The Impact of Equity Investor Protection on the Financial Performance of Deposit Money Banks in Nigeria

The MasterMind Project Umar Habibu Umar 127 PAGES (30945 WORDS) Dissertation
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Abstract

Cash is the most valuable and liquid asset to Deposit Money Banks used to earn profit by issuing out loans facilities to customers. Misuse of cash holding by majority shareholders led to deterioration in the financial performance of the Deposit Money Banks in Nigeria. This study assesses the impact of equity investor protection on the financial performance of Deposit Money Banks in Nigeria. The data for the study was extracted from annual reports and accounts of six sampled Deposit Money Banks and the Factbooks of the Nigerian Stock Exchange from 2003 to 2014. Descriptive statics, Pearson correlation and multiple regressions were used as techniques for data analysis. The study finds that there is a significant positive relationship between cash holding and the financial performance of the Deposit Money Banks in Nigeria. On the other hand, there is also a significant negative relationship between cash holding squared and the financial performance of the Deposit Money Banks in Nigeria. On the basis of the findings, cash holding has an optimal level beyond which the financial performance of the Deposit Money Banks declines. Holding too much cash above the amount needed to meet overhead costs, customers’ withdrawals and other demand for cash at the banks would lead to decrease in the financial performance of the Deposit Money Banks in Nigeria. Thus, it is recommended that Deposit Money Banks should minimize their cash holding by increasing secured loans facilities to both worthy existing and new customers after due consideration of the determinants of customers’ credit worthiness. 


TABLE OF CONTENT

Declaration....................................................................................................................................... I

Certification ....................................................................................................................................II

Approval ...................................................................................................................................... .III Acknowledgements....................................................................................................................... IV Dedication................................................................................................................................... VII

List of Tables ............................................................................................................................... XII

Abstract .......................................................................................................................................XIII 

CHAPTER ONE: INTRODUCTION

Background to the Study ..................................................................................................................................1

Statement of the Problem .................................................................................................................................5

Objectives of the Study ....................................................................................................................................9

Research Hypotheses......................................................................................................................................10

Scope and Limitations of the Study................................................................................................................10

Significance of the Study................................................................................................................................12 

CHAPTER TWO: LITERATURE REVIEW

Introduction ....................................................................................................................................................13

The Concept of Equity....................................................................................................................................13

Structure of Equity Ownership ......................................................................................................................15

Measurements of Equity Investor Protection.................................................................................................18

Legal and Institutional Protection of Equity Investors ...................................................................................20

Nigerian Banking Industry .............................................................................................................................23

Concept of Financial Performance .................................................................................................................27

Empirical Studies............................................................................................................................................30

Cash Holding and Financial Performance ......................................................................................................30

Dividend Policy and Financial Performance ................................................................................................32

Ownership Concentration and Financial Performance ...................................................................................36

Theoretical Framework...................................................................................................................................44

Agency Theory ...............................................................................................................................................44

Stewardship Theory........................................................................................................................................45

Free Cash Flow Theory ..................................................................................................................................46

Dividend Policy Theory.................................................................................................................................47

Investor Protection Theory .............................................................................................................................48 

CHAPTER TWO: RESEARCH METHODOLOGY

Introduction ....................................................................................................................................................51

Research Design .............................................................................................................................................51

Population of The Study .................................................................................................................................51

Sample Size and Sampling Technique ...........................................................................................................54

Sources and Method of the Data Collection ...................................................................................................55

Variables and their Measurements..................................................................................................................55

Dependent Variable ........................................................................................................................................55

Explanatory Variables ....................................................................................................................................55

Independent Variables................................................................................................................................55

Control Variables .......................................................................................................................................57

Robustness Test of Independent and Dependent Variables............................................................................58

Heteroscedasticity...........................................................................................................................................58

Hausman Specification Test.......................................................................................................................58

Techniques of Data Analysis .........................................................................................................................59

Descriptive Statistics ......................................................................................................................................59

Pearson Correlation ........................................................................................................................................59

Multiple Regression Techniques ....................................................................................................................60 

CHAPTER FOUR: RESULTS AND DISCUSSION

Introduction ....................................................................................................................................................62

Robustness Test of Independent and Dependent Variables............................................................................62

Heteroscedasticity...........................................................................................................................................62 4.2.3

Hausman Specification Test ...........................................................................................................................62 4.3

Analysis of Data ............................................................................................................................................63

Descriptive Statistics ......................................................................................................................................63

Correlation Matrix ..........................................................................................................................................65

Results on Equity Investor Protection and Financial Performance of DMBs....................................................67

Results on Cash Holding and Financial Performance of DMBs in Nigeria ..............................................68

Results on Cash Dividend and Financial Performance of DMBs in Nigeria.............................................71

Results on Ownership Concentration and Financial Performance of DMBs in Nigeria.................................75 

CHAPTER FIVE: SUMMARY, CONCLUSION, RECOMMENDATIONS

Summary ........................................................................................................................................................79

Conclusions ....................................................................................................................................................83

Recommendations ..........................................................................................................................................83

Frontiers for Further Research........................................................................................................................84

REFERENCES ............................................................................................................................. 86

APPENDIX A............................................................................................................................... 96

APPENDIX B ............................................................................................................................... 96

APPENDIX C ............................................................................................................................. 102

APPENDIX D............................................................................................................................. 108 


LIST OF TABLES

Table 3.1 Population of the Study......................................................................52

Table 3.2 Working Population of the Study ...........................................................53

Table 3.3 Working Population of the Study ...........................................................54

Table 4.1 Descriptive Statistics ........................................................................63

Table 4.2 Model One Correlation Matrix............................................................66

Table 4.3 Model Two Correlation Matrix............................................................66

Table 4.4 Model Three Correlation Matrix.............................................,.............67

Table 4.5 Model One Regression Results..................................................,.........69

Table 4.6 Model Two Regression Results ............................................................73

Table 4.7 Model Three Regression Results......................................................... 76



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APA

The MasterMind, P (2021). The Impact of Equity Investor Protection on the Financial Performance of Deposit Money Banks in Nigeria. Afribary.com: Retrieved February 24, 2021, from https://afribary.com/works/the-impact-of-equity-investor-protection-on-the-financial-performance-of-deposit-money-banks-in-nigeriaof-deposit-money-banks-in-nigeria

MLA 8th

Project, The MasterMind. "The Impact of Equity Investor Protection on the Financial Performance of Deposit Money Banks in Nigeria" Afribary.com. Afribary.com, 21 Feb. 2021, https://afribary.com/works/the-impact-of-equity-investor-protection-on-the-financial-performance-of-deposit-money-banks-in-nigeriaof-deposit-money-banks-in-nigeria . Accessed 24 Feb. 2021.

MLA7

Project, The MasterMind. "The Impact of Equity Investor Protection on the Financial Performance of Deposit Money Banks in Nigeria". Afribary.com, Afribary.com, 21 Feb. 2021. Web. 24 Feb. 2021. < https://afribary.com/works/the-impact-of-equity-investor-protection-on-the-financial-performance-of-deposit-money-banks-in-nigeriaof-deposit-money-banks-in-nigeria >.

Chicago

Project, The MasterMind. "The Impact of Equity Investor Protection on the Financial Performance of Deposit Money Banks in Nigeria" Afribary.com (2021). Accessed February 24, 2021. https://afribary.com/works/the-impact-of-equity-investor-protection-on-the-financial-performance-of-deposit-money-banks-in-nigeriaof-deposit-money-banks-in-nigeria