Effect of Market Structure and Conduct on the Performance of Selected Agro-Based Firms in Nigeria.

Author(s)

Bassey, Nsikan Edet , Okon, Ubokudom Etim , Okeke, Chinyere Charity ,

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Volume 4 - February 2015 (02)

Abstract

In this study, the validity of the structure, conduct and performance (SCP) paradigm is tested with view to ascertaining which version of the hypothesis holds sway in Nigeria listed agro-based sector. Data collected from 22 listed agro-based firms for the period 2000-2010 were analyzed using the Ordinary Least Square (OLS) regression technique as well as granger causality test. The data was first examined for unit roots using the Augmented Dickey Fuller (ADF) and the Phillips- Peron (PP) tests. Result revealed that all the variables were stationary at first difference except market share (MKTS), return on capital employed (ROC) and cost efficiency (CEFF) that were later stationary at first difference. The major determinants of profitability were market share, capital to labour ratio and cost efficiency variables. Surprisingly, total number of firm branches and firm sizes carried the expected positive signs but failed to significantly explain the variation in profit of the sampled agro-based firms. Findings further revealed that the behavior of agro-based firms were consistent with the relative market Power (RMP) and the efficient market (EM) hypothesis, implying that the traditional SCP paradigm is not validated. Result also revealed that granger causality runs uni-directionally from market share, cost efficiency and capital to labour ratio to return on capital employed and from return on capital employed to firm size and from capital to labour ratio to cost efficiency. This, therefore, inform the need to pursue policies that would reduce branch network and focus on few productive branches, increase their market share and enhance their efficiencies as the way out

Keywords

Market structure, conduct, hypothesis, agro-based firms, performance. 

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