Managerial Ownership and Tobin’s Q Ratio

Abstract

This study addresses the persistent concern over fluctuating firm value among listed Deposit Money Banks (DMBs) in Nigeria, despite ongoing corporate governance reforms, with particular attention to the role of managerial ownership in influencing market-based performance, the effect of managerial ownership on firm value remains unclear in Nigeria’s Deposit Money Banks, as empirical evidence is mixed and the unique banking environment may cause managerial shareholding to either enhance or erode Tobin’s Q. therefore, the study examines the effect of managerial ownership on Tobin Q’ ratio of listed deposit money banks in Nigeria over the period 2015–2024. A panel data methodology was employed, incorporating pre-estimation tests (unit root, multicollinearity, heteroskedasticity, and cointegration), while the Fully Modified Ordinary Least Squares (FMOLS) and Error Correction Model (ECM) techniques were used for long-run and short-run estimations, respectively. Firm value was proxied primarily by Tobin’s Q, alongside Return on Assets (ROA), Return on Equity (ROE), and Earnings Per Share (EPS). The findings reveal that executive directors’ shareholding has a positive and statistically significant effect on firm value, whereas CEO ownership and non-executive directors’ ownership exert significant negative effects, suggesting the presence of managerial entrenchment at higher ownership levels. Overall, the study concludes that managerial ownership has a mixed and non-linear impact on firm value in Nigeria’s banking sector. It is therefore recommended that regulatory authorities and bank management establish optimal ownership thresholds and strengthen corporate governance mechanisms to prevent excessive concentration of control and enhance firm value.