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FUO Quarterly Journal of Contemporary Research, Vol. 8 No. 1, 2020
THE MODERATING ROLE OF AGENCY THEORY ON CEO ATTRIBUTES
AND FIRM VALUE: IMPLICATIONS ON CONSUMER GOODS FIRMS IN
NIGERIA
EMMANUEL EMENYI PhD
Department of Accounting Akwa-
Ibom State University
emenyi007@yahoo.com
DORATHY C. AKPAN PhD
Department of Accounting
Akwa-Ibom State University
Dotdede2001@yahoo.com
IDORENYIN OKON
Department of Accounting
Akwa-Ibom State University
iddyokon22@gmail.com
ABSTRACT
Chief Executive Officers (CEOs) have repeatedly been referred to as icons in
accounting research and in the business world. The popularity of a CEO is a
function of his ability to revive a dying firm back to life and infuse energy into
the firm to enable it bounce back to its feet. This paper seeks to ascertain the
relationship between CEO Attributes and the value of listed Consumer goods
companies in Nigeria from 2011-2018. The study identifies CEO Tenure, CEO
Compensation as measures of CEO attributes while Tobin’s q are used as a
measure of Firm Value. Furthermore, the study was controlled by Firm age
and firm size. With a sample size of 26 Consumer goods firms in Nigeria,
Ordinary Least Square Regression method was carried out to test the
relationship between the variables and findings revealed that CEO tenure
positively and significantly affects the value of the firm measured as Tobin’s
q. Again, results revealed that there is also a positive and significant
relationship between CEO compensation and Firms’ value. Conclusively, the
study submits that there is a relationship between CEO Attributes and Firms’
Value. Based on this finding the study recommended that the necessary
regulatory agencies should review CEO remuneration in order enhance the
value of firms listed in the Nigerian stock exchange. Secondly, the result is
consistent with the notion that long CEO tenure enhances firm value because
of their expertise and experience hence this study recommended that a
maximum ten years tenure for CEO should be reviewed.
Keywords: CEO, Firm, Accounting, Strategic vision, Decision making. Economies
To cite this work: Emenyi, E. O., Akpan, D. C. & Okon, I. (2020). The moderating role of agency theory
on CEO attributes and firm value: Implications on consumer goods firms in Nigeria. FUO Quarterly Journal
of Contemporary Research, 8(1), 17-30
INTRODUCTION
Emmanuel E.et al
The literature of board structure and the position of the chief executive officer (CEO)
within the firm is continuously growing. It is one of the most discussed topics in corporate
finance today. Chief Executive Officer (CEO) managerial power has attracted attention since
the global financial crisis, because CEO specific-effect matters for firm policies and investment&
Schoar, 2003; Koo, 2015). Chief Executive Officers (CEOs) have repeatedly been referred to as
icons in accounting research and in the business world. The popularity of a CEO is a function of
his ability to revive a dying firm back to life and infuse energy into the firm to enable it bounce
back to its feet. Hambrick and Mason (1984) contend that the strategic vision and the
organizational direction followed by the CEO is subject to his/her understanding of the
changing business world. The authors argue that the CEO’s attitude toward organizational
success depends on his experience, educational background, functional background and other
demographic factors. The way he perceives glitches and the perceptual alignment deployed in
the decision-making process is instrumental to his success.
The deterioration of the economies of nations world over and the slow downturn in
most companies have caused a paradigm shift from concentrating on issue such as expansion,
strategy and excited deal to restructuring of operations, designing product lines, enhancing
debt recovery procedures, and making other tasks not thought of before (Jim, 2009). Hambrick
(2007) adds that CEOs’ actions are built on their personal understandings of the strategic
circumstances they are faced with and this intention depends on the CEO’s educational
background and beliefs. The author further argues that firm performance can much be
explained by managerial features of the CEO. Some schools of thought (Child, 1972) assert that
CEOs are also involved in strategic decision-making process and choices that impact directly on
the performance of the firm. CEOs actions reshape organizational structures and make them
adaptive to the environmental and economic challenges.
