CHAPTER ONE

INTRODUCTION

1.1- Background of the Study

Corporate governance dates back to the 19th century when corporation laws enhanced the

rights of corporate boards without unanimous consent of shareholders. They did it in

exchange for statutory benefits such as appraisal gifts in order to make corporate governance

more efficient. The early debates came up after the increase of agency problem, which

emanated from separation of ownership and control created in the case of Salomon v

Salomon, (1987). Recently corporate governance becomes a hot topic among a wide

spectrum of people, government, industry operations, directors, investors, shareholders,

academics and international organizations to least but a few. Todays world has seen that

organization transparency, financial disclosure, independency,board size, board composition,

board connittees, board diversity and among other is the cornerstone of good governance

practices. These variables are in the main agenda of most meetings and confrences worldwide

including the World Bank, International Monetary Fund(IMF).

Researchers have managed to come up with many definitions of corporate governance

recently. Strine(2010) pointed out that corporate governance is about putting in place the

structure, processes and mechanisms that ensure that the firm is directed and managed in a

way that enhance firm performance. Adewoyin(2012) opines that banking is anchored on

trust and confidence. Once such assurance is shaken, it becomes very difficult to win back the

trust and confidence of banking public. What this means is that boards and management of

banks must ensure sound performance of their institutions. To achieve this, Osisioma(2012)

submitted that the focus of governance of corporate governance is on the board of directors.

The unitary board model which is prevalent in Nigeria merges both of governing role
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(monitoring and supervison) and a management function responsible for day-to-day

administration of company operations. Governance therefore, becomes the combination of

processes and monitor activities of the corporate body towards the achievement of set

objectives.

In recent times corportate governance has become a topical issue which has attracted the

attention of academic scholars and practitioners. Revelations of corporate fraud all over the

world in the past years have clearly shaken investors, confidence and historical antecedents in

financial practices have indicated that financial crisis is the direct consequences of poor

corporate governance (Akingunola, Olusegun & Adedipe,2013). For instance, the Enron saga

and the crash of sub-prime mortgage institutions which led to the last global financial crisis.

These problems transferred to other parts of the world through globalization which makes

countries of the world to be interconnected as a result of trade liberalization and advancement

in technology( telecommunication and transportation). Africa particularly Nigeria had its own

share contagious financial most distressed.

The banking sector crisis remained a subject of concern because of its role in facilitating and

stimulating economic development. This however made the apex bank(Central Bank of

Nigeria) to take a bold step in revitalizing the banking sector through the stipulation of N23

billion naira capital base for all the banks in Nigeria. This led to the emergence of 25

commercial banks in Nigeria issued a code of corporate governance to complement the

existing one and the provisions of the new code were said to be indispensable in achieving

viable and successful and successful banking practice (Demaki, 2011). Since the issuance of

the code of corporate governance by the CBN, efforts have been made to evaluate its impact

on the performance of banks. From empirical perspective, efforts aimed at studying the

impact of corporate governance among scholars have yielded varying outcome where a

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consensus is yet to be reached. This led to continuous study in the area of corporate

governance and the performance of banks in the post consolidation era. In light of the above,

this study will examine if the compliance with the code of corporate governance mechanism

has brought about sound financial performance in Nigerian banks.

The few studies on bank corporate governance normally focused on a single aspect of

governance, such as the role of directors or that of shareholders while omitting other factors

and interactions that may be important within the governance framework. Feasible among

few studies is the one by Adams and Mehran (2000) for a sample of US companies, where

they examined the effect of the board size and proportion of non-executive directors is no

guarantee that they will be active and work collectively as a team without any selfish interest.

What are the criteria for the appointment and are they are of standard? are they examined and

evaluated before being appointed by the shareholders for quality assurance purposes that they

will carry out their duty truthfully, there must be something that can drive them to do their

best to ensure sound financial performance and a standard that every one of them follows.

The purpose of the study is to determine the structural relationship between corporate

governance and financial performance. The study develops a model linking corporate

governance and financial performance then verifies it through structural equation modeling

based on partial least square.

1.2- Statement of the Problem

Although the concept of corporate governance has in recent years become a prioritized policy

agenda in financial institutions of many developing countries, the promises of practicing this

concept, such as improved banks financial performance does not appear to adequately

manifest itself in the Nigerian banking sector, as evidenced by an alarmingly expanding

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number of banks that are either performing dismally or have completed failed in the past two

decades. The period ranging from 1984 to 2010 witnessed the failure of no less than 22 banks

(Upadhyaya, 2011). This poor performance as identified by a number of empirical

investigations points a finger at poor corporate governance practices. It is therefore clear that

unless the practice of corporate governance vis-à-vis firm performance is well researched and

emerging problems addressed, more bank failures are likely to occur. Bank failures or

closures can have a wide ranging impact on the socio-economic well-being of the country

including loss of client deposits, loss of jobs, reduced contribution to GDP, and general loss

of public confidence in the banking system. Therefore when the status of performance in the

Nigerian banking sector in the past two decades is critically analyzed, it can be argued that

even though there is awareness and existence of corporate governance mechanisms, there is

need to empirically review and strengthen the practices. This argument may be reinforced by

the fact that we cannot overemphasize the importance of a healthy financial sector’s role in

driving Nigerias economic growth. Whereas a small number of recent researches carried out

in Nigeria have also investigated aspects of the relationships between corporate governance

and banks financial performance, their findings have been inconclusive or even contradictory.

This study attempts to establish the effect of corporate governance on banks financial

performance listed in theNigerian stock exchang (NSE )by measuring corporate governance

using the following variables (1) board size; (2) board ownership; (3) board gender diversity

(4) board meeting. In addition, a firm’s performance is measured by the return on capital

employed, known as the ROCE ratio.

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1.3- Objectives of the Study

The main objective of this study is to evaluate the impact of corporate governance on

financial performance of listed banks in the banking sector in Nigeria. However the specific

objectives are;

1. To examine the impact of board ownership on financial performance of listed bank in

Nigeria.

2. To investigate the effect of board size on financial performance of listed bank in

Nigeria.

3. To evaluate the impact of board gender diversity on financial performance of listed

bank in Nigeria.

4. To appraise the effect of board meeting on financial performance of listed bank in

Nigeria.

1.4- Research Question

1. To what extent does board ownership impact on financial performance of listed bank

in Nigeria?

2. To what extent does board size affect the financial performance of listed banks in

Nigeria?

3. How does board gender diversity impact the financial performance of listed banks in

Nigeria?

4. To what extent does board meeting affect the financial performance of listed banks in

Nigeria?

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1.5- Research Hypotheses

1. Ho1- Board ownership has no significant impact on financial performance of listed

banks in Nigeria.

2. Ho2- Board size has no significant effect on financial performance of listed banks in

Nigeria.

3. Ho3- Board gender diversity has no significant impact on financial performance of

listed banks in Nigeria.

4. Ho4- Board meeting has no significant effect on financial performance of listed banks

in Nigeria.

1.6- Significance of the Study

The study will be of significance to the financial performance of banks in Nigeria in making

informed decisions. It will also be significant to researchers and academicians for future

references during research. Also scholars will be interested in the findings from the study.

Lastly the government and policy makers will find the study useful for decision making. We

find that governance ratings have positive and significant impact on corporate financial

performance. But like any other research, the present study is also subject to certain

limitations, which should be considered while using the results of this study and future

researchers.

