Causality between Institutional Shareholding and Corporate Governance of Deposit Money Bank in Nigeria
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Date
2017-12
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Ilorin Journal of Finance
Abstract
Corporate decision may be influenced by institutional shareholders and the effect on corporate policies may change with the level of institutional ownership. Hence, this study examined the causal effect between institutional shareholding and corporate governance of selected Nigerian deposit money banks. The study used a sample of fifteen (15) deposit money banks quoted on the Nigerian Stock Exchange. The study employed secondary data which was obtained from Audited Annual Report of Nigerian deposit money banks for a period of ten years (2006- 2015). The data obtained were subjected to Granger causality test to determine the causal effect relationship that exists between institutional shareholding and corporate governance. Findings of the study show that there is bidirectional causality between institutional shareholding and board independence and audit committee independence while there is unidirectional causal relationship between institutional shareholding and board composition. Based on these findings, the study concluded that there exist a causal effect between institutional shareholdings and corporate governance of deposit money banks in Nigeria. Therefore, the study recommends that institutional investors should use their power to ensure independence of the audit committee in curbing insider related credit which may affect the return on their investment. Also, the banks’ board of directors should ensure independence of the board and audit committee in order to attract more institutional investors.
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Keywords
Corporate Governance, Institutional Shareholding, Generalized method of moment