixed
assets and business operations expects returns in the form of profit, which may be measured on
before–interest, before tax or after-tax basis, and in the form of increased cash flows. An investor
who buys ordinary shares expects returns in the form of dividend payment and capital gains
(share price increases). Again, an investor who buys corporate bonds expects regular returns in
the form of interest payments (Frimpong, 2010).
Stock Market Returns are the returns that the investors generate out of the stock market. This
return could be in the form of profit through trading or in the form of dividends given by the
company to its shareholders from time-to-time. Stock Market Returns can be made through
dividends announced by the companies. Generally, at the end of every quarter, a company
making profit offers a part of the kitty to the shareholders. This is one of the sources of stock
30
market return one investor could expect. The most common form of generating stock market
return is through trading in the secondary market. In the secondary market an investor could earn
stock market return by buying a stock at lower price and selling at a higher price. Stock Market
Returns are not fixed ensured returns and are subject to market risks. They may be positive or
negative. Stock Market Returns are not homogeneous and may change from investor-to-investor
depending on the amount of risk one is prepared to take and the quality of his Stock Market
Analysis. In opposition to the fixed returns generated by the bonds, the stock market returns are
variable in nature. The idea behind stock return is to buy cheap and sell dear. But risk is part and
parcel of this market and an investor can also see negative returns in case of wrong speculations.
Stock return is very important as it is the main objective of investment in ordinary shares.
Investors, both existing and potential ones’ regard return as the fundamental reason for investing
in a particular firm. Stock return can be in form of capital appreciation/depreciation (as obtained
in the Nigerian stock exchange) plus dividend received if any. Stock prices are important metrics
of measuring stock market returns. Therefore, the value attached to them matters a lot to both
existing and prospective investors in the stock market. There are several factors in stock prices
determination in the stock market. These factors range from accounting and non-accounting
information. Stock Market Returns are the returns or gain that the investors generate out of the
stock market (Lin & Zhan, 2011).
The most common way of generating stock market return is through trading in the secondary
market. In the secondary market an investor could earn stock market return by buying a stock at
lower price and selling it at a higher price. Book value of equity constitutes the accounting-based
31
value for owners and be useful in judging on the true value of equity (Hallefors, 2013). Capital
market serves as a place or arrangement where investors and investees interact. The share at
which is being sold is determine by the corporate firm characteristics which usually affect the
amount of capital a company can raise from the stock market. Stock market provides a link
between firms need to raise fund for business continuity or expansion and those investors wish to
invest their excess resources. Therefore, it is a point for buying and selling of shares, and share
prices are determined by demand and supply, which usually influence by firm specific factors
and/or macroeconomic variables (Adedoyin, 2011).
Accounting fundamentals (firm specific ratios) serve as a predictor of stock market returns since
it gives highlight to the likely future returns. Examples of accounting fundamentals are leverage
ratio, profitability, market capitalization. According to Aldin, Dehnari, and Hajighasemi (2012),
investors aim at maximizing their yield and they are very eager to predict the firm stock returns
in which they invest. They expect to receive dividend and/or capital gain from investing in the
equity market. Al-Tamimi (2007) avers that Stock Market Returns are subject to market risks. He
further posits that they are not homogeneous and may change from investor-to-investor
depending on the amount of risk one is prepared to take and the quality of his Stock market
analysis. This implies that the more investment one has, the higher the amount of risk one
assumed and hence the higher the expected stock market returns. Because of the importance
attached to the ‘tradeoff between risk and returns’, investors are interested in making judgment
about expected returns from investing in stock, and several researches were conducted that
identified models and firm specific ratio that can influence market stock returns (Wajid, Arab,
Madiha, Waseem & Ahmad, 2013).
32
The traditional model for predicting market return- CAPM (Capital Asset Pricing Model)
developed by Sharpe (1964) and Linter (1965) and Black (1972) assumes that in an efficient
market, securities are correctly priced and returns are ascertained mainly by the amount of risk
one assumes. This model cannot be sufficient in predicting stock market returns alone and has its
own defect (Uwubanmwen&Obayagbona, 2012). Recent studies show that there are other
variables that outperform CAPM (represented by company’s systematic risk or beta) in
determining or predicting stock market returns with great precision. Basu (1997) demonstrated
that the differences in Beta cannot justify and explain the difference in stock returns. Another
criticism of CAPM was found in the work of Fama and French (1992) who sees that the positive
relationship between beta established by CAPM and average stock returns was a product of the
negative association between firm size and beta. This shows that firm size has inverse
relationship with the beta. More clearly the larger the firm the lower the risk of investors. They
further argued that when this association was taken into cognizance, the relationship between
beta and stock returns will definitely disappeared. Drew (2003) also stated that beta alone is not
sufficient in explaining stock return and that firm size and market to book value ratio are
significant and effective in explaining average stock returns.
2.2. Empirical Review
2..2.1 Firm Size and Stock Returns
Chabachib, Hersugondo, Ardiana and Pamungkas (2021) analyzed the factors that influence
company value (PBV) in consumer goods companies listed on the Indonesia Stock Exchange in
2014-2018. The independent variables used in the study are capital structure (DER), company
size (SIZE), liquidity (CR) with profitability (ROE) as an intervening variable. The population
33
used in this study is all companies engaged in the consumer goods sector listed on the Indonesia
Stock Exchange in 2014-2018. Sampling in this study used purposive sampling which resulted in
a sample of 128 consumer goods sector companies. The method used is path analysis which is
the development of multiple regression and bivariate analysis. The results of this study indicated
that company size and liquidity have a positive and significant effect on profitability, the capital
structure has a negative and not significant effect on profitability. Profitability and company size
have a positive and significant effect on firm value. Capital structure and liquidity have a
positive and not significant effect on firm value. Then profitability is able to mediate the
influence of company size and liquidity on firm value, but profitability is not able to mediate the
influence of capital structure on firm value. This study was done in Indonesia, the current study
in Nigeria is needed due to problem of external validity as outcome of the formal study will
ineffectual for the purpose of decision making in Nigeria.
Ahmed (2020) examined the impact of changing firm characteristics on dividend payout ratios of
listed publicly traded North American companies. This study builds upon these and extends the
research to publicly traded, North American firms in the past 30-year time period (1989-2019).
The key question that this research paper aims to answer is which, if any, firm characteristics
have any causal relationship with the dividend payout ratio of the firm. This study also looks at
the appearing and disappearing phenomenon of cash dividends in the past 30 years and aims to
reconcile the changing characteristics of the firms to this phenomenon. This is done by creating
sub-periods within the dataset and observing the changing characteristics of the firms and the
possible impact on the dividend payout ratios of the firms. It was found that size and liquidity
produce statistically significant results in terms of having some relationship the dividend payout
ratios of the firms. After performing the Granger-Causality test, it was determined that only
34
liquidity of the firm has some causal relationship with the dividend payout ratio of a firm. This
study was done in North America why this current study was carried out in Nigeria to solve the
problem of external validity.
Akwe, Garba and Dang (2019) examined the effects of firm level attributes on stock returns of
top twenty-five most capitalized quoted equity firms in Nigeria. Specifically, the study
investigated the effects of firm size, ratio of market to book value per share, and price to earnings
ratio on stock returns of selected quoted firms in Nigeria from 2007 – 2016. The population
comprised top twenty-five most capitalized quoted equity firms, out of which twenty-one
companies represent the sample of the study. The study adopted ex-post facto research design.
The study used secondary data obtained from the audited accounts of the sampled firms, Central
Bank of Nigeria Statistical Bulletin and the Nigerian Stock Exchange database and website.
Analysis of data was carried out using panel data regression. The panel regression results
indicate insignificant negative effect between firm size and stock returns in Nigeria. The study
used selected equity firms in Nigeria while the current study used consumer goods companies
which make for the much differences.
Ltaifa and Khoufi (2016) investigated empirically the determinants of stock market returns of
Banks in the MENA countries between 2004 and 2014. The study uses the three-factor model of
Fama and French (1993) and the capital asset pricing model (CAPM) to analyze the relationship.
The findings reveal that firm size, book to market value, and stock returns have positive
relationship. That is, companies with high book to market value ratio earn superior returns. The
study of Ltaifa and Khoufi (2016) suffers from some limitations. One, the study did not clearly
state the technique for data analysis. Two, the study should have included more internal variables
35
with a view to determining their behavior on stock returns. Investors would want to know this as
it will help in their investment.
Sani (2016) examined the effect of firm specific characteristics on dividend payout ratio of
quoted conglomerates in Nigeria for a period of eight (8) years ranging from 2004-2011. The
population of this study comprised the eight (8) conglomerate firms quoted on the Nigerian
Stock Exchange as at 31 December, 2011. Correlation research design and ex-post factor
research design was adopted. Multiple regression technique was employed as a tool for analysis
in examining the impact of firm specific characteristics on dividend payout ratio of Nigerian
quoted conglomerates and the study relied on the OLS regression result. The findings revealed a
positive and significant impact of firm size, profitability, and institutional ownership on dividend
payout ratio, liquidity had no effect on dividend payout ratio while leverage had a negative and
significant effect on dividend payout ratio. The study concluded that four of the explanatory
variables of this study (that is; firm size, profitability, leverage and institutional ownership)
impact on the quantum of dividend paid by Nigerian quoted conglomerates firms. The study
collected data to 2014 while this current study used data to 2019 which captured recent issues
such as the new code of corporate governance.
Nguyen and Nguyen (2016) examined the relationship between firm sizes and stock returns of
service sector in Ho Chi Minh City stock exchange. The paper aims at investigating the existence
of size effect in Vietnamese financial market. Particularly, the relationship between firm size and
stock returns was explored. Stock return was calculated by dividing the sum of stock price and
dividend payment by previous stock price to achieve stock return in percentage while firm size
was measure using log of total assets Having 160 observations of the companies in service sector
from 2009 to 2014, the correlational research design was adopted and the multiple regression
36
model was employed to test that effect. The result revealed a significantly negative relationship
between firm size and stock returns. This study focused on firm size as an explanatory variable
while this current study employed both firm characteristics and corporate governance variables.
Handoko (2016) determined the effect of variables dominant characteristics of the company,
namely the size of the company, growth opportunities, profitability, liquidity, and tangibility to
capital structure and to determine the effect on the capital structure of a company's value as well
as to determine the trade-off theory or pecking order theory can be more precise in predicting
changes in the different leverage between public insurance companies listed on the Indonesia
Stock Exchange. This research used a sample of 10 insurance companies (non-life insurance)
during the years 2008-2013. The analytical method used is panel data analysis method that uses a
combination of data time series and cross section with technical applications panel random effect
model and fixed effect models and data used are secondary data. This research indicated that the
dominant variable characteristics that affect the company's capital structure is firm size and
growth, while positive effect on the liquidity variable negative effect. Further positive effect on
the capital structure of the company and the value of the trade-off theory can explain and more
appropriate for the case of a public insurance company listed on the Indonesian stock exchange.
This study was done in Indonesia and in insurance companies while this current study is in
Nigeria and on consumer goods firms.
Hasan, Alam and Rahaman (2015) analyzed the effects of size and value on cross-section of
expected returns in Dhaka Stock Exchange (DSE). The study deploys the Fama and French
(1993) three-factor methodology in conjunction with Ordinary Lease Square (OLS) model. The
study period is divided into three periods; the pre-boom (2004 – 2008), boom period (2009 –
2010) and post-crash period (2011 –2013). The result of the study reveals that book to market
37
equity ratio and stock returns have positive effect in Bangladesh. The use of Ordinary Least
Square Regression (OLS) does not seem to explain the individual or cross-sectional effect of the
sampled firms given their respective peculiarities. Panel data stand to tackle a more set of
problems and address more sophisticated issues than either pure time series or pure cross-
sectional data alone would address. Thus, the use of panel regression is capable of given more
robust result that can be acceptable than OLS.
Bala and Idris (2015) examined firms’ specific characteristics of firm size, debt-equity, and
earnings per share and stock market returns in Nigeria. The study samples nine (9) out of the
twenty-one (21) quoted food and beverages firms in Nigeria from 2007 to 2013 by means of
multiple regression models. The findings show that firm size has a significant and negative effect
in stock returns of quoted food and beverages firms in Nigeria. The effect of earnings per share
and debt-to-equity is found to be statistically significant and positive. The study did not factor in
dividend in the measurement of the dependent variable (stock market returns). Stock return is the
combination of dividend yield and capital appreciation. Also, the results of nine (9) out of over
170 sampled quoted firms cannot be the representative of the entire market. More firms would
have explained the effect better. The study should have also included other internal non-financial
variables that have been examined and found to explain stock returns in other jurisdictions.
2.2.2 Firm Age and Stock Returns
Oduma and Odum (2017) investigated the influence of leverage on dividend payout of selected
manufacturing companies in Nigeria. The study used a sample of 50 quoted companies that have
dividend history and consistently published their audited annual financial report from 2011 to
38
2015. A pooled regression analysis was adopted in the study. The result revealed that long term
leverage has a significant positive effect on firm’s dividend policy. The study went further to
reveal that interaction of age and profitability was significant in influencing dividend payout
within the period under study. The study used only leverage as a firm characteristic why this
current study used two others (firm size and firm age) to investigate their effects on stock
returns.
Matemilola, Bany-Ariffin, Nassir and Azman-Saini (2017) investigated the moderating effects of
firm age on the relationship between debt and stock returns. The system generalized method of
moment’s results indicates that firm age has a positive moderating effect on the relationship
between book debt and stock returns. The results are robust, as firm age positively moderates the
relationship between market debt and stock returns. Moreover, firm age has a direct positive
effect on stock returns. Results suggest that as firms grow older, they use their experience to
make effective capital structure decisions (i.e., optimal debt-equity mix) to maximize debt
interest-tax-shield and increase shareholders’ returns. This current study used multiple regression
technique to analyse the data for the study which is different methodological approach.
Uwubanmwen and Obayagbona (2012) investigated the influence of firm attributes and equity
returns in the stock market of Nigeria. The study uses eight sample firms with 11 years’
observation. The proxies employ firm’s unique attributes to include: leverage, book/market value
of equity, ratio of price/earnings and firm size. The study establishes that the size of firm and
returns of common stocks have no statistically significant relationship or effect. The study uses
total asset natural log which is the traditional measure of firm size. This is as against previous
studies use of firm size or market capitalization as the best and appropriate representative for
examining the effect of size of firm on returns of common stocks.
39
Ramachandran and Packkirisamy (2010) examined the association between the Corporate
Leverage (CL), firm age and the Dividend Policy (DP) of firms across industries in India in
respect of Size of Corporate Firms. The investigation is conducted on a panel sample of 73 firms
across industries [Cement, Chemical and Fertilizer, IT, Oil and Gas, Pharmaceutical, Shipping,
and Textiles], which listed their shares in National Stock Exchange (NSE) in India for the period
1996–2007. The impacts of Capital Structure (CS) variables (leverage) on DP measures –
dividend payout (Net dividend paid/net income) in the presence of some basic fundamental
variables are considered to be the determinants of DP, using the Multiple Regression Technique
(OLS method). The results of the cross-sectional OLS Model for the selected sample firms under
various sectors show that there is a significant effect of selected independent variables. This
study focused on only leverage while the current study employed several other firm attributes
making it wider in scope and more suitable for decision-making.
2.2.3 Profitability and Stock Returns
Chabachib, Hersugondo, Ardiana and Pamungkas (2020) analyzed the factors that influence
company value (PBV) in consumer goods companies listed on the Indonesia Stock Exchange in
2014-2018. The independent variables used in the study are capital structure (DER), company
size (SIZE), liquidity (CR) with profitability (ROE) as an intervening variable. The population
used in this study is all companies engaged in the consumer goods sector listed on the Indonesia
Stock Exchange in 2014-2018. Sampling in this study used purposive sampling which resulted in
a sample of 128 consumer goods sector companies. The method used is path analysis which is
the development of multiple regression and bivariate analysis. The results of this study indicated
that company size and liquidity have a positive and significant effect on profitability, the capital
structure has a negative and not significant effect on profitability. Profitability and company size
40
have a positive and significant effect on firm value. Capital structure and liquidity have a
positive and not significant effect on firm value. Then profitability is able to mediate the
influence of company size and liquidity on firm value, but profitability is not able to mediate the
influence of capital structure on firm value. This study was done in Indonesia, the current study
in Nigeria is needed due to problem of external validity as outcome of the formal study will
ineffectual for the purpose of decision making in Nigeria.
Oduma and Odum (2017) investigated the influence of leverage on dividend payout of selected
manufacturing companies in Nigeria. The study used a sample of 50 quoted companies that have
dividend history and consistently published their audited annual financial report from 2011 to
2015. A pooled regression analysis was adopted in the study. The result revealed that long term
leverage has a significant positive effect on firm’s dividend policy. The study went further to
reveal that interaction of age and profitability was significant in influencing dividend payout
within the period under study. The study used only leverage as a firm characteristic why this
current study used two others (firm size and firm age) to investigate their effects on stock
returns.
Sani (2016) examined the effect of firm specific characteristics on dividend payout ratio of
quoted conglomerates in Nigeria for a period of eight (8) years ranging from 2004-2011. The
population of this study comprised the eight (8) conglomerate firms quoted on the Nigerian
Stock Exchange as at 31 December, 2011. Correlation research design and ex-post factor
research design was adopted. Multiple regression technique was employed as a tool for analysis
in examining the impact of firm specific characteristics on dividend payout ratio of Nigerian
quoted conglomerates and the study relied on the OLS regression result. The findings revealed a
positive and significant impact of firm size, profitability, and institutional ownership on dividend
41
payout ratio, liquidity had no effect on dividend payout ratio while leverage had a negative and
significant effect on dividend payout ratio. The study concluded that four of the explanatory
variables of this study (that is; firm size, profitability, leverage and institutional ownership)
impact on the quantum of dividend paid by Nigerian quoted conglomerates firms. The study
collected data to 2014 while this current study used data to 2019 which captured recent issues
such as the new code of corporate governance.
Handoko (2016) determined the effect of variables dominant characteristics of the company,
namely the size of the company, growth opportunities, profitability, liquidity, and tangibility to
capital structure and to determine the effect on the capital structure of a company's value as well
as to determine the trade-off theory or pecking order theory can be more precise in predicting
changes in the different leverage between public insurance companies listed on the Indonesia
Stock Exchange. This research used a sample of 10 insurance companies (non-life insurance)
during the years 2008-2013. The analytical method used is panel data analysis method that uses a
combination of data time series and cross section with technical applications panel random effect
model and fixed effect models and data used are secondary data. This research indicated that the
dominant variable characteristics that affect the company's capital structure is firm size and
growth, while positive effect on the liquidity variable negative effect. Further positive effect on
the capital structure of the company and the value of the trade-off theory can explain and more
appropriate for the case of a public insurance company listed on the Indonesian stock exchange.
This study was done in Indonesia and in insurance companies while this current study is in
Nigeria and on consumer goods firms.
Olowoniyi and Ojenike (2012) aimed at identifying the factors that influence stock returns as a
major concern for practice and academic research. This paper investigates the determinants of
42
stock returns of listed firms in Nigeria. Panel econometric approach was used to analyse panel
data obtained from 70 listed for the period 2000-2009. The fixed effect (FE), random effect (RE)
and Hausman-test based on the difference between fixed and random effects estimators were
conducted. Their findings suggest that expected growth and size positively influenced stock
return while tangibility negatively impacted on stock return of listed firms. This study was done
in 2012 and given the changes in governance, economic fluctuations and other regulatory
requirements; this study cannot be used to take informed business decisions.
Mutiso (2011) analyzed the relationship between the dividend payout ratio, firm size and the
shareholders’ dispersion using sample of firms which are listed at the Nairobi Stock exchange
(NSE) for the period 2005 to 2010. The study uses a sample of 31 firms out of the total 55 firms
listed at the NSE by December 2010. The sampled firms consistently paid dividends to the
shareholders over the period of the study. The study also tested whether the DPOR of the firms
listed at the NSE support various existing dividend payout policy theories. Secondary data was
obtained from the NSE secretariat, internet and company financial statements. The data was
analyzed appropriately and the shareholders’ dispersion was calculated by dividing the number
of shareholders by the total shares for each company. The average DPOR was calculated, as well
as the natural log of the average market capitalization for each firm. Parametric analysis was
done and regression was performed on the various variables and the findings analyzed using
descriptive statistics and regression. The result of the study showed that firm size and the
shareholders dispersion do not have a significant influence to the DPOR. The study was done in
Nairobi but this study is done in Nigeria.
2.2.4 Ownership Concentration and Stock Returns
43
Amal and Ahmed (2017) investigated the impact of institutional ownership and ownership
concentration on firm stock return performance using panel data model. Our main ownership
measures include; percentage of institutional ownership held by different institutions in a firm
and percentage of a firm’s outstanding stocks held by the largest three block holders. We find
that there is no significant relationship between either institutional ownership or ownership
concentration and both ex post and ex ante return. Also, it was found that there is negative and
significant relationship between institutional ownership represented by some institutions and ex
post risk, while the relationship is negative and significant only between institutional ownership
by employee associations and ex ante risk. Ownership concentration has no effect on ex post risk
but it has a positive and significant effect on ex ante risk. This current study used other corporate
governance and firm attributes aside ownership attributes making it more robust for decision
purposes.
Faten, Adel and Mohammad (2015) investigated the relationship between firm’s ownership
structure and its stock liquidity for firms listed on Amman Stock Exchange. The study found that
most of the firms have highly concentrated ownership structure. The largest shareholder of most
of the publicly traded corporation is either a family or a private firm. The results show that stock
liquidity of firms whose “largest shareholder” is a family which is very low compared to those of
widely held firms. Regression results show that the percentage of ownership and the existence of
one or more “large shareholders” significantly explain the cross-sectional variation in illiquidity
ratio and turnover ratio. The coefficients of the percentage of ownership and the existence of
largest shareholder are positively (negatively) related to illiquidity ratio (turnover ratio).
Vintilă and Gherghina (2014) aimed at providing the first empirical evidence for the companies
listed in Romania regarding the influence of ownership concentration on firm value. The
44
empirical research was employed for a sample of companies listed on the Bucharest Stock
Exchange (BSE), over the period 2007-2011, being estimated multivariate regression models for
panel data, unbalanced, with fixed effects. The value of the companies was measured out by the
instrumentality of Tobin's Q ratio, however adjusted with the purpose of taking into account the
industry membership diversity of the selected sample. We considered distinctly the ownership of
the first, the second, and the third largest shareholder, as well the sum of holdings of the two
largest shareholders and the sum of holdings of the three largest shareholders. Therefore, the
results sustain a lack of influence on firm value exhibited by the first largest shareholder, while
the second largest shareholder positively influences firm value. By considering the ownership of
the third largest shareholder we identified a positive influence, but down to a level of holdings of
13.08 percent, thereupon the influence becomes negative. Only ownership concentration was
used in the previous study while this current study employed other ownership attributes.
Oyerogba, Olaleye and Zaccheaus (2014) explored the link between ownership concentration
and the market value of listed companies using data from the selected 21 banks listed on the
Nigeria Stock Exchange during the period of 2008 -2012. The hypothesis formulated and tested
for the study was that there is no significant relationship between ownership concentration and
market value of listed companies. Ownership concentration was considered as independent
variable while market value was considered as dependent variable. Ownership concentration was
measured by the amount of stock owned by individual investors and large –block shareholders
divided by total stock. Market value was determined using the stock prices. The firm specific
control variables were loan performance, profitability and firm size of the selected companies.
Descriptive statistics was used to analyze the data while least square regression method was used
to draw inference on the relationship between ownership concentration and firm value. The result
45
indicates that a positive significant relationship exists between a firm value and ownership
concentration.
Amal (2014) studied the effect of institutional ownership and ownership concentration on firm
stock returns and financial performance of the listed companies in the Egyptian Stock Exchange.
For this purpose, panel data model is employed. The results from the analysis show that
institutional ownership has no effect on ex post stock returns as well as ex ante stock returns. On
the contrary, institutional ownership represented by top management and individuals have a
negative and significant effect on stock volatility, while employee associations have a positive
and significant effect. No significant effect is detected on ex ante risk except for employee
associations that have negative and significant effect on ex ante risk. In addition, the results show
that institutional ownership has no effect on stock liquidity except employee associations and
individuals that have a negative and significant effect on stock liquidity. Finally, the results show
that institutional ownership represented by companies, holdings and individuals have negative
effect on financial performance represented by ROA and ROE. Also, institutional ownership has
no effect on debt to equity ratio except banks that have negative and significant effect and
employee associations that have positive and significant effect. This study considered only
ownership structure while this current study looks at other corporate attributes making it wider in
scope.
2.2.5 Managerial Ownership and Stock Returns
Afriyani (2018) analyzed the effect of managerial ownership structure, institutional ownership
and investment opportunities on the performance of stocks in the manufacturing companies listed
46
on the Indonesia Stock Exchange. For this purpose, it is used to apply the analysis of managerial
ownership, institutional ownership analysis, analysis of investment opportunities and stock
performance analysis, multiple linear regression analysis, the classical assumption test (normality
test, multicolinearity, autocorrelation test and test heterokesdastisitas) and hypothesis testing.
The results showed that the effect of managerial stock ownership structure and a significant