All levels of managers: The findings and recommendations in this study would be useful to

all levels of managers in the various corporate organizations to better manage their firms by

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providing good corporate governance factors that they need to adopt in their organizations.

The findings will be a guide in setting up corporate governance systems within the banking

sectors for better financial performance. The academicians and students of, Finance,

Economics, Management, Marketing, HRD and Organizational Development will find this

study thought provoking for further research in this area. Through the resultant interaction

between the researcher and the respondents, the researcher’s knowledge, skills and

understanding of research may improve.

1.7- Scope of the Study

The study covers the performance of banking financial sector in Nigeria and it covers the

period of 2011-2020.Many researchers have studied the impact of corporate governance in

different sectors of the economy. There is a significant impact of corporate governance on

firm performance of bank in Nigeria. This study analyses the impact of Corporate

Governance (CG) elements that include board composition on the financial performances of

the financial institutions listed on Nigerians stock exchange. (CSE) this study regarded as

necessary in reducing the risk for investors and improving performance. Precisely, this study

investigates the relationship between corporate governance inthe board of directors and the

financial performance of Nigerian banks. Three board attributes (board independence, board

meetings and board gender) were used as proxies of the independent variables while ROA

was chosen as a measure of performance. Furthermore, the research made use of secondary

data obtained from the annual reports of fifteen (15) banks listed in the Nigeria Stock-

banking industry.

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1.8-Limitation of the Study

This study investigates the effect of corporate governance and financial performance banks

listed at the NSE. Corporate governance is the independent variable while financial

performance is the dependent variable. The size and age of the firm are the control variables.

The rationale for using commercial banks listed at the NSE is due to the fact that they are

public companies whose data is easily accessible as it is a statutory requirement for publicly

listed firm to publish this information. The study was carried out in Nigeria at the head

offices of the listed selected banks. This due their proximity to Nigeria and also the fact most

of the information required being strategic in nature can only be located at the head offices.

The study focused on the period 2012-2016 since a period of 6 years is enough to give a

reliable trend.

1.9-Operational Definition of Terms

Return on Capital Employed: Return on capital employed (ROCE) is a measure of how

profitable a business is due to combination of the shareholders’ fund and debt capital. ROCE

provides the boss, customer, or analyst an understanding of how effective the management of

a business is to use its properties to earn income. The return on investment is seen as a

percentage.

Central Bank of Nigeria: The Central Bank of Nigeria (CBN) was founded by the CBN Act

of 1958 and started operations on 1 July 1959 as the central bank and apex monetary

authority of Nigeria. The CBN Act was amended in 1991, 1993, 1997, 1998, 1999 and 2007.

As specified in the CBN Act, the key regulatory objectives of the bank are: to preserve the

country's external reserves, to foster monetary stability and a stable financial climate, and to

act as a last resort banker and financial advisor to the federal government.

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Profitability: Profitability is a company's willingness to use its services to produce income

that covers its costs. In other words, this is the potential of a company to produce income

from its activities. One of four building blocks for evaluating financial statements and

business results as a whole is profitability. Effectiveness, solvency, and business

opportunities are the remaining three. These key principles are used by customers, creditors,

and administrators to assess how good a corporation is performing and the possible success it

might have if operations were better handled.

Total Assets: Total assets are the representation of the worth of everything a person owns

after considering all assets and liabilities. An asset is anything that a person or organization

owns, such as a car or a share. Individuals or organizations purchase an asset because it has

the potential to increase in value in the future. Companies sometimes acquire assets, such as

new equipment or real estate, with the intention of using those assets to increase their cash

flow.

Profit after Tax: Profit after tax (PAT) can be termed as the net profit available for the

shareholders after paying all the expenses and taxes by the business unit. The business unit

can be any type, such as private limited, public limited, government-owned, privately-owned

company, etc. Tax is an integral part of an ongoing business. After paying all the operating

expenses, non-operating expenses, interest on a loan, etc., the business is left out with several

profits, which is known as profit before tax or PBT. After that, the tax is calculated on the

available profit. After deducting the taxation amount, the business derives its net profit or

profit after tax (PAT).

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 CHAPTER TWO

LITERATURE REVIEW

2.0 Preamble

This section consists of conceptual, theoretical and empirical reviews. Concepts reviewed

include corporate governance, board composition, board size and firm performance. The

theories reviewed include agency theory, stakeholders’ theory, shareholders’ theory, resource

dependency theory, transactional cost theory and stewardship theory. Relevant previous

empirical studies were also reviewed.

2.1 Conceptual Review

This chapter discusses the existing theoretical and empirical literature on corporate

governance. This study focused on corporate governance and performance of selected

Nigerian banks firms from 2012 to 2016. Specifically, the study focused on the effect of

board size, activism and committee activism on return on asset and firm growth rate.

Secondary data collected from four multinational firms were analyzed via static panel

estimation techniques. While board size and board activism exerted significant negative

impact on return on asset, committee activism exerted insignificant impact. The results of the

study further showed that board size and board activism exert insignificant negative impact

on firm’s growth rate, while committee activism insignificantly spurs firm’s growth rate.

Decisively, discoveries from this study reflect that corporate governance has significant

negative impact on return on asset, but has insignificant influence on the growth rate of

Nigerian multinational firms. Based on these findings, the authors recommended that

corporate governance dynamics in firms world over should be reconsidered, such that it gives

credence to more than just numbers of persons or meetings held, but the main reasons and

deliberations in such meetings. It was also recommended that excessive increase in

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magnitude or frequency of meetings held by board of directors cum committee should be

avoided.

2.1.1 Corporate Governance

The term Corporate Governance refers to the rules, processes or laws by which institutions

are operated, regulated and governed. It is developed with the primary purpose of promoting

a transparent and efficient banking system that will engender the rule of law and encourage

division of responsibilities in a professional and objective manner. Effective corporate

governance practices provides a structure that works for the benefit of stakeholders by

ensuring that the enterprise adheres to accepted ethical standards and best practices as well as

formal laws (CBN, 2014). In the context of this research, it refers to rules and regulations that

guide the organization.

2.1.2-Board Composition

Board composition refers to the number of independent non-executive directors on the board

relative to the total number of directors and it is measured by the percentage of outside

directors(non-executive directors) on the board members. (Ahmed,2011). An independent

non-executive director is defined as an independent director who has no affiliation with the

firm except for their directorship (Clifford & Evans, 1997). There is an apparent presumption

that boards with significant outside directors will make different and perhaps better decisions

than boards dominated by insiders. Fama & Jensen, 1983 (as cited in Bansal & Sharma,

2016) suggest that non-executive directors can play an important role in the effective

resolution of agency problems and their presence on the board. Can lead to more effective

decision-making, hence improved firm performance. Bocean, 2001, (as cited in Mirza &

Javed, 2013) gave five principles of corporate governance:

i.. Protection of shareholders’ rights

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ii. Equitable treatment of shareholders

iii. Protection of stakeholders’ rights

iv. Proper disclosure and transparency

v. Fulfillment of responsibilities by board

2.1.3 Board size (BDS)

This is the total number of directors sitting on the board of. Particular bank which in line with

the code of corporate governance should not be more than 20. Board size refers to the number

of people on the board- executive or non- executive directors. The Central Bank of Nigeria’s

Code of Corporate Governance for Banks and Discount Houses in Nigeria (2014)

recommends that the number of non-executive directors should be more than that of

executive directors subject to a maximum board size of 20 directors. This is considered to be

a crucial characteristic of the board structure. Large boards could provide the diversity that

would help companies to secure critical resources and reduce environmental uncertainties.