The proponents of this school of thought argue that in a competitive economy, the
quality and performance of the managers determine the success and sustainability of the
business. Some are of the opinion that the financial crisis that took place in the last decade and
the current stock market turmoil in the U.S and EU led to changes in the way firms perform
business. Arising from series of happenings world over it became imperative for firms to adjust
their strategic goals and redefine their organizational vision. The wind of change that blew over
the global business arena has drastically affected the basic organizational functions of
marketing, product/service development and the operations functions. The accounting and
finance function which have often facilitated and made available information available to top
management for decision making have also witnessed changes across the globe. The usage of e-
commerce and the internet to access various economic based information outlets unlike before
have changed these support functions dramatically.
Taking into cognizance these changes it is relevant for this paper to critically scrutinize
those CEO attributes that affect firm value given that such factors may influence the way
business problems are perceived by managers and the mental process which they use in the
decision-making process (Fligstein, 1990). Koyuncu (2010) argues that the CEO intellectual
placement influences the competitive strategy followed by a firm given that such values shape
the assumptions made about present, future and alternative actions. In spite of the general
agreement that CEO attributes influence firm value in some specific way theorist and scholars
have divided opinions and have been able to provide little evidence to substantiate the fact
FUO Quarterly Journal of Contemporary Research, Vol. 8 No. 1, 2020
that managerial/behavioral characteristics, educational background or CEO attributes have
significant effect on firm value. (Fligstein,1990). The major determinant of agent-principal
relationship in agency theory is the ownership of the company. Unlike the case of agency
relationship, the CEO who acquires a good proportion of company shareholding will be an
agent-cum-principal officer which gives him a good ground to influence almost every activity in
the organization.
When the CEO has significant stock ownership, he can influence the selection of other
directors, hence giving him an edge over the other members of the board. Having significant
ownership will enable the CEO to influence the determination of the board member’s
remuneration, scuffling their dismissal if need be, and dominate in most of the board decisions.
The mind-boggling question as to whether ownership in companies could result in firm
performance and value across all settings still remained not fully answered. Many of the recent
studies ascribed agency situation to CEOs, and most of the studies used variables that have to
do with managerial discretion (Veprauskaite and Adams 2013). Findings from most of the
studies reported the negative impact of CEO power. The motive to study the CEO managerial
discretions is not connected to the recent happening in the governance structure whereby
some CEOs of global companies such as Enron and WorldCom engaged in some corporate
scandals. The financial crises that took place among Nigerian Firms in last two decades which
led to the collapse of some firms was attributed (by stakeholders) to lack of transparency, lack
of accountability and elongated CEO tenure hence the objective of this paper is to ascertain the
impact of CEO attributes on firm value with explanation based on Agency Theory.
REVIEW OF RELATED LITERATURE
Firm value
Tobin’s q ratio (Tobin and Brainard (1968); Tobin and Brainard (1977); Tobin (1969); and
Tobin (1978) is extensively used in the financial literature as a proxy for firm value. The q ratio is
defined as the market value of a firm divided by the replacement cost of the firm’s assets.
Although the ratio, in its many variations, is a popular choice in empirical studies, no paper to
our knowledge has established the linkage between the q ratio and the future firm value. The
numerator of the ratio – the market value of the firm – depends on discounted expected future
cash flows generated by the firm’s assets. Since the denominator of the ratio is simply
replacement cost of assets is expressed in present value terms, there exists an implied positive
association between a firm’s Tobin’s q ratio and its future cash flows. In this paper we
undertake a study to determine whether the expected linkage exists between the Tobin’s q
ratio and future firm operating performance.