positive effect on the performance of stocks, but institutional ownership have a positive effect
but not significant increase in stock performance. While investment opportunities have
significant positiveeffect on the performance of the stock on the Indonesia stock exchange. Test
results obtained by the finding that in unison between managerial ownership, institutional and
investment opportunities jointly affect the performance of the company's shares are listed on the
Manufacturing Indonesia Stock Exchange. This study was done in Indonesia and given the
differences in legal and governance stipulations between these countries, the findings of the
previous studies cannot be used to informed decisions.
Shindu, Hashmi, Haq and Ntim (2016) analyzed the impact of ownership structure on dividend
payout (DIV) ratio of 100 companies related to non-financial sector listed in Karachi stock
exchange. The study sample period was from 2011–2015. The study adopted the use of multiple
regression analysis technique to analyse the data. The result of the fixed effects model as a panel
data analysis technique indicates that managerial ownership (MO) has shown significant and
negative impact on DIV which indicates that as MO rise, they will prefer to retain instead of
distribution. Institutional ownership is showing significant and positive behavior with DIV ratio
which also showing favorable arguments for dividend distribution. The stock was done in a
different economy which presents the problem of external validity and also, the variables used
are limited to make a wide range of decisions.
47
Otieno (2016) determined the effect of managerial ownership on stock performance for the
companies listed at the NSE. Sixty-five firms listed at the NSE for the year ending December
2015 formed the population for this research and it was a census. The use of secondary data was
employed and data was obtained largely from the NSE Handbook 2015-2016 together company
websites and the CMA website. The evaluation of managerial ownership’s effect on stock
performance was done using regression analysis. The coefficient of managerial ownership was
found to be positive which showed that there existed a relationship that is positive of managerial
ownership on the performance of stock. However, the relationship was found to be insignificant
since the results revealed a p value that was low. This means that a low percentage change in
stock performance was explained by variation in managerial ownership. The study used only
managerial ownership while this current study used other forms of ownership structures which
are also, considered important in predicting returns.
Bako (2015) examined the impact of ownership structure on dividend policy of firms listed in the
Nigerian Consumer Goods Industry. The study employs the ex-post-facto research design. Data
were collected from annual reports and accounts of sampled companies and was analysed using
descriptive statistics, correlation and multiple regression methods. The study found that insider
ownership has negative and insignificant impact on dividend per share (DPS) of consumer goods
industry and suggested that little attention should be given to ownership structure. This study
was done in consumer goods firms however, only ownership structure was considered important
in predicting dividend policy while the current study considered firm and board structures as
predictors of dividend policy.
48
Chandren, Ahmad and Ali (2015) examined the relationship between managerial ownership on
earnings per share in Pakistan. The study used a sample of 220 listed manufacturing firms,
financial and service institutions. Data were collected from the annual report for a period of eight
years from 2001 to 2008. Multiple regression technique was employed to analyze the effect of
managerial ownership on earnings per share. The result provided insignificant and positive
support on the effect of managerial ownership and earnings per share. This study looked at
manufacturing, financial and service institutions while this current study considered consumer
goods companies since finding from the other sectors cannot be used to take informed decisions
in the consumer goods sector.
Dandago, Faruk and Muhibudeen (2015) examined the relation between corporate shareholding
Structure and dividend pay-out ratio of listed chemical and paint companies in Nigerian stock
exchange. The study covered the period of 2008-2013. Meanwhile, an ex- post factor research
design was adopted for the study. The entire listed chemical and paints companies were used as
sample size of the study. Multiple regression analysis technique was employed as the statistical
tool. The result revealed that managerial shareholding has a negative and significant impact on
the dividend pay-out ratio of chemical and paint companies in Nigeria. This study used data from
2008 to 2013 and was done in the chemical and paints industry while this current study was done
from 2010 to 2019 making it more recent to rely on for decision purposes. Also, findings from
chemical and paints industry cannot be used for informed decisions in consumer goods sector
due sectorial peculiarities.
Meyer and Wet (2014) assessed the relationship between board ownership and earnings per share
in South Africa. The study used a sample of 126 selected listed South African companies. Data
were collected from the annual report for a period of three years from 2010 to 2012. Multiple
49
regression technique was employed to analyze the effect of board ownership on earnings per
share. The result provided significant and positive support on the effect of board ownership on
earnings per share. This study concentrated on board ownership while this current study focused
on both ownership and board structures making it more robust in respect to variables
combination.
2.2.6 Institutional Ownership and Stock Returns
Afriyani (2018) analyzed the effect of managerial ownership structure, institutional ownership
and investment opportunities on the performance of stocks in the manufacturing companies listed
on the Indonesia Stock Exchange. For this purpose, it is used to apply the analysis of managerial
ownership, institutional ownership analysis, analysis of investment opportunities and stock
performance analysis, multiple linear regression analysis, the classical assumption test (normality
test, multicolinearity, autocorrelation test and test heterokesdastisitas) and hypothesis testing.
The results showed that the effect of managerial stock ownership structure and a significant
positive effect on the performance of stocks, but institutional ownership have a positive effect
but not significant increase in stock performance. While investment opportunities have
significant positive effect on the performance of the stock on the Indonesia stock exchange. Test
results obtained by the finding that in unison between managerial ownership, institutional and
investment opportunities jointly affect the performance of the company's shares are listed on the
Manufacturing Indonesia Stock Exchange. This study was done in Indonesia and given the
differences in legal and governance stipulations between these countries, the findings of the
previous studies cannot be used to informed decisions.
50
Afhraf, Iqbal & Tariq (2017) examined the relationship between board ownership on earnings
per share in Nigeria. The study used a sample of 23 microfinance banks in Nigeria. Data were
collected from the annual report for a period of three years from 2011 to 2013. Multiple
regression technique was employed to analyze the effect of board composition on earnings per
share. The result provided insignificant and negative support on the effect of board independence
and earnings per share. This study used micro finance banks in Nigeria while this current study
used consumer goods companies presenting a limitation of sectorial peculiarities.
Amal and Ahmed (2017) investigated the impact of institutional ownership and ownership
concentration on firm stock return performance using panel data model. Our main ownership
measures include; percentage of institutional ownership held by different institutions in a firm
and percentage of a firm’s outstanding stocks held by the largest three block holders. We find
that there is no significant relationship between either institutional ownership or ownership
concentration and both ex post and ex ante return. Also, it was found that there is negative and
significant relationship between institutional ownership represented by some institutions and ex
post risk, while the relationship is negative and significant only between institutional ownership
by employee associations and ex ante risk. Ownership concentration has no effect on ex post risk
but it has a positive and significant effect on ex ante risk. This current study used other corporate
governance and firm attributes aside ownership attributes making it more robust for decision
purposes.
Sayumwe and Amroune (2017) examined the relationship between board ownership on market
price per share in Canada. The study used a sample of 50 Canadian companies that are listed on
the Toronto Stock Exchange. Data were collected from the annual report for a period of five
years from 2009 to 2013. Regression analysis technique was employed to analyze the effect of
51
board ownership on market price per share. The result provided significant and positive support
on the effect of board ownership directors on market price per share. This study was done in
Canada which has a different investment climate than Nigeria hence, the need for a domestic
study.
Shindu, Hashmi, Haq and Ntim (2016) analyzed the impact of ownership structure on dividend
payout (DIV) ratio of 100 companies related to non-financial sector listed in Karachi stock
exchange. The study sample period was from 2011–2015. The study adopted the use of multiple
regression analysis technique to analyse the data. The result of the fixed effects model as a panel
data analysis technique indicates that managerial ownership (MO) has shown significant and
negative impact on DIV which indicates that as MO rise, they will prefer to retain instead of
distribution. Institutional ownership is showing significant and positive behavior with DIV ratio
which also showing favorable arguments for dividend distribution. The stock was done in a
different economy which presents the problem of external validity and also, the variables used
are limited to make a wide range of decisions.
Moghaddam (2014) studied the effect of institutional investors ownership on stock returns for
companies listed in Tehran Stock Exchange for the period from 2008-2012. The study calculated
the percentage of ownership institutional investors using the total number of shares in hand of
banks and insurance, holding and investment companies, pension funds, finance companies and
investment funds, institutions and public companies divided by the company's outstanding total
shares and stock returns was measured through dividends and share price total return. The study
used control variables such as firm size, firm growth, financial leverage, type of industry and
year. The result using multiple regression analysis found a significant relationship between
52
institutional investors and stock return at 95% confidence level. The study findings cannot be
applied to the Nigerian situation due differences in legal, economic and governance settings.
Alzeaideen and AL-Rawash (2014) investigated the effect of different ownership structure (The
largest, Five Greatest, Institutional and Individual Shareholder Structure) on a share price
volatility of listed companies in Amman Stock Exchange. The research has four hypotheses. To
test each hypothesis; a model was defined based on dependent variables employed to measure
share price volatility. A panel data procedure is applied to the dataset that includes 51 Jordanians
companies from 2005 to 2009. Two empirical models are used OLS (Ordinary Least Square) and
SUR (Seemingly Unrelated Regression), and we found that SUR shows better and accurate result
than OLS. The results provide evidence of positive statistically significant relationship between
the largest shareholder and share price volatility. Also; the results reveal a positive and
significant relationship between the five greatest shareholder and share price volatility. This
finding cannot be used for effective decision making in Nigeria due to the problem of external
validity.
Amal (2014) studied the effect of institutional ownership and ownership concentration on firm
stock returns and financial performance of the listed companies in the Egyptian Stock Exchange.
For this purpose, panel data model is employed. The results from the analysis show that
institutional ownership has no effect on ex post stock returns as well as ex ante stock returns. On
the contrary, institutional ownership represented by top management and individuals have a
negative and significant effect on stock volatility, while employee associations have a positive
53
and significant effect. No significant effect is detected on ex ante risk except for employee
associations that have negative and significant effect on ex ante risk. In addition, the results show
that institutional ownership has no effect on stock liquidity except employee associations and
individuals that have a negative and significant effect on stock liquidity. Finally, the results show
that institutional ownership represented by companies, holdings and individuals have negative
effect on financial performance represented by ROA and ROE. Also, institutional ownership has
no effect on debt to equity ratio except banks that have negative and significant effect and
employee associations that have positive and significant effect. This study considered only
ownership structure while this current study looks at other corporate attributes making it wider in
scope.
2.2.7 Board Independence and Stock Returns
Sumail (2018) explored the impact of corporate governance on dividend payout ratio. In order to
investigate the linkage between corporate governance and dividend payout ratio, data of four
fiscal years (2013-2016) was extracted from annual reports of Indonesian publicly listed
companies. The study examines the impact of ownership structure and corporate governance
mechanisms on dividend payout ratio using panel data regression model. The findings of the
study indicated that board independence, board size, institutional ownership, size and earnings
before interest and tax are positive; whereas the CEO duality, managerial ownership, ownership
concentration and leverage are in negative relation with dividend payout ratio. The data for
publicly listed companies in Indonesia may not be effective for decision making in Nigerian
consumer goods sector.
54
Sani and Musa (2017) examined the impact of corporate board attributes on dividend policy of
listed deposit money banks in Nigeria. The data was collected from annual reports and accounts
of the sampled companies for the period of fifteen years from 2006 to 2015. Data is analyzed by
means of descriptive statistics, correlation analysis and panel data regression technique was used
to analyze the data using STATA software version 13.00. The variables tested include board
size, board composition, audit committee size and managerial ownership. The result found that
board size, composition and ownership structure have significant negative impact on dividend
policy of listed DMB’s in Nigeria, and audit committee is statistically insignificant. This study
although done in Nigeria was on DBMs while that current study was done in the consumer goods
sector.
Aloui and Jarboui (2017) investigated the relationship between the stock return, the outside and
the independent directors. The volatility, as the dependent variable in the model, is measured by
the standard deviation of annual stock returns. The sample comprises 89 firms listed on the SBF
120 index over 2006-2012. The study used multiple regression analysis technique to analyse the
data. Findings revealed that the outside directors have a positive and significant effect on the
stock return. Moreover, the firm’s size and ROA have a negative effect on the stock return
volatility, which is clearly evidenced in all the regressions. On the other hand, the CEO, audit
size and debt ratio have statically significant and positive effects on the stock return volatility.
This study data stopped in 2012 while this current study data to 2019 making it more current to
rely on its findings for decision purpose.
Rostami, Rostami and Kohansa (2016) investigated the effect of corporate governance
components on return on assets and stock return of companies listed in Tehran stock exchange.
In order to test the hypothesis, about 469 firm-year observations were collected using systematic
55
sampling for a period of seven years. In this paper, we have used 6 internal components of a
corporate governance system such as ownership concentration, institutional ownership, Board
independence, Board size, CEO duality and CEO tenure as independent variables and their effect
on return on assets and stock return, as the firm financial performance evaluation criteria, were
studied. The control variables of this study are the market value of the equity and the ratio of
book value to market value of the equity. The results, which are based on estimated generalized
least square method, indicate that there is a significant positive relationship between ownership
concentration, Board independence, CEO duality and CEO tenure and return on assets. On the
other hand, there is a significant negative relationship between institutional ownership and Board
size and return on assets. Besides there is a significant positive relationship between institutional
ownership, Board independence, CEO duality and CEO tenure with stock return. However, there
is a significant negative relationship between ownership concentration and Board size with stock
return. Findings from this study will be misleading for decision purpose in Nigeria due problem
of external validity.
Faramarzi and Amini (2016) examined the relationship between board independence on earnings
per share in Tehran. The study used a sample of 109 companies that are listed on the Tehran
Stock Exchange. Data were collected from the annual report for a period of eight years from
2005 to 2012. Multiple regression technique was employed to analyze the effect of board
independence on earnings per share. The result provided insignificant and negative support on
the effect of board independence and earnings per share. Only board independence is considered
here, hence the need for estimations using other board attributes.
Azeez (2015), examined the relationship between board independence on earnings per share in
Sri Lanka. The study used a sample of 100 listed companies in the Colombo Stock Exchange.
56
Data were collected from the annual report for a period of three years from 2010 to 2012.
Multiple regression technique was employed to analyze the effect of board independence on
earnings per share. The result provided significant but negative support on the effect of board
independence and earnings per share. The findings from this study will not be used to take
informed decisions due to differences in corporate governance codes between these countries.
Shehu (2015) examined the relationships between board characteristics and dividend payout
among the Malaysian public listed companies. A sample of 164 Malaysian companies for the
year 2013 was selected from the Bursa Malaysia website. This paper examines the relationships
between independent non-executive directors, board size, CEO, proportion of family member on
board and concentrated ownerships and dividend payout among the Malaysian listed companies.
The findings show that concentrated ownership is found to be positive and significant in
influencing the dividend payout. But the independent director is also found to be significant in
influencing the dividend payout in negative direction. The study although robust was done in
Malaysia which present the problem of external validity
Ayesha, Chathurika, Kumarihami, Sagarika, Nanayakkara and Abeywardane (2015) examined
the relationship between board non-executive independence on earnings per share in Sri Lanka.
The study used a sample of 26 listed manufacturing companies in the Colombo Stock Exchange.
Data were collected from the annual report for a period of six years from 2009 to 2014. Multiple
regression technique was employed to analyze the effect of board non-executive independence
on earnings per share. The result provided significant but negative support on the effect of board
independence and earnings per share. This study was done in the manufacturing companies’
sector while this current study is done in the consumer goods sector.
57
Ahmad and Hamdan (2015) examined the impact of board independence on earnings per share in
Bahrain. The study used a sample of 42 listed companies in Bahrain Stock Exchange database.
Data were collected from the annual report for a period of five years from 2007 to 2011. Multiple
regression technique was used to analyze the effect of board independence on earnings per share.
The result provided negative insignificant support on the effect of board independence directors
on earnings per share.
2.2.8 Board Size and Stock Returns
Sumail (2018) explored the impact of corporate governance on dividend payout ratio. In order to
investigate the linkage between corporate governance and dividend payout ratio, data of four
fiscal years (2013-2016) was extracted from annual reports of Indonesian publicly listed
companies. The study examines the impact of ownership structure and corporate governance
mechanisms on dividend payout ratio using panel data regression model. The findings of the
study indicated that board independence, board size, institutional ownership, size and earnings
before interest and tax are positive; whereas the CEO duality, managerial ownership, ownership
concentration and leverage are in negative relation with dividend payout ratio. The data for
publicly listed companies in Indonesia may not be effective for decision making in Nigerian
consumer goods sector.
Sayumwe and Amroune (2017) examined the relationship between board size on market price
per share in Canada. The study used a sample of 50 Canadian companies that are listed on the
Toronto Stock Exchange. Data were collected from the annual report for a period of five years
from 2009 to 2013. Regression analysis technique was employed to analyze the effect of board
58
size on market price per share. The result provided significant and positive support on the effect
of board size on market price per share. The work was done in Canada and not Nigeria.
Elmagrhi, Ntim, Crossley, Malagila, Fosu, and Vu (2017) examined the extent to which
corporate board characteristics influence the level of dividend pay-out ratio using a sample of
UK small and medium-sized enterprises (SMEs) from 2010 to 2013 listed on the Alternative
Investment Market. The data is analyzed by employing multivariate regression techniques,
including estimating fixed effects, lagged effects and two-stage least squares regressions. The
results show that board size, the frequency of board meetings, board gender diversity and audit
committee size have a significant relationship with the level of dividend pay-out. Audit
committee size and board size have a positive association with the level of dividend pay-out,
whilst the frequency of board meetings and board gender diversity has a significant negative
relationship with the level of dividend pay-out. By contrast, the findings suggest that board
independence and CEO role duality do not have any significant effect on the level of dividend
pay-out. This study used only corporate governance as predictors of dividend payout while the
current study adopted firm specific variables as well as other corporate attributes.
Elmagrhi, Ntim, Crossley, Malagila, Fosu, and Vu (2017) examined the extent to which
corporate board characteristics influence the level of dividend pay-out ratio using a sample of
UK small and medium-sized enterprises (SMEs) from 2010 to 2013 listed on the Alternative
Investment Market. The data is analyzed by employing multivariate regression techniques,
including estimating fixed effects, lagged effects and two-stage least squares regressions. The
results show that board size, the frequency of board meetings, board gender diversity and audit
committee size have a significant relationship with the level of dividend pay-out. Audit
committee size and board size have a positive association with the level of dividend pay-out,
59
whilst the frequency of board meetings and board gender diversity has a significant negative
relationship with the level of dividend pay-out. By contrast, the findings suggest that board
independence and CEO role duality do not have any significant effect on the level of dividend
pay-out. This study used only corporate governance as predictors of dividend payout while the
current study adopted firm specific variables as well as other corporate attributes.
Sani and Musa (2017) examined the impact of corporate board attributes on dividend policy of
listed deposit money banks in Nigeria. The data was collected from annual reports and accounts
of the sampled companies for the period of fifteen years from 2006 to 2015. Data is analyzed by
means of descriptive statistics, correlation analysis and panel data regression technique was used
to analyze the data using STATA software version 13.00. The variables tested include board
size, board composition, audit committee size and managerial ownership. The result found that
board size, composition and ownership structure have significant negative impact on dividend
policy of listed DMB’s in Nigeria, and audit committee is statistically insignificant. This study
although done in Nigeria was on DBMs while that current study was done in the consumer goods
sector.
Rostami, Rostami and Kohansa (2016) investigated the effect of corporate governance
components on return on assets and stock return of companies listed in Tehran stock exchange.
In order to test the hypothesis, about 469 firm-year observations were collected using systematic
sampling for a period of seven years. In this paper, we have used 6 internal components of a
corporate governance system such as ownership concentration, institutional ownership, Board
independence, Board size, CEO duality and CEO tenure as independent variables and their effect
on return on assets and stock return, as the firm financial performance evaluation criteria, were
studied. The control variables of this study are the market value of the equity and the ratio of
60
book value to market value of the equity. The results, which are based on estimated generalized
least square method, indicate that there is a significant positive relationship between ownership
concentration, Board independence, CEO duality and CEO tenure and return on assets. On the
other hand, there is a significant negative relationship between institutional ownership and Board
size and return on assets. Besides there is a significant positive relationship between institutional
ownership, Board independence, CEO duality and CEO tenure with stock return. However, there
is a significant negative relationship between ownership concentration and Board size with stock
return. Findings from this study will be misleading for decision purpose in Nigeria due problem
of external validity.
Haider, Khan, Al-Sufy and Iqbal (2015) examined the relationship between board size on
earnings per share in Pakistan companies. The study used a sample of selected firms listed on the
Pakistan stock exchange. Data were collected from the annual report of the companies for a
period of five years from 2008 to 2012. Multiple regression analysis was used as the method of
data analysis. The result provided significant and positive effect of board size on earnings per
share.
Sayumwe and Amroune (2015) examined the relationship between board size on earnings per
share in Canada. The study used a sample of 36 Canadian companies that are listed on the
Toronto Stock Exchange. Data were collected from the annual report for a period of three years
from 2011 to 2013. Multiple regression technique was employed to analyze the effect of board
size on earnings per share. The result provided significant and positive support on the effect of
board size on earnings per share. The study was done in Canada not Nigeria.
61
Malik, Wan, Ahmad, Naseem and Rehman (2014) investigated the relationship between board
size on earnings per share in Pakistan companies. The study used a sample of selected firms
listed on the Karachi stock exchange. Data were collected from the annual report of the
companies for a period of five years from 2008 to 2012. Linear regression analysis was used as
the method of data analysis. The result provided significant and positive effect of board size on
earnings per share. The study used only board size while this current study used other board
attributes which makes for the much difference.
Meyer and Wet (2014) assessed the relationship between board non-executive and earnings per
share in South Africa. The study used a sample of 126 selected listed South African companies.
Multiple regression technique was employed to analyze the effect of board non-executive on
earnings per share. The result provided significant and positive support on the effect of board
non-executive on earnings per share.
Adebayo, Ayeni and Oyewole (2013) examined the relationship between board independence on
earnings per share in Nigeria non-financial companies. The study used a sample of 30 listed
manufacturing firms, financial and service institutions. Data were collected from the annual
reports for a period of six years from 2005 to 2010. Multiple regression technique was employed
to analyze the effect of board independence on earnings per share. The result provided
significant and positive support on the effect of board independence and earnings per share.
2.2.9 Board Expertise and Stock Returns
Salawudeen and Aminu (2020) examined the direct and indirect effect of board characteristics on
shareholders’ wealth of manufacturing companies in Nigeria using dividend policy as mediator.
62
Correlational and explanatory research designs were used for the study. This study was based on
the functional/ positivist paradigm. As the study is quantitative was nature and used secondary
sources of data. The data were collected from the annual reports and financial statement of the
sampled listed manufacturing companies filed with SEC and NSE. The population of this study
covered the manufacturing companies listed on the Nigerian stock exchange as at 31st
December, 2008 up till 2018. This study sampled listed manufacturing companies on stratified
random sample due to similarity in their assets allocation from other sectors. Using path analysis,
significant impact of dividend payout on BX and SW exist. BC, BS, and BG have positive
significant effect on SW (EPS and MPS). It’s concluded that, board characteristics can improve
shareholders’ wealth by using dividend policy. This study used the entire manufacturing sector
while this current study used only consumer goods sector because the findings of the entire
manufacturing sector cannot be effectively used in making informed conclusions in the consumer
goods sector.
Adamu, Ishak and Hassan (2019) examined the relationship between corporate board attributes
and dividend payout likelihood of non-financial firms in Nigeria. Specifically, the study aimed at
exploring the influence of gender diversity and financial expertise on the likelihood of dividends
payout. Pooled logistic regression was used on a sample of data from non-financial listed firms
in Nigeria spanning from 2009 to 2015. The study documents gender diversity and financial
experts have significant effect on a firm’s likelihood to distribute cash dividends. The results
remain unchanged after adjusting the standard errors for clustering at a firm. The overall finding
suggests that diversity in terms of gender and expertise play a critical role all things being equal
in determining the decision to pay cash dividends shareholders of listed firms in Nigeria. This
63
study concentrated on the entire non-financial firms and the findings cannot be applied to the
consumer goods sector specifically, hence the needs for a consumer goods sector study.
Sarwar, Xiao, Husnain and Naheed (2018) focused on a new dimension; financial expertise on
the corporate board for explaining the dividend policy dynamics in the emerging equity markets
of China and Pakistan.The study employs static (fixed effect (FE) and random effect (RE)) and
dynamic models – two-step generalized method of moments (GMM) estimation techniques by
Arellano and Bond (1991) and Arellano and Bover (1995) – during the timespan from 2009 to
2014. Further, this study re-estimated FE, RE and GMM two-step estimation techniques by
excluding the non-dividend-paying companies, and also employed instrumental variable
regressing by using two instrumental variables – industry average financial expertise of the board
and board size – as proxies for board financial expertise to control the possible endogeneity. The
