TABLE OF CONTENTS
TITLE PAGE i
TABLE OF CONTENTS vi
1.0 INTRODUCTION 1
1.1 BACKGROUND OF THE STUDY 1-2
1.2 STATEMENT OF THE PROBLEM 2-3
1.3 HYPOTHESIS OF THE STUDY 3-4
1.4 RESEARCH OBJECTIVE 4-5
1.5 JUSTIFICATION OF THE STUDY 5-6
1.6 SCOPE AND LIMITATION 6
1.7 DEFINITION OF TERMS 7-8
2.0 REVIEW OF LITERATURE 9
2.1 INTRODUCTION 9
2.2 MEANING AND PURPOSE 10
2.3 CAPITAL INVESTMENT DECISION 10-12
2.4 CAPITAL STRUCTURE AND INVESTMENT DECISIONS
FOR THE INSURED BANK 13-14
2.5 THE ECONOMIC EVALUATION OF INVESTMENT
2.6 CAPITAL INVESTMENT DECISION UNDER CAPITAL
2.7 INVESTMENT RISK AND POLICIES 22-23
2.8 COMMERCIAL BANKING IN NIGERIA 23-27
2.9 SERVICES RENDERED BY COMMERCIAL BANKS 27-28
2.10 THE EFFECTS OF CAPITAL INVESTMENT ON
SHAREHOLDERS WEALTH 29-30
3.0 METHODOLOGY OF RESEARCH 31
3.1 INTRODUCTION 31
3.2 AREA OF STUDY 31
3.3 RESEARCH DESIGN 31-32
3.4 SAMPLE SIZE AND SAMPLING TECHNIQUE 32
3.5 RESEARCH INSTRUMENT 33
3.6 SOURCES AND COLLECTION OF DATA 33-35
3.7 MEASUREMENT OF VARIABLES 35
3.8 VALIDATION OF RESEARCH INSTRUMENT 35
3.9 DATA ANALYSIS TECHNIQUE 36
4.0 DATA PRESENTATION ANALYSIS AND DISCUSSION 37
4.1 INTRODUCTION 37
4.2 HISTORICAL DEVELOPMENT OF UNION BANK PLC 37-38
4.3 DATA ANALYSIS AND INTERPRETATION 39-50
4.4 TESTING OF HYPOTHESIS 50-53
5.0 SUMMARY, CONCLUSION AND RECOMMENDATION 54
5.1 INTRODUCTION 54
5.2 SUMMARY 54-55
5.3 CONCLUSION 55-56
5.4 RECOMMENDATIONS 56
- BACKGROUND TO THE STUDY
The great growth of investment companies has been an outstanding feature of post war period was period – serving as media through which individual investors acquire a stake in bonds and stocks, they have had a great influence on investor habits and on the securities markets. Their role has been to funnel savings into outstanding securities in the secondary markets rather that to finance new capital investment. The investment company pools the funds of investors, obtained through the sale of share (and in some cases bonds) in a portfolio of securities. The portfolio is managed to obtain for the shareholders the benefits of diversification, professional selection and supervision of securities, and skilled timing of purchase and sales. The shareholders hopes with a small outlay (per share), to attain result superior to those he could obtain through direct investment. For such companies, investment is the primary function funds are obtained and managed for this purpose, in contrast to other financial institutions such as banks and insurance companies, which acquire stocks for purpose of control.
However, investment means the commitment of funds to capital assets. And investment is naturally based in sacrifice benefit theory and the theory states that scarifiestoday is for gain in the future. Capital investment deals with tangible asset that can be employed for further production of goods and services.
Moreover, capital markets are the complex institution that also needs to be examined when considering capital investment. Capital markets which institution and mechanisms whereby intermediate funds (loan of up to 10 years maturity for example) and long term funds (longer maturity loans and corporate stocks) are pooled and made available to business, government and individuals, and whereby instrument already outstanding are transferred.
Furthermore during this project, the effect of capital investment on shareholders wealth in commercial banking sub-sector will be examined. It needs to be mentioned here that profits on share holding is everlasting as long as the company continue to exist. Shareholders are entitled to return of their capital when the company is being roundup.
As seen from above, a share is a chose in action, being mainly a collection of rights but as much as it is a perpetualinvestment with inherent advantages which should of the society.
- STATEMENT OF THE PROBLEM
It is pertinent to point put the effect of capital investment on shareholders wealth in the commercial banking sub-sector.
Generally, it is believed that capital investment in the commercial banking sub-sector may have both positive and negative effect on shareholders wealth. But littleresearch has so far been to find out why so little success has been placed. Besides, capital investment play enormous roles/impact on shareholders wealth in commercial banking sub-sector.