Many papers have attempted to measure the q ratio using methodologies ranging from
complex to relatively straightforward. Some of the complex methodologies (Lindenberg and
Ross (1981), Hall (1990), and Lewellen and Badrinath (1997)) require data from a variety of
sources, some of which may be missing for many firms. Chunk and Pruitt (1994) present a
simpler formula for approximating the Tobin’s q ratio and find that their approximate q
correlates well with the more theoretically q ratio obtained using the Lindenberg and Ross
method. Megna and Klock (1993) present a refinement of approaches to measurement of the q
ratio and present results for the semi-conductor industry. Perfect and Wiles (1994) show that
Tobin’s q and the market value of firms divided by book value of assets (our proxy for the q
Emmanuel E.et al
ratio) are highly correlated. While much of the debate in the literature has centered on how
best to measure the q-ratio, an important aspect has not received any attention. Since the
methods mentioned above lead to similar estimates of the ratio, it is pertinent to ask if the
ratio measured using any of the methodologies is indeed a proxy for growth opportunities. If
the measured q-ratio is a valid proxy for future investment opportunities, we would expect to
observe superior future operating performance for firms with higher q ratio. In other words, we
would expect to observe a positive relationship between the observed q ratio and future
operating performance.
CEO Tenure and Firm Value
Does CEO tenure matter? According to Hambrick and Fukutomi’s (1991) paradigm of
CEO tenure seasons, the temporal characteristics associated with CEO tenure can affect firm
value. Fundamentally, the paradigm posits that ‘there are discernible phases, or seasons, within
an executive’s tenure in a position, and those seasons give rise to distinct patterns of executive
attention, behavior, and ultimately, organizational performance’ (Hambrick and Fukutomi,
1991). In particular, depending on the CEO’s life cycle seasons, CEO tenure can have both
positive and negative effects on firm value (Miller and Shamsie, 2001). During their early tenure
seasons, CEOs tend to learn rapidly and are willing to take risks. As their tenure progresses,
they espouse new initiatives and expand their knowledge and skill repertoires (Wu, Levitas, and
Priem, 2005), thus improving firm performance and overall firm value.
In their later seasons, however, CEOs myopically commit to obsolete paradigms,
become risk averse and stale in the saddle, and tend to adapt less to the external environment
(Miller, 1991; Levinthal and March, 1993), thus hurting firm value. In summary, the relationship
between CEO tenure and firm value over the CEO’s life cycle can be visualized as an ‘inverted
U’. However, recent research suggests that the impact of CEO tenure on firm value is a
complex phenomenon that goes beyond the simple and direct effects (Simsek, 2007; Souder,
Simsek, and Johnson, 2012). To get a holistic view of the causal linkages between CEO tenure
and firm value, it is important to explore the underlying mechanisms that explain how CEO
tenure matters (Simsek, 2007). Nevertheless, even after several calls (e.g., Wu et al., 2005;
Simsek, 2007), our knowledge of the intermediate factors that channel the impact of CEO
tenure on value is surprisingly limited. The present study aims to bridge this crucial theoretical
gap.
CEO Compensation and Firm Value
Executive compensation gap, also known as the distribution of executive compensation,
is mainly manifested in two basic characteristics: the internal compensation gap within the
executive team and the executive-employee compensation gap. Among them, the salary gap
within the senior executive team refers to the difference in the salary amount between the CEO
and other senior executive members, which indicates the difference in the salary that senior
executives can get before and after promotion, and also reflects the effectiveness of the
incentive mechanism for senior executives’ earnings and promotion (Siegel and Hambrick,
2005; Lu, 2007). Executive-employee salary gap refers to the absolute or relative difference
between the average salary level of the entire executive team and the average salary level of
ordinary employees. Executive pay gap is a double-edged sword, on the one hand, it can be
used to form a strategic consensus and key strategy means to realize strategic landing, in order
FUO Quarterly Journal of Contemporary Research, Vol. 8 No. 1, 2020
to promote the business enterprise inside members to compete against each other, mutual
supervision of the motivation, the strengthening of the shareholders, the board of directors,
executives and ordinary workers goals between the parties with risks, so as to improve
corporate value.
