Blockholding and bank performance in Nigeria

We examine the nexus between blockholding and bank performance in Nigeria given the narrowing size blockholding and absence of institutional mechanisms for effective activism. We employ the system-Generalised Method of Moments (system-GMM) using annual bank-level data from 2007 to 2019 and find evidence of negative relationship between blockholding and the bank performance in Nigeria. The negative effect of blockholding on bank performance could be attributed to the low level of financial sector development, which serves as a disincentive for blockholders to pursue shareholders' value maximization. This finding brings to the fore, the importance of rethinking policies that would make the voice and exit channels effective, and to insulate blockholders from pursuing personal benefits. Specifically, strengthening external governance laws and enforcement and deepening the Nigerian financial market would eliminate the prohibitive cost of exercising the exit channel to reduce the self-serving behaviour of managers.