CORPORATE GOVERNANCE AND DEPOSIT MONEY BANKS’ PERFORMANCE IN NIGERIA

 

*OLOKOYO, Felicia O.¹, *ADEGBOYE, Folasade B.², *OKOYE, Lawrence Uchenna³, *EVBUOMWAN, Grace O.⁴ and *ADEBO, Adefoyeke E.⁵

¹Dr., Covenant University, Nigeria. felicia.olokoyo@covenantuniversity.edu.ng,

²Dr., Covenant University, Nigeria. folasade.adegboye@covenantuniversity.edu.ng,

³Dr., Covenant University, Nigeria. lawrence.okoye@covenantuniversity.edu.ng,

⁴Dr., Covenant University, Nigeria. grace.evbuomwan@cu.edu.ng,

⁵Ms., Covenant University, Nigeria. adebofoyeke@yahoo.com

*Corresponding Author

 

Abstract

This research work observed the relationship between corporate governance and bank performance in Nigeria. Over the years, emphasis has been placed on the use of effective governance to ensure corporate discipline in maximizing the interests of all relevant stakeholders of an organization. Using auditors, board of directors and performance information of five quoted banks in the Stock Exchange of Nigeria with a total of 40 observations during the 2007-2014 sample years, this study sheds some light on the association and effect of internal corporate governance (board size, board composition, board independence, and bank liquidity) on bank performance. The method of analysis adopted is the panel regression involving fixed effect estimation techniques. The correlation coefficient was used to measure the degree of association between our governance variables and profitability indices; while a robust estimator involving panel corrected standard error was applied. The estimated result for board size and board independence reveals a significant lag effect on bank performance. Board composition appears to have a significant inverse relationship with bank performance which further suggests a low acceptance and adherence to cooperate governance by most banks with its resultant adverse effect on the bank performance. Also, a statistical inverse relationship between the board size of a bank and its performance was observed which suggests that increasing the size of the board of directors of a bank does not guarantee its performance. The study therefore suggests that regulatory agencies should encourage firms to maintain a reasonable board size since overly large boards may be detrimental to the firms' performance. Also, the study recommends there is need for the regulatory authorities to reassess the procedures for the appointment of directors to the board in order to ensure uniform standards; transparency, accountability and stability exist in these financial markets.

Keywords: Corporate Governance, Board Size, Bank Performance