Abstract
In most developing countries, several cases of collapses or failure in the banking sector were witnessed. Nigeria had witnessed several cases and collapsed in the banking sector. This study investigated the effects of corporate governance on the financial performance of commercial banks in Nigeria. The study used the survey research design. A secondary source of data was used for this research. The data were collected from financial statements of the five (5) commercial banks selected from the Nigerian Stock Exchange listing for fourteen financial years (2003 – 2017). The study utilized the panel Least Squares Regression Analysis as the method. The result indicated that board size had significant effects on financial performance (ROA) of commercial banks in Nigeria, board composition had significant effects on financial performance (ROA) of commercial banks in Nigeria, board gender diversity had significant effects on financial performance (ROA) of commercial banks in Nigeria, the audit committee has no significant effects on financial performance (ROA) of commercial banks in Nigeria, and board independence had significant effects on financial performance (ROA) of commercial banks in Nigeria. The study, therefore, concludes that the weak corporate governance structure in Nigeria contributed immensely to the recent crisis experienced in the Nigerian banking sector. The study recommended that banks develop and implement strategic training for board members and senior bank managers. Nigerian banks should appropriately adopt the international codes of corporate governance to meet the need of the Nigerian environment, among other recommendations.
Highlights
In most developing countries, several cases of collapses or failure in the banking sector were witnessed
The main objective of this study is to investigate the effects of corporate governance such as board composition, the board size, board gender diversity, board audit committee, and board independence on the financial performance of commercial banks (ROA) in Nigeria
The variable return on asset (ROA), Board independence (BIND), BCOMP, and board size (BSIZE) were found stationary at first difference 1(1)
Summary
Several cases of collapses or failure in the banking sector were witnessed. With the failure in Nigerian banks and the activities of some of the bank operators, there are concerns about the need to strengthen corporate governance in banks This will boost public confidence and ensure efficient and effective functioning of the banking system (Soludo, 2004) In Nigeria, corporate governance has been given the front burner status by all sectors of the economy. This is in recognition of the failure of the critical role of corporate governance in the success or failure of companies (Ogbechie, 2006). Corporate governance can be said to refer to the processes and structures by which the business and affairs of institutions are directed and managed in order to improve long-term shareholders' value by enhancing corporate performance and accountability while taking into account the interest of other stakeholders (Tricker, 2009)
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