On the other hand, executive compensation gap plays a very important role in the
performance of enterprises. Establishing an excellent mechanism to attract and retain the
incentive mechanism of senior executives who play a key role in the survival and development
of enterprises is directly related to the performance of enterprises. According to the optimal
contract theory, determining executive compensation based on corporate performance can tie
the interests of executives and shareholders together and reduce agency costs. At this time,
corporate performance is an exogenous variable and a main factor determining executive
compensation. However, motivated executives will further affect the performance of
enterprises, so the performance of enterprises is also endogenous. How effective the incentive
effect of executive compensation is and whether it has an incentive effect of improving
corporate performance is an important criterion to test whether the executive compensation
contract is effective. Zhou, Yang and Li (2010) found that executive compensation was
significantly positively correlated with company performance.
Yang and Huang (2010) found that senior executives who are motivated by salary can
have after-effect on enterprise performance, that is, improve the performance of the
enterprise in the next phase. These studies show that executive compensation incentive is
conducive to improving corporate performance, but whether executive compensation incentive
is the best incentive method is also worth studying. O’Connor and Rafferty (2010) found that
though the monetary compensation of corporate executives could improve returns, it could not
maximize the value of shareholders. Jensen and Murphy (1990) earlier proposed to use the
regression method to study the relationship between executive monetary compensation and
accounting performance, which is, the sensitivity of compensation performance. A large
number of studies (Sloan, 1993; Baber, Kang and Kumar, 1999) showed that there is sensitivity
between executive compensation and corporate performance, that is, firm value is an
important factor determining executive compensation.
Theoretical Exposition and Hypothesis Development
Agency theory argues that in the modern corporation, in which share ownership is
widely held, managerial actions depart from those required to maximize shareholder returns
(Berle and Means 1932; Pratt and Zeckhauser 1985). In agency theory terms, the owners are
principals and the managers are agents and there is an agency loss which is the extent to which
returns to the residual claimants, the owners, and fall below what they would be if the
principals, the owners, exercised direct control of the corporation (Jensen and Meckling 1976).
Agency theory specifies mechanisms which reduce agency loss (Eisenhardt, 1989). These
include incentive schemes for managers which reward them financially for maximizing
shareholder interests. Such schemes typically include plans whereby senior executives obtain
shares, perhaps at a reduced price, thus aligning financial interests of executives with those of
shareholders (Jensen and Meckling 1976). Other similar schemes tie executive compensation
and levels of benefits to shareholders returns and have part of executive compensation
deferred to the future to reward long-run value maximization of the corporation and deter
Emmanuel E.et al
short-run executive action which harms corporate value. In like terms, the kindred theory of
organizational economics is concerned to forestall managerial “opportunistic behaviour” which
includes shirking and indulging in excessive perquisites at the expense of shareholder interests
(Williamson 1985).
A major structural mechanism to curtail such managerial “opportunism” is the board of
directors. This body provides a monitoring of managerial actions on behalf of shareholders.
Such impartial review will occur more fully where the chairperson of the board is independent
of executive management. Where the chief executive officer is chair of the board of directors,
the impartiality of the board is compromised. Agency and organizational economics theories
predict that when the CEO also holds the dual role of chair, then the interests of the owners will
be sacrificed to a degree in favour of management, that is, there will be managerial
opportunism and agency loss. The “model of man” underlying agency and organizational
economics is that of the self-interested actor rationally maximizing their own personal
economic gain. The model is individualistic and is predicated upon the notion of an in-built
conflict of interest between owner and manager. Moreover, the model is one of an individual
calculating likely costs and benefits, and thus seeking to attain rewards and avoid punishment,
especially financial ones. This is a model of the type called Theory X by organizational
psychologists (McGregor 1960).
