Corporate Governance and Bank Profitability: Lessons From Nigeria

Abstract

Corporate governance is the framework by which the various stakeholder interests are balanced or the relationships among the management, board of directors, and others are monitored. It is argued that lack of good corporate governance in banks is responsible for excessive risk taking and irresponsible lending that often result in huge non-performing loans and the erosion of shareholders funds. Studies show that almost 60 percent of failed banks had board members who either lacked banking knowledge or were uninformed and passive regarding supervision of their banks affairs. It is suggested that a strong bank managing director and a weak board of directors are a recipe for weak corporate governance. Weak corporate governance became a major global concern of banks before and after the global financial crisis between 2007 and 2009 for bank management. Despite the difficult times banks that embraced the basic principles of good corporate governance continued to make profit and growing stronger today. Nigeria that was not isolated from the global financial tsunami boasts of its oldest bank that prides itself in banking excellence based on strong corporate governance ethics. The survey research design was used for the study. Data generated were organized before they were analyzed. Based on the analysis of data, it was found that corporate governance has strong positive relationship with bank profitability.