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Ownership structure is one of corporate governance mechanism that influences firms’ performance. Owners of the firm had invested purposely for returns, but management as agents pursue interest contrary to that of owners. Therefore owners’ wants control due to firms’ sub optimal performance. This work examined the relationship between ownership structure (managerial, institutional, family, foreign and government) and financial performance (Return on Assets and Return on Equity) in Food and Beverage industry in Nigeria.

The study adopted ex post-facto research design using sixteen (16) listed food and beverage firms in Nigeria. Using secondary data from audited financial reports of the firms between 2010 and 2015, the study used Pearson Moment Correlation co-efficient and regression analysis to analyze the data collected. Statistical Package for Social Sciences (SPSS) version 20.0 was used as analytical tool.

Findings revealed that managerial ownership has insignificant impact on performance

(t = 0.293, p = 0.774>.05), (t = 1.343, p = 0.202 >.05); institutional ownership has significant impact on performance (t = -2.773, p = 0.015 <.05), (t = -2.990, p = 0.010 <.05); foreign ownership has significant influence on performance (t = 2.265, p = .041<.05),

(t = 1.681, p = 0.047 <.05); government ownership has insignificant impact performance

(t = 1.274, p = 0.223>.05), (t = 1.518, p = 0.153 >.05) and family ownership has insignificant impact on performance (t = 0.221, p = 0.828 >.05), (t = 0.497, p = 0.627>.05)

The study concluded that foreign ownership structure has significant and positive impact on financial performance; managerial ownership, government ownership and family ownership are weak predictors of financial performance. However, institutional ownership has significant inverse impact on financial performance. It can therefore be deduced that foreign ownership is an antidote for distressed syndrome facing Nigerian food and beverages industry. The study recommended that policy that will encourage foreign direct investment in Nigeria should be aggressively pursued by government and that Nigerian investors should give serious consideration  to issues bordering on corporate governance than just considering it as mere legal niceties.

Keywords: Managerial ownership, Foreign ownership, Return on Asset, Return on Equity,

Corporate governance

Word Count: 348



1.1       Background to the Study

Corporate governance has received greater attention from regulators, professionals and academics following a series of corporate scandals that had happened in large companies around the world. The issue of corporate governance has attracted the attention of both business market leaders and regulatory authority around the globe, aiming to minimize the scandals rate in companies.

Shareholders are often considered to be the corporate proprietors, though company directors are representatives of shareholders that are expected to assign business resources in a way to improve shareholders’ fortune. The commitment of several shareholders for investment in organizations is profit not control (Kadivar, 2006).

The concepts of corporate governance encompass problems such as measure of management, degree of control as well as way of relationship between the great and small shareholders. Corporate governance spells out the delivery of rights and duties among diverse players in the establishment; the board, managers, shareholders as well as other stakeholders. It also stipulates the techniques for making decisions on corporate affairs. In this fashion, it offers the framework whereby the organization’s goals are established and strategy for reaching those goals and monitoring performance (Kaola, 2008).

According to Aganga (2011), the issue of corporate governance is comparatively fresh in Nigeria, on account of several cases of corporate misconduct. The shift in Nigeria system of government from military era to the democratic dispensations with a policy to catch the attention of new and environmentally friendly foreign investments entailed the requirement for corporate governance reform. This results in a recognized commission to evaluate the presence, adequacy and corporate governance relevance in Nigeria relative to global best practices as a reaction to the New International Economic Order. Considering the importance linked to the organization for efficient corporate governance, the Nigerian government, via its numerous agencies, has constituted several institutional arrangements to safeguard the investors’ valuable investment from disingenuous management/directors of company in Nigeria (Aganga, 2011). Despite all the efforts and mechanism put in place by government, there are cases of crises, collapses, inefficiencies, and eventual distress among the firms in Nigeria. This may be the consequence of management-shareholder conflict or agency conflict especially while shareholders want long term maximization of their compensation and power.

Ownership structure has been identified as one of corporate governance mechanisms that influence organizational performance. According to Ebrahim, Abdullah and Faudziah (2013), ownership structure is among the central mechanisms of corporate governance. Ownership structure has been a consideration seeker to both scholars and analysts alike. The innovative study in the theory of the organization, on modern firm was performed by Berle and Means (1932). They focus on the disputes of great interest between controllers and managers, claimed that with growing ownership diffusion, the authority of the shareholders to handle management is been curtailed.