There are, however, other “models of man” which originate in organizational
psychology and organizational sociology. Here organizational role-holders are conceived as
being motivated by a need to achieve, to gain intrinsic satisfaction through successfully
performing inherently challenging work, to exercise responsibility and authority, and thereby to
gain recognition from peers and bosses (McClelland, 1961). Thus, there are non-financial
motivators. Moreover, identification by managers with the corporation, especially likely if they
have served there with long tenure and have shaped its form and directions, promotes a
merging of individual ego and the corporation, thus melding individual self-esteem with
corporate prestige.
Again, even where a manager may calculate that a course of action is unrewarding
personally, they may nevertheless carry it out from a sense of duty, that is, normatively induced
compliance (Etzioni, 1975). Further, while agency theorists posit a clear separation of interests
between managers and owners at the objective level (Jensen and Meckling, 1976), this may be
debatable, and organizational sociologists would point out that what motivates individual
calculative action by managers is their personal perception (Silverman, 1970). To the degree
that an executive feels their future fortunes are bound to their current corporate employers
through an expectation of future employment or pension rights, then the individual executive
may perceive their interest as aligned with that of the corporation and its owners, even in the
absence of any shareholding by that executive. Thus, agency theory yields two hypotheses
regarding CEO attributes for this study:
H0: CEO tenure does not have any significant effect on the value of listed consumer goods firms
in Nigeria.
H0: CEO compensation does not have any significant effect on the value of listed consumer
goods firms in Nigeria.
FUO Quarterly Journal of Contemporary Research, Vol. 8 No. 1, 2020
Empirical Framework
Berg and Smith (1978) studied the relationship between whether or not the CEO and
board chair roles were held by the same person and financial performance. They found a
significant statistical association on ROE, which was only one out of the three financial
performance indicators they examined. But the report is unclear, with the sign of the
relationship differing as between the text. Thus, the results of Berg and Smith study must be
coded as weak and equivocal.
Rechner and Dalton (1991) examined the relation between CEO duality and
organizational performance. Their study supports agency theory expectations about inferior
shareholder returns from CEO duality. They studied a random sample of corporations from the
Fortune 500. Rechner and Dalton (1991) identified corporations which had remained as either
dual or independent chair CEO structures for each year of a six-year period (1978–1983). They
found that corporations which had independent chair-CEO structures eunicehad higher return
on equity (ROE), return on investment (ROI) and profit margins. But Rechner and Dalton (1991)
made no control for industry in their study, so the extent of any confounding of structure
effects by industry effects is unknown. It is thus desirable to assess effects of structure on
shareholder returns controlling for industry effects. Thus, there is need for a further study of
the relation of CEO duality and its effects.
Rechner and Dalton (1989) also examined the effect of CEO duality on risk adjusted
shareholder returns using stock market data for the same sample and period. They found no
significant difference between structures (Rechner and Dalton 1989). Thus, there is a need for a
further study of shareholder stock market returns.
METHODOLOGY
The Research deign adopted for this paper is the ex post facto Research Design. Since
the aim is to ascertain the relationship between two variables and the difference between the
variables (based on the quantity of data gathered). Due to the nature of this study, ex post
facto research design and time series data were adopted for this study. The population of this
study consists of all the 28 consumer goods firms quoted on the Nigerian stock exchange. The
sample size is determine using Yaro Yamene (1986) formula:
𝐧 = 𝐍
𝟏 + 𝐍(𝐂)𝟐
Where:
n = Sample Size N = Population Size
e = Confidence Level, Given as 5% The sample size is computed
below;
The sources of data collection in this study comprises of the secondary data as
presented in the Nigeria stock exchange. The secondary data are obtained from the sample size
Emmanuel E.et al
between the periods of 2011-2018. The relationship between the dependent and independent
variables will be analyzed using the ordinary least square technique.
