The Effect of Market Share on a Firm’s Profit Ability: A Study of Selected Commercial Banks in Nigeria

Abstract

The aim of this study was to examine the relationship between market share and profitability of the banking sector in Nigeria. The study involved ten banks listed on the Nigerian Stock Exchange (NSE). Secondary data were used for the study and it covered a period of nine years from 2003 to 2011. The multiple regression analysis was used to test the hypotheses. The dependent variable in the regression model is profitability represented by profit after tax (PAT), while the independent variables are two components of market share for banks: deposit customers (DC) and loans customers (LC). The results of the study revealed that market share represented here by deposit customers (DC) and loan customers (LC) have positive relationship with the profitability (PAT) of firms in the banking sector of Nigeria. The researchers recommended that management of banks should entreat quality of management as an important part of market share effect because superior management causes banks to operate at a higher level of effectiveness and efficiency that will in turn boost profitability of the banking sector in Nigeria. Further studies on the impact of the efficient management of bank risk assets and profitability of the banking sector in Nigeria, was also recommended.