Karaca and Ekşi (2012) asserted that the ownership structure – corporate performance relationship continues to be getting important interest in economic literature. In a similar vein, Fama and Jensen (2003) and Jensen and Meckling (1986) showed that the ownership diffusion has a substantial impact on the genuineness of the profit-maximizing  aim of companies, as the separation of control allows corporate managers to put in effort to pursue their own interests. Furthermore, Demsetz (1983) asserted that ownership structure is an endogenous facet of governance that raises the earnings and worth of an establishment. In addition, Fazlzadeh, Hendi and Mahboubi (2011) also acknowledged that ownership structure performs major function on firms’ overall performance and offers policy makers with experience for improving the system of corporate governance. In most developed nations, ownership structure is substantially distributed. On the other hand, the emerging nations identified by less strong legal system protecting the interest of investors, the ownership structure are concentrated (Ehikioya, 2009).

Performance of an organization is often determined by how effectively and efficiently the firm is able to achieve the set goals which may be financial or operational. The operational performance concerns firm’s growth and expansion in relations to sales and market value (Hofer & Sandberg, 1987). The financial performance of the firm relates to its motive to maximize profit both to the owners and on assets. Long, Mahanra, and Ajagbe (2013) argued that the nature of ownership of a firm influences the firm’s performance, in emerging economies such as Nigeria where it is contended that ownership is less disperse and control is not fully separated from ownership.

The interest in ownership studies, led to institutional shareholders or large block holders investing in firms. It was discovered in recent times that the percentage of institutional investment is increasing on corporate equity with control and monitors performance. Zuobawei and Zhang (2004) considered different kinds of ownership structures including state ownership, organization’s investing and foreign ownership as independent variables. The result of his survey showed that there is a negative relationship between the structure of state ownership and firm performance. The relationship between the structure of organization ownership and firm performance is also reported negatively significant. Family ownership often needs a long-term perspective within the firm, which gives many benefits: owners with longer investment period experience less managerial short sightedness of company’s performance.

Literature examined the significance of ownership structure on firm performance, Cheng (2008) stated there is no significant relationship between firm performance and ownership concentration in some European countries. Aljifri and Moustafa (2007) in their study revealed that governmental ownership has significant relationship with firm performance, while institutional ownership has no significant relationship with firm performance. Therefore, the current research targets the assessment of the ownership structure – firm financial performance relationship.

1.2       Statement of the Problem

        In Nigeria, most organizations’ crises, inefficiencies, and eventual distress are linked to the ownership structure of such organizations, the separation of control and sub optimal performance of management results in conflict with owners. This is mainly the consequence of management-shareholder conflict or agency conflict. Specifically, while shareholders want long term maximization of their compensation and power (larger enterprises), management often pursue other interests’ different from the shareholders’ interest. Furthermore, the agency problem in business organization governance arises because of considerable information asymmetry between shareholders and managers and uncertainty about strategic decisions. Managers have a lot more information than shareholders have about the organization, which makes it difficult for the shareholders to determine if the organization is being governed in their interests (Ebrahim et al, 2013).

Studies on agency problem revealed that managers use the information and available organization resources to pursue their interest rather than owners’ interest resulting in conflict of interest and sub optimal performance. Sadiq, Muthar, Oyebola, and Rasheed (2011) viewed the main problem as the owners’ inability to monitor the managers/agents performance.

The performance of the manufacturing sector in the country compared to the other sectors is low; Adenikinju (2005) confirmed that manufacturing contribution to foreign exchange earnings was found to be less than one percent (1%) while about eighty-one percent (81%) of the nation’s total foreign exchange earnings was utilized by the sector. In terms of employment generation, about ten percent (10%) of the population was employed compared to seventy percent (70%) in agriculture and twenty percent (20%) in services. The dismal performance of Nigeria’s manufacturing sector is manifested in the high level of graduate unemployment, poverty, corruption and other types of social vices which constitutes a threat to the nascent democracy and further investments in Nigeria, thereby perpetuating underdevelopment.

There have been no consensuses on how to resolve the conflict of interest and suboptimal performance among scholars, regulators and professionals. The lack of consensus have led to a variety of mechanisms on how to deal with the problem of agency (owners-management).These include promoting managerial share ownership, encouraging ownership concentration and discouraging government ownership.