Model Specification and Variable Measurement
In order to test the hypotheses formulated in the study and to achieve the objectives of
the research, the following models are used;
Firm value = f (CEO Attributes)
Tobin’s q = f (CEO Tenure, CEO Compensation)
Tobin’s q= f (CEO_T + CEO_C +F_age + Firms’ Size)
Tobin’s q= α + β1CEO_T + β2CEO_C)
FUO Quarterly Journal of Contemporary Research, Vol. 8 No. 1, 2020
Operationalization of variables
Variable
Measurement
Source
Dependent
Firm Value:
Tobin’s q
Ratio of market capitalization to total
value of assets
Zajac and Westphal, 1996;
Shrader et al., 1997; Kiel and
Nicholson, 2003; Carter et
al., 2003; Erhardt et al., 2003
Independent Variable
CEO Tenure
We measured CEO tenure as the number of
yearsof CEO experience in the position
(Hendersonet al ., 2006;
Simsek, 2007; Souder et al .,
2012).
CEO Compensation
The sum of long-term, equity-based
compensation and short-term,fixed
compensation (salary, bonus, and other fixed
annualpayments) scaled by firm assets
Fondas and Sassalos, 2000;
Carter et al., 2003; Latendre,
2004; Huse and Solberg,
2006
Control Variable
Firms’ Size
Logarithm of Total Assets
(Henderson et al ., 2006;
Simsek, 2007; Souder et al .,
2012).
Firms’ Age
Logarithm of Years Since Incorporation
(Henderson et al ., 2006;
Simsek, 2007; Souder et al .,
2012).
DATA PRESENTATION AND ANALYSIS
This section contains the presentation and analysis of the data collected for this research work.
Consequently, it entails the application of both mathematical and statistical techniques to
provide the basis for the testing of the research hypothesis. Hence, it is a vital part of any
research work, since it forms the basis for recommendation and conclusions at the end of the
research.
Variable | Obs Mean Std. Dev. Min Max
-------------+---------------------------------------------------------
Tobin’s_ q|
382
1.365366
7.310187
-78.32
20.76
CEO_T |
379
3.870712
.9521139
1
7
CEO_C |
381
5.745407
.7544682
4
9
F_age |
380
56.38563
726.6628
0 14178.16
F_size |
382
17.86107
2.207688
15.13 22.45
From the table above, it is observed that Tobin’ q (Tobin’s q) of consumer goods
companies in Nigeria has a mean of 1.3653 with standard deviation of 7.3102, signifying that
the firm value in terms of Tobin q is 137% on average and the value deviate from both sides of
the mean value by 731%. The minimum and maximum values of firm value in terms of Tobin q
during the period are -78.32% and 20.76% respectively. Also observed, the table shows that on
the average CEO Tenure (CEO_T) during the period of the study is 3.8707 times with standard
deviation of 0.9521. This implies that the deviation from the mean is 95.21%; the minimum and
maximum tenure during the period are 1 and 7 years respectively. The table also indicate that
Emmanuel E.et al
the minimum and maximum values of CEO Compensation (CEO_C) are 4 and 9 respectively,
with the mean value of 5.7454 and standard deviation of 0.7545. This indicates that the
(CEO_C) of the sampled companies deviate from both sides of the mean by 75.45%. Firm age on
the average is 56.3856, and the standard deviation is 726.6628. The minimum and maximum
value are 0 and 14178.16 respectively. Moreover, the results from table also show that the
average firms’ size (FSIZE) of the sample consumer goods companies is 17.86107 with standard
deviation of 2.207688 and the minimum and maximum values of 15.13 and 22.45 respectively.
Shapiro-Wilk W test for normal data
Variable | Obs W V z Prob>z
-------------+------------------------------------------------------
Tobin’s_q|
382 0.66978
87.240
10.610 0.00000
CEO_T |
379 0.98642
3.563
3.016 0.00128
CEO_C|
381 0.93376
17.459
6.789 0.00000
F_age |
380 0.03549
253.619
13.141 0.00000
fsize |
382 0.84756
40.274
8.775 0.00000
The table above reveals results for normalcy of distribution of response variables.