Olayinka (2010) opines that this positively affects performance by reducing high earnings

management, restatements and fraud. Fama & Jensen, 1983 (as cited in Bandsal & Sharma,

2016) argue that. the increase in the number of the members of the board slows down the

decision-making processes of the firm, causing the board to pass off the problems, thus,

leading to a decrease firm value and effectiveness. Lipton and Lorsch (1992) suggested that

as size of the board grows, the decision-making processes will slow down and this will cause

communication problems and impacts the firm’s performance negatively. Board Size and

Composition as prescribed by CBN, 2014:

a. The size of the Board of any bank or discount house shall be limited a minimum of five (5)

and a maximum of twenty (20).

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b. Members of the Board shall be qualified persons of proven integrity and shall be

knowledgeable in business and financial matters, in accordance with the extant CBN

Guidelines on Fit and Proper Persons Regime.

c. The Board shall consist of Executive and Non-Executive Directors. The number of Non-

Executive Directors shall be more than that of Executive Directors.

2.1.4 Firm Financial Performance

Firm financial performance is a subjective measure of how well a firm can use assets from its

primary mode of business and generate revenues. This term is also used as a general measure

of a firm's overall financial health over a given period of time, and can be used to compare

similar firms across the same industry or to compare industries or sectors in aggregation.

George and Karibo (2014) defined it as the success in meeting pre-defined objectives, targets

and goal within a specified time target. Some of the aspects that must be considered when

attempting to define performance are: time frame and its reference point. It is possible to

differentiate between past and future performance. And it has been shown that past superior

performance does not guarantee that it will remain superior in the future (Santos & Brito,

2012).

Santos and Brito (2012) identified the Superior financial performance, which can be

represented by profitability, growth and market value, underpins corporate governance

practice in organizations. Profitability is a measure of a firm’s past ability to generate returns

while growth demonstrates a firm’s past ability to increase its size. Increasing size, even at

the same profitability level, will increase its absolute profit and cash generation. This,

according to their research, goes to show that larger firm size can bring economies of scale

and market power, leading to enhanced future profitability. Market value, on the other hand,

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 represents the external assessment and expectation of firms’ future performance, which must

have a correlation with historical profitability and growth levels, while incorporating future

expectations of market changes and competitive moves. The non-financial performance

facets are: Customers’ Satisfaction, Employees’ Satisfaction, Environmental Performance

and Social Performance. But the study focuses on Financial Performance aspect

(profitability).

Figure 1: Conceptual Framework

Corporate-Governance
Financial-Performance
 Board Size
-Return on capital
 Board ownership employed

 Board gender diversity (Dependent Variable)

Board meeting

(Independent variables)

Source: Researcher’s Design (2022)

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2.2- Theoretical Review

Experts in corporate governance have identified the agency theory, stakeholders’ theory,

institutional theory, stewardship theory and shareholders theory. These are prominent theory.

The following theories of corporate govern which are discussed below.

2.2.1-Agency theory

Agency theory was developed by Jensen and Meckling(1976). They suggested a theory of

how the governance of a company is based on conflict of interest between the company's

owners (shareholders), managers and major provider. According to Egbunike and Abiahu

(2017), "Agency theory has been widely used in literature to investigate the information

asymmetry between principals (shareholders) and agent (management)". The advent of

Modern Corporation created a separation between ownership and control of wealth (Berle &

Means, 1932). This is because as firms grow beyond the means of a single owner, who may

be incapable of meeting the rapidly increasing obligations of the firm, there is the tendency

that the ownership structure of the business will grow also with the attraction of new

investors. As the firm continues to grow, the owners of the enterprise employ some

professional executives to help them run the enterprise efficiently on a day to day basis. This

arrangement creates a relationship in which the owners of the business become the principals

and the executives, whom they contracted to help manage their firms, the agents.

Agency theory argues that as firms grow in size the shareholders (principals) lose effective

control, leaving professional managers (agents), have more information than principals to

manage the affairs of the business. Often times, this transfer of firm‘s control from principals

to agents, creates a moral hazard which results in a situation where, to maximize their own

15
wealth; agents may face the dilemma of acting against the interests of their principals. So,

principals do not have access to all available information at the time a decision is being made

by an agent, they are unable to determine whether the agent’s actions are in the best interest

of the firm (Jensen and Meckling (1976). When the interests and utility functions of the self-

serving agents coincide with those of the principals, agency problem will not exist. However,

when there is divergence, agency costs are incurred by the principals because the agents will

want to maximize theirown utility at the expense of the principals.

2.2.2-Stakeholders’ Theory

In 1984, R. Edward Freeman originally detailed the Stakeholder Theory of organizational

management and business ethics that addresses morals and values in managing an

organization. The stakeholders’ theory was adopted to fill the observed gap created by

omission found in the agency theory which identifies shareholders as the only interest group

of a corporate entity. Within the framework of the stakeholders’ theory, the problem of

agency has been widened to include multiple principals (Sand, Garba & Mikailu, 2005). The

stakeholders’ theory provides that the firm is a system of stakeholders operating within the

larger system of the host society that provides the necessary legal and market infrastructure

for the firm's activities. (Aminu, Aisha & Mohammad, 2015). The stakeholders’ theory

attempts to address the questions of which group of stakeholders deserve the attention of

management. The stakeholders’ theory proposes that companies have a social responsibility

that requires them to consider the interest of all parties affected by their actions. The original

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proponent of the stakeholders’ theory suggested a re-structuring of the theoretical

perspectives that extends beyond the owner- manager-employee position and recognizes the

numerous interest groups. Freeman, Wicks & Parmar (2004), suggested that: “If

organizations want to be effective, they will pay attention to all and only those relationships

that can affect or be affected by the achievement of the organizations purpose.

2.2.3-Shareholders Theory

The “shareholder theory,” posited in the early 20th century by economist Milton Friedman,

says that a company is beholden only to shareholders - that is, the company must make a

profit for its shareholders

Shareholder value theory is the dominant economic theory in use by business. Maximizing

shareholder wealth as the purpose of the firm is established in our laws, economic and

financial theory, management practices, and language. Business schools hold shareholder

value theory as a central tenet. Nobel Laureate Milton Friedman (1970) strongly argues in

favor of maximizing financial return for shareholders. His capitalistic perspective clearly

considers the firm as owned by and operated for the benefit of the shareholders. He says

‘there is one and only one social responsibility of business - to use its resources and engage in

activities designed to increase its profits so long as it stays within the rules of the game,

17
which is to say, engages in open and free competition without deception or fraud. Friedman’s

statements reflect three fundamental assumptions that lend support to the shareholder view of

the firm. The first is that the human, social, and environmental costs of doing business should

be internalized only to the extent required by law. All other costs should be externalized. The

second is that self-interest as the prime human motivator. As such, people and organizations

should and will act rationally in their own self-interest to maximize efficiency and value for

society. The third is that the firm is

fundamentally a nexus of contracts with primacy going to those contracts that have the

greatest impact on the profitability of the firm. M Having reviewed the above theories, this

study is anchored onmshareholders theory, because the goal of the firm is to use its resources

and engage in activities designed to increase its profits.