The government and regulatory bodies have continuously encouraged the restructuring of ownership structure of organizations to enhance efficiency and profitability as one way of dealing with the problem. The uncertainty surrounding the outcome of these options may have further made organizations vulnerable to decline in profits, due to existing uncompetitive ownership structure (Ezygwu & Itodo, 2014). The possible impact of initial public offers, conversion to public limited company (Plc), and mergers on ownership structure and the subsequent impact on the operating performance of companies is an issue which has not received sufficient conclusive empirical attention in Nigeria.

Most researches and similar studies on ownership structure, focused on firms’ capital structure, value of shares, corporate performance and the case studies were often on the banking, and insurance institutions of developed and developing economies, some works are, Eric,(2011), Ezugwu & Itodo, (2014), Chari, Chen & Domingues, (2012) examined foreign ownership and performance in emerging market acquisition, and Adenikinju & Ayorinde, (2012), worked on ownership structure, corporate governance and corporate performance of Nigeria quoted companies. Few researchers examined the non financial sector, though taking a global view at the trading and services sector, Zakaria, Purhanudin & Palanimally, (2014).

Based on this, the study tried to fill the existing gap of having limited work done on other industry of the economy. Hence, the focus of this study was on examining the correlation between ownership structure (dimensions) and financial performance of Nigeria food and beverage industry listed on the Nigerian Stock Exchange.

1.3     Objective of the Study

The general objective of this study is to examine the relationship between ownership structure and financial performance with particular reference to the listed food and beverage manufacturing companies in Nigeria. The specific objectives are to:

  1. determine the relationship between managerial ownership and performance of Nigeria food and beverage industry;
  2. examine the influence of institutional ownership on performance of Nigeria food and beverage industry;
  3. investigate the influence of foreign ownership on  performance of Nigeria food and   beverage industry;
  4. determine the relationship between government ownership and performance of Nigeria food and beverage industry;
  5. examine the influence of family ownership on performance of Nigeria food and beverage industry.

1.4    Research Questions

The following research questions were the focus of this study:

  1. what relationship exist between managerial ownership influence on performance of  Nigeria food and beverage   industry?
  2. what influence does institutional ownership have on performance of Nigeria  food and beverage industry?
  3. how does foreign ownership affects performance of Nigeria food and beverage industry?
  4. what relationship exist between government ownership and performance of Nigeria food and beverage industry?
  5. to what extent does family ownership influences performance of Nigeria food and beverage industry?


1.5       Hypotheses

            The following null hypotheses were postulated for the study:

Ho1:      Managerial ownership has no significant relationship with performance of Nigeria food and beverage industry.

Ho2       Institutional ownership has no significant influence on performance of Nigeria food and beverage industry.

Ho3:      Foreign ownership has no significant effect on performance of Nigeria food and beverage industry.

Ho4:      Government ownership has no significant relationship with performance of Nigeria food and beverage industry.

Ho5       Family ownership has no significant influence on performance of Nigeria food and beverage industry.


1.5.1   Rationale for Hypotheses

    Hypothesis One

       The opinion of separating control from owners may results in divergence of purpose amongst the managers and owners. This had led to many studies on the relationship between firm’s financial performance and managerial ownership. Literature examined that with management owing part the shares diversity of interest would be reduced, investigation on the relationship between managerial ownership and firms’ performance had shown mixed findings, Gugory, Arugu & Dangogo (2014) attested that they are associated, thus Ho1 was formulated.

Hypothesis Two

Institutional ownership involvement in firms is contentious. Some studies viewed the institutional shareholding as improving the performance of the firm, because the huge investment would motive keeping trail of the records to ensure earnings. Ioraver & Wilson, (2013), in their study established that institutional ownership has influence on firm’s performance, based on this Ho2 was stated.

Hypothesis Three

The third null hypothesis is on foreign ownership and firm performance. Previous studies explored ownership structure, corporate governance and performance reveals no significant between diverse shareholding and performance. However, Eric, (2011) and Ioraver & Wilson, (2013) found that foreign ownership have impact on firms’ performance, hence Ho3 was postulated.

Hypothesis Four

The relationship between government ownership and firm performance as other ownership dimensions had been widely examined and showed mixed results. Mei, (2013) established relationship between government ownership and performance.

Hypothesis Five

The hypothesis postulated that family ownership does not have influence on firms’ performance, among literature on ownership structure, Mei, (2013), showed that family ownership has impact on performance.