Shapiro technique tests the null hypothesis (that the data is normal), that is, the variables came
from a normally distributed population. The results from table above indicate that the data
from response variables are not normally distributed, because the P-values are statistically
significant at 5% and below.
Variable | VIF 1/VIF
-------------+----------------------
fsize |
1.19
0.842659
CEO_C |
1.14
0.879630
CEO_T |
1.07
0.931280
F_age |
1.00
0.998386
-------------+----------------------
Mean VIF | 1.10
The variance inflation factor was carried out as a robust test for the existence of multi-
collinearity among the explanatory variables under consideration. As observed form the table
the mean of the variance inflation factor is 1.10 suggesting that there was no unacceptable
level of multi-collinearity in the data set. This is in consonance with Gujarati (2003), who stated
that there is no consequence of multi-collinearity if the mean VIF is less than 10.
Correlation Analysis
| Tobin_QCEO_T CEO_CF_agef_size
-------------+---------------------------------------------
FUO Quarterly Journal of Contemporary Research, Vol. 8 No. 1, 2020
Tobin’s_q | 1.0000
CEO_C | 0.0576 1.0000
CEO_T | 0.0499 0.1530 1.0000
F_age | 0.0787 0.0062 0.0089 1.0000
F_size | 0.0189 0.2518 0.3393 -0.0317 1.0000
The table above indicates a significant positive relationship between CEO Compensation
(CEO_C) and firm value (Tobin’s_q) of the sample firms, as observed from the correlation
coefficient of 0.0576, which is statistically significant at 5% level of significance. The result
indicates that firm value increases as CEO compensation increases during the period of the
study. Additionally, the table indicates that there is a significant positive relationship between
firm Value (Tobin’s_q) and CEO Tenure (CEO_T), from the correlation coefficient of 0.0499
which is statistically significant at 1% level of significance. This suggests that firm value
increases as tenure of the CEO increases during the period under review. For the control
variables, Firm Age is also found to be positively correlated to firm value measured in terms of
Tobin’s_q with a coefficient of 0.0787. This is statistically significant at 5%. Finally, it is observed
that firm size (Fsize) is positively significant at 1% as the coefficient value is 0.0189.
Linear Regression Results
Linear regression Number of obs = 379
F(4, 374) = 244.15
Prob > F = 0.0000
R-squared = 0.0112
Root MSE = 7.3245
-----------------------------------------------------------------------------
| Robust
roa | Coef. Std. Err. t P>|t| [95% Conf. Interval]
-------------+---------------------------------------------------------------
CE0_C | .4213905
.6017877
0.70
0.484
-.761921
1.604702
CEO_T | .401307
.5267261
0.76
0.447
-.6344089
1.437023
F_age | .0007827
.0000423
18.51
0.000
.0006996
.0008659
F_size| -.0217882
.1259351
-0.17
0.863
-.2694179
.2258415
_cons | -2.239281
3.83596
-0.58
0.560
-9.782033
5.303471
-----------------------------------------------------------------------------
The results from the table above indicate that CEO Tenure of the sample firms in Nigeria
has positive effect on the firm value (Tobin’s q),as observed from the coefficient of 0.4013 with
t-value of 0.76 which is statistically significant at 5% level of significance (p-value of 0.447),
suggesting that the higher the tenure of the CEO, the higher the Firm value. The results from
the model imply CEO Tenure significantly improves the firm value of the consumer goods firms
during the period of the study. Based on these evidences, the study rejects the null hypothesis,
which states that CEO Tenure not have any significant effect on the value of listed consumer
Emmanuel E.et al
goods firms in Nigeria. The study infers that CEO Tenure has significant positive influence on
the value of consumer goods firm in Nigeria.
