Regulatory shocks and shareholders’ returns in financial institutions

Thesis Overview

<p> </p><div><p><strong>INTRODUCTION</strong></p><p>There is the general notion that regulatory shocks significantly impact the ability of managers of financial institutions to generate adequate returns for their shareholders. The managers of financial institutions in Nigeria also share this sentiment as evident by the constant reference to regulatory headwinds as a reason for poor or dwindling performance. In recent years, the number of managers that ascribed regulatory shocks to poor results has increased. The key question is whether this is just a case of managers taking advantage of the regulatory environment by using it as excuse for lack luster performance, or indeed regulatory shocks do severely impact profitability.</p><p>As we are all aware, the Central Bank of Nigeria further tightened the regulation and supervision of financial institutions in Nigeria, in the wake of the 2008 crisis in the country. Despite the stricter regulatory framework and the volatility in regulatory pronouncements, the impact – as measured by profitability and return to shareholders – has varied considerably from institution to institution. Some financial institutions post superlative results while other post mediocre results. One would have expected that all financial institutions post great results in the times of favourable regulatory pronouncements and vice versa.</p><p>However, the performance of the financial institutions over the past 5 to 7 years is at variance from the general expectation (notion) earlier asserted. The disconnect between perceived impacts and actual impacts prompts this research work.</p></div><h3></h3><br> <br><p></p>