study reveals that Chinese firms having more financial expertise on the board do not take
dividends as a control mechanism (substitution hypothesis), while Pakistani firms support the
compliment hypothesis and use dividends as a control mechanism to mitigate agency conflict to
protect shareholders’ interests and keep additional funds from the manager’s opportunism.
Further robustness models also confirm the presence of a significant association between
dividend policy and board financial expertise in both equity markets. This study was done in
china and such its findings cannot be applied effectively in the Nigerian context.
Meyer and Wet (2014) assessed the relationship between board non-executive and earnings per
share in South Africa. The study used a sample of 126 selected listed South African companies.
Multiple regression technique was employed to analyze the effect of board non-executive on
64
earnings per share. The result provided significant and positive support on the effect of board
non-executive on earnings per share.
Adebayo, Ayeni and Oyewole (2013) examined the relationship between board independence on
earnings per share in Nigeria non-financial companies. The study used a sample of 30 listed
manufacturing firms, financial and service institutions. Data were collected from the annual
reports for a period of six years from 2005 to 2010. Multiple regression technique was employed
to analyze the effect of board independence on earnings per share. The result provided
significant and positive support on the effect of board independence and earnings per share.
Abdullah, Faudziah and Yahya (2012) examined the relationship between board characteristics
and the firm performance of non-financial listed Kuwaiti firms. To achieve the objectives of the
study, the data were collected from a sample of 136 companies for the financial year 2009.
Variables such as CEO duality, COE tenure, audit committee size, board size and board
composition were considered as predictors of the firm performance that was measured
employing the return on assets (ROA). By contrast, the effects of CEO tenure and leverage on
firm performance were found to be negative and significant at the chosen level of significance.
To test the hypotheses of the study, multiple linear regression analysis using SPSS 18.0 was
utilized. Using the firm size and leverage as a control variable, the findings of the study support
the positive effects of CEO duality and audit committee size on ROA. This study used only data
for 2009 hence, the need for a more current which captures more recent governance rules.
Yusoff and Adamu (2012) examined the relationship between non-executive independence
directors on earnings per share in Malaysia. The study used a sample of 813 listed companies on
Bursa Malaysia. Data were collected from the annual report for a period of three years from 2009
65
to 2011. Correlational analysis was used to test the hypotheses on the relationships between non-
executive independence director and earnings per share. The result provided positive significant
association between non-executive independence directors on earnings per share. This used
correlation as data analysis technique while the current study used multiple regression analysis to
ascertain the causal effects between the dependent and predictor variables.
2.3 Theoretical Framework
2.3.1 Arbitrage Pricing Theory
Arbitrage Pricing Theory (APT) developed by Ross (1976) as a Capital Asset Pricing Model
(CAPM), is premised on the basis that the stock returns are caused by a specific number of
economic variables. The theory further suggests that there are different risks in the economy that
cannot be eradicated by sole diversification. It is a one-period model in which every investor
believes that the stochastic properties of returns of capital assets are consistent with a factor
structure. Ross (1976) argued that if equilibrium prices offer no arbitrage opportunities over
static portfolios of the assets, then the expected returns on the assets are approximately linearly
related to the factor loadings. Ross’ (1976) heuristic argument for the theory is based on the
preclusion of arbitrage. Her formal proof showed that the linear pricing relation is a necessary
condition for equilibrium in a market where agents maximize certain types of utility. The
subsequent work, derives either from the assumption of the preclusion of arbitrage or the
equilibrium of utility-maximization. A linear relation between the expected returns and the betas
is tantamount to an identification of the stochastic discount factor (SDF).
Also, CAPM was introduced by Sharpe (1964), Lintner (1965) and Mossin (1966). The theory
states that non-diversifiable market risk impacts expected security returns. According to Al-
66
Shami and Ibrahim (2013), the general notion behind the APT is that compensation is provided
for the investors due to the time value of money or systematic risk which is characterized by the
risk-free rate. Another compensation for taking up extra risk can be calculated through a risk
measure (Beta) by comparing the asset returns with the market for a time period and with the
market risk premium.
According to Gatuhi, Gekara and Muturi (2015), APT assumes that various market and industry
related factors contribute towards returns on stocks. These multi factor models have been
developed with the assumption that stock returns are based upon several economic factors which
include market return as well as other factors, and can be grouped into industry wide and
macroeconomic forces. The industry related variables can vary with the nature of industry and
economic conditions. The exact number of industry related variables is not identified so far. The
frequently used macroeconomic and industry variables in existing literature are interest rate,
exchange rate, money supply, consumer price index, risk free rate, industrial production, balance
of trade, dividend announcements, and unexpected events in national and international markets.
Amtiran, Indiastuti, Nidar and Masyita (2017) concluded that model APT one factor is valid
more than multi-factor APT. Other studies that found APT useful in relating changes in returns
on investments to unanticipated changes in a range of key value drivers for these investments
include Acikalin, Aktas and Unal (2008), Ali (2013), Ibrahim and Musah (2014), and Kirui,
Wawire and Onono (2014).
Basically, at the core of APT is the recognition that only a few systematic factors affect the long-
term average returns of financial assets. APT does not deny the myriad factors that influence the
daily price variability of individual stocks and bonds, but it focuses on the major forces that
move aggregates of assets in large portfolios. By identifying these forces, one can
67
gain an intuitive appreciation of their influence on portfolio returns. The ultimate goal is to
acquire a better understanding of portfolio structuring and evaluation and thereby to improve
overall portfolio design and performance. The returns on an individual stock in, say, the coming
year, will depend on a variety of anticipated and unanticipated events. Anticipated events will be
incorporated by investors into their expectations of returns on individual stocks and thus will be
incorporated into market prices. Generally, however, most of the return ultimately realized will
be the result of unanticipated events. Of course, change itself is anticipated, and inves tors know
that the most unlikely occurrence of all would be the exact realization of the most probable
future scenario. But even though it is realized that some unforeseen events will occur, their
direction or their magnitude is still unknown. What can be known is the sensitivity of asset
returns to these events.
Asset returns are also affected by influences that are not systematic to the economy as a whole,
influences that impinge upon individual firms or particular industries but are not directly related
to overall economic conditions. Such forces are called idiosyncratic to distinguish them from the
systematic factors that describe the major movements in market returns. Because, through the
process of diversification, idiosyncratic returns on individual assets cancel out, returns on large
portfolios are influenced mainly by the systematic factors alone.
Systematic factors are the major sources of risk in portfolio returns. Actual portfolio returns
depend upon the same set of common factors, but this does not mean that all large portfolios
perform identically. Different portfolios have different sensitivities to these factors. A portfolio
that is so hedged as to be insensitive to these factors, and that is sufficiently large and well-
proponed that idiosyncratic risk is diversified away, is essentially riskless. Because the
systematic factors are the primary sources of risk, it follows that they are the principal
68
determinants of the expected, as well as the actual, returns on portfolios. The logic behind this
view is not simply the usual economic argument that more return can be obtained only by
bearing more risk.
2.3.2 Agency Theory
The separation between owners and managers creates an agency relationship. An agency
relationship exists when one or more persons (the principal or principals) hire another person
or persons (the agent or agents) as decision-making specialists to perform a service. (Ireland,
Hoskisson&Hitt, 2011). Top managers are hired hands who may very likely be more interested
in their personal welfare than that of the shareholders (Berle& Means, 1932). Agency problem
arises where management emphasizes such policies that increase the size of the firm or that
diversify the firm into unrelated businesses to the detriment of the shareholders that result in a
reduction of dividends and stock price. Agency theory is related to examining and deciding
two problems that are prominent in relationship between principals and (shareholders) and
their agents (board of directors): The agency problem that arises when the desires or objectives
of the owners and the agents conflict or it is difficult or expensive for the owners to verify
what the agent is actually doing. The executives may be more interested in increasing their
salary than raising stock dividends (Olowookere, 2008).
Monitoring the functioning of boards, or the 'control' role (Boyd, 1990; Johnson, Daily,
&Ellastrand, 1996), is an important focus of corporate governance research (Hillman &
Dalziel, 2003). The primary theoretical framework that relates this monitoring function to firm
performance is derived from agency theory, which predicts that conflicts of interest can arise
from the separation of ownership and control in organisations (Berle& Means, 1932; Fama&
69
Jensen, 1983). From this perspective, the primary function of boards is to monitor the actions
of managers (agents) in order to protect the interests of shareholders (principals) (Mizruchi,
1983; Eisenhardt, 1989; Andreasson, 2011). Should management pursue their own interests at
the expense of the shareholders' interests (Nicholson & Kiel, 2007), agency costs typically
arise (Berle& Means, 1932). Monitoring by boards of directors may therefore reduce the
agency costs inherent in the separation of ownership and control and, in this way, improve firm
performance (Fama, 1980; Zahra & Pearce, 1989). Agency theory also predicts that the
incentives available to directors and boards vary and are therefore an important precursor to
effective monitoring (Kyereboah-Coleman &Biekpe, 2005), and that firm performance will
therefore improve if these are aligned with the interests of shareholders (Jensen &Meckling,
1976; Fama, 1980).
The principal-agent problem arises when a principal compensates an agent for performing certain
act that are useful to the principal and costly to the agent, and where there are elements of the
performance that are costly to observe. This is the case to some extent for all contracts that are
written in a world of information asymmetry, uncertainty and risk. Wheelen and Hunger (2010)
are of the opinion that, the probability that agency problem will occur increases when shares are
owned by a large number of dispersed shareholders in which no single investor owns more than a
small proportion of the entire issued shares. A similar problem will also arise when the corporate
board is composed of persons who know less about the company or who are personal friends of
top management, and when a larger percentage of members of the board are executive directors.
Consequently, in order to curtail the possibility of the ethical threat associated with separation of
management from control and achieve optimality, principals and agents are involved in
contractual agreement including the institution of control procedures such as auditing. The
70
principal and agent connection as portrayed in agency theory is significant in appreciative of how
the phenomenon of an auditor has evolved. Agents are appointed by the principals and transfer
the authority to make some decisions to them. As a result, agents are entrusted with the resources
of the firms by the principals. But asymmetric information between principals and agents has
engendered divergent interests. Subsequently, lack of trust in the agents necessitated the
initiation of certain control mechanisms, such as the audit, to strengthen this trust (Welch, 2003).
Agency theory therefore is an important accountability economic theory which elucidates the
development of audit quality.
Agency theory is therefore concerned with contractual relationship between two or more
persons called the agent(s) to perform some services on behalf of the principal. Both the agents
and the principal are presumed to have entered into mutual agreement or contract motivated
solely by self-interest. The principal delegates decision making responsibility to agents
(Chowdhury, 2004). It is a concept that explains why behavior or decisions vary when
exhibited by members of a group. Specifically, it describes the relationship between one party,
called the principal that delegates work to another, called the agent. It explains their differences
in behavior or decisions by noting the two parties often have different goals and, independent
of their respective goals, different attitudes toward risk. Invariably, the agents’ decision choices
are assumed to have effect on both parties. These relationships, according to Bromwich (1992)
are perceived in economic and business life and also generate more problems of contracting
between entities in the economy. Other related reviews include; The Sarbanes-Oxley Act of
2002 (SOX) which requires companies to report on the effectiveness of their internal controls
over financial reporting as part of an overall effort to reduce fraud and restore integrity to the
financial reporting process. Morris (2011) asserted that software vendors that market enterprise
71
resource planning (ERP) systems have taken advantage of this new focus on internal controls
by emphasizing that a key feature of ERP systems is the use of “built-in” controls that mirror a
firm’s infrastructure. They emphasize these features in their marketing literature, asserting that
these systems will help firms improve the effectiveness of their internal controls as required by
SOX. Internal control is one of many mechanisms used in business to address the agency
problem. Others include financial reporting, budgeting, audit committees, and external audits
(Jensen and Payne 2003). Studies have shown that internal control reduces agency costs
(Abdel-khalik 1993; Barefield et al. 1993) with some even arguing that firms have an economic
incentive to report on internal control, even without the requirements of SOX (Deumes and
Knechel 2008). Their argument assumes that providing this additional information to the
principal (shareholder) about the behaviour of the agent (management) reduces information
asymmetry and lowers investor risk and, therefore, the cost of equity capital.
During the 1980s, several high-profile audit failures led to creation of the Committee of
Sponsoring Organizations of the Treadway Commission (COSO) organized for the purpose of
redefining internal control and the criteria for determining the effectiveness of an internal
control system (Simmons 1997). They studied the causal factors that can lead to fraudulent
financial reporting and developed recommendations for public companies, independent
auditors, educational institutions, the Securities Exchange Commission (SEC) and other
regulators (COSO 1985). The product of their work is known as the COSO Internal Control—
Integrated Framework (Simmons 1997). The framework also points out that controls are most
effective when they are “built into” the entity’s infrastructure (COSO 1992,) and further states
that “built in controls support quality and empowerment initiatives, avoid unnecessary costs
and enable quick response to changing conditions” (COSO 1992).
72
Morris (2011) separates internal controls into those that are general (entity-wide) controls from
those that are specific (account-level) controls. He believes that if management was overriding
control features in order to manage earnings, then one would expect to find more Internal
Control Weaknesses related to general controls, even if the specific (account-level) controls are
effective. This type of behaviour should be uncovered during the audit process since this is an
area of concern specifically identified in Auditing Standard No. 5, Paragraph 24, which states
that entity-level controls include controls over management override. On the other hand, a
stronger argument could be made that if general controls are in place and working, then one
would expect to find less Internal Control Weaknesses related to general controls.
In the Executive Summary of “Enterprise Risk Management-Integrated Framework” 2004 by
the Committee of Sponsoring Organizations (COSO, 2004) of the Treadway Commission,
Internal controls have been incorporated into policies, rules and regulations to help
organizations achieve their established objectives. This is in line with Pany, Gupta and Hayes’
assertion that internal controls are meant to help an organization achieve its objectives. The
COSO commission was partly instituted in response to a series of high-profile scandals and
business failures where stakeholders (particularly Investors) suffered tremendous losses. This
study however differs in that it is done for an institution that is not ailing though there are
reported incidences of scandals and financial misfeasance. The end results should therefore aid
the preventive mechanism rather than being reactionary. Entities exist to provide value to its
stakeholders but are normally face with uncertainty.
2.3.3 Stakeholder Theory
73
Stakeholder theory was propounded by Edward Freeman in 1984. Stakeholder theory is an
extension of the agency view, which expects board of directors to take care of the interests of
shareholders. However, this narrow focus on shareholders has undergone a change and boards
are now expected to take into account the interests of many different stakeholder groups,
including interest groups linked to social, environmental and ethical considerations (Freeman,
1984; Donaldson & Preston, 1995; Freeman, Andrew, Wicks, Bidhan& Parmar, 1991). This
shift in the role of the boards has led to the development of stakeholder theory. Stakeholder
theory views that “companies and society are interdependent and therefore the corporation
serves a broader social purpose than its responsibilities to shareholders (Kiel & Nicholson,
2003). Likewise, Freeman (1984), one of the original proponents of stakeholder theory, defines
stakeholder as “any group or individual who can affect or is affected by the achievement of the
organization’s objectives”. There is considerable debate among scholars on whether to take a
broad or narrow view of a firm’s stakeholder. Freeman’s definition (1984) cited above proposes
a broad view of stakeholders covering a large number of entities, and includes almost all types
of stakeholders. In contrast, Clarkson (1994) offers a narrow view, suggesting that voluntary
stakeholders bear some form of risk as a result of having invested some form of capital, human
or financial, or something of value, in a firm. Involuntary stakeholders are placed at risk as a
result of a firm’s activities. But without the element of risk there is no stake. The use of risk
enables stakeholders a legitimate claim on a firm’s decision making, regardless of their power
to influence the firm. Donaldson and Preston (1995) identify stakeholders as “persons or groups
with legitimate interests in procedural and/or substantive aspects of corporate activity.” For
Example, Wheeler and Sillanpaa (1997) identified stakeholder as varied as investors, managers,
employees, customers, business partners, local communities, civil society, the natural
74
environment, future generations, and non-human species, many of whom are unable to speak
for them.
Mitchell, Agle and Wood (1997) argued that stakeholders can be identified by possession of
one, two or all three of the attributes of: power to influence the firm, the legitimacy of
relationship with the firm, and the urgency of their claim on the firm. This typology allows
managers to pay attention and respond to various stakeholder types. Stakeholder theory
recognizes that many groups have connections with the firm and are affected by firm’s decision
making. Freeman et al. (2004) suggests that the idea of value creation and trade is intimately
connected to the idea of creating value for shareholders; they observe, “business is about
putting together a deal so that suppliers, customers, employees, communities, managers, and
shareholders all win continuously over time.” Donaldson and Preston (1995) refer to the myriad
participants who seek multiple and sometimes diverging goals. Manager’s view of the
stakeholders’ position in the firm influences managerial behaviour.
However, Freeman et al. (2004) suggests that managers should try to create as much value for
stakeholders as possible by resolving existing conflicts among them so that the stakeholders do
not exit the deal. Carver and Oliver (2002) examine stakeholder view from non-financial
outcomes. For example, while shareholders generally define value in financial terms, others
stakeholders may seek benefits “such as the satisfaction of pioneering a particular
breakthrough, supporting a particular kind of corporate behaviour, or, where the owner is also
the operator, working in a particular way. It means stakeholders have ‘no equity stakes’ which
requires management to develop and maintain all stakeholder relationships, and not of just
shareholders.
75
This suggests the need for reassessing performance evaluation based on traditional measures of
shareholder wealth and profits by including measures relating to different stakeholder groups
who have non-equity stakes. Nonetheless many firms do strive to maximize shareholder value
while, at the same time, trying to take into account the interest of the other stakeholders.
Sundaram and Inkpen (2004) argued that objective of shareholder value maximization matters
because it is the only objective that leads to decisions that enhance outcomes for all
stakeholders. They argue that identifying a myriad of stakeholders and their core values is an
unrealistic task for managers (Sundaram &Inkpen, 2004). Proponents of stakeholder
perspective also argue that shareholder value maximization will lead to expropriation of value
from non-shareholders to shareholders. However, Freeman et al. (2004) focus on two core
questions: ‘what is the purpose of the firm?’ and ‘what responsibility does management have to
stakeholders? They posit that both these questions are interrelated and managers must develop
relationships, inspire their stakeholders, and create communities where everyone strives to give
their best to deliver the value the firm promises. Thus, the stakeholder theory is considered to
better equip managers to articulate and foster the shared purpose of their firm.
2.3.4 Stewardship Theory
While Agency theory assumed that principals and agents have divergent interests and that
agents are essentially self-serving and self-centered, Stewardship theory takes a diametrically
opposite perspective. It suggests that the agents (directors and managers) are essentially
trustworthy and good stewards of the resources entrusted to them, which makes monitoring
redundant (Donaldson 1990; Donaldson & Davis, 1991; Donaldson & Davis, 1994; Davis,
Schoorman& Donaldson, 1997). Donaldson and Davis (1991) observed that organizational role-
holders are conceived as being motivated by a need to achieve, to gain intrinsic satisfaction
76
through successfully performing inherently challenging work, to exercise responsibility and
authority, and thereby to gain recognition from peers and bosses. The stewardship perspective
views directors and managers as stewards of firm. As stewards, directors are likely to maximize
the shareholders’ wealth. Davis et al. (1997) posited that stewards derive a greater utility from
satisfying organizational goals than through self-serving behavior. They argued that the
attainment of organizational success also satisfies the personal needs of the stewards.
Stewardship theory suggests that managers should be given autonomy based on trust, which
minimizes the cost of monitoring and controlling behavior of the managers and directors. When
managers have served a firm for considerable period, there is a “merging of individual ego and
the corporation (Donaldson & Davis, 1991). Stewardship theory considers that manager’s
decisions are also influenced by nonfinancial motives, such as need for achievement and
recognition, the intrinsic satisfaction of successful performance, plus respect for authority and
the work ethic. These concepts have been well documented throughout the organizational
literature in the work of scholars such as Argyris (1964), Herzberg (1966), McClelland (1961),
and Muth and Donaldson (1998).
Davis et al. (1997) suggested that managers identify with the firm and it leads to personalization
of success or failure of the firm. Daily (2003) argued that managers and directors are also
interested to protect their reputation as expert decision makers. As a result, managers operate
the firm in a manner that maximizes financial performance, including shareholder returns, as
firm performance directly impacts perception about managers’ individual performance. Fama
(1980) suggested that managers who are effective as stewards of the firm are also effective in
managing their own careers. Supporting this view, Shleifer and Vishny (1997) suggested that
managers who bring good financial returns to investors, establish a good reputation that allows
77
them to re-enter the financial markets for the future needs of the firm. From the stewardship
theory perspective, superior performance of the firm was linked to having a majority of the
inside (executive) directors on the board since these inside directors (managers) better
understand the business, and are better placed to govern than outside directors, and can
therefore make superior decisions (Donaldson, 1990, Donaldson & Davis, 1991).
Stewardship theory argues that the effective control held by professional managers empowers
them to maximize firm performance and corporate profits. Consequently, insider-dominated
boards are favored for their depth of knowledge, access to current operating information,
technical expertise and commitment to the firm. Similarly, CEO duality (i.e., same person
holding the position of Chair and the chief executive) is viewed favorably as it leads to better
firm performance due to clear and unified leadership (Donaldson & Davis, 1991; Davis, et al.,
1997). Several studies supported the view that insider directors (managers), who possess a
superior amount and quality of information, make superior decisions (Baysinger & Hoskisson,
1990; Baysinger, Kosnick & Turk, 1991; Boyd 1994; Muth & Donaldson, 1998) compared the
predictions of agency theory with that of stewardship theory and found support for stewardship
theory being a good model of reality. Bhagat and Black (1999) have also found that firms with
boards consisting of a greater number of outside directors (representing agency theory
perspective), perform worse than firms with boards with less number of outside directors. As
such, some support exists for the stewardship perspective both conceptually e.g., Davis et al.,
(1997) and also empirically Bhagat and Black (1999).
CHAPTER THREE
RESEARCH METHODOLOGY
78
3.1 Research Design
This study adopted a descriptive ex- post facto research method and positivist research
philosophy for the purpose of addressing the research problem. An ex- post facto research design
is commonly used in studies that investigate possible cause-and-effect relationships by observing
a condition and searching back in time for plausible causal factors. A positivist research is
applied when a research tests a theory rather than develop a new one. In the case of this study,
the research investigated the effect of firm attributes, ownership structure and board attributes on
stock returns after the event under investigation has taken place.
3.2 Population, Sample and Sampling Techniques
The population of the study comprised all the twenty-three (23) listed consumer good firms on
the Nigerian Stock Exchange as at 2019. The study used purposive sampling technique to obtain
a sample size of sixteen (16) firms listed in the consumer goods sector. This number is arrived at
using the criteria that a company must have complete information for the number of years under
consideration.
Table 3.1 Population of the Study
79
S/N Name Year of Listing
1 Champion Brewery Plc 1983
2 Golden Guinea Brewery Plc 1979
3 Guinness Nigeria Plc 1965
4 International Brewery Plc 1995
5 DN Tyre& Rubber Plc 2001
6 Nigerian Breweries Plc 1973
7 Nigerian Enamelware Plc 1979
8 7 Up Bottling Company Plc 1986
9 Vita Foam Nigeria Plc 2007
10 Dangote Sugar Refinery Plc 2006
11 Flour Mills Nigeria Plc 1979
12 Honeywell Flour Mill Plc 2006
13 P. Z. Cussons Nigeria Plc 1974
14 Multi – Trex Integrated Foods Plc 2010
15 Nascon Allied Industries Plc 1992
80
16 Northern Nigeria Flour Mills Plc 1978
17 Dangote Flour Mills Plc 2008
18 Union Dicon Salt Plc 1993
19 U.T.C. Nigeria Plc 1972
20 Mcnichols Plc 2009
21 Unilever Nigeria Plc 1973
22 Cadbury Nigeria Plc 1979
23 Nestle Nigeria Plc 1976
Source: N.S.E. website, 2020.
Table 3.2 Sample Size of the Study
S/N Name
1 Champion Brewery Plc
2 Guinness Nigeria Plc
3 Unilever Plc
4 Nigerian Enamelware Plc
5 Multi-Trex Integrated food plc
81
6 Vita Foam Nigeria Plc
7 Dangote Sugar Refinery Plc
8 Flour Mills Nigeria Plc
9 Honeywell Flour Mill Plc
10 P. Z. Cussons Nigeria Plc
11 Nascon Allied Industries Plc
12 Northern Nigeria Flour Mills Plc
13 International Breweries Plc
14 McNichols Plc
15 Cadbury Nigeria Plc
16 Nestle Nigeria Plc
Source: N.S.E. website, 2020.
82
3.3 Methods of Data Collection
The study employed secondary sources for the purpose of data collection. The data was collected
from the annual reports of the sampled companies for a period of ten (10) years (2010 to 2019).
These firms are public limited companies listed on the Nigerian Stock Exchange. By virtue of
being public limited companies and as a requirement of being listed, annual financial report has
to be made available to the Nigerian Stock Exchange. Annual financial statements are a preferred
choice for the purpose of data collection based on the type of data to be collected, availability of
data to be collected, ease of access ability and ease of results comparability.
3.4 Techniques of Data Analysis and Model Specification
The study employed multiple regression technique as the procedure of analysis with aid of
STATA version 13 as a tool for analysis. The data for the study is panel in nature (that is cross-
sectional time series data). In order to check for endogeneity, the study used the Hausman
specification test. Additional robustness tests adopted in this research include the test for
Multicollinearity using the Variance Inflation Factor (VIF) and the Breutsch-Pagan test for
heteroscedasticity, to check for the fitness of model and reliability of findings.
Model Specification and Variable Measurement
The crux of the model is to study the determinants of stock returns of quoted consumer goods
companies in Nigeria. The determinants used as predictors of stock returns include firm
characteristics, ownership structure and board attributes. Thus, statistical analysis for this study
was rooted in Arbitrage Pricing Theory (APT) which is on the basis that the stock returns are
caused by a specific number of economic variables. The study examined the determinants of
83
stock returns among consumer goods firms. The model for the study in tandem with other
previous studies of Nguyen and Nguyen (2016) and Ltaifa and Khoufi (2016) is as presented
below:
SRit = b ๐+ β1FZit +β2FAit +β3PRit + β4OCit +β5IOit +β6MOit + β7BIit +β8BZit +β9BEit Ɛit…… (i)
Where: SR= Stock Returns, FZ= firm size, FA= age, PR= profitability, OC= ownership
concentration, IO= institutional ownership, MO= managerial ownership, BI= board
independence, BZ= board size, BE= board expertise
b0 = intercept (constant)
i= cross-sectional time
t=time series
ε = Error term
84
Measurement of Variables
S/N Variables Definitions Type Measurement Construct