Also, CEO compensation (CEO_C) of the sample firms in Nigeria has significant positive
effect on the value of the firm (Tobin’s q), from the coefficient of 0.4214 with t-value of 0.70
which is statistically significant at 5% level of significance (p-value of 0.484). This implies that an
increase in the compensation of CEO increases firm value significantly. Based on these
evidences, the study rejected the null hypothesis, which states that CEO Compensation does
not have any significant effect on listed consumer goods firms/ in Nigeria. The study infers
that CEO Compensation has significant positive influence on the value of consumer goods firms
in Nigeria. The control Variable of firm age of the sample firms in Nigeria has significant positive
effect on the firm value (Tobin’s q), from the coefficient of 0.009 with t-value of 0.18.51 which
is statistically significant at 1% level of significance (p-value of 0.000). Finally, the table indicates
that the size of the firms (FSIZE) has significant negative effect on the financial performance
(Tobin’s q), from the coefficient of -0.218 with t-value of -0.17 which is statistically significant at
5% level of significance (p-value of 0.863). This suggests that holding too much assets in the
firms reduces performance.
DISCUSSION OF FINDINGS
The study found that CEO tenure has significant positive impact on firm value of the
firms during the period of the study. This suggest that the higher the CEO tenure, the higher the
firm value. This finding support the findings of Abbott et al. (2000), Zhou and Chen (2004),
Cohen et al., (2014), Sharma et al., (2009), and Hassan (2013); and the finding contradicts the
findings of Xieet al., (2001), Thoopsamut (2008), Stephen et al. (2014), and Saatet al, (2012).
The study also found that CEO compensation significantly improves the firm’s value of
the consumer goods firms during the period of the study; that is, CEO compensation has
positively impacted on the value of the firm as an increase in the CEO compensation package
increases firms’ value significantly. This finding is inconsistent with those of Stephen et al.,
(2014), Ali et al., (2012), Inaamet al., (2012), Abbott et al., (2000); and the finding support those
of Ojulari 110 (2012), Bouaziz (2012), Aldamenet al., (2011) Zhou and Chen (2004), Cornett et
al., (2010), and Sharma et al., (2009)
Firms’ Age of the sample firms in Nigeria has significant positive effect on the firms’
Value (Tobi
n’s q), from the coefficient of 0.009 with t-value of 0.18.51 which is statistically
significant at 1% level of significance (p-value of 0.000). This finding agrees with Sharma et al.,
(2009), and Hassan (2013); and the finding contradicts the findings of Xieet al., (2001),
Thoopsamut (2008), Stephen et al. (2014), and Saatet al, (2012). Finally, findings also indicate
that the size of the firms (FSIZE) has significant negative effect on the value of the firm (Tobin’s
q), from the coefficient of -0.218 with t-value of -0.17 which is statistically significant at 5% level
of significance (p-value of 0.863). This suggests that holding too much assets in the firms
reduces value. This finding is in line with those of Hassan (2013), García-Meca and Sánchez-
Ballesta (2009), Bukit and Iskandar (2009), Abbott et al., (2000), Zhou and Chen (2004), Saatet
al., (2012), Stephen et al., (2014), Bouaziz (2012), and is inconsistent with those of Hundal
(2013), and Ame (2013).
FUO Quarterly Journal of Contemporary Research, Vol. 8 No. 1, 2020
CONCLUSION AND RECOMMENDATION
The deterioration of the economies of nations world over and the slow downturn in
most companies have caused a paradigm shift from concentrating on issue such as expansion,
strategy and excited deal to restructuring of operations, designing product lines, enhancing
debt recovery procedures, and making other tasks not thought of before. CEOs’ actions are
built on their personal understandings of the strategic circumstances they are faced with and
this intention depends on the CEO’s educational background and beliefs. Furthermore, firm
value can much be explained by managerial features of the CEO. From the findings of this
study, the author concludes that there is a relationship between CEO attribute and the value of
the firm.
The study recommended that the necessary regulatory agencies should review CEO
remuneration in order enhance the value of firms listed in the Nigerian stock exchange.
Secondly, the result is consistent with the notion that long CEO tenure enhances firm value
because of their expertise and experience hence this study recommends that the maximum ten
years’ tenure for CEO should be reviewed.
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