Blockholding and agency cost: evidence from Nigeria

Ibekwe, Ibe

doi:10.1108/ijoem-08-2018-0445

Cited by 4 publications

(5 citation statements)

References 64 publications

(286 reference statements)

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“…The author classified 17 of these firms as underperforming and 14 as outperforming firms. The companies also included diversified firms where the CEOs had no share ownership (NS), a low level of share ownership (LS) – less than 5% and block shareholding – 5% or more (Ibekwe, 2023).…”

Section: Methodsmentioning

confidence: 99%

“…Based on the finding that the dominant agency motive for diversification in Nigeria is the principal–principal problem, the author conjectures that contrary to the agency cost hypothesis of diversification, blockholding would be associated more positively with firm diversification than low managerial ownership in Nigeria. Future researchers may test this conjecture, especially given that blockholding features prominently in corporate ownership in Nigeria (Ibekwe, 2023).…”

Section: Conclusion Limitations Implications and Recommendationsmentioning

confidence: 99%

“…The findings of this study will be useful to regulators such as the Nigerian Stock Exchange who are concerned about the corporate governance of firms. The findings suggest that in corporate environments such as Nigeria, where large controlling shareholders are prominent (Ibekwe, 2023), a more significant agency problem that policymakers should pay more attention to is the principal–principal conflict rather than the agent-principal conflict that has influenced corporate governance over the years. Given the finding that stewardship motives dominate the decision to diversify, managers could create value for their firms by rejecting the prevailing view that diversification is an inherently value-destroying strategy and adopting the strategy when it becomes necessary for their firm – either to exploit excess capacity in certain resources or to defend their firms against adverse developments in their industry.…”

Section: Introductionmentioning

confidence: 99%

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Agency motives and the corporate diversification decision: perspectives of corporate executives in Nigeria

Ibekwe

2023

QRFM

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Purpose The purpose of this study was to explore the motives (especially the agency motives) for corporate diversification from the perspective of corporate executives who make such strategic decisions and manage the diversified firms daily. Design/methodology/approach A qualitative research approach was adopted, and 12 chief executive officers (CEOs) of diversified firms in Nigeria were interviewed for their perspectives on the motives for corporate diversification. Findings Stewardship motives – diversification to use excess capacities in assets and resources to exploit opportunities in the market and defend against adverse environmental developments – were the most cited reasons for diversification. The relevant agency problem related to corporate diversification motive in Nigeria is the principal–principal (majority shareholder-minority shareholder) one. CEOs with substantial holdings in their firms indicated that they use diversification to reduce their investment risk and retain control of their portfolio. Practical implications The findings suggest that in corporate environments such as Nigeria that feature blockholding prominently, the corporate strategy-related agency problem that policymakers should pay greater attention to is the principal–principal conflict rather than the traditional agent–principal problem that has influenced corporate governance over the years. There is also a need to revise the dominant view that diversification is a value-destroying strategy motivated by the self-seeking behavior of managers who have little or no shares in the companies they manage. Originality/value The few studies on motives for corporate diversification that incorporated the perspectives of corporate executives did not address the agency motives of diversification. To the best of the authors’ knowledge, this is the first study that has done so.

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Section: Methodsmentioning

confidence: 99%

Section: Conclusion Limitations Implications and Recommendationsmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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Agency motives and the corporate diversification decision: perspectives of corporate executives in Nigeria

Ibekwe

2023

QRFM

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“…These related activities of identifying opportunities in the business space through investing resources for maximization of profit could be seen as the process of entrepreneurship. As opine by Ogborned (2000) in Ibekwe et al, (2021), entrepreneurship occurs when an enterprising individual pursues lucrative business opportunities, mobilizing men, materials, machines and financial resources to produce new products and serve new markets. Ibekwe et al, (2021) observe that entrepreneurship is the process of identifying opportunities in the market-place, marshalling the resources required to pursue these opportunities and investing the resources to exploit the opportunities for longterm gain.…”