Validity
Source
1 SR Stock Returns Dependent P1-P0 /P0 × 100 Ayuba

(2018); Bala
Where: P1 and Idris
represent price of (2015).
the stock in current
year as quoted at
the end of the
financial year. P0
represent price of
the stock in the last
financial year end.
2 FZ Firm Size Independent measured by Nguyen and

Natural logarithm Ngyuyen
of Total Assets. (2016); Bala
and Idris
(2015).
Akwe et al.
(2018).
Measured by
3. FA Age Independent firm’s listing age; Shafana,
that is the number Fathima and
of years that have Jariya
elapsed since the (2013)
year of the
company’s IPO.
4. PR. Profitability Independent Measured by ROA Sani,

which is given as (2016);
PBIT divided by Handoko
Total Assets. (2016).
5. OC Ownership Independent Measured by the Iqbal,

Concentration proportion of the Siddiq and
value of shares Gul (2016);
held by number of Erivelto and
block holders, Fernando
85
exceeding 5% to (2016);
the total number of Foroughi
ordinary and Fooladi
shareholders. (2012).
6. MO Managerial Independent Measured by the Ezazi,

Ownership proportion of Sadeghi and
number of shares Amjadi
owned by directors (2011);
to the total number Bawa and
of ordinary shares Isa (2014);
issued.
Teshima and
Shuto
(2008);
Wafa and
Younes,
(2014).
7. IO Institutional Independent Measured by the Iqbal,

Ownership proportion of Siddiq and
number of equity Gul (2016);
shares of the firm Hajara,
held by (2015);
institutional Yang, Chun
investors to the and
total number of Ramadili
ordinary shares. (2009).
8. BI Board Independent measured by the Alvas

Independence proportion of (2014);
independent non- Hassan and
executive directors Bello
on the board to the (2013);
total number of Akeju and
directors. Babatunde
(2017).
9. BZ Board Size Independent measured by the Adebiyi

total number of (2017);
executive and non- Holtz and
executive directors Neto (2014);
on the board Chalaki,
86
Didar and
Riahinezhad
(2012).
10 BE Board Independent Measured by the Gray and