1.6       Scope of the Study

There are many factors that affect the governance and performance of companies.  However, this study focuses on the impact of the ownership structure, (managerial ownership, institutional ownership and foreign ownership, government ownership and family ownership) while organizational performance as dependent variable was based on the financial performance. Performance was measured using return on assets and return on equity in term of content. The geographical scope of this study covers all the sixteen (16) listed food and beverage firms, listed on the Nigerian Stock Exchange for the period of five years, 2010 to 2014.

1.7       Significance of the Study

The study is expected to advance knowledge on the impact of ownership structure variables on performance of Nigeria food and beverage industry. This area has attracted little attention of empirical researchers in Nigeria for the obvious reason of non-availability of ownership structure data in an organized form and also in terms of proper econometric modelling.

The study would contribute to the past literature on association between ownership structure and firm performance, by adopting a more recent data set to test the impact of institutional setting on the relationship between ownership structure and firm performance.

The findings of the study are expected to equip policy makers with the relevant information on the right ownership structure that would ensure higher and sustainable   performance in the industry.

The research on the ownership structure of Nigeria food and beverage industry would enrich the growing concern of ownership structures around the world.


.10   Historical background of listed firms in Nigeria food and beverage industry

This section discussed the historical background of some companies included in the study;

Cadbury Nigeria Plc

Cadbury Nigeria Plc started business operation to procure cocoa beans and as a precursor in Nigeria far back to the 1950s. The company and as a forerunner set the stage for the company’s founders to access the opportunities of  serving indigenous market with international famous, Cadbury-branded products. In the early 1960s, the first operation commenced with the re-packaging of imported bulk products.

This packing operation quickly grew into a complete manufacturing business which cumulated into the incorporation of Cadbury Nigeria Limited in January 1965. The firm became a publicly quoted company on the Nigerian Stock Exchange and its shares traded locally on the floor of Nigeria Stock Exchange. Cadbury Nigeria has grown to become a household name providing consumers with attractive varieties of products (Food drinks, Gums, and Candies).


Flour Mills Nigeria Plc

Flour Mills of Nigeria Plc (FMN) was incorporation in 1960 and was listed on the Nigerian Stock Exchange in 1978. The company has a wide ownership base around 67,000 shareholders, often ranked among the leading 25 companies in terms of market capitalization. FMN has been able to survive all macroeconomic challenges and however become a market leader in the flour mill sector. Its products brand, “Golden Penny” is well known and accepted and remains the best and preselected choice among both final consumers and industrial users. The firm operates an extensive distribution structure that results to high profit turnover.

Flour Mills of Nigeria Plc. is one of the largest and most successful industrial conglomerates in Nigeria, concentrating on Food and Agro-allied products. It evolved into one of the largest millers in the world, leading food company in Nigeria with a diverse and growing offering of retail for instance pasta and industrial products example bakery flour. The firm operations span beyond flour milling, pasta manufacturing, into port operations, cement trade & manufacturing, fertilizer blending, bags & other packaging materials manufacturing and agricultural business.

The company leads the market in all its business lines with growing market share,    dominating in its major markets with, approximately 55% of pasta market, greater than 45% in retail semolina category, higher than 50% in industrial flours. The Group consists of many subsidiaries involved in diverse related operations, such as pasta and noodles production, sugar refining, edible oils processing, animal feeds, agriculture, cement, port operations, logistics and packaging. Flour Mills Group Structure is stated below; Food businesses

Northern Nigeria Flour Mills Plc                    52.6%

Nigerian Eagle Flour Mills Limited                51%

Niger Mills Company Limited                        98.9%

Golden Pasta Company Limited                     100%

Golden Noodles Company Limited                100%

Golden Sugar Company Limited                    100%

Support businesses

Golden Transport Company Limited              100%

Golden Shipping Company Nig. Limited       100%

Nigerian Bag Manufacturing Company Plc    70%

Apapa Bulk Terminal Limited                         100%

Flour Mills Registrars Limited                         100%

Agro-allied businesses

Premier Feed Mills Company Limited             62%

Kaboji Farms Limited                                      100%

Cement businesses

Unicem                                                             28.15%


Northern Nigeria Flour Mills Plc

Northern Nigerian Flour Mills (NNFM), was incorporated on 29th October 1972, and began production and commercial activities in November 1975. Northern Nigeria Flour Mills is the first and leading flour milling company in Northern Nigeria. The firm produces premium quality Golden Penny Flour, Golden Penny Pasta and also into grain and oilseed milling. The company currently production capacity is about 1,750 metric tons per day.  Flour Mills of Nigeria Plc is a major shareholder in NNFM with investment holdings of 52.6%. Apart from being a major investor in the company, Flour Mills of Nigeria Plc provided substantial assistant at the take-off for NNFM, through financial backing and transfer of technology.