- HYPOTHESIS OF THE STUDY
In the course of this study hypothesis has formulated and they form the core of the questionnaire. It is the responses of these questions that will now be subjected to test to know how valid the hypothesis are so.
Null Hypothesis (Ho) is the hypothesis that said that there is no difference between situation being compared.
Alternative hypothesis (Hi) is the opposite of the Null hypothesis. Null should contain equality sign mathematical or in words.
In this case the statement of hypothesis stated that:
Ho: That capital investment does not have a favourable effect on shareholder wealth.
Hi:That capital investment has a favourable effect on shareholder wealth.
Ho: That a shareholder does not normally obtained the expected returns on their wealth from capital investment.
Hi: That a shareholder normally obtained the expected returns on their wealth from capital investment.
- RESEARCH OBJECTIVE
The main objective of the study to make a comprehensive analysis of the effect of capital investment on shareholders wealth in Union Bank Plc.
This is simplified and carried out through the following specific objectives:
- To find out the effect of capital investment on shareholders wealth in commercial banking sub-sector.
- To identify capital investment decision and howoften the decision are change, and the effect of such decision on capital investments.
- To identify the financial policy of the bank and the effect on capital investment
- To identify capital investment policy and the effect on such policy.
- To identify and examine the level of profitability of capital investment.
- To consider how decision on capital investments are made what prompts or forces these decisions and what factors affects the evaluation process which proceeded and aided the actual decision.
- To identify and measure the overall effect of capital investment on the bank and the shareholders
- To confirm the effectiveness of the common determinants of commercial banks lending as specified and how it affects the lending of commercial bank.
- JUSTIFICATION OF THE STUDY
Considering the enormous contribution of capital investment on shareholders wealth in commercial banking, it has contributed a lot to the growth of commercial banking.
Capital investment plays a crucial role in the commercial banking economic development. Commercial banks itself contribute in no small measures to the industrial development of the nation. When one considered commercial bank as related to the nation’s economic growth, one does not doubt the importance of this project work.
However, the necessity of this project is to really examine the commercial banks capital investment policies in encouraging shareholders. The project would also serve as a good literature for commercial banking sub-sector on capital investment decision and policy.
- SCOPE AND LIMITATION
This project studies the effect of capital investment on shareholders wealth in commercial banking sub-sector.
However, it is impossible to reach all the commercial banks in the country.
And due to time limit, a selected commercial bank (Union Bank Plc) was covered for the study.
The major limitation is the fact that the bank may not show the true position of their involvement in capital investment.
Also, it’s highly a demanding task to undertake a research study during periods of adverse economic conditions. Thus, finance constituted a major obstacle inhibiting the researcher from putting up a more comprehensive work, for which the research was limited to only Union Bank Plc in Lagos (Head Office)
Moreover, some staff of the banks visited could not co-operate in supplying the necessary information as they felt it contains unnecessary details, which cut across their private financial and business affairs.
Above all, time was not on my side, as the research has to be combined with other academic activities.
- DEFINITION OF TERMS
One problem in the social sciences is the lack of a general consensus over the meaning of terms, partly because no subject in this field can claim the exactness of a pure science.
According to Wagner (1969:20) “Before discussing any controversial issue, a common understanding of the issue itself must be established”.
In any case, definition of key terms in the context of this project is to make an easy and un interrupted flow of thoughts in the rank and file of the leadership.
One essential aspect of clarifying terms is that every term must have empirical reference, that is such definition should relate the term to an observed fact or some reality. The terms must be represented by an observed phenomenon.
PORTFOLIO: – According to Hornby, (1998:128), portfolio is a range of investment held by a person or organisation.
CAPITAL: – Capital is defined by Dwivedi (1985:195) as the wealth reserved or set aside for the production of further wealth.
INVESTMENT: – According to Hornby (1998:11) investment is a net addition to the stock of the capital.
RISK: – According to Hornby (1998:98) defined as a situation that could be dangerous or have a bad outcome.
SECURITY: – According to Cheng (1980:48) security is a certificate providing that one owns stock or bonds.
PREMIUM: – According to Hornby (1998:123) premium is an extra sum added to a basic price or other payment.
SYSTEMATIC RISK: – According to Cheng (1980:75) system risk is a risk that cannot be diversified.
UNSYSTEMATIC RISK: –According to Cheng (1980:76) unsystematic risk is a risk that can be totally reduced through diversification.
RISK FREE SECURITY: – According to Everett (1979:14) risk free security is the one which has a zero variance or standard deviation.
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