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.

Purpose This paper aims to investigate the effect of corruption on bank profitability. Design/methodology/approach The paper adopts panel cointegration, differenced generalized method of moments (GMM) and system GMM. Findings The empirical results show that corruption is important in explaining the profitability of commercial banks in both developed and emerging countries. While it has mixed effects in emerging countries, only positive effect is validated in developed countries. Research limitations/implications Macroeconomic measures of corruption are adopted in the study. Originality/value The paper contributes to the literature on corruption and bank profitability by reporting evidence from both developed and developing countries. Existing papers have only concentrated on developing countries.

PurposeThe paper investigates the determinants of capital structure and the speed of adjustment of capital structure decisions of Nigerian firms.Design/methodology/approachThe paper adopts three methods: difference GMM, system GMM and stochastic frontier analysis (SFA).FindingsThe empirical results show that firms' efficiency affects the capital structure decisions of Nigerian firms. At the same time, short-term debt has a higher speed of adjustment in the context of Nigerian firms. The roles of other control variables are established in the paper.Social implicationsNigerian firms should adopt short-term debt in order to achieve their targeted debt levels. Managers of Nigerian firms are also advised to be more efficient in order to attract higher performance.Originality/valueThe paper is the first literature to measure the efficiency of firms using SFA method. Extant studies in the literature have neglected the determinant while four papers that adopt the determinant data envelope analysis (DEA) method. This is also the first study to document the speed of adjustment in capital structure decisions in the context of Nigerian firms.

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.