2.2.4-Stewardship Theory

Stewardship Theory, developed by Donaldson and Davis (1991 & 1993) is a new perspective

to understand the existing relationships between ownership and management of the company.

This theory arises as an important counterweight to Agency Theory

While profit drives any business, some companies may consider themselves part of

something bigger. Stewardship theory holds that ownership doesn’t really own a company;

it’s merely holding it in trust.

The operation may be a vehicle for a higher calling or designed to honor a founder’s initial

vision, so making a profit often takes a back seat to meeting a company’s social standards

The steward theory states that a steward protects and maximises shareholders wealth through

firm Performance. Stewards are company executives and managers working for the

18
shareholders, protects and make profits for the shareholders. The stewards are satisfied and

motivated when organizational success is attained. It stresses on the position of employees or

executives to act more autonomously so that the shareholders’ returns are maximized. The

employees take ownership of their jobs and work at them diligently.

2.2.5-Resource Dependency Theory

Pfeffer and Salancik (1978) devised the resource dependence theory to explain how

organisations' behaviour is affected by the external resources they possess. They propose that

firms change, as well as negotiate with, their external environment in order to secure access

to the resources which they need to survive.

The Resource Dependency Theory focuses on the role of board directors in providing access

to resources needed by the firm. It states that directors play an important role in providing or

securing essential resources to an organization through their linkages to the external

environment. The provision of resources enhances organizational functioning, firm’s

performance and its survival. The directors bring resources to the firm, such as information,

skills, access to key constituents such as suppliers, buyers, public policy makers, social

groups as well as legitimacy. Directors can be classified into four categories of insiders,

business experts, support specialists and community influentials.

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2.2.6-Transaction Cost Theory

Transaction cost theory states that a company has number of contracts within the company

itself or with market through which it creates value for the company. There is cost associated

with each contract with external party; such cost is called transaction cost. If transaction cost

of using the market is higher, the company would undertake that transaction itself. However,

agency theory was explored to carry out the study because the corporate governance variables

were derived from it.

2.3 Empirical Review

Empirical studies on the nexus between corporate governance and financial performance

among DMBs cut across various jurisdictions. From Nigeria, Olayinka, (2010) investigated

the impact of board structure on corporate financial performance among some selected listed

DMBs. This study examines the impact of board structure on corporate financial performance

in Nigeria. It investigates the composition of boards of directors in Nigerian firms and

analyses whether board structure has an impact on financial performance, as measured by

return on equity (ROE) and return on capital employed (ROCE). Based on the extensive

literature, four board characteristics (board composition, board size, board ownership and

CEO duality) have been identified as possibly having an impact on corporate financial

performance and these characteristics are set as the independent variables. The Ordinary

Least Squares (OLS) regression was used to estimate the relationship between corporate

performance measures and the independent variables. Findings from the study showed that

there is strong positive association between board size and corporate financial performance.

Evidence also exists that there is a positive association between outside directors sitting on

the board and corporate financial performance. However, a negative association was

observed between directors’ stockholding and firm financial performance measures. In

20
addition, the study reveals a negative association between ROE and CEO duality, while a

strong positive association was observed between ROCE and CEO duality.

In another study, carried out by Akingunola, Adekunle and Adedipe (2013) on Corporate

Governance And Bank’s Performance in Nigeria (Post – Bank’s Consolidation), they

considered estimated models. Binary probit was adopted to test the covariance matrix

computed on structured questionnaire to bank’s clients and it was discovered that the

variables such as independence, reliance, and fairness helps in the effective performance of

banks but the major significant ones in this consolidation period are accountability and

transparency of bank’s staff. Also, least square regression analysis was adopted to convey the

relationship between bank deposits and bank credit. The estimation of the developed model

was found that banks total credit was positively related but not significantly determinant

factors of bank’s performance, and bank deposit was found to be positively related to bank

performance.

In a related research conducted by George and Karibo (2014) on Corporate Governance

Mechanisms and Financial Performance of Listed Firms in Nigeria: A Content Analysis, the

study adopted a content analytical approach to obtain data through the corporate website of

the respective firms and website of the Securities and Exchange Commission. A total of 33

firms were selected for the study cutting across three sectors: manufacturing, financial and oil

and gas. The result of the study showed that most of the corporate governance items were

disclosed by the case study firms. The result also showed that the banking sector has the

highest level of corporate governance disclosure compared to the other two sectors. The

result thus indicates that the nature of control over the sector have an impact on companies’

decision to disclose online information about their corporate governance in Nigeria; and that

21
there were no significant differences among firms with low corporate governance quotient

and those with higher corporate governance in terms of their financial performance.

Kajola (2008) investigated the relationship between indicators of corporate governance

(board size, board composition, chief executive status and audit committee) and performance

which are proxied with return on equity and profit margin. He sampled 20 Nigerian listed

firms from periods 2000 to 2006 and adopted panel data methodology and OLS to analyse.

Results found proved a positive significant relationship between ROE and board size and

chief executive status; positive relationship between profit margin and chief executive status;

and insignificant relationship between the two performance ratio, board composition and

audit committee. Utilizing the regression method, Ammar et al (2013) from a sample of 22

banksin the Nigerian Stock Exchange (NSE) for periods 2012 to 2016 gathered that there

exist a positive association between board size and firm performance while a negative

relationship existed between nonexecutive directors’ percentage, chief executive officer

duality and performance. Osundina et al (2016) studied the relationship between corporate

governance measured by board structure index, ownership structure index and audit

committee index and performance measured by ROA of selected banks. The study adopted

ex-post facto research design and 6 sampled banks were investigated from period 2012- 2016.

Results indicated that board.

Musa (2020) investigated the relationship between corporate governance and the financial

performance of Nigerian banks. The independent variables of the study include board

independence, board meetings and board gender while the dependent variable is return on

assets (ROA). Furthermore, the research made use of secondary data obtained from the

annual reports of fifteen (15) banks listed in the Nigeria Stock Exchange for the year 2013 to

2015. This study utilized a panel data technique on 15 banks with 45 firm-year observations.

22
The random effect model was used to examine the effect of the predictors on financial

performance. The results indicated that the relationship between board independence and

ROA is negatively insignificant. Board meeting and ROA were found to be negatively

significant. However, the relationship between board genders, board size and ROA were

negatively insignificant. While the relationship between firm size and ROA is positively

significant. For bank age and ROA, the relationship was found as negatively significant. This

study provides a guide for regulators and the Nigerian banking industry.

Rahmadanti, Wahyudi and Farhan (2022) evaluated the effect of ISR disclosure and good

corporate governance (GCG) on financial performance as well as the effect of ISR disclosure

on financial performance with firm size as a moderating variable, and the effect of GCG on

financial performance with firm size as a moderating variable. The population used in this

study consists of 14 BUS in Indonesia in a period of 5 consecutive years in the 2016-2020

period while the sample in this study was 11 BUS in Indonesia for the period 2016-2020. The

study explored quantitative research design. The data used in this study were obtained from

the annual reports of Syariah banks in Indonesia for 2016-2020 through the OJK. The study

used time series data covering 2016-2020 and cross sectional data consisting of 11 BUS. The

results of this study indicate that the ISR disclosure variable has a positive and insignificant

effect on Financial Performance which is measured using ROA, the GCG variable has a

significant and negative effect on financial performance, firm size as a moderating variable

on the relationship between ISR disclosure and financial performance has a significant and

positive effect, firm size as a moderating variable on the relationship between GCG

disclosure and financial performance has no significant and negative effect.