National Salt Co. Nigeria Plc (Nascon)

Industry Giant (Makers of Dangote Salt)

NASCON Allied Industries Plc (previously National Salt Company of Nigeria Plc) was established in 1973 as a salt refinery at Ijoko (Near Sango-Ota); Ogun State as a joint venture between the Federal Military Government of Nigeria and Atlantic Salt & Chemical Inc. of Los Angeles, California, USA, due to recognition  for self-sufficiency in the production of salt. To achieve this goal Messrs Atlantic Salt & Chemical Company Incorporation was appointed as Technical Partner to set up the company in 1972 by the government and the contract was signed in 1973. The company began operation in August 1976, with a total capacity of 110,000 metric tons and the equity distribution of the company then was;

Federal Military Government of Nigeria   55%

Atlantic Salt & Chemical Inc.   35%        (Technical Partner)

Former Western State Government   10%  (Now Oyo, Ogun, Osun, Ondo, Lagos    and Ekiti States)

NASCON became listed on the Nigerian Stock Exchange in 1991 when the Dangote Group first invested in the company before becoming the majority shareholder in 1996.With the acquisition of controlling shares by Dangote Group, the average daily production increased to 600,000 metric tons per annum, with the inclusion of three refineries in Apapa, Oregun and Port Harcourt. In 2001 Apapa plant commenced operation with the production of edible and kitchen salt in 25kg and 50 kg (bulk) sizes. The Port Harcourt refinery took off in 2003, while Oregun started with the production of iodized table salt in 250g, 500g and 1Kg sachet sizes for domestic use under the brand names Annapurna®* and Dangote®. The by-products from the salt refining process include; Fine (butter) salt (used in the production of biscuits and confection) and Granulated kitchen salt and industrial salt.

*Annapurna is a brand name owned by West Africa Popular Foods (WAPF) as a joint venture between NASCON and Unilever Nigeria Plc. 

Foremost   Dairies Plc

Nestle, a Swiss international food and drink company with headquartered in Switzerland  was established in 1905 by the merger of the Anglo-Swiss Milk Company, founded in 1866 by two brothers George and Charles Page, and Farine Lactée Henri Nestlé, established  in 1866 by Henri Nestle (born Heinrich Nestle). The company has grown to become the world’s biggest food company, for consecutive three years for 2014, 2015, and 2016 measured by revenues and other metrics. It ranked 72nd on the Fortune Global 500 in 2014 and 33rd on the 2016 edition of the Forbes Global 2000 list of largest public companies.

Nestlé’s produces include baby food and medical food, bottled water, breakfast cereals, coffee and tea, confectionery, dairy products, ice cream, frozen food, pet foods, and snacks.

Union Dicon Salt

Union Dicon Salt was established in 1984 and was listed on the Nigeria Stock Exchange. Union Dicon Salt Plc is the largest producer of salt in Nigeria. It owns two ultra-modern factories, one each in Lagos and Port Harcourt with a total installed production capacity of 700,000 metric tons per year. Union Dicon imports crude salt in large vessels which are unloaded in Lagos to barges for processing in the Lagos Factory. The lightened ships proceeds to Port Harcourt and discharge directly at the Port Harcourt factory of the company.  This firm uses indigenous sourced materials and labour to the maximum in the production and distribution of its finished product, thus preserving the nation’s foreign exchange.

Union Dicon Salt Plc produced iodized salt for health reasons, to assist in the prevention of goiter and other disorder caused by iodine deficiency. Such treatment is incompliance with the objectives of the World Health Organization. Apart from the production of the finest quality iodized salt edible salt, Union Dicon Salt Plc also manufactures industrial salt for detergent manufacturer, animal feeds, leather tanning as well as oil wells and other drilling related operations.

Union Dicon Salt Plc has consistently maintained its position among the top 10 companies quoted on the Nigeria Stock Exchange assessed by the value of its shares, and measured by its turnover, the company is ranked the number 12 Company in Nigeria.



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