ISSN: 2225-8329
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The existing literature documents inconsistent results regarding the effect of managerial ownership on firms’ performance level. This study integrates insights from agency and resource dependency theories and model board independence to account for these indeterminate empirical results that prior research exhibited. Hence, this research aims at investigating the moderating effect of board independence on the relationship between managerial shareholding and financial performance of the Nigerian listed firms. The article analysed the balanced panel data of 71 listed companies covering the period from 2012-2018, by exploiting a generalised method of moments framework. The paper presents evidence of a strong negative relationship between managerial ownership and firm performance level. However, the direct effect of board independence on performance shows a positive but insignificant coefficient. More importantly, evidence from this study suggests that the magnitude and direction of the association between managerial ownership and firm performance depend on the levels of board independence. Thus, revealing that firms with a substantial number of independent directors on their boards are likely to neutralise the entrenchment behaviour that a higher managerial shareholding induces. Consequently, this research recommends that companies should constitute their boards with a considerable number of independent directors to enhance their bottom line.
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To cite this article: Sani, A. (2020). Managerial Ownership and Financial Performance of the Nigerian Listed Firms: The Moderating Role of Board Independence, International Journal of Academic Research in Accounting, Finance and Management Sciences 10 (3): 64-73.
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