Expertise proportion of Nowland
directors on the (2015);
board with Güner,
financial expertise Malmendier
to the total number and Tate
of directors. (2008).
Source: Researcher’s Compilation, 2020.
3.5 Justification of Methods
The choice of ex-post facto approach is that the event under study has already taken place. This
study depends on historical data. In line with the objectives and hypotheses formulated the study
made use of multiple regressions technique to determine the impact of independent variables on
the dependent variable, since it is the most suitable techniques for determining the extent of
impact of independent variables on dependent variable. Stata Statistical Package was used since
it allows for establishing the impact of independent variables on the dependent variable as well
as testing for robustness such as heteroscedasticity test, fixed and random effect test,
Multicollinearity test. The choice of secondary data is based on the fact that financial statements
are readily available and made public in company annual reports.
87
CHAPTER FOUR
DATA ANALYSIS AND INTERPRETATION
4.1 Data Presentation
The chapter begins with the discussion of the descriptive statistics of the variables, and then the
correlation matrix of the variables of the study. This is followed by the presentation,
interpretation and discussion of the regression results and test of hypotheses of the study. The
chapter ends with the discussion of the major findings of study. See appendix A.
4.1.1 Descriptive Statistics
This section contains the description of the properties of the variables ranging from the mean of
each variable, minimum, maximum and standard deviation. The summary of the descriptive
statistics of the variables are presented in table 4.1. The full result is contained in appendix B.
88
Table 4.1: Descriptive Statistics
Variables Obs Mean Std Dev Min Max
SR 160 .5684284 5.108861 . -1 63.79638
FZ 160 7.665493 2.200853 2.83181 14.8783
FA 160 28.3 14.39025 1 54
PR 160 .3020525 .2332101 -.223967 .891987
OC 160 .5958285 .1879737 .01 .861
MO 160 .1754935 1.182254 .001 .15
IO 160 .1927492 .0811085 .092 .701
BI 160 .0894777 .0604368 .0 .285714
BZ 160 12.10625 2.1503316 6 16
BE 160 .092468 .0756545 .0 .25
Source: STATA OUTPUT, 2021.
The outcomes in Table 4.1 indicates that the measure of share return (SR), which is the inverse
of the variance in stock returns behaviour of the sampled consumer goods firms has an average
value of 0.5684284 and a corresponding standard deviation of 5.108861, This imply that the
changes in stock returns between companies within the period significantly differ. Also, the
minimum and maximum values stood at -.1 and 63.79638 respectively. The firms tend to record
a significantly high stock returns in some years than in others. also, as evidenced by the
minimum most companies record negative returns.
The table also indicates that the sample firms have an average firm size of 7.665493 with
standard deviation of 2.200853. This means that the average value of firm size within the period
89
of the study is 7.67 billion. The figure of the standard deviation means that there is a high level
of variance in firm size among the companies. The minimum and the maximum as shown by the
table is 2.83181 and 14.8783. This implies that the least amount of firm size is 2.83 billion and
the largest is 14.88 billion.
The descriptive statistics in Table 4.1 shows that on average, the firm age of companies during
the period of the study is 28.3 years, with an accompanying standard deviation of 14.39025. This
shows that on average firms have being in existence for 28 years. The value of the standard
deviation which is far from the mean show that there is a lot of differences in age among the
sampled firms. The value of firm age for minimum and maximum is 1 and 54 respectively.
The descriptive statistics from Table 4.1 also indicates the mean of profitability is .3020525
which signifies that on the average 30% of the companies’ sampled made profit within the period
of the study. Meanwhile, the value of the standard deviation which is .2332101 (23%) is close to
the mean implying certain of agreement with the claim that at least 30% of the companies
registered profit at various periods in the ten years captured by this study. The profitability shows
a minimum and maximum value of -.223967 and .891987 respectively. The minimum figure
indicates 22% of the companies’ make losses while a maximum of 89% recorded profit figures.
For ownership concentration, the table shows a mean value of .5958285 and a corresponding
standard deviation of .1879737. This shows that average 59% of the firms under study have
concentrated owners in their ownership structure and the value of the standard deviation
confirms this assertion. The lowest number stands at 1% while the maximum number is 86%.
Table 4.1 also shows that the average managerial ownership of the sampled consumer goods
firms during the period of the study is .1754935 with a standard deviation of 1.182254. This
90
implies that an average of 17% of consumer goods firms in Nigeria have top level managers who
are also, shareholders of the company. This assertion is refuted by the standard deviation which
suggests that the data is not distributed around the mean. The minimum and maximum values
of .001 and .15 respectively. The maximum figure implies that just 16% of the companies have
managerial shareholders.
The descriptive statistics in Table 4.1 shows a mean value of .1927492 and a corresponding
standard deviation 0.0811085. This means that on average, 19% of companies during the period
of the study had institutional investors in their ownership composition. However, the value of the
standard deviation which is far from the mean shows that there is a lot of differences in level of
institutional ownership among the sampled firms. The value of institutional ownership for
minimum and maximum is .092 and .701 respectively. This means that highest number of
institutional owners is 70%.
The Table also indicates that the sampled consumer goods firms in Nigeria have an average
of .0894777 independent directors on the board stood during the period of the study, with a
standard deviation of .0604368. This suggests that an average of 8% directors have independent
status. This is confirmed by the value of the standard deviation which is close to the mean.
Meanwhile, the minimum and maximum value stood at 0% and 28% respectively.
Again, the Table show that the mean board size of all sampled consumer goods firms in Nigeria
during the period of the study stood at 12.10625 with a corresponding standard deviation of
2.150316. This suggests that on average the size of the board is 12. However, the value of the
standard deviation shows a certain level of disagreement. The result further, show that the
minimum and maximum number of directors stands at 6 and 16 respectively.
91
The descriptive statistics in Table 4.1 shows that on average, 9% of the board members in the
sampled consumer goods companies have financial expertise. This evidenced by the mean value
of .092468 and the standard deviation of .0756545. The value of the standard deviation which is
close to the mean significantly upholds this claim. Meanwhile, the value of board financial
expertise for minimum and maximum is 0 and .25 respectively. This means the highest number
of directors with financial expertise in the company stood at 25%
4.1.2 Correlation Matrix
The Pearson correlation analysis matrix shows the relationship between the explanatory and the
explained variables and also the relationship among all pairs of independent variables
themselves. It is useful in discerning the degree or extent of relationship among all independent
variables as excessive correlation could lead to multicollinearity, which could consequently lead
to misleading findings and conclusions. The correlation matrix does not lend itself to statistical
inference but it is relevant in deducing the direction and extent of association between the
variables. Table 4.2 presents the correlation matrix for all the variables.
92
Table 4.2 Correlation Matrix
Variable SR FZ FA PR OC MO IO BI BZ BE
SR 1.0000
FZ 0.1166 1.0000
FA 0.0535 0.5138 1.0000
PR 0.0914 0.3674 -0.0230 1.0000
OC 0.0243 0.0662 -0.2215 0.1245 1.0000
MO -0.0005 0.3509 0.0424 0.3717 -0.2145 1.0000
IO 0.1178 0.1183 0.3172 -0.0485 0.0831 0.5003 1.0000
BI -0.0361 0.2662 0.2337 0.1215 0.2863 -0.1179 0.0233 1.0000
BZ 0.0713 0.2310 0.2883 0.0019 -0.1157 0.1146 0.0194 -0.4836 1.0000
BE 0.0430 0.2249 0.0951 0.8717 0.0884 -0.1081 0.0386 0.3121 0.0728 1.0000
Source: STATA OUTPUT, 2021
Table 4.2 showed that the correlation between the dependent variable, SR and the independent
variables, FZ, FA, PROF, OC, MO, IO, BI, BZ and BEXP on one hand, and among the
independent variables themselves on the other hand. Generally, high correlation is expected
between dependent and independent variables while low correlation is expected among
independent variables. According to Gujarati (2004), a correlation coefficient between two
independent variables 0.80 is considered excessive and thus certain measures are required to
93
correct that anomaly in the data. From Table 4.2, it can be seen that all the correlation
coefficients among the independent variables are below 0.80. This points to the absence of
possible Multicollinearity, though the variance inflation factor (VIF) and tolerance value (TV)
test is still required to confirm the assumption.
The table reveals a positive correlation between the dependent variable stock returns and the
explanatory variables of firm size, firm age and profitability with coefficients of 0.1166, 0.0535
and 0.0914 respectively. This implies that the three explanatory variables move in the same
direction with stock returns. Other variables that move in the same direction with stock returns
are ownership concentration, institutional ownership, board size and board financial expertise.
While the table reveals that managerial ownership and board independence exhibit negative
correlation with stock returns with a coefficient of -0.0005 and -0.0361. It means that these
explanatory variables and the outcome variable move in different directions.
4.1.3 Robustness Test
The following healthiness tests are carried out to find out whether data used for analysis are
reliable.
4.1.3.1 Test for Multicollinearity
Non-existence of Multicollinearity is a key assumption of linear regression analysis.
Multicollinearity occurs when the explanatory variables are not independent of each other.
Multicollinearity is examined using tolerance and variance inflation factor (VIF) values. The
result of Multicollinearity test is shown in the table below.
94
Table 4.3: Tolerance and VIF Values
Variable VIF 1/VIF
FZ 1.89 0.528388
FA 2.03 0.491734
PR 1.31 0.766126
OC 1.40 0.715010
MO 1.77 0.563864
IO 1.76 0.566706
BI 1.73 0.579506
BZ 1.52 0.656455
BE 1.29 0.773772
Mean VIF 1.63
Source: STATA Output, 2021.
Based on the evidence presented in Table 4.3, it can be concluded that there is no
Multicollinearity problem. This is because the VIF values for all the variables are less than 10
and the tolerance values for all the variables are greater than 0.10 (rule of thumb).
4.1.3.2Test for Heteroscedasticity
This test was conducted to check whether the variability of error terms is constant or not. The
presence of heteroskedasticity signifies that the variation of the residuals or term error is not
constant which would affect inferences in respect of beta coefficient, coefficient of determination
(R2) and F-statistic of the study. Heteroscedatiscity was tested using Breusch Pagan’s Test. The
results of heteroscedasticity for the study shows that the goodness of fit test which is a statistical
hypothesis test to show how sample data fit a distribution from a population with a normal
95
distribution shows pearson chi2 value of 0.74 and a corresponding probability of 0.1202. (see
Appendix B). This indicates that the adjustment of the observations problem is well and no errors
exist underlining the general fitness of the model.
4.2.6 Hausman Specification Test
In panel data analysis (the analysis of data over time), the Hausman Test can help to choose
which between fixed effects model or a random effects model is appropriate for interpretation.
The null hypothesis is that the preferred model is random effects; The alternate hypothesis is that
the model is fixed effects. Essentially, the tests look to see if there is a correlation between the
unique errors and the regressors in the model. The null hypothesis is that there is no correlation
between the two. Therefore, because of the homogeneity of data used in this study, which
assumes that fixed effects and random effects models are similar, Hausman test is performed to
determine which of the two models is more efficient. The result for the Hausman Specification
Test for the study revealed that the value of chi2 is 0.69 and an associating probability of 0.9999.
The insignificant value as reported by the probability of chi2 indicates that the Hausman Test is
in favour of random effect model. Furthermore, to meet the condition that one or more equations
have to be satisfied exactly by the chosen values of the variables, the Breusch and Pagan
Lagrangian Multiplier Test for random effect was conducted to choose between the random
effect result and pooled OLS regression which is more appropriate. The result revealed that the
prob>chi2 for all variables indicates 0.0000. From this result, the best model to be interpreted is
the pooled OLS regression model since the prob>chi2 is less than 0.05.
96
4.2. Data Analysis and Results
A single regression model was stated in methodology with the aimed at achieving the specific
objectives of the study. The model examined relationship between firm size, age, profitability,
ownership concentration, managerial, institutional ownership, board size, board independence
and board financial expertise and stock returns. The result of the model using pooled OLS
regression as specified by the outcome of the Breusch and Pagan Lagrangian multiplier test for
random effect is presented below as well as the test of hypotheses.
97
Table 4.6 Pooled OLS Regression Result
SR Coefficient T p-value
FZ 11.55934 0.97 0.336
FA 2.709042 1.43 0.155
PR 303.9675 3.24 0.001
OC 1.306201 7.98 0.000
MO -12.21482 -0.57 0.572
IO 266.9867 2.22 0.028
BI 7.626885 1.75 0.082
BZ 7.795936 0.71 0.479
BE .1673587 2.01 0.046
Cons -1.745176 -6.96 0.000
R-Square 0.6251
Adjusted R- 0.5953
Square
F-Statistics 52.30
Prob > F 0.0000
Source: STATA OUTPUT, 2021.
In regression analysis, the result of the R-square value shows the level at which the explanatory
variables explain the dependent variable. Table 4.6 revealed that the R-square is 0.6251. This
means that the selected variables in the study explained stock returns to the tune of 62%. The
value of F - statistic is 52.30 with probability of chi2 = 0.0000. The probability of chi2 is
significant at 5%, indicating that the model is fit. This serves as a substantial evidence to
98
conclude that the variables selected for the study are suitable and can be used to predict the
behaviour of the dependent variable.
Ho1: Firm attributes have no significant effect on the stock returns of Quoted Consumer
Goods Companies in Nigeria.
The first hypothesis addressed firm size, firm age and profitability. Based on the individual
explanatory variables, Table 4.6 shows that firm size has an insignificant positive effect on the
stock returns of sampled consumer goods firms in Nigeria, from the coefficient of 11.55934 with
t-value of 0.97 and a p-value of 0.336 which is statistically insignificant at 5% level of
confidence. This result suggests that, an increase in firm size will increase the level of stock
returns of firms. However, looking at the p-value such increase is considered insignificant.
Hence, the study accepts the assertion that firm size has no significant effect on the stock returns
of listed consumer goods firms in Nigeria.
The study also, examined whether age as a firm characteristic can determine the level of stock
returns among quoted consumer goods companies in Nigeria. The result obtained from the
pooled OLS regression indicates that age has a positive but insignificant effect on stock returns.
This is evidenced by the value of coefficient and probability of 2.709042 and 0.155 respectively.
This implies that the age of firms has a positive contribution to stock returns. However, since the
p-value is above the 5% level of significance, the study lacks evidence to conclude that age can
significantly influence the stock returns of firms in the area covered by the study.
From the table 4.6, it can be seen that profitability can significantly, determine the stock returns
of quoted consumer goods companies in Nigeria. This result is evidenced by the value of
coefficient which is 303.9675 and a p-value of 0.001 indicating a strong likelihood that
99
profitability can be used to predict the level of stock returns in the consumer goods sector. Based
this the study rejects the hypothesis that profitability has no significant effect on stock returns of
quoted consumer goods companies in Nigeria.
Ho2 Ownership Structure has no significant effect on stock returns of quoted consumer
goods companies in Nigeria.
The second hypothesis addressed ownership concentration, managerial ownership and
institutional ownership. The table 4.6 presents evidence to show that ownership concentration
which is one of the ownership structure variables has a positive and significant effect on stock
returns of quoted consumer goods companies in Nigeria. This is evidenced by the coefficient of
1.306201 and the p-value of 0.000 which is significant at 5% level of confidence. Given this
outcome, the study has significant statistical evidence to reject the hypothesis which states that
ownership concentration has no significant effect on stock returns of quoted consumer goods
Table 4.6 signal that managerial ownership has a t-value of -0.57, a coefficient of -12.21482 and
a p-value of 0.572 which is insignificant at 5%. This means that managerial ownership has an
insignificant negative relationship with stock returns of listed consumer goods firms in Nigeria.
The 5% significance level reveals that managerial ownership does not have any strong statistical
influence on stock returns of consumer goods firms in Nigeria. Based on this, the study accepts
the null hypothesis which states that, managerial ownership has no significant effect on stock
returns of listed consumer goods firms in Nigeria.
This study also, determined the effect of institutional ownership as one of the ownership
attributes on stock returns of quoted consumer goods companies in Nigeria. The result emanating
100
from table 4.6 indicates that institutional ownership has a statistically positive and significant
effect on stock returns in the area covered by the study. This claim is substantiated by the value
of the coefficient and the p-value is 266.9867 and 0.028 respectively. This indicates a strong
likelihood that institutional owners can be used to determine the level of stock returns of
investors in the consumer goods sector.
Ho3 Board attributes have no significant effect on stock returns of quoted consumer goods
The third hypothesis addressed board independence, board size and board financial expertise.
Given the individual explanatory variables the summary of the result in table 4.6 shows that
board independence has a positive and insignificant effect on stock returns. This is based on the
evidence of the coefficient which is 7.626885. This means the independent directors have
positive influence on the level of returns on stock. However, this is said to be insignificant
considering the p-value which is greater than 0.05 as seen from the regression output. Hence, the
study accepts the hypothesis which states board independence has no significant effect on stock
returns of consumer goods companies quoted on Nigerian the stock exchange.
The relationship between board size and stock returns was also, investigated and the result from
table 4.6 clearly show that board size has no positive influence on stock returns in the consumer
goods sector. The evidence from the result shows a coefficient of 7.795936 and a p-value of
0.479 indicating a statistically, insignificant relationship. Hence, the study aligns with the
hypothesis that board size has no significant effect on stock returns of quoted consumer goods
101
The study also, looked at the extent to which board financial expertise can influence the stock
returns of quoted consumer goods companies in Nigeria. The output in table 4.6 shows a positive
and strong statistical relationship exist between board financial expertise and stock returns. This
is evidenced by the value of coefficient and probability of .1673587 and 0.046 respectively. This
shows that the boards with financial experts determine the level of stock returns. Based on this
the study rejects the hypothesis which states that board financial expertise has no significant
effect on stock returns of quoted consumer goods companies in Nigeria.
4.3 Discussion of Findings
4.3.1 Firm Attributes and Stock Returns
The first objective of this research is to ascertain the effect of firm attributes (i.e firm size, firm
age and profitability) on stock returns of quoted consumer goods companies in Nigeria. The
result of the study shows that firm size has positive insignificant statistical influence on stock
returns of listed consumer goods sector suggesting that the size of a firm contributes positively
towards the level of stock returns. Based on the result, such contribution is insignificant in
determining or predicting the level of stock returns of consumer goods companies in Nigeria.
This finding implies that the size of company does not necessarily; influence the level of stock
returns. This assertion can hold true because according to CAPM what states that small
companies will get higher returns. Investments in these companies can be considered to be at the
highest level of risks and are deserved to earn higher returns. With the assumption, CAPM can
successfully support the hypothesis that small firms can bring higher profits where high risks
investments should be compensated with higher returns. However, larger firms are associated
with having more diversification capabilities, ability to exploit economies of scale and scope and
102
also being highly formalized in terms of procedures. This finding is in tandem with those of
Chabachib et al, (2020); Ahmed (2019); Akwe, Garba and Dang (2018); Nguyen and Nguyen
(2016).This finding supports the Arbitrage Pricing Theory (APT) which is a Capital Asset
Pricing Model (CAPM), on the basis that the stock returns are caused by a specific number of
economic variables.
Again, the study found that firm age has a positive but insignificant impact on stock returns
among consumer goods companies in Nigeria. Here firm age is found to have a positive effect
but not significant increase in stock returns. This means that the age of the firm does not
significantly determine the level or extent of stock returns to the shareholders. Although it has a
positive contribution on stock returns. Firm age is an important factor in respect to stock returns.
This is because as firms grow older, they are characterized by lower rate of failure and low costs
to obtain capital (Koh, Durand, Dai & Chang, 2015), and they have experience to negotiate
favorable debt capital to increase returns. Although, the reverse is true for young firms in the
birth stage (Stepanyan, 2012). The fact is as listed firms becomes older and closer to maturity
stage in their firm life cycle, they acquire more business experience to make effective capital
structure decisions and do utilize debt to increase returns. Also, the life-cycle model of the firm
can explain the relationship between firm age and shareholders’ returns. Firms closer to maturity
have substantial experience (Stepanyan, 2012) and make effective capital structure decisions by
maximizing the benefits of a debt interest tax shield emphasized in Modigliani and Miller (1963)
theory. This finding is in line with Oduma and Odum (2017); Matemilola et al, (2017).
Also, Profitability of the firm is another dimension of the firm’s characteristics focused in this
study. The study finds that profitability has a positive significant effect on stock returns of
quoted consumer goods companies in Nigeria. This outcome provides statistical evidence that
103
profitability has a significant influence on stock returns. Consler and Lepak (2016) avers that
more profitable firms are likely to guarantee higher returns. EPS (Earning per share) usually
have significant positive influence on market return as shown in many past researches. This
indicates that the higher the firm’s EPS, the higher market adjusted return and abnormal return
that can be resulted by firm’s stock, because a higher EPS means higher profit obtained from
every naira price earned by the firm. Investors/shareholders consider current earnings, future
earnings, and earnings stability are important, thus they focus their analysis on firm’s
profitability. They concern about financial condition which will affect firm’s ability to pay
dividend. This finding aligns with the stakeholder theory which focused on how various
stakeholders including investors can be satisfied given the performance of the company. This
finding is consistent with that of Chabachib et al., (2020); Handoko (2016); Sani (2016).
4.3.2 Ownership Structure and Stock Returns
The effect of ownership structure as a monitoring mechanism is also, investigated with the aim
of ascertaining the individual effects of ownership concentration, managerial ownership and
institutional ownership on stock returns. Hence, the second objective of the study is to ascertain
the effect of ownership structure on stock returns of quoted consumer goods firms in Nigeria.
Based on the individual explanatory variables, the study reveals that there is a strong likelihood
that ownership concentration is a determinant of stock returns. This is evidenced by the outcome
which shows that ownership concentration has positive and statistically, significant effect stock
returns. This means that a unit increase in concentrated ownership will lead to an increase in the
stock returns in the area covered by the study. Basically, large block holders have greater
incentive to monitor management as the costs involved in monitoring is less than the benefits to
large equity holdings in the firm. This will go a long way in creating additional wealth that can
104
be made available for distribution as dividends. However, Demsetz and Lehn (1985) realize with
empirical evidence that ownership concentration is normally associated with high stock price
volatility. This is because the closed corporate governance system associated with high
ownership concentration means that the outside investors have little information and there is a
high probability of insider trading. Importantly, in a diverse situation where the shareholders
hold lower stock in a firm the incentive to monitor management is low because the costs
involved in monitoring outweigh the benefits to be derived. This finding is in line with the
agency theory which seeks to resolve the problem of information asymmetry between
management and shareholders and are in tandem with the previous findings of Amal and Ahmed
(2017); Shindu, Hashmi, Haq and Ntim (2016) and Faten, Adel and Mohammad (2015).
This study also, investigates the effect of managerial ownership on stock returns of quoted
consumer goods companies in Nigeria. The result of the study provides evidence that managerial
ownership has no statistical influence on stock returns in the area covered by the study. This
imply that managerial shareholding is not a determinant of stock returns. Hence, a unit change in
managerial shareholding does not affect the returns of shareholders. This finding contravenes the
general notion that ordinarily, managerial ownership should affect firm performance positively
as it is expected that directors will make good decisions because they partly own the firm hence
their interest in the decisions made. The stock price should thus increase with more shares being
held by directors. Literatures suggest that the interest of both shareholders and management
starts to converge as the management holds a portion of the firm’s equity ownership. This
implies that the need for intense monitoring by the board should decrease (Jensen &Meckling,
1976). The motive behind the rise of this corporate governance variable is rooted in the agency
theory, which assumes that manager’s equity holdings inspires them to act in a way that
105
maximizes the value of the firm. This finding is in line with that of Boubaker (2018) and
contradicts those of Afriyani (2018) and Otieno (2016) and Oyerogba, Olaleye and Zaccheaus
(2014).
This study also, examines the extent to which institutional ownership as a monitoring mechanism
affect the stock returns of consumer goods companies quoted on the Nigerian stock exchange.
The finding reveals that institutional owners significantly, influence the behaviour of stock
returns of companies in the area covered by the study. This result implies that institutional
ownership is a determinant of stock returns. This result may hold true because several literatures
align with the assertion that institutional ownership has an effect on stock returns, because the
higher institutional ownership, the stronger the external control of the company, so that it can
encourage managers to increase dividend payments. It is important in monitoring management
because with institutional ownership it will encourage more optimal supervision. Although,
several arguments indicate that institutional investors may not limit managers’ earnings
management discretion and may increase managerial incentives to engage in earnings
management. This is based on the argument that institutional owners are overly focused on short-
term financial results, and as such, they are unable to monitor management. This finding
supports the agency theory which is a theory that seek to reconcile the conflict of interest
between management and owners. Amal and Ahmed (2017) finding contradict the position of
this study while Moghaddam (2014); Boubaker (2018); Afriyani (2018) findings are in
agreement with the that of the current study.
4.3.3 Board Attributes and Stock Returns.
106
The concept of the board is derived from the attributes that play a significant role in monitoring
managers and can be described as a bridge between company management and shareholders. To
understand the role of the board, it should be recognized that boards consists of a team of
individuals, who combine their competencies and capabilities that collectively represent the pool
of social capital for their firm that is contributed towards executing the governance function.
Given the level of importance of boards to company management and control, the third objective
of this study examines the effect of board attributes on stock returns of quoted consumer goods
companies in Nigeria. Under this section board independence, board size and board financial
expertise were used as predictor variables.
The individual explanatory variables board independence was found to have a positive and
insignificant influence on the stock returns of consumer goods companies in Nigeria. This result
implies, that the more independent directors on the board the more the possibility that dividends
will be paid to shareholders. Hence, the study finds evidence to suggest that board independence
is a predictor of stock returns in the area covered by the study. It should be worthy of note
however, that no consistent empirical evidence has been found to suggest increasing percentages
of outsiders on boards will enhance stock performance, but pushing too far to remove insider and
affiliated directors may harm firm stock performance by depriving boards of the valuable firm
and industry specific knowledge they provide. To resolve this tension, however, agency theory is
in favour of a majority of independent non-executive directors. Also, studies such as Sumail
(2018); Aloui and Jarboui (2017); Rostami, Rostami and Kohansa (2016); Azeez (2015);
Meanwhile, findings of Elmagrhi, Ntim, Crossley, Malagila, Fosu, and Vu (2017); Faramarzi and
Amini (2016) are in disagreement with the current finding.
107
Again, this study explores that influence of board size as a corporate governance mechanism on
stock returns of quoted consumer goods companies in Nigeria. The finding of the study reveals
that board size has a negative and statistically insignificant influence on stock returns in the
sector covered by the study. This implies that board size is not a determinant of stock returns. It
also, means that a percentage increase in the number of board members will not affect the level
of stock returns. There have been diverging opinions by various researchers on the number of
persons that should make up an ideal board. Some school of thoughts are of the opinion that a
small board is more effective because it enhances fast decision making and cannot be
manipulated by management. Dozie (2003) also argued that a smaller board may be less
encumbered with bureaucratic problems, more functional and is able to provide better financial
reporting oversight.
Conversely, from an agency theory perspective, larger boards allow for effective monitoring by
reducing the domination of the CEO within the board and protect shareholder’s interests. Also,
agency theory states that the board size, which is one of the variables that predicts if corporate
governance can prevent the tendency of managers to behave in an opportunistic manner, by
distributing free cash flow to shareholders as cash dividends. The finding in this study is
supported previous study of Sani, Sani and Musa (2017). Although, majority of the studies in
literature present evidence that board size significantly, influence stock returns.
Furthermore, this examines whether board financial expertise is likely to influence the stock
returns of quoted consumer goods companies in Nigeria. The result of the study using regression
analysis technique reveal that board financial expertise has a positive and significant effect on
stock returns of quoted consumer goods in Nigeria. This study considers board financial
expertise as a good predictor of stock returns variation. This basically, entails having a member
108
on the board that is financially, literate. Kirkpatrick (2009) and Walker (2009) argue that the lack
of financial expertise on corporate boards played a major role during the financial crisis.
Therefore, the presence of more financial expertise on a board ultimately influences the board’s
decisions, including dividend policy. Having financial expertise on the board will keep them
from being accused of failure in their watchdog role and will better serve the shareholders’
interests. The expertise criteria are specified in Nigeria by the 2011 and 2018 SEC Codes, 2006
Post consolidation CBN code amongst other codes. The confidence of shareholders has been
shaken by various accounting scandals and financial crises since the beginning of the 21 st
Century, such as Enron, HealthSouth, Tyco, WorldCom and the financial crisis of 2007-2008,
which has stressed the regulators and market makers to the need for board members to have
financial expertise. This finding is in line with the findings of Adamu, Ishak and Hassan (2019);
Sarwar, Xiao, Husnain and Naheed (2018).
109
CHAPTER FIVE
SUMMARY, CONCLUSION AND RECOMMENDATIONS
5.1 Summary
Stock returns from investments in equity are subject to vary because changes in stock prices
which are a product of several factors and the impacts could either be positive or negative. Also,
emerging markets such as Nigeria have different structures and institutional characteristics from
developed stock markets, and in view of the fact that investors in these markets are interested in
getting more insights into the activities of companies, it is imperative to find out whether stock
returns in Nigeria respond differently to effects of firm level attributes factors or not. Thus, the
need to begin to look up for indicators that guarantees rise in stock returns. Hence, this current
study examined the determinants of stock returns of quoted consumer goods companies in
Nigeria. Specifically, this study examined the effects of firm attributes, ownership structure and
board attributes on stock returns of consumer goods companies quoted on the Nigerian Stock
Exchange from 2010-2019.
Relevant theoretical and empirical literatures were reviewed. The review shows that studies on
stock returns are motivated by the fact that listed firms use returns to communicate their level of
performance to the shareholders and the public at large. It also reveals that previous studies in
this area of research were marred by inconsistent and inconclusive findings. The differences in
findings could be attributed to methodological approaches regarding measurement of the
dependent and independent variables, disparity in research domains and differences in economic
110
systems where these studies were conducted. The literature review also reveals dearth of studies
on the subject in the Nigerian context.
In line with the Arbitrage Pricing and Agency Theories that underpin the study, a multiple
regression model was used with the aim of explaining and predicting empirically the changes in
Stock Returns (return variance) as a result of changes in firm attributes, ownership attributes and
board attributes. The model used for the study examined the association between firm size, firm
age, profitability, ownership concentration, managerial, institutional ownership, board
independence, board size and board financial expertise and one dependent variable: stock
returns.
Balanced panel data were extracted from the financial statements of 16 quoted consumer goods
firms in Nigeria for the period 2010-2019. The pooled OLS result reveals that profitability,
ownership concentration, institutional ownership and board financial expertise have significant
effect on stock returns, while firm size, firm age, managerial ownership, board independence and
board size and have no significant effect on stock returns of quoted consumer goods firms in
Nigeria.
5.2 Conclusions
Stock return and its effect on the activities of firms has become a topical issue in the literature of
Accounting and Finance. Attempt has been made in this study to examine the effect of three
corporate properties on stock returns of quoted consumer goods firms in Nigeria. The study
formulates three hypotheses that firm attributes, ownership structure and board attributes have no
significant effect on stock returns of quoted consumer goods firms in Nigeria. Based on the result
obtained, the study concludes that in so far, the aggregated corporate properties are concerned,
111
their combined influence on stock returns of quoted consumer goods firms in Nigeria is
significant. The effect however gets diluted as the variables are considered on individual basis.
Specifically, the study finds that firm size, firm age, managerial ownership, board independence
and board size do not have any significant influence on stock returns. Based on that the study has
statistical evidence to conclude that these variables are determinants of stock returns of quoted
consumer goods companies in Nigeria.
However, the study finds that profitability, ownership concentration, institutional ownership and
board financial expertise have significant influence on stock returns among consumer goods
companies quoted on the Nigerian stock exchange. Given this result, the study has statistical
evidence to conclude that these attributes are determinants of stock returns in the area covered by
the study.
5.3 Recommendations
The study offers the following recommendations based on variety of people/organizations that
are involved directly or indirectly with firm level attributes and other corporate properties and
stock returns processes in Nigeria:
1. Firstly, the study provided statistical and empirical evidence to support that profitability
have significant influence on stock returns among quoted consumer goods firms in
Nigeria. It therefore, recommended that the Security and Exchange Commission (SEC)
should continually subject the reported profits of consumer sector to stress quality tests to
insulate the investors and potential investing public from possible rip off.
112
2. The study recommends that consumer goods companies should encourage higher
institutional shareholding. This is based on the fact that; institutional ownership has an
effect on stock returns, because the higher institutional ownership, the stronger the
external control of the company, so that it can encourage managers to increase dividend
payments.
3. It is further recommended that the Board of Directors of consumer goods firms should
increase their monitoring capacity towards discretionary behavior of management
activities by increasing the number of experts in accounting and finance on the Board to
at least three in order to improve earnings quality. It is also, recommended that more
independent director should be encouraged on the board. This is in an attempt to improve
monitoring activities that will curb the individual behavior of management.
4. The SEC should provide incentive, in form of commendation, to firms that disclose
accounting information necessary for assessment of the quality of their profitability and
earnings as well impose penalty through rebuttal on firms that do not make full
disclosure. This is based on the fact fraudulent reporting misinforms market triggering
stock prices based on fraudulent representations.
5.4 Limitations of the Study
i. Firstly, the study is limited to quoted consumer goods firms in Nigeria. The findings and
recommendations therefore are only applicable to consumer goods firms as behaviour of
stock returns may vary across different sectors. Also, the exclusion of firms, whether due
to the nature of the industry, the size of the industry or the rank of the firm, reduces the
generalizability of the results to all publicly traded consumer goods firms.
113
ii. Secondly, the study limits itself to firm attributes, ownership attributes and board
attributes. Other studies may consider other properties not used in this study.
5.5 Suggestion for Further Studies
i. The study focused mainly on listed consumer goods sector so it is suggested that future
endeavors can expand the scope by studying the entire non-financial sector.
ii. Also, since the study considered determinants that are within the control of the firm, other
studies may take a different dimension by looking at the effect of factors such as
inflation, interest rates, exchange rate etc that are outside the control of the firm.
114
REFERENCES
Abdel-khalik A., (1993). Research opportunities in auditing: The second decade. American
Accounting Association, Sarasota (FL).
Acikalin, S., Aktas, R., &Unal, S. (2008). Relationships between stock markets and
macroeconomic variables: An empirical analysis of the Istanbul Stock Exchange.
Investment Management and Financial Innovations, 5(1), 7-16.
Adebiyi, M.A (2016), ‘‘Institutional Framework, Interest Rate Policy and the Financing of the
Nigerian Manufacturing Sub-Sector’ ’African Development and Poverty Reduction: The
Macro-Micro Linkage, Forum Paper.
Adams R. B., & Mehran, H., (2003) Bank board structure and performance: evidence for large
bank holding companies. Journal Finance Intermed 21(2):243–267
Adedoyin, A. O. (2011). Share price determinants and corporate characteristics. Dissertation,

