Firm Performance, Ownership Structure, and CEO Selection

The Case of Nigeria

Authors

  • Yahya Uthman Abdullahi Tunku Puteri Intan Safinaz School of Accountancy, Universiti Utara Malaysia
  • Rokiah Ishak Tunku Puteri Intan Safinaz School of Accountancy, Universiti Utara Malaysia
  • Norfaiezah Sawandi Tunku Puteri Intan Safinaz School of Accountancy, Universiti Utara Malaysia

DOI:

https://doi.org/10.52962/ipjaf.2018.2.1.41

Keywords:

Blockholder, CEO Selection, Corporate, Performance, Connectedness, Nigeria

Abstract

This paper attempts to examine the effect of ownership structures, corporate performance and board political connectedness on CEO selection. The sample of the study is all Nigerian non-financial firms from the year 2011 to 2015 consisting of 72 CEO selection events. This study uses logistic regression analysis to provide evidence that firms dominated with blockholder ownership favour external successors while managerial ownership-controlled firms are inclined to select internal candidates as successors. However, this study fails to support the argument that corporate performance and board political connectedness do influence the choice of CEO selection in the Nigerian public listed companies. In sum, the findings suggest that blockholders and managerial ownership significantly influence the choice of the origin of the successor CEOs in the Nigerian corporate landscape. This paper enriches the literature about CEO selection choices in developing economies with weak corporate governance structure like Nigeria. In addition, the findings from this study could be of immense benefit to the shareholders and corporate board members in making a decision on recruiting their CEOs; and the regulatory agencies in the formulation and enforcement of reforms that guarantee good corporate practices by the boards.

Downloads

Download data is not yet available.

References

Acero, I., & Alcalde, N. (2014). Ownership structure and board composition in a high ownership concentration context. European Management Journal, 32(4), 646–657. http://doi.org/10.1016/j.emj.2013.10.003

Agrawal, A., & Nasser, T. (2012). Blockholders on Boards and CEO Compensation, Turnover and Firm Valuation, (September).

Ansari, F. I., Goergen, M., & Mira, S. (2014). The determinants of the CEO successor choice in family firms. Journal of Corporate Finance, 28, 6–25. http://doi.org/10.1016/j.jcorpfin.2013.12.006

Ashbaugh-Skaife, H., Collins, D. W., & Lafond, R. (2006). The effects of corporate governance on firms’ credit ratings. Journal of Accounting and Economics, 42(1-2), 203–243. http://doi.org/10.1016/j.jacceco.2006.02.003

Barnea, A., & Guedj, I. (2007). Director Networks and Firm Governance. Working Paper.

Borokhovich, K. A., Parrino, R., & Trapani, T. (1996). Outside Directors and CEO Selection. The Journal of Financial and Quantitative Analysis, 31(3), 337–355.

Cannella, A. A., & Lubatkin, M. (1993). Succession as a Sociopolitical Process : Internal Impediments to Outsider Selection. The Academy of Management Journal, 36(4), 763–793.

Chan, K. S., Dang, V. Q. T., & Yan, I. K. M. (2012). Chinese firms’ political connection, ownership, and financing constraints. Economics Letters, 115(2), 164–167. http://doi.org/10.1016/j.econlet.2011.12.008

Cheng, C. S., Hu, J., & Saffar, W. (2014). Private Benefits of Control, Ownership Structure, and CEO Turnover: Evidence from East Asia. In Jinshuai and Saffar, Walid, Private Benefits of Control, Ownership Structure, and CEO Turnover: Evidence from East Asia (November 17, 2013).

Cook, J. L. (2015). Corporate Diversification and CEO Turnover Among Financially Distressed Firms. NSU Libraries.

Custódio, C., Ferreira, M. A., & Matos, P. (2011). Generalists versus Specialists: Managerial Skills and CEO Pay.

Dimopoulos, T., & Wagner, H. . (2012). Corporate Governance and CEO Turnover Decisions. Swiss Finance Institute Research Paper Series, 12(16).

Fama, E. F., & Jensen, M. C. (1983). Separation of Ownership and Control. Chicago Journals, 26(2), 301–325.

