Should Limits Be Placed on the Tenure of Bank CEOs?: Evidence from Nigeria

In 2010, the CBN announced a fixed tenure policy for bank CEOs in Nigeria. To contribute to the understanding of the (in)appropriateness of this policy, this study analyzes the link between CEO tenure and bank efficiency in Nigeria. Using a balanced data set comprising 160 observations of 32 pre-consolidation banks and 80 observations of 16 post-consolidation banks over the financial period 2000-2009 and an unbalanced data set over the same period, bank efficiency estimates are obtained using DEA and SFA. The efficiency estimates are then regressed against CEO tenure and a vector of bank-specific, industry-specific and macroeconomic control variables. Though the analysis is yet ongoing, preliminary results indicate that banks’ ability to effectively utilize their expenses to generate incomes declines when new CEOs hop on board. But, new CEOs get their acts together much faster when there is perfect competition in the banking industry. Also, banks in which CEOs spend around sixteen years in office are more efficient. The findings of the study serve as a reference source for regulators of other economic sectors and countries that may be interested in adopting similar policies in the near future.