AGENCY COST AND BANK PERFORMANCE IN NIGERIA: MODERATING ROLE OF OWNERSHIP STRUCTURE

Abstract

The presence of external directors increases agency costs. An excessive or poor management often indicate possible agency issues inside the company and shareholders are keen on how to reduce such cost to a bearable level in order to improve performance of the firm. Therefore, the purpose of this study is to investigate how ownership structure affects agency cost and listed bank performance in Nigeria. Fifteen banks that were listed on the Nigerian Exchange Group (NGX) as of December 31, 2024, were included in this longitudinal research project. The 12-year study period runs from 2012 to 2024. The findings show that the interaction between monitoring cost and ownership structure is negative and statistically significant, implying that as managerial/insider ownership rises, the marginal effect of additional monitoring expenditure on ROA becomes more adverse. A similar but stronger moderating pattern emerges for residual loss where the interaction is negative and highly significant. Finally, the interaction between restructuring cost and ownership structure is economically small and statistically insignificant in the LSDV model. The study concludes that the moderation patterns are strongest and most stable for RDL, ownership concentration amplifies the performance drag of unresolved agency frictions, while the moderating effect on RSC is negligible in the short run, suggesting that restructuring charges function primarily as transitional costs regardless of who owns the bank. The study recommends that the boards and senior management should reallocate governance effort toward closing the execution gaps that drive residual loss and away from undifferentiated increases in oversight budgets whose marginal returns are lowest in owner-controlled settings.