Abu, Okpeh and Okpe (2016) investigated the influence of board characteristics on the

financial performance of listed deposit money banks in Nigeria for the period of 2005-2014.

23
The total number of listed deposit money banks as at 31st December, 2014 are seventeen (17)

out of which a sample of fifteen (15) were used for the study. The study categorically seeks to

examine whether board characteristics (proxy by executive director, independent director,

grey director, women director and foreign director) has any influence on the Performance of

listed Deposit Money Banks in Nigeria. The study adopted multiple regression technique as a

tool of analysis and data were collected from secondary source through the annual reports and

accounts of the sampled banks. The findings show that foreign director is significantly and

positively correlated or influenced the performance of deposit money bank, while the grey

director have negative significant effect on the performance of deposit money banks in

Nigeria. Other variables such as executive director, independent non-executive director and

women director have no significant impact on banks performance in Nigeria. Therefore, the

study among others recommended that the management of deposit money banks in Nigeria

should increase the number of foreign directors on board to a certain number as they have

skills, expertise, experience and would like to protect their integrity, reputation and

professional competence with creativity and innovation to manage the relationship between

the boards and stakeholders leading to an improvement in the bank financial performance.

Similarly, the study recommended that the number of grey directors on board should be

reduced to an average of three (3) or four (4) as the case may be in order to overcome its

negative effect on performance.

Abubakar, Sulaiman and Haruna (2018) examined the Effect of Firms Characteristics and

Financial Performance of Listed Insurance Companies in Nigeria. The data for the study were

collected from the annual reports and accounts of Insurance companies quoted in the Nigeria

Stock Exchange (NSE) within the period of 2007 and 2016. Robust regression analysis was

used to test the hypothesis in addition to some diagnostic tests conducted on the data. The

results of the study revealed that liquidity and Age have significant negative impact on
24
financial performance of insurance companies in Nigeria. The study recommends that

companies are to convert significant part of their cash and cash equivalent into productive

assets that can improve their financial performance.

Agyei-Mensah (2018) investigated selected corporate governance attributes and financial

reporting lag and their impact on financial performance of listed firms in Ghana. The study

uses 90 firm-year data for the period 2012–2014 for firms listed on the GSE. Each annual

report was individually examined and coded to obtain the financial reporting lag. Descriptive

analysis was performed to provide the background statistics of the variables examined. This

was followed by regression analysis, which forms the main data analysis. The descriptive

statistics indicate that over the three years, the mean value of timeliness of financial reporting

(ARL) is 86 days (SD 21 days), minimum is 55 days and maximum is 173 days. The

regression analysis results indicate that financial reporting lag has a negative statistically

significant relationship with firm performance. This negative sign indicates that when

financial performances of companies are high (good news), companies have the tendency to

disclose this situation early to the public. Firms that are not timely in the financial reporting

practices will find it difficult to attract capital as the delay will affect their reputation.

Oyedokun (2019) examined the effect of board characteristics on financial Performance of

quoted commercial banks in Nigeria for the period 2013-2017. Ex-post Facto research design

was adopted. Board characteristics used include size, independence, gender diversity and

board meeting. Data were extracted from the annual reports of the quoted commercial banks.

Multiple panel regression analysis was used to analyse the data. The result shows that board

characteristics have a significant effect on the financial performance of quoted commercial

banks in Nigeria. Specifically, Board gender diversity hasa significant positive effect, and

board meetings have a significant negative effect on board characteristic while board size
25
hasan insignificant negative effect on financial Performance while board independence hasan

insignificant negative effect on financial Performance. Based on the findings, This study,

recommends that, the regulators of commercial banks in Nigeria should increase surveillance

and supervision to ensure proper overall risk management that could safeguard the interest of

all stakeholders and the reputations of the banks, The regulators and the management of the

commercial banks in Nigeria should emphasize the optimal size of the board and board of

directors should have composed of more independent/non-executive directors who are

experts in the financial services industry to bring more independent and expert-based

judgments and opinions with regard to risk management and the overall performance of the

banks.

Aminu, Aisha and Muhammad (2015) analyzed the effects of board size and board

composition on the performance of Nigerian banks. The financial statements of five banks

were used as a sample for the period of nine years and the data collected were analysed using

the multivariate regression analysis. The paper found that board size has significant negative

impact on the performance of banks in Nigeria. This signifies that an increase in Board size

would lead to a decrease in ROE and ROA. On the other hand, board composition has a

significant positive effect on the performance of banks in Nigeria. This signifies that an

increase in Board composition would lead to a decrease in ROE and ROA. It is recommended

that banks should have adequate board size to the scale and complexity of the organisation’s

operations and be composed in such a way as to ensure diversity of experience without

compromising independence, compatibility, integrity and availability of members to attend

meetings. The board size should not be too large and must be made up of qualified

professionals who are conversant with oversight function. The Board should comprise of a

mix of executive and non-executive directors, headed by a Chairman.

26
 CHAPTER THREE

METHODOLOGY

3.0 Preamble

The study was quantitative in nature. The population for this study includes companies listed

on the Nigerian Stock Exchange. Purposive sampling technique was adopted to select (22)

banks listed on the Nigerian Stock Exchange market. This was due to the fact that data

needed were not sufficient in the annual reports of all the listed banks, hence the use of the

six (6)selected banks in Nigeria. Below are the 6 selected banks;

S/N BANKS Year of Listing

1 Guaranty trust bank PLC 1996

2 First Bank PLC 1971

3 United Bank of Africa PLC 1970

4 Diamond Bank PLC 2005

5 Access Bank PLC 1998

6 Union Bank PLC 1970

Source: Researcher’s Design (2022)

3.1 Research Design

The research design adopted for this study is ex-post facto research design using panel of data

for the period under study (2012-2016). The choice of this design was chosen because the

27
researchers are reporting what is already in existence (that is published financial statements),

which provides basis for full establishment of banks in Nigeria.

3.2 Population of the Study

The population of the study consists of all listed money deposit in banks whose shares are

quoted on the Nigeria Stock Exchange. We have 22 banks but we are restricted to using 10

selected banks in Nigeria Therefore, the population size is 22 banks. The data for this study

are limited to the financial statement of listed banks whose annual reports are available on

Nigeria Stock Exchange (NSE) under the period of study (2011-2020). These periods are

chosen base on the availability of data.

3.3 Sampling and Sampling Technique

This study employed purposive or judgmental sampling technique to select twelve (12)

commercial banks out of twenty two (22) banks operating currently in Nigeria. This selection

is base only on banks whose shares are quoted on the floor of the Nigeria Stock Exchange

(NSE) and whose financial statements are available. The technique is well suited for

determining the sample as it provides an equal probability of selection and as such minimizes

selection bias. The sample size is twelve (12) selected banks out of the population of twenty

two deposit money banks in Nigeria, using a period of ten years in the financial report, 2011-

2020. The sampling technique is based on judgemental sampling technique. The research

used only secondary data that were extracted from the annual reports and statement of

account (statement of comprehensive income and statement of financial position) of selected

banks in Nigeria.

28
3.4 Method of Data collection

The population of this study consists of the top 22 registered deposit money banks in Nigeria

based on their total assets. Their cumulative assets were compared using the newly uploaded

accounts on their official websites. The research will span a period of 10 years from 2011 to

2020. For the study, a total of 120 observations from 12 deposit money banks chosen for 10

years from 2011 to 2020 will be used. Secondary source of data was used for this research.

The data were collected from financial statements of the twelve (12) deposit money banks

selected from the Nigerian Stock Exchange listing for the period of ten (2011-2020) financial

years.

3.5 Model Specification

A multiple regression model was developed for this study. The model was adapted from the

study of Osundina et al (2016) by replacing return on assets with return on equity employed.

It is presented below:

FPF = β + β BDO +β BDS + β BDG + β BDM + ε (1)

Where:

FPF = Financial performance

BDO = Board ownership

BDS = Board size

BDG = Board gender

BDM = Board meeting

β0 = Intercept

29
β1, β2, β3 and β4 = Regression coeeficients

ε = Error term

3.6 Measurement of Variables

The dependent variable of this study is firm performance. It was measured by return on

capital employed (ROCE). The independent variables of this study include board ownership,

board size, board gender diversity and board meeting. The measurement of variables is

presented in Table 3.1 below.

Table 3.1: Measurement of Variables

SN Variable Nature Notation Measurement Authority

1 Financial Performance Dependent ROCE % of PAT to Olayinka

Capital (2010)

Employed

2 Board ownership Independent BDO % of shares of Osundina et

the directors al (2016)

to the total

share capital

3 Board size Independent BDS Number of Amar et al

directors on (2013)

the board

4 Board gender diversity Independent BDG % of female

to total

30
 number of

directors

5 Board meeting Independent BDM Number of

board meeting

in a year

Source: Researcher’s Design (2022)

3.6 Method of Data Analysis

The data generated for this study were analysed using the application software, SPSS Version

22. Descriptive statistics in a tabular form which included mean and standard deviation were

used to describe the variables of the study. Inferential statistics explored include correlation

analysis which was employed to answer the research questions and multiple regression

analysis which was used to test the hypotheses of the study.

31
 CHAPTER FOUR

PRESENTATION OF RESULTS AND DATA ANALYSIS

4.0 Preamble

The current chapter mainly focused on the analysis of the data collected from the field and

interpretation of the results obtained from the statistical analyses. The chapter covers

descriptive analysis, answers to the research questions and test of the hypotheses of the study.

4.1 Descriptive Statistics

The descriptive statistics involved computation of means and standard deviations for the all

the variables of the study. The descriptive statistics are presented in Table 4.1 below. The

mean score obtained for financial performance is very low (Mean = 5.43%, Min = -57.30%,

Max = 48.08%, SD = 10.47634). In other words, a mean of 5.43% was obtained for return on

capital employed which was used as a proxy for firm performance in this study. This value

suggests that the profitability of an average company in the sector sampled for this study is

very low. The mean score obtained for board ownership revealed that board shareholding is

moderate, being above 10% and below 50% (Mean = 10.47%, Min = 0.00, Max = 101.98, SD

= 17.42769). This outcome implies that the board of directors hold significant shareholding

interest in an average DMB sampled for this study.

32
Table 4.1: Descriptive Statistics

N Minimum Maximum Mean Std. Deviation

FPF 120 -57.30 48.09 5.4278 10.47634

BDO 120 .00 101.98 10.4732 17.42769

BDS 120 6.00 21.00 13.8167 3.18606

BDG 120 .00 45.45 18.0723 10.55616

BDM 120 2.00 16.00 5.9667 2.23394

Valid N
120
(listwise)

Source: Researcher’s Computation (2022)

The mean score obtained for board size is moderate (Mean = 14, Min = 6, Max = 21, SD =

3.18606). The board of an average DMB sampled for this study is in line with the

requirements of the Code of Corporate Governance 2018, formulated by the Financial

Reporting Council of Nigeria which specified a minimum of six directors and a maximum of

15 directors for effective board deliberations. This finding signifies that the board decisions

are likely to be of high quality since the decisions can be reached on time from a wide variety

of board diversity already accommodated on the board due to a moderate board size. The

mean score obtained for interest coverage ratio is about 10 times (Mean = 9.83, Min = -13.03,

Max = 662, SD = 66.11131). This value signifies that an average company in the sector

sampled can pay their interest 10 times from their profit. This result suggests that an average

company sampled in that sector is credit worthy.

4.2 Research Questions

Four research questions were asked in this study. The questions link corporate profitability

with the four proxies of capital structure investigated in this study. Therefore, correlation
33
analysis was used to answer the research questions. The outcomes of this statistical analysis

are presented in the following sub-sections.

4.2.1 Research Question One

The first research question focuses on the extent to which board ownership impact on

financial performance of listed bank in Nigeria. Table 4.2 contains the correlation result on

the relationship between board ownership and financial performance of listed bank in

Nigeria. The correlation results reveals that a negative and significant relationship exists

between board ownership and financial performance (r = -0.210, Sig. = 0.021). This result

suggests that board ownership may not have significant impact on financial performance of

listed oil and gas companies in Nigeria.

Table 4.2: Correlation Result (Research

Question One)
FPF BDO
Pearson
1 -.210*
Correlation
FPF
Sig. (2-tailed) .021
N 120 120
Pearson
-.210* 1
Correlation
BDO
Sig. (2-tailed) .021
N 120 120
*. Correlation is significant at the 0.05 level (2-
tailed). Source: Researcher’s Computation
(2022)

34
4.2.2 Research Question Two

The second research question looks at the extent to which board size affect the financial

performance of listed banks in Nigeria. Table 4.3 contains the correlation result on the

relationship between board size and financial performance. The correlation result shows that

a negative but non-significant relationship exists between board size and financial

performance. (r = -0.008, Sig. = 0.935). This result signifies that board size may not have

significant effect on the financial performance of listed banks in Nigeria.

Table 4.3: Correlation Result (Research

Question Two)

FPF BDS

Pearson
1 -.008
Correlation
FPF
Sig. (2-tailed) .935

N 120 120

Pearson
-.008 1
Correlation
BDS
Sig. (2-tailed) .935

N 120 120

Source: Researcher’s Computation (2022)

4.2.3 Research Question Three

The third research question considers the impact of board gender diversity on the financial

performance of listed banks in Nigeria. Table 4.4 contains the correlation result on the

relationship between board gender diversity and financial performance. The correlation result

35
shows that a positive but non-significant relationship exists between board gender diversity

on the financial performance of listed banks in Nigeria. (r = 0.048, Sig. = 0.606). This result

suggests that board gender diversity may not have significant effect on the financial

performance of listed banks in Nigeria.

Table 4.4: Correlation Result (Research

Question Three)

FPF BDG

Pearson
1 .048
Correlation
FPF
Sig. (2-tailed) .606

N 120 120

Pearson
.048 1
Correlation
BDG
Sig. (2-tailed) .606

N 120 120

Source: Researcher’s Computation (2022)

4.2.4 Research Question Four

The fourth research question examines the extent to which board meeting affect the financial

performance of listed banks in Nigeria. The correlation result on the relationship between

board meeting and financial performance of listed banks in Nigeria is contained in Table 4.5

below. The correlation result indicates that a negative and significant relationship exists

between board meeting and financial performance. (r = -0.224, Sig. = 0.014). This result
36
suggests that board meeting has significant effect on financial performance of listed banks in

Nigeria.

Table 4.5: Correlation Result (Research

Question Four)

FPF BDM

Pearson
1 -.224*
Correlation
FPF
Sig. (2-tailed) .014

N 120 120

Pearson
-.224* 1
Correlation
BDM
Sig. (2-tailed) .014

N 120 120

*. Correlation is significant at the 0.05 level (2-

tailed).

Source: Researcher’s Computation (2022)

4.3 Test of Hypotheses

Four hypotheses were formulated for this study. Multiple regression analysis was explored to

test the hypotheses of the study. The results of the multiple regression analyses were

contained in Table 4.6 – Table 4.8. Table 4.6 contains the model summary. The model

summary reveals that a positive relationship exists between corporate governance

characteristics and financial performance of the sampled listed banks in Nigeria (r = 0.328).

The R square value obtained is very small (R square = 0.108). This outcome implies that only

10.8% of the variation in financial performance can be accounted for by the corporate
37
governance variables examined in this study. Therefore, more variables are needed to be able

to predict the profitability among the sampled companies.

Table 4.6: Model Summary

Mode R R Square Adjusted R Std. Error of

l Square the Estimate

1 .328 .108 .077 10.06621

a. Predictors: (Constant), BDM, BDG, BDO, BDS

Source: Researcher’s Computation (2022)

Table 4.7 contains the output of the analysis of variance (ANOVA). The F-Value obtained is

moderate and significant (F-Value = 3.474, Sig. = 0.010). This result implies that the model

is of good fit and can predict the variation in return on asset accurately.

Table 4.7: ANOVA

Model Sum of df Mean F Sig.

Squares Square

Regression 1407.906 4 351.976 3.474 .010

1 Residual 11652.780 115 101.329

Total 13060.686 119

a. Dependent Variable: FPF

b. Predictors: (Constant), BDM, BDG, BDO, BDS

Source: Researcher’s Computation (2022)

The multicolinearity statistics and the regression coefficients are contained in Table 4.11

below. The multicolinearity results show that all the tolerance values obtained for all the
38
independent variables are greater than 0.2 (Mernard, 1993) and all the variance inflation

factors (VIFs) obtained for all the independent variables are less than 10 (Belsley, 1991).

These outcomes suggest that there is no multicolinearity problem among the independent

variables of the study. Therefore, the results of the multiple regression results can be

interpreted with high level of confidence.

Hypothesis One

Hypothesis one states that board ownership has no significant impact on financial

performance of listed banks in Nigeria. The regression coefficient obtained is negative and

significant (Beta = -0.233, t-value = -2.608, Sig. = 0.010). This outcome suggests that board

ownership has a significant impact on return on financial performance. Therefore, the null

hypothesis was rejected and it could be concluded that board ownership had a significant

impact on financial performance of listed banks in Nigeria.

Hypothesis Two

Hypothesis two posits that board size has no significant effect on financial performance of

listed banks in Nigeria. The beta value obtained is positive but insignificant (Beta = 0.018, t-

value = 0.194, Sig. = 0.847). This outcome suggests that board size has no significant effect

on financial performance. Therefore, the null hypothesis was accepted and it could be

concluded that board size has no significant effect on financial performance of listed banks in

Nigeria.

39
 Coefficients

Model Unstandardized Standardized T Sig. Collinearity Statistics

Coefficients Coefficients

B Std. Beta Tolerance VIF

Error

(Constant) 12.663 4.763 2.658 .009

BDO -.140 .054 -.233 -2.608 .010 .970 1.031

1 BDS .058 .299 .018 .194 .847 .940 1.064

BDG .033 .088 .033 .373 .710 .984 1.017

BDM -1.200 .425 -.256 -2.824 .006 .945 1.058

a. Dependent Variable: FPF

Source: Researcher’s Computation (2022)

Hypothesis Three

Hypothesis three reads that board gender diversity has no significant impact on financial

performance of listed banks in Nigeria. The regression coefficient obtained is positive but

non-significant (Beta = 0.033, t-value = 0.373, Sig. = 0.710). This outcome suggests that

board gender diversity has no significant impact on financial performance. Therefore, the null

hypothesis was accepted and it could be concluded that board gender diversity has no

significant impact on financial performance of listed banks in Nigeria.

Hypothesis Four

Hypothesis four proposes that board meeting has no significant effect on financial

performance of listed banks in Nigeria. The beta value obtained is negative and significant

40
(Beta = -0.256, t-value = -2.824, Sig. = 0.006). This outcome suggests that board meeting has

significant effect on financial performance. Therefore, the null hypothesis was rejected and it

could be concluded that board meeting has significant effect on financial performance of

listed banks in Nigeria.

4.4 Discussion of Results

The finding in relation to hypothesis one revealed that board ownership had a significant

negative impact on financial performance of listed banks in Nigeria. This finding is supported

by the study of Rahmadanti et al. (2022) which found that board ownership had significant

negative effect on financial performance. However, the study of Oyedokun (2019) which

established that board ownership had a significant positive effect on financial performance,

did not support this finding. Similarly, Abu et al. (2016) which found that foreign director

ownership had significant positive effect on financial performance of deposit money banks in

Nigeria, did not support the finding of this study.

Taking hypothesis two into consideration, this study established that board size has no

significant effect on financial performance of listed banks in Nigeria. This outcome derived

support from the study of Oyedokun (2019) which found that board size had an insignificant

negative effect on financial performance. Contrarily, this outcome was not supported by the

findings in the study of Musa (2020) which posited that a significant negative relationship

exists between board size and ROA. Also, the study of Rahmadanti et al. (2022) which found

that board size had significant negative effect on financial performance did not support the

outcome of this study. Furthermore, the study of Aminu et al. (2015) which observed that

board size had significant negative impact on the performance of banks in Nigeria did not

support the outcome of this study.

41
Moreover, concerning hypothesis three, this study found out that board gender diversity had

no significant impact on financial performance of listed banks in Nigeria. This result got

support from the study of Abu et al. (2016) which documented that women directorship had

no significant impact on banks performance in Nigeria but was not supported by the study of

Musa (2020) which found a significant negative relationship between board gender and ROA.

However, the study of Rahmadanti et al. (2022) which found that board gender had

significant negative effect on financial performance did not support this result. Also, the

study of Oyedokun (2019) which observed that board gender diversity had a significant

positive effect on financial Performance did not support the result of this study. Aminu et al.

(2015) that documented a significant positive effect of board composition on the performance

of banks in Nigeria did not align with the result of this study as well.

Nevertheless, in connection with hypothesis four, it was found out that board meeting had

significant effect on financial performance of listed banks in Nigeria. This outcome derived

support from the study of Musa (2020) which found a significant negative relationship

between board meeting and ROA. Further support was derived from the study of Rahmadanti

et al. (2022) which found that board meeting had significant negative effect on financial

performance. More support was obtained from the study of Oyedokun (2019) which posited

that board meetings had significant negative effect on financial Performance.

42
 CHAPTER FIVE

SUMMARY, CONCLUSION AND RECOMMENDATIONS

Preamble

This chapter focused on summary of the work done which includes the summary of findings,

conclusion, recommendations and suggestion for future studies. The conclusion was drawn

from the findings of this study. The recommendations were derived from the conclusion of

this study. Suggestions for further studies emanated from the limitations of this study.

Summary of the Work Done

This study investigated the impact of corporate governance on financial performance of banks in

Nigeria. The research work began with the review of relevant literature. The gaps in the previous

studies were observed which include geographical, variable exclusion and methodological gaps. Thus,

this study proceeded to fill the identified gaps. Through purposive sampling technique, 12 DMBs

were selected from the 22 DMBs on the Nigerian Stock Exchange as at 31 st December 2020. The

secondary data used for this study were obtained from the Nigerian Stock Exchange (NSE), Research

Unit. The panel data used for this study covered a period of 10 years from 2011 to 2020. Means were

used for descriptive statistics while correlations were used for answering of the research questions.

Multiple linear regression analysis was explored for test of the four hypotheses of the study.

Findings from the study indicated that:

- Board ownership had a significant negative impact on financial performance of listed

banks in Nigeria.

- Board size has no significant effect on financial performance of listed banks in

Nigeria.

- Board gender diversity had no significant impact on financial performance of listed

banks in Nigeria.
43
 - Board meeting had significant effect on financial performance of listed banks in

Nigeria.

Conclusion

This study investigated the impact of corporate governance on financial performance of banks in

Nigeria. Findings from the study indicated that board ownership and board meeting had

significant negative impact on financial performance of listed banks in Nigeria. Further

findings revealed that board size and board gender had no significant effect on financial

performance of listed banks in Nigeria. Consequently, the study concluded that board

ownership and board meeting had significant negative impact on financial performance of

listed banks in Nigeria.

Recommendations

Based on the conclusion of this study, optimum board size between 6 and 15 board members is

recommended for the membership of the board of directors to aid the quality of board decisions.

Inclusion of more women on the board of directors is also recommended to ensure gender balance on

the board which can aid balance of view from gender perspective.

Suggestion for Further Studies

This study investigated board of directors’ characteristics as independent variables; future studies may

consider other corporate governance structure such as audit committee, risk management committee

and remuneration committee. Since the current study focused on listed DMBs in the financial sector,

future studies may consider other industries in financial sector which include microfinance banks,

mortgage banks, insurance companies.

44
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48
Appendix I: List of Banks Sampled

S/N Name of the Bank

1 Access Bank

2 Fidelity Bank

3 First Bank

4 First City Monumental Bank

5 GTB

6 Sterling Bank

7 Stanbic IBTC Bank

8 ECOBANK

9 UBA

10 Union Bank

11 WEMA Bank

12 Zenith Bank

49
Appendix II: Data Used for the Study

ROCE BDO BDS BGD BDM

4.5718 15.2727 15 15 8

8.5544 9.0925 15 15 8

8.927 7.7691 17 17 7

8.0041 7.0521 16 16 6

8.2633 10.7042 16 16 6

6.4775 9.8693 15 15 10

4.3111 9.7782 17 17 8

4.3188 10.4165 15 15 10

3.9913 4.5909 18 18 10

1.4508 4.7164 18 18 9

0.0924 4.7728 19 19 8

10.8035 3.9133 16 16 8

3.2831 4.4895 16 16 12

4.2276 1.1919 19 19 12

3.0349 1.5768 14 14 4

2.1896 1.7827 18 18 4

3.3616 1.3603 12 12 9

3.3883 1.3 15 15 8

3.415 1.52 14 14 7

1.0171 1.7411 15 15 16

3.946 0.1536 16 16 7

11.805 1.608 6 6 4

50
 9.6969 1.6001 8 8 7

7.1902 1.3968 11 11 9

1.7998 2.3159 12 12 4

1.4056 2.2945 11 11 4

2.7147 2.3606 10 10 8

3.1364 2.4986 10 10 8

3.8458 3.0011 10 10 8

1.0886 3.2117 13 13 9

24.0407 1.9921 15 15 8

8.4042 1.1029 15 15 6

6.2049 1.0553 12 12 3

5.4969 1.0626 11 11 6

1.6913 1.0614 10 10 5

3.1689 1.1229 10 10 5

2.3095 2.1019 12 12 5

3.0256 2.1019 12 12 5

2.775 2.1104 11 11 5

1.0645 1.0925 11 11 5

11.1984 0.035 14 14 5

17.5612 0.2451 14 14 4

15.8571 0.2971 14 14 4

15.7775 0.2701 15 15 4

13.2016 0.2368 15 15 4

14.6119 0.239 16 16 4

51
15.5341 0.2205 15 15 4

21.2728 0.2011 14 14 5

18.8937 0.2007 14 14 5

4.8152 0.5703 14 14 5

4.1354 24.3731 12 12 4

4.1033 12.9363 12 12 2

12.9425 0.9601 11 11 4

10.3815 0.9601 7 7 5

6.7845 0.7194 10 10 5

8.4799 0.7194 10 10 6

9.6663 0.7126 10 10 4

12.671 0.3565 8 8 4

7.3409 0.3344 11 11 4

3.8095 0.3376 11 11 4

10.6027 55.1934 13 13 7

11.2374 49.9275 11 11 4

14.8709 37.7503 11 11 6

6.6437 37.5081 16 16 4

5.282 33.7256 17 17 4

2.4052 31.2933 16 16 4

2.2217 31.4259 15 15 5

2.772 29.4016 17 17 5

3.6797 29.4306 15 15 4

0.9524 30.5691 14 14 5

52
 -

19.4459 0.0223 7 7 12

1.7744 0.0237 18 18 6

0.9886 0.0175 17 17 8

5.601 0.0171 18 18 6

3.0324 0.0207 19 19 5

2.6484 0.0627 18 18 7

2.376 0.4904 20 20 8

3.0437 0.3175 15 15 7

2.5198 0.6267 16 16 8

1.1855 0.8035 14 14 7

-8.2182 6.5813 18 18 7

14.4293 1.0204 16 16 4

11.6517 1.0507 19 19 6

9.4787 5.8462 17 17 6

10.203 6.8781 19 19 5

3.7554 6.6202 19 19 7

7.8783 7.0515 19 19 6

7.0212 8.9954 21 21 6

6.2833 7.1158 20 20 5

1.7129 7.4466 16 16 7

57.2989 32.8329 15 15 4

8.7015 3.2311 16 16 6

53
 -

33.5191 34.7105 16 16 13

10.0084 30.1832 14 14 7

1.1057 22.03 15 15 4

0.795 71.5975 15 15 5

14.8664 71.5975 7 7 7

23.6761 47.4346 9 9 5

1.9707 47.7092 9 9 5

0.4519 47.7169 9 9 4

-5.5851 0.111 9 9 6

-7.0478 0.1086 12 12 5

2.7143 0.0865 13 13 5

2.5031 0.0004 13 13 4

2.7249 0.025 14 14 5

2.3058 4.5385 12 12 5

2.2441 4.5384 12 12 6

4.0113 0.3889 12 12 5

4.8778 21.248 11 11 5

0.6056 101.9769 12 12 4

24.3493 0.4806 12 12 4

48.0914 0.3582 14 14 5

30.9685 0.3491 12 12 4

9.8358 9.5169 12 12 4

54
 8.6694 9.529 12 12 4

8.9254 9.5514 13 13 4

9.4311 14.6441 14 14 5

10.2277 16.5891 13 13 6

11.6711 16.7051 14 14 7

0.3049 16.647 13 13 5

Source: Nigeria Stock Exchange (2022)

55