Effect of corporate governance on risk management of selected deposit money banks in Nigeria

Abstract

This paper addresses effect of corporate governance on risk management by bank. Selected deposit money banks base on FOBES list were selected to address the effect in question. The questions asked to which answers were provided among others includes: To what extent (if any) does board strength, shareholders influence and management efficiency influence or affect capital risk, credit risk and liquidity risk of banks in Nigeria. The study is limited to six randomly selected listed commercial banks in Nigeria over the period of six years. In carrying out the analysis, the panel data regression analysis method was adopted. The variables used for this analysis are: the board index and management influence as proxies for corporate governance; capital risk, credit risk and liquidity risk all as proxy variables for risk taking by banks. The data were sourced from the audited financial statements of the sample banks. The estimated result revealed a negative relationship between capital risk and corporate governance which invariably means that the capital risk goes up as Corporate Governance disclosure increases. The result further shows that the more the corporate governance disclosure, the less the credit and liquidity risk taking by the banks in Nigeria.