Section: Concept Of Entrepreneurshipmentioning

confidence: 99%

“…Therefore, entrepreneurship could be such as an initiative created by an individual or individuals engaging in the initiative for productive end for services to the general public and enjoy the benefit of profitability and so on. Ibekwe et al, (2021) investigated financial inclusion and entrepreneurial development in Nigeria. The study adopted an ex-post facto research design and Fuller Test, Engel Granger co-integration and Vector Auto regression estimation per analyses.…”

Section: Concept Of Entrepreneurshipmentioning

confidence: 99%

Technology of Electronic Banking on Financial Inclusion Policy: The Nexus on Entrepreneurial Growth in Rural Communities, Akwa Ibom State, Nigeria

Mbon

2023

AKSUJACOG

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The adoption of an electronic banking system has reduced the complexities in financial transactions and made it possible for the vast populace to be financially included formally. Thus, financial inclusion has become a product used to improve the economic prosperity of entrepreneurs in rural communities. The study examined the impact of e-banking on financial inclusion and entrepreneurial growth in rural communities of Akwa Ibom State. A survey research design was adopted alongside multi-stage sampling techniques. Data for the research were collected from 300 respondents of farmers, petty shop sellers and auto-mechanics and data were analysed using inferential tools of the SPSS statistical package. The study was founded on public choice and diffusion of innovation theories. The study revealed that productivity in the farming sector in rural communities has improved immensely due to financial inclusion, despite the fact some farmers are still unaware of formal banking services. The study recommended that the Government should ensure proper sensitisation of the benefits of formal banking because some farmers in rural communities are still unaware of formal banking services. This has affected the enhancement in productivity that e-banking on financial inclusion has offered to farmers in rural communities.

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Debt and the Excess Value of Diversified Firms: Evidence from Nigeria

Ibekwe,

Siliya

2024

IJEFM

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The purpose of this study was to examine the relationship between debt and the value and excess value of diversified firms in Nigeria. This is against the background that there is no consensus on the factors that distinguish value-creating from value-destroying diversified firms. Data were collected from the annual reports of 62 diversified firms listed on the Nigerian Stock Exchange between 2008 and 2018. The multilevel generalized method of moments technique in the REndo package in the R Statistical Package was used to test the hypotheses. There is a significant positive relationship between debt and diversified firms’ value and excess value. The study and its findings are significant in several ways. First, no study has examined the relationship between debt and the value and excess value of diversified firms in the Nigerian context, and the few relevant studies have been in the context of developed countries. Second, it contributes to the literature on the valuation implications of firm diversification by providing some insight into the diversification discount often documented in the literature. These findings suggest that diversified firms’ failure to use the debt capacity that diversification creates is one reason some experience valuation discount. Third, the study employs the multilevel GMM analytical technique to control for endogeneity in the absence of valid instrumental variables. This technique has not been used in the diversification literature. The implication of the findings is that diversified firms should use the debt capacity that diversification provides to invest in positive net present value projects. The use of debt also adds a layer of corporate governance required in an environment of increased complexity and opacity associated with diversification. Increased investment in positive NPV projects and improved corporate governance through increased use of debt will enhance firm performance and value. The increased valuation of diversified firms due to debt increases the ability of diversified firms to play their developmental role in society. Investors would also benefit more from investing in diversified firms with higher debt ratios than those with lower debt ratios, all things being equal.

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Blockholding and agency cost: evidence from Nigeria

Cited by 4 publications

References 64 publications

Agency motives and the corporate diversification decision: perspectives of corporate executives in Nigeria

Agency motives and the corporate diversification decision: perspectives of corporate executives in Nigeria

Technology of Electronic Banking on Financial Inclusion Policy: The Nexus on Entrepreneurial Growth in Rural Communities, Akwa Ibom State, Nigeria

Debt and the Excess Value of Diversified Firms: Evidence from Nigeria

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