Corporate Governance and External Mechanism on Organizational Performance. (Evidence From Quoted Manufacturing Firms in Nigeria)

Abstract

Corporate governance is regarded as the key foundation for effective organizational performance and for organizations to be more productive, governed and controlled. The level of collapse of institutions and failure of firms across the world has also emphasized the need to study the ways by which organizations are governed and controlled. Despite these advancements, organizations are still faced with challenges such as the separation of ownership and control. Formal legal and regulatory obligations are part of the external incentive structure designed to ensure that competing companies abide by common standards of fairness, transparency, accountability, and responsibility to protect shareholders, consumers, workers, the environment, and even competitors from abusive practices. The general objective of the study was to examine the impact of corporate governance and external mechanism on organizational performance. The specific objectives of the study were to examine if separation of ownership and control affects the performance of listed manufacturing company in Nigeria and to determine the significant effect of laws/regulators on the performance of listed manufacturing company in Nigeria. The population of this study comprised all quoted manufacturing companies in the Nigerian Stock Exchange as at 2019. The study adopted secondary data. The secondary data was extracted from the Annual Reports of the sampled companies for a period of ten (10) years (2010-2019). The descriptive method which includes frequency tables, percentage, mean and standard deviation was used in describing and explaining information obtained from audited annual report of quoted manufacturing company while the quantitative method includes regression analysis. The main findings from the empirical analysis are that there is a significant relationship and effect between separation of ownership and control on the performance of listed manufacturing company given a P-value of 0.0005, R-Squared of 0.9712, adjusted R 2 of 0.9481 and F-value of 42.14. Also, the analysis revealed that laws/regulators on the performance of listed manufacturing company in Nigeria (LR) is significant given a P-Value of 0.0017 and F-Value of 51.10, R 2 of 0.8031 and adjusted R 2 of 0.6456. The empirical results of this study revealed that external mechanism of corporate governance has impact on the performance of manufacturing firms in Nigeria. Based on the findings and conclusion, the study therefore recommended that regulatory bodies should ensure that the Manufacturing Companies comply with the statutory rules and regulations of corporate governance act. Keywords: Corporate governance, external mechanism, organizations and performance DOI: 10.7176/EJBM/12-24-02 Publication date: August 31 st 2020