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An Empirical Investigation into Determinants of Shareholders Value Creation among Banks in Nigeria

Author

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  • Ya’u M. Damagum
  • Abdulrasheed Balogun
  • Emmanuel Ib Chima

Abstract

This paper empirically investigates the determinants of shareholder value creation among quoted banks in Nigeria. Some Banks in Nigeria were growing big in value and size and also attracting investors but were suddenly discovered by the Central Bank of Nigeria to have enmeshed in serious liquidity problems. The stock market evidence also showed that some banks with high level of performing loans were recording improved shareholder value creation while those indicted for non-performing loan offence recorded low shareholder value creation at the time. The study therefore employs the use of variables such as dividend per share, performing loans index, and size(proxies by log of total assets) of the bank as metric variables and introduced one dummy variable of age of the bank in determining whether they have significant influence on the shareholder value creation or not. The study however used four testable hypotheses which were tested at 0.05 and 0.1 significant levels using multiple regression analysis technique to determine the significant relationship or otherwise between the predictors and the shareholder value. The whole quoted 21 commercial banks in Nigeria were used spanning the period of 2005-2009.The results however showed that dividend payments has the most significant influence on the shareholder value creation, while performing loan is not significant in determining shareholder value. The study therefore recommends consistent payments of dividends to the owners of the banks by ensuring that there is always free cash flow to distribute.

Suggested Citation

  • Ya’u M. Damagum & Abdulrasheed Balogun & Emmanuel Ib Chima, 2015. "An Empirical Investigation into Determinants of Shareholders Value Creation among Banks in Nigeria," International Journal of Empirical Finance, Research Academy of Social Sciences, vol. 4(6), pages 345-353.
    • Handle: RePEc:rss:jnljef:v4i6p2
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    References listed on IDEAS

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    1. Michael C. Jensen, 2010. "Value Maximization, Stakeholder Theory, and the Corporate Objective Function," Journal of Applied Corporate Finance, Morgan Stanley, vol. 22(1), pages 32-42, January.
    2. Samy Ben Naceur and Mohamed Goaied, "undated". "The Value Creation Process in the Tunisia Stock Exchange," API-Working Paper Series 9903, Arab Planning Institute - Kuwait, Information Center.
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