Effect of Corporate Governance on the Performance of Listed Deposit Money Banks in Nigeria

Umar Abbas Ibrahim,Sani Danjuma

doi:10.11648/j.sjbm.20200801.15

Abstract

The study considered the implication of corporate governance on the performance of quoted deposit money banks in Nigeria. The deterioration of banks asset portfolios, largely due to distorted credit management, was one of the main structural sources of corporate governance problem. To a large extent, this problem was the result of poor corporate governance in countries’ banking institutions and industrial groups. Poor corporate governance, in turn, was very much attributable to the relationships among the government, banks and big businesses as well as the organizational structure of businesses. The objective of the study is to investigate the connection between corporate governance proxy (Board size, Board composition and Firm size) and Return on Asset (ROA) of quoted deposit money banks in Nigeria for a period of 5 years (2015-2019). Data for the study was obtained from secondary sources i.e. audited annual reports of fifteen (15) listed banks on floor of the Nigeria Stock Exchange (NSE, 2017). The study employed panel data analysis using regression model. The Statistical Package used was Stata 11 version. Findings showed that there is significant relationship between board composition, board size and firm size and the ROA of deposit money banks in Nigeria. Following from the above conclusion of the study, it was recommended that to improve corporate governance issues in deposit money banks in Nigeria, focus on board composition, board and firm sizes has to be intensified as it was positively related to return on asset of Deposit Money Banks.

Highlights

Corporate governance focuses on organization management and organizational systems and procedures
This research work which focuses on the effect of corporate governance on performance of quoted deposit money banks in Nigerian
It is concluded that board composition has a positive impact on performance suggesting an increase in the number of non-executive directors (NED) would result in increases performance of quoted deposit money bank, while board size has a negative impact on the performance signifying an increase in board size decreases performance of quoted deposit money banks

Summary

Introduction

Corporate governance focuses on organization management and organizational systems and procedures. This involves the relationships between the control system of the company, the positions of its executives, shareholders and stakeholders. Liu et al considered corporate governance to be related to transaction costs and, in turn, to improve firm performance [1]. Corporate governance is a management and control system where the share of the rights and responsibilities of different members of a company are clearly stated and the rules and regulations to be applied to the company's decisions are explained in detail [3]. Corporate governance suggests that the conflicts of interest between these participants are undermined [5]

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Conclusion