Foreign Ownership and Firm Financial Performance of Nigerian Listed Conglomerates

Abstract

This study was undertaken to examine the relationship between foreign ownership and firm financial performance of quoted conglomerates in Nigeria. To achieve the objective, this study used panel regression model to analyse the data obtained from the financial statements of the five (5) conglomerates quoted on the Nigerian Stock Exchange (NSE) for a period of 15 years (2006 – 2020) and market data on share prices were obtained from the NSE historical market data portal. Return on Assets (ROA) and Tobin’s Q were used as proxies for financial performance measuring performance from both accounting based and market-based perspectives. The data collected were estimated by fixed-effects and random-effects regression estimations and Hausman Test of Specification was applied to determine the better estimator for the models. The findings revealed that foreign ownership has significant negative effect on ROA of the quoted conglomerates in Nigeria but insignificant negative relationship when measured with Tobin’s Q. The study therefore recommends that Government of Nigeria and its agencies should ensure they put policies in place which will encourage Foreign Direct Investment (FDI) and at the same time check practices of those foreign owned companies to ensure they are not involved in practices that amounts to repatriation of profits abroad while reporting losses to avoid payment of tax; and Managers or Directors are advised to maintain optimal capital structure so as to maximize firm performance and to avoid embarking on projects that add no value to the organisation as a whole.