Gangloff, K. A., Connelly, B. L., & Shook, C. L. (2014). Of Scapegoats and Signals Investor Reactions to CEO Succession in the Aftermath of Wrongdoing. Journal of Management.

Goyal, V. K., & Park, C. W. (2002). Board leadership structure and CEO turnover. Journal of Corporate Finance, 8(1), 49–66.

Guo, L., & Masulis, R. W. (2015). Board Structure and Monitoring: New Evidence from CEO Turnovers. Review of Financial Studies. http://doi.org/10.1093/rfs/hhv038

Ishak, R. (2010). Determinants and Consequences of CEO Succession in Malaysian Public Listed Companies. Universiti Utara Malaysia.

Ishak, R., Ismail, K. N. I. K., & Abdullah, S. N. (2013). CEO Succession and Firm Performance: Evidence from Publicly Listed Malaysian Firms. Asian Academy of Management Journal of Accounting and Finance, 9(2), 29–48.

Ishak, R., Ku Ismail, K. N., & Abdullah, S. N. (2012). Determinants of Internal vs External CEO Successions in Malaysian Public Listed Companies. Asian Academy of Management Journal, 17(2), 79–96.

Jensen, M. C., & Meckling, W. H. (1976). Theory of the firm: Managerial behavior, agency costs, and ownership structure. North-Holland Publishing Company, 3, 305–360.

Jenter, D., & Lewellen, K. (2010). Performance-induced CEO turnover. Work. Pap., Stanford Univ.

Ku Ismail, K. N., & Abdul-Manaf, K. B. (2016). Market reactions towards the appointment of women to the boards of Malaysian firms. Journal of Multinational Financial Management. http://doi.org/10.1016/j.mulfin.2016.04.004

Larcker, B. D. F., Miles, S. a, & Tayan, B. (2014). Seven Myths of CEO Succession. Stanford Closer Look Series.

Nguyen, T., Locke, S., & Reddy, K. (2014). Does boardroom gender diversity matter ? Evidence from a transitional economy. International Review of Economics and Finance. http://doi.org/10.1016/j.iref.2014.11.022

Ogbechie, C. I. (2012). Key Determinants of Effective Boards of Directors - Evidence from Nigeria. Brunel Business School, Brunel University.

Park, S., & Rozeff, M. S. (1996). The Role of Outside Shareholders, Outside Boards, and Management Entrenchment in CEO Selection. Accounting Review, 64(1), 55–73.

Parrino, R. (1997). CEO turnover and outside succession A cross-sectional analysis. Journal of Financial Economics, 46, 165–197.

Rachpradit, P., Tang, J. C. S., & Ba Khang, D. (2012). CEO turnover and firm performance, evidence from Thailand. Corporate Governance: The International Journal of Business in Society, 12(2), 164–178.

Ruan, W., Tian, G., & Ma, S. (2011). Managerial Ownership, Capital Structure, and Firm Value : Evidence from China ’ s Civilian-run Firms. Australasian Accounting Business & Finance Journal, 5(3), 73–92.

Thanh, T. T., & Heaney, R. (2013). The determinants of equity agency conflicts between managers and shareholders : Evidence from Australia. Journal of Multinational Financial Management, 23(4), 314–326. http://doi.org/10.1016/j.mulfin.2013.05.001

Tsegba, I. N., Herbert, W. E., & Ene, E. E. (2014). Corporate Ownership, Corporate Control and Corporate Performance in Sub-Saharan African : Evidence from Nigeria, 7(11), 73–84. http://doi.org/10.5539/ibr.v7n11p73

Xie, Q. (2014). CEO tenure and ownership mode choice of Chinese firms : The moderating roles of managerial discretion. International Business Review, 23(5), 910–919. http://doi.org/10.1016/j.ibusrev.2014.02.003

Downloads

Published

2018-01-01

Issue

Section

Main Section

How to Cite

Firm Performance, Ownership Structure, and CEO Selection: The Case of Nigeria. (2018). Indian-Pacific Journal of Accounting and Finance, 2(1), 49-60. https://doi.org/10.52962/ipjaf.2018.2.1.41

Similar Articles

1-10 of 61

You may also start an advanced similarity search for this article.