Department of Accounting, College of Development Studies, Covenant University,
Ogun, Nigeria.
Afriyani, J. (2018). The Effect of Managerial Ownership, Institutional and Investment
Opportunities on Stock Performance in Manufacturing Companies That Are Listed on

The Idx. International Journal of Scientific and Technology Research. Vol 7, ISSUE 12,
December 2018ISSN 2277-8616
Agrawal, A., & Chadha, S., (2005). Corporate governance and accounting scandals. Journal of
Law and Economics, 48 (2), 371-406.
Ahmad, H.,& Hamdan, A., (2015). Board interlocking and firm performance: The role of foreign
ownership in Saudi Arabia. International Journal of Managerial Finance, 14(3), 266-
281.
Ahmed, A. (2019).Auditors‟PerceptionsofAuditFirmRotationImpactonAuditQualityin Egypt.

JournalofAccountingandTaxation.6 (1),105-120.
Akeju, J. B., & Babatunde, A. A., (2017). Corporate governance and financial reporting quality
in Nigeria. International Journal of Information Research and Review, 4(2), 3749-3753
Akwe, J., Ayuba, I., & Dang, G. H., (2018). Effects of Firm Level Attributes on Stock Returns in
Nigeria. Doctor of Philosophy Dissertation, University of Dhaka.
Almazan, H. Hartzell, J. C. & Starks L. T. (2005): “Institutional Investors and Executive

Compensation”. Journal of Finance, vol. 58, 2351-2374.
115
Al-Shami, H. A. A., & Ibrahim, Y. (2013). The effects of macro-economic indicators on stock
returns: Evidence from Kuwait stock market. American Journal of Economics, (3)5C, 57-
66.
Alzeaideen, Z. & AL-Rawash, S. (2014). The Effect of Ownership Structure on Share Price
Volatility of Listed Companies in Amman Stock Exchange. Research Journal of Finance
and Accounting, 5(6), 192-201.
Amadi, S.N., &Odubo, T.D. (2002). Macroeconomic variables and stock prices: Causality
analysis. The Nigeria Journal of Economic and Management Studies, 4(1&2), 29-41.
Amtiran, P. Y., Indiastuti, R., Nidar, S. R., &Masyita, D., (2017). Macroeconomic Factors and
Stock Returns in APT Framework. International Journal of Economics and
Management, 11(S1), 97-206.
Anderson, R.C. (2004). Board composition: Balancing family influence in S&P 500 firms.
Administrative Science Quarterly, 49(2), 209–237.
Anderson, R. C., Mansi, S. A. &Reeb, D. M., (2004), “Board characteristics, accounting report
integrity, and the cost of debt”, Journal of Accounting and Economics, 37(3), 315-342.
Argyris, C. (1964). Integrating the Individual and the Corporation. New York: Wiley and Sons
Baker, M., &Wurgler, J., (2002). “Market Timing and Capital Structure’’. Journal of Finance,
57, 1- 32.
Bala, H., & Idris, I. (2015). Firm’s specific characteristics and stock market returns (evidence
from listed food and beverages firms in Nigeria). Research Journal of Finance and
Accounting, 6(16), 188-200.
Banz , R. W. (1981). The relation between return and market value of common stocks, Journal
of Financial Economics 9 3-18.
Basu, S. (1997). The conservatism principle and the asymmetric timeliness of earnings. Journal
of Accounting & Economics, 24 (1), 3-37
Baysinger, B. &Hoskisson, R.E. (1990) ‘The composition of board of directors and strategic
control: effects on corporate strategy’, Academy of Management Review. 15: 72–87
Baysinger, B., Kosnik, R. & Turk, T.A. (1991) ‘Effects of board and ownership structure on
corporate R&D strategy’, Academy of Management Journal. 34: 205–214.
Beasley, M. (1996), “An empirical analysis of the relation between the board of director
composition and financial statement Fraud”, The Accounting Review, 71(4), 443-465.
116
Becht, M,,&Röell. P., (1999), Corporate Governance and Control‖. European Corporate
Governance Institute. Finance Working Paper.
Berle, A.A., & Means, G.C. (1932). The modern corporation and private property. Transaction
publishers, New York.
Black, F. (1976), “The dividend puzzle”, The Journal of Portfolio Management, 2(2), 5-8.
Bhagat, S., & B. Black. (1999). The Uncertain Relationship between Board Composition and
Firm Performance. Business Lawyer, 54, 921-63.
Bhandari, L. C. (1988). Debt-Equity ratio and expected common stock returns: empirical
evidence. Journal of Finance, 43, 507-528
Bonn, I., Yoshikawa, T., & Phan, P.H., (2004). “Effects of Board Structure on Firm
Performance: A Comparison between Japan and Australia”, Asian Business &
Management (3), 105-125.
Boone et al., (2007). The effect of institutional ownership on firm transparency and information
production, Journal of Financial Economics, 117(3), 508-533.
Boubaker,S. (2018). Does Audit Quality Affect Firms’ Investment Efficiency? Journal of the
operational Research Society. Vol 69,2018 Issue 10. Pages 1688-1699.
Boyd, B. K., (1990), Board control and CEO compensation. Strategic Management Journal,
15(5), 335-344.
Bushee, B. (1998). Do institutional investors prefer near-term earnings over long-run value?
Contemporary Accounting Research18(2): 207-246.
Carver, K., & Oliver, M., (2002). Board composition and firm performance variance: Australian
evidence. Accounting Research Journal. 22(2), 196-212.
Chabachib,M., Hersugondo,H., Ardiana, E., & Pamungkas, I.D. ( 2020). Analysis of Company
Characteristics of Firm Values: Profitability as intervening variables. International

journal of Financial Research. Vol 11, no 1
Chung, R., Firth, M., & Kim, J.-B. (2002). Institutional monitoring and opportunistic earnings
management. Journal of Corporate Finance, 8(1), 29–48.
Claessens, S, &Djankov, S. (1998). Ownership concentration and corporate performance in the

Czech Republic. Journal of Comparative Economics, 27, 498-513.
Claessens, S., & Fan, J. P. H., (2002). Disentangling the incentive and entrenchment effects of
large shareholdings. The Journal of Finance, 57(6), 2741–2771.
117
Clarkson, P. M. (1994),Conservatism, disclosure and the cost of equity capital. Australian
Journal of Management, 39(2), 293-314.
Claudia Custodio and Daniel Metzger, (2014), Financial expert CEOs: CEO‫׳‬s work experience
and firm‫׳‬s financial policies, Journal of Financial Economics, 114, (1), 125-154
Chalaki, P., Didar, H., &Riahinezhad, M. (2012). Corporate governance attributes and financial
reporting quality: Empirical Evidence from Iran. International Journal of Business and
Social Sciences, 3(15), 223-229.
Chang, L.H., Chen, P., Lien, M.T., Ho, Y.H., Lin, C.M., Pan, Y.T., Wei, S.Y., Hsu, J.C. (2011).
Differential adhesion and actomyosin cable collaborate to drive Echinoid-mediated cell
sorting. Development 138(17): 3803--3812.
Charles, C., Reilly, H., & Jennifer, J., (1989). Women in the boardroom, symbol or substance?
Research Paper Series. Standford Graduate School of Business.
Chowdhury, S., (2004) Earnings management through real activities manipulation. Journal of
Accounting Economics. 42: 335–370
Coles, (2008). Boards: Does one size fit all?.Journal of Financial Economics, 87(3), 329–356.
Consler, J., &Lepak, G.M. (2011). Earnings per share versus cash flow per share as predictor of
dividends per share. Managerial Finance, 37(5), 482-488.
Cornett, M., Marcus, A., &Tehranian, H. (2008). Corporate governance and pay-for
performance: The impact of earnings management. Journal of Financial Economics,
87(1), 357-373.
Custodio, C., & Metzger, D. (2014). Financial expert CEOs: CEO’s work experience and firm’s
financial policies. Journal of Financial Economics, 114(1), 125–154.
Daily, C. M., & Dalton, D. R. (1993). Board of directors’ leadership and structure:Control and
performance implications. Entrepreneurship Theory and Practice, 17,65–81.
Daltoni, C., Catherine, A., Alan, K., & Jonathan, L., (1998). Meta-analytic reviews of board
composition, leadership structure, and financial performance. Strategic Management
Journal, 19, 269–290.
Dalton et al., (1999).What's wrong with having friends on the board. Across the Board, 36(3),
28–32.
Donaldson, T. & Preston, L. (1995). The stakeholder theory of the corporation: concepts,
evidence, and implications. Academy Management Review, 20 (1), 65-91.
Donaldson, L. (1990).The ethereal hand: Organizational economics and management theory. The
Academy of Management Review, 15(3), 369–381.
118
Donaldson, L., & Davis, J. H. (1991). Stewardship theory or agency theory: CEO governance
and shareholder returns. Australian Journal of Management, 16(1), 49–69.
Donaldson, L. & Davis, J. H. (1994) Boards and company performance research challenges the
conventional wisdom, Corporate Governance: An International Review, 2(3), 151-160.
David J. Denis and Igor Osobov, (2008), Why do firms pay dividends? International evidence on
the determinants of dividend policy, Journal of Financial Economics, 89, (1), 62-82
Davis, J. H., Schoorman, F. D. & Donaldson, L. (1997). Toward a stewardship theory of

management. Academic Management Review, 22(1); 20-47.
Dechow, P., Sloan, R. & Sweeney, A. (1996), “Causes and consequences of earnings
manipulation: an analysis of firms subject to enforcement actions by the SEC”,
Contemporary Accounting Research, 13(1), 37-47.
Demsetz, H. (1983). The Structure of Ownership and the Theory of the Firm. Journal of Law
and Economics, 26(2), 375-390.
Demsetz, H. & Lehn, K., (1985), Ownership structure and corporate performance, Journal of
Corporate Finance 209–233.
Denis, D. J. &Osobov, I., (2008). Why do firms pay dividends? International evidence on the
determinants of dividend policy. Journal of Financial Economics, 89(1), 62-82.
Deumes, K., &Knechel, L., (2008). Economic incentives for voluntary reporting on internal
Risk Management and control systems.
Dionne, G. &Triki, T. (2005), “Risk management and corporate governance: the importance of
independence and financial knowledge for the board and the audit committee”.
Dimitrov, V. & John, P. C. (2008). The Value-Relevance of Changes in Financial Leverage

beyond Growth in Assets and GAAP Earnings. Journal of Accounting, Auditing &
Finance, 23(2), 191-222.
Dozie, P. (2003). Corporate Governance in Nigeria: A status report on the financial services
sector. In O. Alo (Ed.), Issues in Corporate Governance. 190 – 200.
Duggal, R. & Millar. J. A. (1999). Institutional Ownership and Firm Performance: The case for
Bidder returns. Journal of Corporate Finance 5, 103-117.
Drew, M. E. (2003). Beta, firm size, book-to-market equity and stock returns. Journal of the
Asia Pacific Economy, 8 (3), 354-379
Ebrahim, A. (2007). Auditing quality, auditor tenure, client importance, and earnings
management: an additional evidence, Unpublished, Rutgers University.
Eisenhardt, K. M. (1989). Agency theory: An assessment and review. Academy of Management
119
Review, 14(1), 57–74.
Eklund, J. E., Palmberg, J., &Wiberg, D., (2009). Ownership structure, board composition and
investment performance. Electronic Working Paper Series No. 172. The Royal Institute
of Technology, Centre of Excellence for Science and Innovation Studies (CESIS)
Sweden, 1-28.
Erivelto, F. & Fernando, C. (2016). The relationship between equity ownership

concentration and earnings quality. Management Journal. (43).
Ezazi M., Sadeghi S. &Amjadi H., (2011), "The Effect of Ownership Structure on Share Price
Volatility of Listed Companies in Tehran Stock Exchange: An Empirical Evidence of
Iran". International Journal of Business and Social Science 2(5).
Fama, E.F. & Jensen, M.C. (1983), “Separation of ownership and control”, The Journal of Law
and Economics, 26 (2), 301-325.
Fama, E. F. & French, K. R., (1992). “The Cross-Section of Expected Stock Returns”. Journal of
Finance, 47, 427-465.
Fama, E.F. (1980). Agency problems and the theory of the firm. Journal of Political Economy,
88(2), 288-307.
Faten, A.S., Adel, B. & Mohammad, T.(2015). The Impact of Ownership Structure on Stock
Liquidity: Evidence from Ammam Stock Exchange. Jordan Journal Of Business

Administration. Vol 11 (1) 239-251
Fernandes, N. &Fich, M.E. (2013), “Does financial experience help banks during credit crises?”.
Finegold, D., & Lawler, E.E. (1998). Appraising boardroom performance. Harvard Business
Review, 76(1), 136-148.
Francis, B. B., Hasan, I. & Wu, Q. (2012), “Do corporate boards matter during the current
financial crisis?”, Review of Financial Economics, 21(2), 39-52.
Freeman, R. E. (1984). Strategic Management: A Stakeholder Approach. Boston MA. Pitman

Publishing.
Freeman, R. E., Andrew, D., Wicks, Q., Bidhan, H., & Parmar, A., (1991). Stakeholder theory
and “the corporate objective revisited.” Organization Science, 15, 364-369.
Foroughi, M. &Fooladi, M. (2012).Concentration of Ownership in Iranian Listed Firms.

International Journal of Social Science and Humanity, (2) 2.
Gallizo, J., & Salvador, M. (2006). Share prices and accounting variables: a hierarchical
Bayesian analysis. Review of Accounting and Finance, 5(3), 268-278.
120
Gatuhi, S., Gekara, M., & Muturi, D. (2015). Effect of macroeconomic environment on stock
returns of firms in the agricultural sector in Kenya. International Journal of Management
& Business Studies, 5(3), 9-23.
Glautier, K., Underdown, H., & Morris. R. D., (2011), "Corporate transparency in China: Factors
influencing financial disclosure levels". Working Paper, School of Accounting,
University of New South Wales.
Gray S. &Nowland, N., (2015) ownership structure and corporate voluntary disclosure in
Hong Kong and Singapore. International journal of accounting. 37(2)247-256
Guner, A. B., Malmendier, U. & Tate, G (2008). Financial Expertise of Directors. Journal of
Financial Economics, 88, 323-354.
Hajara, M.B. (2015). Ownership Structure and Earnings Quality of Listed Insurance Companies
in Nigeria. Published MS.cDissertation , Ahmadu Bello University Zaria.
Hallefors, H. (2013). On the relationship between accounting earnings and stock returns-model
development and empirical tests based on Swedish data. Dissertation for the degree of
Licentiate of philosophy in Business Administration, Stockholm School of Economics.
Hasan, B., Alam, N., &Rahaman, A. (2015). The size and value effect to explain cross-section
of expected stock returns in Dhaka stock exchange. International Journal of Economics
and Finance, (7) 14-23.
Healy, P. (1985), The Impact of Bonus Schemes on the Selection of Accounting Principles,
Journal of Accounting and Economics, 7: 85-107.
Heninger, W. G. (2001).The association between auditor litigation and abnormal accruals,

The Accounting Review, 76 (1), 111 – 126.
Hermalin, B. E., &Weisbach, M. S., (2003). Board of Directors as an Endogenously Determined

Institution: A Survey of the Economic Literature, Economic Policy Review, 9 (1), 7-26.
Herzberg, F. (1966). Work and the Nature of Man. Cleveland: World Publishing.
Himmelberg, C.P., Hubbard, R.G., &Palia, D. (1999). Understanding the determinants of

managerial ownership and the link between ownership and performance. The Journal of
Financial Economics, 53, 353-384.
Holtz, L. &Neto, S. A. (2014), “Effects of board of directors’ characteristics on the quality

of accounting information in Brazil”, RevistaContabilidade&Finanças, (25) 66, 255-
266.
HovaKimian, A., Opeler, T., & Titman, S. (2001). “The Debt-Equity Choice’’. Journal of
Quantitative and Financial Analysis, 36, 1-24.
121
Ibrahim, M., &Musah, A. (2014). An econometric analysis of the impact of macroeconomic
fundamentals on stock market returns in Ghana. Research in Applied Economics, 6(2),
47-72.
Ingley, C. & Walt, N. V., (2003). Board dynamics and the influence of professional background,
gender and ethnic diversity of directors, corporate governance. An International Review,
11(4), 218–234
Ismail, A (2013), ‘Impact of Firm’s Characteristics on Stock Return: A Case of Non-Financial

Listed Companies in Pakistan’, Asian Economic and financial Review. 3(1), 51-61.
Adamu, A. I., Ishak, R. & Hassan, N.L.(2019). Dividend Payout Among Nigerian Firms: Do
Female Directors Matters? DOI: 10.21067/jem.v15 1.3041
Iqbal, M. J., Siddiq, A., Gul, H, & Gul, H., (2016). Institutional Ownership and Discretionary
Accruals: Empirical evidences from Pakistani listed non-Financial companies. Journal
of Information Management and Business Review.4(4), 217-222.
Jensen, M.C. &Meckling, WH. (1976). Theory of the firm: Managerial behavior, agency costs,
and ownership structure. Journal of Financial Economics, 3, 305–360.
Jensen, M. (1986), ‘‘Agency Costs of Free Cash Flows, Corporate finance and Takeovers’’.
American Economic Review,. 26, 323.
Jensen, M.C. (1993), “The modern industrial revolution, exit, and the failure of internal control
systems”, The Journal of Finance, (48)3, 831-880.
Jiraporn, P., &Ning, Y. S., (2006), ‘Corporate Governance, Shareholder Rights and Firm
Diversification: An Empirical Analysis,’ Journal of Banking and Finance, 30, 947-963.
John Consler& Greg M. Lepak, 2016. "Dividend initiators, winners during 2008 financial
crisis," Managerial Finance, Emerald Group Publishing, 42(3), 212-224.
John, K., &Senbet, L. W., (1998), “Corporate governance and board effectiveness”, Journal of
Banking & Finance, 22(4), 371-403.
Johnson, J. L., Daily, C. M., &Ellstrand, A. E., (1996), “Boards of directors: a review and
research agenda”, Journal of Management, 22(3), 409-438.
JuhmaniO.(2017).“Ownershipstructureandcorporatevoluntary disclosure: Evidence from

