Among banks Micco Panizza and Yanez investigate

Among banks, Micco, Panizza, and Yanez (2006) investigate whether the performance of public and private banks is driven by political considerations during the 1995 to 2002 period. They find that state-owned banks located in developing countries have lower profitability and higher costs than their private-owned banks. They did not find a strong correlation between bank ownership and performance for banks located in industrial countries. Iannotta, Nocera, and Sironi (2007) investigate the relationship between ownership structure, risk taking and bank performance for 181 European banks during the 1999–2004 period. They find that ownership concentration does not significantly affect bank profitability but rather high ownership concentration is associated with better loan quality, lower asset risk and lower insolvency risk, thereby improving bank performance. Lin and Zhang (2009) investigate the impact of bank ownership reform on the performance of Chinese banks. They examine 60 Chinese banks during the 1997 to 2004 period, and find that ‘Big Four’ commercial banks which have concentrated ownership are less profitable, less efficient and have worse asset quality than other types of banks. Ben Slama and Boulila (2014) investigate the relationship between ownership structure and bank performance with a focus on 53 Islamic banks over the 2005 to 2009 period. They did not find a correlation between ownership concentration and firm performance measured by return on assets (ROA) and return on equity (ROE), amongst others. Bian and Deng (2017) examine Chinese banks over the 2007–2014 period and find that higher ownership dispersion improves return on assets, return on equity and reduces the ratio of nonperforming loans. Overall, the literature on bank ownership structure and firm performance provides mixed evidence. Prior Nigerian studies examine the relationship between corporate governance and firm performance among non-financial firms in Nigeria. Tsegba and Herbert (2013) investigate the relationship between foreign ownership structure and firm performance for non-financial firms during the 2003 to 2007 period, and find that foreign ownership concentration has a negative impact on firm performance. Uwuigbe and Olusanmi (2012) find that institutional ownership has positive effects for ROA while foreign ownership has positive effects for listed firms in the financial sector. Gugong et al. (2014) find a positive significant relationship between ownership structure and firm performance, measured by return on assets (ROA) and return on equity (ROE). In induced pluripotent stem cell to prior Nigerian studies, we investigate a different type of ownership concentration categorisation. More specifically, we focus on Nigerian banks with controlling shareholders versus Nigerian banks with non-controlling shareholders and divide banks into three ownership categories to detect how concentrated ownership, moderate ownership and dispersed ownership affects bank profitability in Nigeria. This is Rho-factor our main contribution to the scant literature on ownership concentration and bank profitability in developing countries.
Data
Methodology First, we follow prior literature to estimate bank profitability determinants using a static and dynamic panel model (Demirgüç-Kunt and Huizinga, 1999; Pasiouras & Kosmidou, 2007; Ozili, 2015; Ozili, 2017). We employ four measures of bank profitability (П) as a function of capital adequacy (EQTA), cost efficiency (CI), regulatory capital ratio (TRC), asset quality (AQ) and macroeconomic growth rate (ΔGDP). The model is given as:Where П is the dependent variable representing four measures of profitability: return on assets (ROA), return on equity (ROE), net interest margin (NIM) and recurring earnings power (REP). ROA is a measure of firm\'s operational performance (Ozili, 2017), measured as the ratio of profit after tax to average asset for bank ‘i’ at year ‘t’. Return on equity (ROE) measures the return to equity shareholders measured as the ratio of profit after tax to average equity for bank ‘i’ at year ‘t’(Ozili, 2015). Net interest margin (NIM) measures the return to banks from interest-generating activities while recurring earnings power (REP) measures the ability of a firm/bank to generate income or profits over time assuming all current operational conditions remain constant; and is measured as pre-provision profit excluding net income from financial instruments and sale of securities and tax to average asset ratio. Cost efficiency (CI) is measured as cost to income ratio for bank i at year t, reflecting banks’ efficiency. Asset quality (AQ) is measured as loan loss reserves to gross loans for bank i in year t (Ozili, 2017). Capital adequacy (EQTA) is measured as total equity to average assets for bank i in year t while regulatory capital ratio (TRC) is measured as tier 1+2 capital divided by total risk weighted assets (Ozili, 2015). Gross domestic product growth rate (ΔGDP) is measured as the change in gross domestic product at year t. Next, we interact each profitability determinants on the ownership variables to detect the impact, if any, of different levels of ownership concentration on bank profitability; thus, we estimate the model: