Purpose The purpose of this paper is to re-examine the determinants of bank profitability in Nigeria. Specifically, the study investigates the effect of managerial cost efficiency on bank profitability. Also, since there exist mixed results and controversies in the literature, in both developed and developing countries, regarding the effect of efficiency on bank profitability, this study employs the standard measure of efficiency. In addition, the work incorporates the role of persistence, which is often neglected in the literature in developing countries. Design/methodology/approach This study employs system generalized method of moments. Findings The findings, using the case of Nigeria, show that cost efficiency is a strong determinant of bank profitability in developing countries. In addition, the profitability of banks in Nigeria persists over time; hence, the industry is fairly competitive. Research limitations/implications The recent policies of banking industry recapitalization meant to increase profitability and stability in Nigeria and other African countries’ banking industry will not be effective if the issue of managerial efficiency is not properly addressed. Practical implications Improving the banking managerial efficiency will positively reduce bad loans, hence leading to the stability in the banking system. Originality/value The authors introduce efficiency using standard measure of stochastic frontier analysis for its measurement. Also, this study introduces the role of persistence in the literature in developing countries.

The bulk of extant studies on the relationship between firm size and profitability focus on the effect of former on the latter, neglecting the possibility of feedback effect. This research work re-examines the direction of causality between firm size and profitability for 63 listed non-financial Nigerian firms for the period 1998–2010, using an innovative econometric methodology of a dynamic panel generalized method of moments to resolve the problem of endogeneity inherent in the relationship. The results establish a bidirectional relationship between firm size and profitability of firms in Nigeria. While firm size positively Granger-causes profitability, profitability, on the other hand, negatively Granger-causes firm size. This study therefore rebuts the popular assumption that causation only runs from firm size to profitability and not vice versa. The emerging conclusion drawn from this study is that profitability might be a vital tool to make firms grow faster if well managed as the economies of scale could also be induced.

This study examines the causal relationship between CEO pay and firm performance in Nigeria for the period 1998-2010, using annual data of 63 non-financial listed firms. We adopt a two-step dynamic generalized method of moments to explore the causal relationship. The study establishes a bi-directional relationship between CEO pay and firm performance. While CEO pay Granger-causes firm performance, firm performance also Granger-causes CEO pay. It implies that CEO pay acts both as a reward and a performance motivator. This study therefore suggests that CEO pay effectively aligns shareholders' interests with those of CEOs; hence stakeholders should focus more on CEO pay as a corporate governance mechanism to reduce agency problem in non-financial listed firms in Nigeria. 429Moreover, following the two modelling strategies, empirical studies on the relationship between CEO pay and firm performance occupy a substantial portion of economic literature, most especially in advanced countries and emerging economies with limited attention from developing countries and sub-Saharan Africa in particular. Meanwhile, previous empirical investigations have continued to yield conflicting results. Some of these studies have obtained a weak or negative relationship or none at all (Jensen and Murphy, ). Results continue to differ depending on the environment, methodology and the measures of firm performance adopted in various studies.Apart from the inconclusiveness of previous studies, the bulk of these studies ignored the effect of executive pay on firm performance, despite the fact that motivation is the main rationale for executive pay packages. This was hinted at by Jensen and Murphy (1990) who stated that executive pay is 'designed to give manager incentives to select and implement actions that increase shareholders' wealth'. Moreover, Buck et al. (2008) and Tosi et al. (2000) contended that all studies surveyed, most especially in Europe, used pay as the dependent variable which means firm performance is considered a determinant of executive pay, neglecting the possibility of feedback effect from pay to performance. The prevalence of long-term incentives (equity incentives), such as stock awards and options, for managers in Europe has made it extremely difficult to separate reward from motivation (Buck et al., 2008;Jegede, 2012;Olaniyi and Obembe, 2015;Liang et al., 2016;Omoregie and Kelikume, 2017). Hence, the majority of empirical studies from advanced countries focused on the effect of firm performance on directors' compensation (performance-based pay) without exploring the possibility of feedback. Meanwhile, executive directors of publicly traded firms in developing countries, most especially sub-Saharan Africa, are usually paid in cash, not in the form of long-term incentives such as equity-based pay. This gives ample opportunity to examine CEO pay as a factor that determines firm performance (Buck et al., 2008). Globally, only few studies (Choo and Tan, 2004;Buck et al., 2008;Omoregie and Kelikume, 2017; Amdouni, 2016) h...

Studies on the nexus between size and profitability occupy a substantial portion of empirical economic literature; however, the existing literature tilt much in favour of non-financial firms with little attention towards the financial sector, especially in the context of developing countries, most especially, Nigeria. This study examines the causality between size and profitability among 45 financial listed firms in Nigeria using the innovative and recently developed panel vector autoregressive (PVAR) and two-step system generalized method of moments (GMM) in order to resolve the inherent problems of endogeneity and persistence. The results emanating from the study show that there exists a bidirectional causal relationship between size and profitability in the Nigerian financial industry; hence, past profitability has brought about the present size level and past size of the industry has led also to the present profitability level. Consequently, firm size is a strong policy option for corporate managers in the Nigerian financial industry for achieving optimal profitability and vice versa.

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