Bahrain”, International Journalof AccountingandFinancialReporting.(3)2, 133-148.
Jung, K., & Kwon, S. Y. (2002), ”Ownership Structure and Earnings Informativeness Evidence
from Korea”, The International Journal of Accounting, pp. 301-325.
122
Karamanou, I., &Vafeas, N. (2005). The association between corporate boards, audit
committees, and management earnings forecasts: an empirical analysis. Journal of
Accounting Research, 43(3), 453–486.
Kazeem, H.S. (2015). Firm specific characteristics and financial performance of listed insurance
firms in Nigeria: Unpublished M.Sc Dissertation.
Keim, D. B., (1983). “Size-Related Anomalies and Stock Return Seasonality.” Journal of
Financial Economics 12(1), 13–32.
Khalid, W., & Khan, S. (2017). Effects of macroeconomic variables on the stock market
volatility: the Pakistan experience. Global Journal of Management and Business
Research: B Economics and Commerce, 17(4), 68-91.
Kiel, H., & Nicholson, G. J., (2003). Board composition and corporate performance: How the
Australian experience informs contrasting theories of corporate governance. Corporate
Governance: An International Review, 11(3), 189-205.
Kirkpatrick, G. (2009), “The corporate governance lessons from the financial crisis”, report,
OECD, Paris.
Kirui, E., Wawire, N. H. W., &Onono, P. O. (2014). Macroeconomic variables, volatility and
stock market returns: a case of Nairobi securities exchange, Kenya. International Journal
of Economics and Finance, 6(8), 214-228.
Klein, A. (1998). Firm performance and board committee structure. Journal of Law and
Economics, 41, 275–303.
Koh, P. S. (2003). On the association between institutional ownership and aggressive corporate
earnings management in Australia. The British Accounting Review, 35(2), 105–128.
Koh, S., Durand, R.B., Dai, L. & Chang M. (2015). Financial distress: Lifecycle and corporate
Restructuring. Journal of corporate Finance, 33 19-33.
Korteweg. A., (2009), “The Net Benefits to Leverage’’. Journal of Finance, Forthcoming.
Krishnan,J.,&Visvanathan,J.S.
(2008).Auditorindustryspecializationandearningsquality.Auditing:AJournalof
Practice&Theory,22(2),71–97.
Krishnan, H. A. & Park, D. (2005). A few good women: On top management teams. Journal of
Business Research, 58(17) 12–1720.
Kyereboah-Coleman, A, &Biekpe, N. (2005). “The link between corporate governance and

performance of the non-traditional export sector: Evidence from Ghana”. Corporate
Governance: The International Journal of Business in the Society, 6(5), 609-623.
123
La Porta, R. F., Lopez-de-Silanes, A., Shleifer, A., &Vishny, Robert., 2000. “Investor Protection
and Corporate Governance.” Journal of Financial Economics. 58 (1), 3–27.
Linter, J. (1956), “Distributions of incomes of corporations among dividends, retained earnings

and taxes”,
Lintner, J. (1965). The valuation of risk assets and the selection of risky investment in stock
portfolios and capital budgets. Review of Economic Statistics, 47, 13-37.
Lipton, M., & Lorsch, J. (1992). A modest proposal for improved corporate governance. The
Business Lawyer, 48(1), 59–77.
Ltaifa, M.B., &Khoufi, W. (2016). Book to market and size as determinants of stock returns of
banks: an empirical investigation from MENA Countries. International Journal of
Academic Research in Accounting, Finance and Management Sciences, 6, 142-160.
Lucas, D. J., and R.L. McDonald (1990). “Equity Issue and Stock Price Dynamics’’. Journal of
Finance, 45, 1019-1043.
MacAvoy, P., & Millstein I. M., (1999). The Active Board of Directors and Its Effect on the
Performance of the Large Publicly Traded Corporation. Journal of Applied Corporate
Finance 11(4): 8-20.
McClelland, D. (1961). The Achieving Society. New York: The Free Press.
McIntyre, M. L., Murphy, S. A., & Mitchell, P. (2007). The top team: Examining board
composition and firm performance. Corporate Governance an International Review,
7(5), 547-561.
Mizruchi, M. S., (1983), “A Longitudinal Study of the Formation of Interlocking Directorates,”

Administrative Science Quarterly 33, 194-210.
Modigliani. F., & M.H. Miller (1963), “Corporate Income Taxes and the Cost of Capital: A
Correction’’. American Economic Review. June 53(3), 443-53.
Mossin, A. (1966). Capital market and security valuation. Econometric, 17, 867-887.
Muth, M. M., & Donaldson, L. (1998). Stewardship Theory and Board Structure: A Contingency
Approach. Corporate Governance: An International Review, 6(1), 5- 28.
Nguyen T.T. & Nguyen H. (2016). Management Behaviour in Vietnamese Commercial Banks.
Australlian Economic papers, vol 55, issue 4 345-367.
Ntshangase, K., Mingiri, K.F., &Palesa, M.M. (2016). The interaction between the stock market
and macroeconomic policy variables in South Africa. Journal Economics, 7(1), 1-10.
Odum, A.N. & Odum, C.G. (2017). Impact of Financial Leverage On Dividend Policy of
124
Selected Manufacturing Firms in Nigeria.IDOSR Publications 2(1): 57-67, 2017
Olowoniyi A. O &Ojenike J. (2012). Determinants of Stock Return of Nigerian Listed Firms.

Journal of Emerging Trends in Economics and Management Sciences 3 (4), 389-392.
Olowookere, J.K. (2013). Determinants of External Audit Fees: Evidence from the Banking
Sector in Nigeria. Research Journal of Finance and Accounting.
Osamwonyi, I.O. (2003). Forecasting as a tool for securities analysis. a paper presented at a
three-day workshop on introduction to securities analysis, organized by securities and
exchange commission, Lagos August 17th.
Otieno, M. (2016). Total Debt Servicing and Macroeconomic Performance in Kenya. Kenyatta
Oyerogba, E. O., Olaleye, O. M., &Zaccheaus, A. Z., (2014). The effect of ownership
concentration on firm value of listed companies. IOSR Journal of Humanities and Social
Science (IOSR-JHSS), 19, 90-96.
Pearce, J. H., & Zahra, S. A. (1992). Board Composition from a strategic contingency
perspective. Journal of Management Studies, 29(2), 411-438.
Pfeffer, J. (1972). Size, composition, and function of hospital boards of directors. Administrative
Science Quarterly, 18(2), 349-364
Pfeffer, J., &Salancik, G. R. (1978). The external control of organizations: A resource

dependence perspective. New York: Harper and Row.
Potter, G. (1992). Accounting Earnings Announcements, Institutional Investor Concentration,

and Common Stock Returns. Journal of Accounting Research, 146–155.
Pound, J. (1988). The promise of the governed corporation. Harvard Business Review 73.
Ramsey, H. & Blair. M. (1995). Ownership and control: Rethinking Corporate Governance for
the twenty first century, Brookings Institution, Washington, DC.
Rashid, A., De Zoysa, A., Lodth, S., &Rudkin, K. (2010). Board composition and firm
performance: Evidence from Bangladesh. Australasian Accounting Business and Finance
Journal, 4 (1), 76 - 95.
Reinganum, M. R. (1981). Misspecification of capital asset pricing: Empirical anomalies based

on earnings’ yields and market values. Journal of Financial Economics, 9, 19-46.
Robinson, J. R., Xue, Y. & Zhang, M. H., (2012), “Tax planning and financial expertise in the
Audit Committee”.
Rosenstein, S. & Wyatt, J. G. (1990). Outside Directors, Board Independence and Shareholder
Wealth. Journal of Financial Economics, 26(2), 175–191.
125
Ross, S.A. (1976). The Arbitrage Theory of Capital Asset Pricing. The Journal of Economic
Theory, 13, 341–360.
Sahin, K., Basfirinci, C. S. &Ozsalih, A. (2011). 'The impact of board composition on corporate
financial and social responsibility performance: Evidence from public-listed companies
in Turkey.' African Journal of Business Management, 5:7, 2959-78
Sanda, A. U, Mukaila, A. S, &Garba, T. (2011). “Corporate Governance Mechanisms and Firm

Financial Performance in Nigeria”, Final Report Presented to the Biannual Research
Workshop of the AERC, Nairobi, Kenya, 24-29.
Sani, N. (2016). The effect of cross listing on the environmental, social and governance
performance of firms. Journal of World Business, 51, 977–990.
Sani, A.,Sani,A. & Musa, A.M.(2017). Corporate Board Attributes and Dividend Payout Policy
of Listed Deposit Money Banks in Nigeria. International Journal of Research in IT,

Management and Engineering. ISSN 2249-1619. Vol 7(1) January,2017, pg 7-13
Sindhu, M.I., Hashmi,S.H., & Haq, E.U.(2016). Impact of Ownership Structure on Dividend Pay
Out in Pakistani non Financial Sector. Cogent Business & Management Taylor and
Francis Journals, vol.3(1), pages 1272815-127, December
Singh, H. &Harianto, F. (1989) ‘Management-board relationships, takeover risk, and the

adoption of golden parachutes’, Academy of Management Journal 32: 7–24.
Shafana, A. L. Fathima, R. &Jariya, A. M. (2013). Relationship between Stock Values and Firm
Size, and Book-To- Market Equity: Empirical Evidence from Selected Companies Listed
on Milanka Price Index in Colombo Stock Exchange. Journal of Emerging Trends in
Economics and Management Sciences (JETEMS) 4(2):217-225.
Sharpe, W., F., (1964). “Capital Asset Prices: A Theory of Market Equilibrium under Conditions
of Risk.” Journal of Finance 19 (3), 425-442.
Shehu, U. H. & Farouk, B. (2014). Firm Characteristics and Financial Reporting Quality of
Listed Manufacturing Firms in Nigeria. International Journal of Accounting, Banking
and Management, 1 (6): 47-63.
Shleifer, A., &Vishny, R., (1997). A survey of corporate governance. Journal of Finance. 52,
737–775.
Shumway, T. (2001). Forecasting bankruptcy more accurately: A simple hazard model. The
Journal of Business, 74(1), 101-124.
Stepanyan, G.G. (2012). Revisiting Firm Life Cycle Theory for New Directions in Finance.
SSRN Electronic Journal. DOI: 10. 2139/ssrn. 2126479
126
Stiglitz, J. E. (1985). “Credit Rationing in Markets with Imperfect Information.” American
Economic Review 77:1 (March): 228-31.
Sundaramurthy, S., Rhoades, F., &Rechner, K. L., (2005). A Meta-analysis of Board Leadership
Structure and Financial Performance: Are “Two Heads Better than One”? Corporate
Governance: An International Review, (9)4, 311–319.
Sundaram, K., &Inkpen, E., (2004). A Meta-analysis of Board Leadership Structure and
Financial Performance: Are “Two Heads Better than One”? Corporate Governance: An
International.
Teshima, N., &Shuto, A. (2008). Managerial ownership and earnings management: Theory and
empirical evidence from Japan. Journal of International Financial Management &
Accounting, 19(2), 107–132.
Thomsen S. & Pedersen. T. (2000). Ownership Structure and Economic Performance in the
largest European Companies. The Strategic Management Journal 21: 689-705.
Titman, S. & Wessels, R. (1988), “The determinants of capital structure choice”, The Journal of
Finance, 43(1), pp. 1-19.
Tripathi, V., & Seth, R. (2014). Stock market performance. International Journal of Finance and
Accounting. 7(4): 122-131.
Tripathi, V. (2009). Company fundamentals and equity returns in India. India Council of Social
Science Research.
Wafa, M. A., & Younes, B., (2014). The relationship between ownership structure and earnings
quality in the French contex. International Journal of Accounting and Economics Studies,
2 (2) (2014) 80-87
Wajid, K., Arab, N., Madiha, K., Waseem, K. Q. K. & Ahmad, A. (2013). The impact of capital
structure and Research.Journal of Finance and Accounting.6(16).
Walker, M. (2009). Do IFRS reconciliations convey information? The effect of debt contraction.
Journal of Accounting Research, 47, 1167–1199.
Warfield, T., Wild, J. & Wild, K. (1995). Managerial Ownership, Accounting Choices and
Informativeness of Earnings. Journal of Accounting and Economics, 20, 61–91.
Weisbach, M. S. (1988). Outside directors and CEO turnover. Journal of financial Economics,
20, 431- 460.
Welch, I. (2004). “Capital Structure and Stock Returns’’. Journal of Political Economy, 112,
106-131.
Wen W., (2010), “Ownership Structure and Bank Performance in China: Does Ownership
Concentration Matters?”
127
Westphal, J (2001). The strategic context of external network ties: Examining the impact of
director appointments on board involvement in strategic decision-making. Academy of
Management Journal, 44(4). 639-660.
Wheelen, T. L., & Hunger, D. J., (2007). Strategic Management and Business Policy (13 ed.).
Pearson.
Uwubanmwen, A. E., &Obayagbona, J., (2012). Company fundamentals and returns in the
Nigerian stock exchange. JORIND, 10(2).
Vintilă, G., &Gherghina, E. A. (2014). Liquidity and Profitability Analysis on the Romanian
Listed Companies” Journal of Eastern Europe Research in Business & Economics.
Yang, C. Y., Chun, H. N., &Ramadili, B. L., (2009). Managerial Ownership Structure and
Earnings Management, Journal. TTYRE (234).
Yermack, D., (1996). Higher Market Valuation of Companies with a Small Board of Directors,
Journal of Financial Economics 40(1), 185-211.
Yuan, J. & Jiang, Y. (2008), “Accounting information quality, free cash flow and
overinvestment: a Chinese study”, The Business Review, Cambridge, 11 (1), 159-166.
128
APPENDIX ’’ A’’
firms sr fz fa prof oc mo io bi bz bexp

Cadbury Nigeria plc 7.75 8.01848 31 0.136008 0.648 0.051 0.176 0.1 10 0
Cadbury Nigeria plc 40 9.18063 35 0.153817 0.561 0.043 0.194 0.090909 11 0
Cadbury Nigeria plc 23 9.23149 36 0.201524 0.758 0.071 0.135 0.090909 11 0.090909
Cadbury Nigeria plc 10.3 9.29709 37 0.244304 0.748 0.044 0.231 0.090909 11 0.090909
Cadbury Nigeria plc 11 9.38237 38 0.687222 0.714 0.079 0.213 0.090909 11 0.090909
Champion Breweries plc 11.6 6.0665 27 0.210349 0.347 0.014 0.105 0 12 0
-
Champion Breweries plc 8 6.39156 30 0.223967 0.471 0.014 0.092 0.090909 11 0
Champion Breweries plc 6.98 5.43293 31 0.518628 0.477 0.014 0.092 0.090909 11 0
Champion Breweries plc 4.6 5.49389 32 0.854956 0.241 0.026 0.107 0.090909 11 0
Champion Breweries plc 2.5 7.58696 33 0.513106 0.332 0.026 0.141 0.083333 12 0.083333
Dangote Sugar Refinery plc 12.5 9.66765 4 0.454898 0.671 0.385 0.177 0.071429 14 0
Dangote Sugar Refinery plc 6.75 11.1189 9 0.410192 0.653 0.214 0.223 0.153846 13 0.153846
Flour mills of Nigeria plc 19.5 8.96464 31 0.233825 0.615 0.148 0.177 0 11 0
Flour mills of Nigeria plc 21.5 9.00856 32 0.452102 0.615 0.148 0.177 0 12 0
Flour mills of Nigeria plc 31.5 8.32929 33 0.559647 0.591 0.206 0.161 0.083333 12 0
Flour mills of Nigeria plc 39.2 8.51131 35 0.473907 0.583 0.213 0.181 0.083333 12 0.083333
Flour mills of Nigeria plc 29 9.36317 38 0.450517 0.414 0.243 0.216 0.090909 11 0.090909
Flour mills of Nigeria plc 21 9.37835 39 0.48948 0.414 0.243 0.292 0.090909 11 0.090909
Guinness Nigeria plc 13.8 9.0856 45 0.679495 0.714 0.089 0.225 0.090909 12 0.083333
129
Guinness Nigeria plc 73 12.966 53 0.52105 0.668 0.129 0.184 0.142857 14 0.214286
Honeywell flour mills plc 18.8 8.37384 31 0.153927 0.587 0.052 0.125 0 15 0.066667
Honeywell flour mills plc 2.89 8.7028 34 0.512411 0.671 0.075 0.135 0.083333 12 0.083333
International breweries plc 3.65 5.89592 15 0.356456 0.081 15 0.701 0 15 0
International breweries plc 6.7 2.83181 16 0.01592 0.531 0.071 0.179903 0 15 0
International breweries plc 11.8 5.92698 17 0.408713 0.532 0.102 0.179903 0.066667 15 0
International breweries plc 18.5 5.92724 18 0.014018 0.432 0.132 0.179903 0.066667 14 0.071429
International breweries plc 17 5.13251 20 0.186651 0.442 0.093 0.179903 0.071429 14 0.071429
Vitafoam Nigeria plc 5.71 7.53867 3 0.470961 0.591 0.121 0.112031 0.090909 11 0.181818
Unilever Nigeria plc 15 8.47923 37 0.091242 0.451 0.069 0.283 0.1 10 0
Unilever Nigeria plc 17.4 8.48523 38 0.040677 0.451 0.069 0.283 0.1 10 0
Unilever Nigeria plc 35.8 8.59739 41 0.559482 0.541 0.039 0.353 0.076923 13 0.076923
Unilever Nigeria plc 40 8.64672 44 0.24728 0.457 0.042 0.209 0.083333 12 0.083333
PZ cusson Nigeria plc 25.65 8.04363 38 0.060346 0.687 0.088 0.251 0 13 0.076923
PZ cusson Nigeria plc 25.3 8.3447 41 0.20515 0.704 0.109 0.184 0.066667 15 0.066667
PZ cusson Nigeria plc 23 8.5827 44 0.586595 0.721 0.071 0.103 0.071429 14 0.214286
130
Northern Nigeria flour mill
plc 10.05 9.22539 32 0.116737 0.591 0.141 0.154 0 14 0.071429
plc 9.67 6.19678 33 0.186285 0.601 0.14 0.105 0 14 0.071429
plc 12.6 6.25272 34 0.010901 0.01 0.014 0.105 0 13 0.076923
plc 15.4 7.3721 35 0.039314 0.014009 0.014 0.115 0 12 0.083333
plc 16.5 6.38684 36 0.028976 0.014009 0.014009 0.159 0 14 0.142857
plc 17.5 6.4592 37 0.029048 0.026789 0.026789 0.162 0 14 0.142857
plc 18.49 6.53451 38 0.028174 0.026789 0.026789 0.141 0 14 0.142857
plc 19.4 6.57407 39 0.027846 0.026789 0.026789 0.142 0.071429 14 0.142857
plc 20.2 6.63182 40 0.245859 0.026789 0.026789 0.141 0.071429 14 0.142857
plc 18.8 8.69334 41 0.020423 0.026789 0.026789 0.102 0.071429 14 0.142857
Nigeria enamelware plc 18.9 5.27804 31 0.303844 0.714 0.056 0.352 0 10 0.2
Nigeria enamelware plc 31.82 5.03391 35 0.116224 0.656 0.025 0.298 0.076923 13 0.230769
Nestle Nigeria plc 1432 8.72782 42 0.02346 0.854 0.023 0.321 0.07 14 0.071
-
Nestle Nigeria plc 1175 8.69373 43 0.009885 0.702 0.02 0.215 0 13 0.076923
-
Nestle Nigeria plc 1011.75 8.13192 38 0.162792 0.682 0.01 0.287 0.076923 13 0.230769
Nestle Nigeria plc 850.42 8.19178 40 0.14183 0.686 0.01 0.281 0.153846 13 0.230769
Nascon Allied Industry plc 5.65 4.58744 18 0.498805 0.597 0.08 0.181 0.166667 6 0
Nascon Allied Industry plc 7.96 7.34457 24 0.149922 0.702 0.02 0.205 0.2 10 0.2
Nascon Allied Industry plc 13 6.46787 27 0.113917 0.796 0.04 0.206 0.2 10 0.2
Multi-Trex integrated food
plc 0.43 4.27662 1 0.11375 0.795 0.001 0.124 0 13 0.076923
Multi-Trex integrated food 1.18 4.41206 2 0.207191 0.795 0.001 0.124 0 13 0.076923
131
plc
plc 0.34 4.47992 3 0.40833 0.795 0.002 0.136 0.076923 13 0.076923
plc 0.17 4.52132 4 0.025351 0.791 0.003 0.136 0.076923 13 0.076923
plc 0.5 4.48961 5 0.148631 0.861 0.001 0.172 0.071429 14 0.071429
plc 1.76 4.53476 6 0.129769 0.861 0.002 0.176 0.071429 14 0.071429
plc 0.5 4.46307 7 0.269556 0.709 0.003 0.141 0.0625 16 0
plc 0.65 3.89697 8 0.191609 0.809 0.002 0.132 0.0625 16 0
plc 1.65 3.94285 9 0.167859 0.811 0.003 0.141 0.0625 16 0
plc 0.76 4.03647 10 0.130353 0.851 0.002 0.141 0.0625 16 0
McNichols plc 0.6 5.00849 2 0.222088 0.795 0.02 0.16 0.142857 7 0
McNichols plc 0.87 6.01512 3 0.6639 0.795 0.01 0.101 0.142857 7 0
McNichols plc 1.12 5.12892 4 0.080666 0.714 0.02 0.111 0.142857 7 0
McNichols plc 0.96 5.4566 5 0.140936 0.745 0.02 0.121 0.125 8 0
McNichols plc 0.5 5.35453 6 0.396596 0.741 0.04 0.121 0.125 8 0
McNichols plc 1.22 5.32494 7 0.333706 0.773 0.04 0.176 0.25 8 0.25
McNichols plc 1.29 6.67887 8 0.275692 0.707 0.02 0.221 0.25 8 0.25
McNichols plc 1.26 6.47531 9 0.180561 0.702 0.04 0.213 0.25 8 0.25
McNichols plc 0.47 6.49118 10 0.247171 0.704 0.02 0.133 0.25 8 0.25
McNichols plc 0.49 6.4682 11 0.041756 0.771 0.016 0.134 0.25 8 0.25
132
APPENDIX ’’ B’’
. *(14 variables, 160 observations pasted into data editor)
. summarize srfz fa prof ocmo bi bzbexp
Variable | Obs Mean Std. Dev. Min Max

-------------+---------------------------------------------------------
sr | 160 84.73062 264.197 .17 1485
fz | 160 7.665492 2.200851 2.83181 14.87833
fa | 160 28.3 14.39025 1 54
prof | 160 .3020525 .2332101 -.2239673 .891987
oc | 160 .5958285 .1879736 .01 .861
-------------+---------------------------------------------------------
mo | 160 .1754935 1.182254 .001 15
bi | 160 .0894777 .0604369 0 .2857143
bz | 160 12.10625 2.150316 6 16
bexp | 160 .0924681 .0756546 0 .25
. sktestsrfz fa prof ocmoio bi bzbexp
Skewness/Kurtosis tests for Normality

------ joint ------
133
Variable | ObsPr(Skewness) Pr(Kurtosis) adj chi2(2) Prob>chi2
-------------+---------------------------------------------------------------
sr | 160 0.0000 0.0000 . 0.0000
fz | 160 0.0024 0.0693 10.85 0.0044
fa | 160 0.0172 0.0000 31.93 0.0000
prof | 160 0.0073 0.0267 10.52 0.0052
oc | 160 0.0000 0.0001 42.18 0.0000
mo | 160 0.0000 0.0000 . 0.0000
io | 160 0.0000 0.0000 66.42 0.0000
bi | 160 0.0033 0.0793 10.25 0.0060
bz | 160 0.0002 0.2782 13.04 0.0015
bexp | 160 0.0211 0.0036 11.80 0.0027
. correlate fz fa prof ocmoio bi bzbexp

(obs=160)
| fz fa prof ocmoio bi bzbexp

-------------+---------------------------------------------------------------------------------
fz | 1.0000
fa | 0.5138 1.0000
prof | 0.3674 -0.0230 1.0000
oc | 0.0662 -0.2215 0.1245 1.0000
mo| -0.0325 -0.0844 0.0501 -0.2145 1.0000
io | 0.0694 0.2370 -0.0324 0.0831 0.5003 1.0000
bi | 0.0657 -0.1491 0.1625 0.2863 -0.1179 0.0233 1.0000
bz | 0.2061 0.2382 -0.0890 -0.1157 0.1146 0.0194 -0.4836 1.0000
bexp | 0.2283 0.2098 -0.0323 0.0884 -0.1081 0.0386 0.3121 0.0728 1.0000
. regress srfz fa prof ocmoio bi bzbexp
134
Source | SS df MS Number of obs = 160
-------------+---------------------------------- F(9, 150) = 52.30
Model | 2358815.63 9 262090.626 Prob > F = 0.0000
Residual | 8739394.95 150 58262.633 R-squared = 0.6251
-------------+---------------------------------- Adj R-squared = 0.5953
Total | 11098210.6 159 69800.0666 Root MSE = 241.38
------------------------------------------------------------------------------
sr | Coef. Std. Err. t P>|t| [95% Conf. Interval]
-------------+----------------------------------------------------------------
fz | 11.55934 11.96547 0.97 0.336 -12.08329 35.20196
fa | 2.709042 1.896981 1.43 0.155 -1.039214 6.457298
prof | 303.9675 93.77757 3.24 0.001 -489.2631 -118.6719
oc | 1.306201 .1637748 7.98 0.000 .9810667 1.631335
mo| -12.21482 21.56248 -0.57 0.572 -54.82024 30.39059
io | 266.9867 120.4324 2.22 0.028 29.02357 504.9497
bi | 7.626885 4.364485 1.75 0.082 -.9710693 16.22484
bz | 7.795936 10.98732 0.71 0.479 -13.91396 29.50583
bexp | .1673587 .0833539 2.01 0.046 .0032496 .3314677
_cons | -1.745176 .2507962 -6.96 0.000 -2.238949 -1.251404
------------------------------------------------------------------------------
. estathettest
Breusch-Pagan / Cook-Weisberg test for heteroskedasticity

Ho: Constant variance
Variables: fitted values of sr
chi2(1) = 0.74
135
Prob > chi2 = 0.1202
.
. estatvif
Variable | VIF 1/VIF

-------------+----------------------
fa | 2.03 0.491734
fz | 1.89 0.528388
mo | 1.77 0.563864
io | 1.76 0.566706
bi | 1.73 0.579506
bz | 1.52 0.656455
oc | 1.40 0.715010
prof | 1.31 0.766126
bexp | 1.29 0.773772
-------------+----------------------
Mean VIF | 1.63
. regress srfz fa prof

-------------+---------------------------------- F(3, 156) = 7.73
Model | 1436709.98 3 478903.326 Prob > F = 0.0001
136
-------------+---------------------------------- Adj R-squared = 0.1127
Total | 11098210.6 159 69800.0666 Root MSE = 248.86
------------------------------------------------------------------------------
-------------+----------------------------------------------------------------
fz | 19.19973 11.6543 1.65 0.101 -3.82086 42.22032
fa | 2.940353 1.658177 1.77 0.078 -.335023 6.21573
prof | 327.9157 94.37998 3.47 0.001 -514.3432 -141.4881
_cons | -46.60901 71.63107 -0.65 0.516 -188.101 94.88295
------------------------------------------------------------------------------
. estathettest

chi2(1) = 0.331
Prob > chi2 = 0.6410
. estatvif

-------------+----------------------
fz | 1.69 0.592065
fa | 1.46 0.684108
prof | 1.24 0.804023
-------------+----------------------
Mean VIF | 1.46
137
regress srocmoio

-------------+---------------------------------- F(3, 156) = 54.86
Model | 948195.669 3 316065.223 Prob > F = 0.0029
-------------+---------------------------------- Adj R-squared = 0.1678
Total | 11098210.6 159 69800.0666 Root MSE = 255.08
------------------------------------------------------------------------------
-------------+----------------------------------------------------------------
oc | 4.282942 1.112055 3.85 0.000 2.103354 6.46253
mo | -36.9705 20.69375 -1.79 0.076 -77.8466 3.905607
io | 964.9211 295.6347 3.26 0.001 380.9575 1548.885
_cons | .0034803 .0055717 0.62 0.534 -.0076015 .0145622
------------------------------------------------------------------------------
. estathettest

chi2(1) = 0.59
Prob > chi2 = 0.0910
. estatvif
138
Variable | VIF 1/VIF n
-------------+----------------------
mo | 1.46 0.683668
io | 1.41 0.711708
oc | 1.10 0.905609
-------------+----------------------
Mean VIF | 1.32
regress sr bi bzbexp

-------------+---------------------------------- F(3, 156) = 42.93
Model | 591853.24 3 197284.413 Prob > F = 0.0005
-------------+---------------------------------- Adj R-squared = 0.1351
Total | 11098210.6 159 69800.0666 Root MSE = 259.52
------------------------------------------------------------------------------
-------------+----------------------------------------------------------------
bi | .8554883 .2471595 3.46 0.001 .3648146 1.346162
bz | 13.78983 11.35383 1.21 0.226 -8.637244 36.21691
bexp | 674.6007 297.3106 2.27 0.025 87.32688 1261.875
_cons | -135.5375 155.6292 -0.87 0.385 -442.9498 171.8748
------------------------------------------------------------------------------
. estathettest

139
chi2(1) = 41.92
Prob > chi2 = 0.0000
. estatvif

-------------+----------------------
bi | 1.55 0.644813
bz | 1.41 0.710626
bexp | 1.19 0.837220
-------------+----------------------
Mean VIF | 1.38
. xtset cross fyear, yearly

panel variable: cross (strongly balanced)
time variable: fyear, 2010 to 2019
delta: 1 year
. xtregsrfz fa prof ocmoio bi bzbexp, fe
Fixed-effects (within) regression Number of obs = 160

Group variable: cross Number of groups = 16
R-sq: Obs per group:

within = 0.3832 min = 10
140
between = 0.2550 avg = 10.0
overall = 0.4561 max = 10
F(9,135) = 61.36
corr(u_i, Xb) = -0.1001 Prob > F = 0.0000
------------------------------------------------------------------------------
-------------+----------------------------------------------------------------
fz | 5.07188 5.70499 0.89 0.376 -6.210835 16.35459
fa | 5.914911 2.50101 2.37 0.019 .9686824 10.86114
prof | 375.9037 161.4736 2.33 0.021 694.9602 56.84715
oc | 34.43432 58.16078 0.59 0.555 -80.5898 149.4584
mo| -.3475853 7.102189 -0.05 0.961 -14.39353 13.69836
io | 40.18659 137.1143 0.29 0.770 -230.9834 311.3566
bi | 2.289225 160.4349 0.01 0.989 -315.0016 319.5801
bz| -1.990772 5.83022 -0.34 0.733 -13.52115 9.539608
bexp | -243.612 99.73511 -2.44 0.016 -440.8573 -46.36662
_cons | -100.4259 85.38853 -1.18 0.242 -269.2982 68.4463
-------------+----------------------------------------------------------------
sigma_u| 258.73812
sigma_e| 62.905013
rho | .94419036 (fraction of variance due to u_i)
------------------------------------------------------------------------------
F test that all u_i=0: F(15, 135) = 138.24 Prob > F = 0.0000
. estimates store fixed
. estimates store random
141
. xtregsrfz fa prof ocmoio bi bzbexp, re
Random-effects GLS regression Number of obs = 160


within = 0.5830 min = 10
between = 0.3581 avg = 10.0
Wald chi2(9) = 76.17
corr(u_i, X) = 0 (assumed) Prob > chi2 = 0.0000
------------------------------------------------------------------------------
sr | Coef. Std. Err. z P>|z| [95% Conf. Interval]
-------------+----------------------------------------------------------------
fz | 4.88014 5.581122 0.87 0.382 -6.058658 15.81894
fa | 5.653911 2.257903 2.50 0.012 1.228503 10.07932
prof | 195.2497 84.79545 2.30 0.021 29.05371 361.4458
oc | 1.306201 .1637748 7.98 0.000 .9852081 1.627193
mo | -.521908 6.98178 -0.07 0.940 -14.20595 13.16213
io | .4112079 .1099749 3.74 0.000 .1946868 .627729
bi | 4.282942 1.112055 3.85 0.000 2.075233 6.490651
bz| -1.633373 5.643796 -0.29 0.772 -12.69501 9.428264
bexp | 6.730167 3.271975 2.06 0.040 .3172135 13.14312
_cons | -100.8343 111.3901 -0.91 0.365 -319.155 117.4863
-------------+----------------------------------------------------------------
sigma_u| 305.47491
sigma_e| 62.905013
142
------------------------------------------------------------------------------
. estimates store randomw
. hausman fixed randomw
---- Coefficients ----

| (b) (B) (b-B) sqrt(diag(V_b-V_B))
| fixed randomw Difference S.E.
-------------+----------------------------------------------------------------
fz | 5.07188 4.88014 .1917401 1.182367
fa | 5.914911 5.653911 .2610001 1.075606
prof | -9.579348 -11.8049 2.225548 5.454755
oc | 34.43432 39.18702 -4.7527 12.05146
mo | -.3475853 -.521908 .1743226 1.302239
io | 40.18659 47.5998 -7.413202 28.59072
bi | 2.289225 8.685513 -6.396288 46.33883
bz | -1.990772 -1.633373 -.3573992 1.462542
bexp | -243.612 -234.8789 -8.733076 19.45709
------------------------------------------------------------------------------
b = consistent under Ho and Ha; obtained from xtreg
B = inconsistent under Ha, efficient under Ho; obtained from xtreg
Test: Ho: difference in coefficients not systematic
chi2(9) = (b-B)'[(V_b-V_B)^(-1)](b-B)
= 0.69
Prob>chi2 = 0.9999
143
. xttest0
Breusch and Pagan Lagrangian multiplier test for random effects
sr[cross,t] = Xb + u[cross] + e[cross,t]
Estimated results:
| Var sd = sqrt(Var)
---------+-----------------------------
sr | 69800.07 264.197
e | 3957.041 62.90501
u | 93314.92 305.4749
Test: Var(u) = 0
chibar2(01) = 506.56
Prob > chibar2 = 0.0000
. xtregsrfz fa prof, fe


within = 0.1349 min = 10
between = 0.0696 avg = 10.0
F(3,141) = 71.70
144
corr(u_i, Xb) = 0.0551 Prob > F = 0.0000
------------------------------------------------------------------------------
-------------+----------------------------------------------------------------
fz | 1.299594 5.253722 0.25 0.805 -9.086653 11.68584
fa | 3.714377 1.889034 1.97 0.050 -.0201131 7.448867
prof | 259.5875 116.2891 2.23 0.026 -487.5098 -31.6651
_cons | -26.89928 54.14774 -0.50 0.620 -133.9457 80.1471
-------------+----------------------------------------------------------------
sigma_u| 255.79153
sigma_e| 63.152918
------------------------------------------------------------------------------
. estimates store f1
. xtregsrfz fa prof, re


within = 0.2348 min = 10
145
between = 0.1712 avg = 10.0
Wald chi2(3) = 67.24

------------------------------------------------------------------------------
-------------+----------------------------------------------------------------
fz | 1.248305 5.2219 0.24 0.811 -8.986432 11.48304
fa | 3.840369 1.75901 2.18 0.029 .392773 7.287966
prof | 195.2497 84.79545 2.30 0.021 29.05371 361.4458
_cons | -29.04753 79.31832 -0.37 0.714 -184.5086 126.4135
-------------+----------------------------------------------------------------
sigma_u| 239.59637
sigma_e| 63.152918
------------------------------------------------------------------------------
. estimates store r1
. hausman r1 f1

| r1 f1 Difference S.E.
-------------+----------------------------------------------------------------
fz | 1.248305 1.299594 -.0512898 .
fa | 3.840369 3.714377 .1259923 .
prof | -14.80925 -11.41854 -3.390706 2.176014
146
------------------------------------------------------------------------------
chi2(3) = (b-B)'[(V_b-V_B)^(-1)](b-B)
= 0.76
Prob>chi2 = 0.8590
(V_b-V_B is not positive definite)
. xttest0
Estimated results:
---------+-----------------------------
sr | 69800.07 264.197
e | 3988.291 63.15292
u | 57406.42 239.5964
Test: Var(u) = 0
chibar2(01) = 553.13
. xtregsrocmoio, fe
147

within = 0.2132 min = 10
between = 0.1377 avg = 10.0
F(3,141) = 103.15
corr(u_i, Xb) = 0.1479 Prob > F = 0.0000
------------------------------------------------------------------------------
-------------+----------------------------------------------------------------
oc | 34.33022 56.49128 0.61 0.544 -77.34917 146.0096
mo| -.5780129 6.943003 -0.08 0.934 -14.30385 13.14783
io | 6.821349 136.4277 0.05 0.960 -262.8869 276.5296
_cons | 63.06233 42.57025 1.48 0.141 -21.09614 147.2208
-------------+----------------------------------------------------------------
sigma_u| 263.69123
sigma_e| 64.179622
------------------------------------------------------------------------------
. estimates store fff1
. xtregsrocmoio, re
148

within = 0.1031 min = 10
between = 0.0544 avg = 10.0
Wald chi2(3) = 99.60

------------------------------------------------------------------------------
-------------+----------------------------------------------------------------
oc | 1.398232 .5636374 2.48 0.015 .2771798 2.519284
mo| -1.201359 6.885834 -0.17 0.861 -14.69735 12.29463
io | 17.66289 5.286155 3.34 0.001 7.148944 28.17684
_cons | 57.265 80.66792 0.71 0.478 -100.8412 215.3712
-------------+----------------------------------------------------------------
sigma_u| 276.92816
sigma_e| 64.179622
rho k[| .94902717 (fraction of variance due to u_i)
------------------------------------------------------------------------------

| rfff1 fff1 Difference S.E.
-------------+----------------------------------------------------------------
oc | 38.12874 38.12874 0 6.74e-07
mo | -1.201359 -1.201359 0 0
io | 25.72393 25.72393 0 0
149
------------------------------------------------------------------------------
chi2(2) = (b-B)'[(V_b-V_B)^(-1)](b-B)
= 0.01
Prob>chi2 = .08900
(V_b-V_B is not positive definite)
. xttest0
Estimated results:
---------+-----------------------------
sr | 69800.07 264.197
e | 4119.024 64.17962
u | 76689.21 276.9282
Test: Var(u) = 0
chibar2(01) = 599.52
. xtregsr bi bzbexp, fe
150

within = 0.1264 min = 10
between = 0.0537 avg = 10.0
F(3,141) = 78.28
corr(u_i, Xb) = -0.1493 Prob > F = 0.0000
------------------------------------------------------------------------------
-------------+----------------------------------------------------------------
bi | 13.94844 4.222444 3.30 0.025 .2392349 .5419365
bz | 4.183984 5.301868 0.79 0.431 -6.297445 14.66541
bexp| 16.07462 5.058198 3.17 0.033 -337.5357 28.75986
_cons | 32.33615 63.53624 0.51 0.612 -93.27063 157.9429
-------------+----------------------------------------------------------------
sigma_u| 266.53737
sigma_e| 63.427534
------------------------------------------------------------------------------
. estimates store fx1
. xtregsr bi bzbexp, re
151

within = 0.1763 min = 10
between = 0.1377 avg = 10.0
Wald chi2(3) = 101.67

------------------------------------------------------------------------------
-------------+----------------------------------------------------------------
bi | 9.516366 2.286524 4.16 0.003 -98.59913 456.634
bz | 4.610338 5.226738 0.88 0.378 -5.63388 14.85456
bexp | 171.3354 80.01795 2.14 0.034 -329.3938 -13.27692
_cons | 27.1967 92.14229 0.30 0.768 -153.3989 207.7923
-------------+----------------------------------------------------------------
sigma_u| 270.31198
sigma_e| 63.427534
------------------------------------------------------------------------------
. estimates store rw1

. hausman fx1 rw1

| fx1 rw1 Difference S.E.
-------------+----------------------------------------------------------------
152
bi | 179.0175 169.7841 9.233398 17.25646
bz | 4.183984 4.610338 -.4263538 .8893889
bexp | -154.3879 -145.6921 -8.695863 8.251262
------------------------------------------------------------------------------
chi2(3) = (b-B)'[(V_b-V_B)^(-1)](b-B)
= 1.24
Prob>chi2 = 0.7440
. xttest0
Estimated results:
---------+-----------------------------
sr | 69800.07 264.197
e | 4023.052 63.42753
u | 73068.56 270.312
Test: Var(u) = 0
chibar2(01) = 584.04
153

Jibo Stock Return

Uploaded by

Copyright:

Available Formats

You might also like

Jibo Stock Return

Uploaded by

Document Information

Original Description:

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Jibo Stock Return

Uploaded by

Copyright:

Available Formats

DETERMINANTS OF STOCK RETURNS OF QUOTED CONSUMER GOODS

MUHAMMAD, Haliru Jibo

MUHAMMAD, Haliru Jibo

BEING A PROJECT SUBMITTED TO THE DEPARTMENT OF ACCOUNTING,

NASARAWA STATE UNIVERSITY, KEFFI

knowledge and literary presentation.

Olotu all of the staff of Accounting Department.

CHAPTER ONE: INTRODUCTION:

1.1 Background to the Study………………………………….………….………………………1

1.2 Statement of the Problems……………………………………………………………………4

1.3 Research Questions……………………………………….………………………………......7

1.4 Objectives of the Study………………………………………….…………………………....8

1.5 Statement of the Hypotheses……………………………………………..…………….……..8

1.6 Significance of the Study …………………………………………………………….………9

1.7 Scope of the Study…………………………………………………………..………..………9

2.1.1 Firm Attributes…………………………..……………………………..….…….………10

2.1.2Ownership Structure …………………………………………………...……….………16

2.1.3 Board Attributes….…………………….………….…………………...………..………22

2.1.4 Stock Returns…….……………………….…...…..…………………………….……….30

2.2 Empirical Review…………………………………………………………………….……34

2.2.1 Firm Attributes and Stock Returns…….………………………………………………..34

2.2.2 Ownership Structure and Stock Returns……………....……….……….………..…...….42

2.2.3 Board Attributes and Stock Returns …………………………………….…...…………51

2.3 Theoretical Framework……….………………………………….……..……………..…...60

2.3.1 Arbitrage Pricing Theory………………..………………….………...…………...…….60

2.3.2 Agency Theory …………………………….……………………….………………........63

2.3.3 Stakeholder Theory …….……………………………………………………..…...……..67

2.3.4 Stewardship Theory……………..…………………………….………….…………….. 70

CHAPTER THREE: RESEARCH METHODOLOGY

3.2 Population, Sample and Sampling Techniques ……………………….……….…………...73

3.3 Methods of Data Collection………………………………………...……….…………..….77

3.4 Technique for Data Analysis and Model Specification………….……….......................….77

3.5 Justification of Methods………………………………………..………………………..….81

4.1 Data Presentation…………………………………………………………………………...82

4.2 Data Analysis and Results………….………………………………………………………92

4.2.1 Firm Attributes and Stock Returns……………………….. ………………………….….93

4.2.2 Ownership structure and Stock Returns ………. ……………….……………….………95

4.2.3 Board Attributes and Stock Returns………………………….………….………….…….97

4.3 Discussion of findings ……………………………………………………………………..99

CHAPTER FIVE: SUMMARY, CONCLUSION AND RECOMMENDATIONS

5.1 Summary ………………………………………………………………………………….107

5.2 Conclusion ………………………………………………………………………..……….108

5.3 Recommendations ………………………………………………………………….……..109

5.4 Limitation of the Study…………………………………………………………………….110

5.5Suggestions for Further Studies …………………………………………...…………..…..111

Table 3.1 Population of the Study…………………….………………….………………..73

Table 3.1 Sample Size of the Study…………………..………………….………………..73

Table 3.1 Measurement of Variables ………………..………………….………………..77

Table 4.1 Descriptive Statistics…………………………………………………………..82

Table 4.2 Pearson correlation Statistic…………..……………………….……………...…86

Table 4.3 Tolerance and Variance Inflation Values…… …………………………...……89

Table 4.4 Test for Heteroscedasticity…………………..…………………….…………….90

Table 4.5 Hausman Specification Test…………………….. …...………………….……...91

Table 4.6 Pooled OLS Regression Result (firm attributes) …………….………………….92

Table 4.7 Pooled OLS Regression Result (Ownership structure) …….…………………..96

Table 4.8 Pooled OLS Regression Result (Board attributes) ……….………..…………....88

1.1 Background to the Study