Corporate Governance and Financial Performance of Deposit Money Banks in Nigeria
Keywords:
CEO duality; Board size; Gender diversity; ROA; DMBs; NigeriaAbstract
The study examined effects of corporate governance on financial performance of selected deposit money banks in Nigeria. The study used 10 deposit money banks randomly selected from 21deposit money banks listed on the Nigeria stock market. The study sourced for data via the annual reports of the chosen banks over a period of 10 years spanning from 2009 to 2018. Data collected were analyzed using both descriptive and inferential methods of study. Descriptive analysis conducted within the study included mean analysis, measure of dispersion, minimum and maximum analysis, followed by correlation analysis, pooled OLS estimation, fixed effect estimation, random effect estimation, and post estimation test like restricted F-test, Hausman test, Pesaran cross sectional independence. The study revealed that board size exerts a negative and significant effect on the performance of Deposit Money Banks in Nigeria -0.8462(p=0.0090.05). It had been also, revealed that gender diversity exerts a positive but insignificant effect on the financial performance of Deposit Money Banks in Nigeria to the tune of 5.1647(p=0.685>0.05). The study concluded that corporate governance exerts a big effect on the financial performance of Deposit Money Banks in Nigeria. The study recommended that the monitoring function of the members of the board of Deposit Money Banks should be directed at pressing must be productive and convey about a rise within the profit level and therefore the management of those banks should know that tons of advantages are implanted in corporate governance if accorded the proper place within the management of the affairs.
References
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Ahmad, B. A. & Mensur, L. K. (2012). Corporate Governance and Financial Performance of Banks in the Post-consolidation Era in Nigeria. International Journal of Social Sciences and Humanity Studies. 4 (2), pp. 12-28.
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Anastasia, S. & Olga, I. (2012). Role of Corporate Governance in Banking Sector: Evidence from All over the World. Journal of corporate Finance Research, 4 (24), pp. 80-86.
Ashenafi, B. F.; Kelifa, S. K. & Yodit, K. W. (2013). Corporate Governance and Impact on Bank Performance. Journal of Finance and Accounting. 1 (1), pp. 19-26.
Ayorinde, A. O.; Toyin, A. & Leye A. (2012). Evaluating the Effect of Corporate Governance on the Performance of Nigerian Banking Sector. Review of Contemporary Business Research.1, pp. 32 – 42.
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Banafa, A. S.; Muturi, W & Ngugi, K (2015). The Impact of Leverage on Financial Performance of Listed Non-Financial Firm in Kenya. International Journal of Finance and Accounting, 4 (7), pp. 1-20.
Basman, A. (2017). Does Corporate Governance Affects the Financial Performance? Analysis of Findings from Jordanian Bank. International Journal of Business and Management. 12 (4), pp. 1-7.
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Farah, N.; Farrukh, I. & Faizan, N. (2016). Financial performance of firms: Evidence from Pakistan Cement Industry. Journal of Teaching and Education, 5 (1), pp. 81-94
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Gadi, D. P.; Emesuanwu, C. E. & Shammah, Y. (2015). Impact of Corporate Governance on Financial Performance of Microfinance Banks in North Central Nigeria. International Journal of Humanities Social Sciences and Education (IJHSSE), 2 (1), pp. 153-170.
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Gul, S.; Faiza, I. & Khalid, Z. (2011). Factors Affecting Bank Profitability in Pakistan. The Romanian Economic Journal, 2 (3), pp. 6-9.
Hani, E. C. (2014). The Impact of Corporate Governance on Performance of Lebanese Bank. The International Journal of Business and Financial Research. 8 (5), pp. 1-12.
Harun, A. (2017). Corporate Governance and its Effect on Financial Performance of the Ethiopian Private Commercial Banks. Published Master’s Thesis, Addis Ababa University
Herdjiono, I. & Sari, I. M. (2017). The Effect of Corporate Governance on the Performance of a Company. Some Empirical Findings from Indonesia. Journal of Management and Business Administration, 25 (1), pp. 33-52.
Ibrahim, E. A. (2017). The Impact of Corporate Governance on Islamic Banking Performance: The Case of UAE Islamic Banks. Journal of Banking & Finance, 2017(9), pp. 1-10.
James, N. O. & Ibezim, A. U. (2015). The Effect of Poor Corporate Governance on the Performance of Nigerian Banks. African Journal of Innovative Research and Advanced Studies. 3 (1), pp. 1-44.
Jensen, M. C. & Meckling, W. H. (1976). Theory of the Firm: Managerial Behavior, Agency Costs and Ownership Structure. Journal Finance Econ, pp. 305-360.
Julizaerma, M. K., & Sori, Z. M. (2012). Gender Diversity in the Boardroom and Firm Performance of Malaysian Public Listed Companies. Procedia-Social and Behavioural Sciences, 65, pp. 1077-1085.
Khrawish, H. A. (2011). Determinants of commercial banks performance: Evidence from Jordan. International Research Journal of Finance and Economics. Zarqa University, 5 (5), pp. 19-45.
Kumari, P. & Pattanayak, J. K. (2017). Linking Earnings Management Practices and Corporate Governance System with the Firms’ Financial Performance: A study of Indian Commercial Banks. Journal of Financial Crime, 24 (2), pp. 223-241.
Macey, J. R. & O’Hara, M. (2011). The Corporate Governance of Banks. Federal Reserve Bank of New York Economic Policy Review.
Michael. (2016). The Effect of Corporate Governance on the Performance of Banking Institutions Listed on the Ghana Stock Exchange. Published Masters’ Thesis. University of Accra
Mohammed, F. (2012). Impact of Corporate Governance on Banks Performance in Nigeria. Journal of Emerging Trends in Economics and Management Sciences (JETEMS), 3 (3), pp. 257-260.
Mohamed, A. B.; Ehab, K. A. & Ahmed, M. A. (2014). The Effect of Corporate Governance on Bank Financial Performance: Evidence from the Arabian Penisula. Corporate Ownership and Control, 11 (2), pp. 177-131.
Mohammed, R. A. & Fahmida, A. (2017). Impact of Corporate Governance on Performance of Commercial Banks in Bangladesh. The Cost and Management, 45 (4), pp. 1-9
Mugisha, S. X.; Jaya, S.; Joseph, O. & Mbabazi, M. (2015). Effect of Corporate Governance on the Financial Performance of Banking Industry in Rwanda: A Case Study-Commercial Banks in Rwanda. International Journal of Small Business and Entrepreneurship Research, 3 (6), pp. 29-43.
Muller-Kahle, M. & Lewellyn, K. B., (2011). Did Board Configuration Matter? The Case of US Subprime Lenders. Corporate Governance: An International Review, 19 (5), pp. 405–417.
Mutuku, D. M. (2016). Effects of Corporate Governance on Financial Performance of Savings and Credit Cooperative Societies in Machakos and Athi-river sub-counties. Doctoral Dissertation.
Narwal, K. P. & Jindal, S. (2015). The Impact of Corporate Governance on the Profitability: An Empirical Study of Indian Textile Industry. International Journal of Research in Management, Science & Technology, 3 (2), pp. 81-85.
Noredi, A. B. M. & Noriza, B. M. S. (2010). Working capital management: The Effect of Market Valuation and Profitability in Malaysia. International Journal of Business and Management, 5 (11), pp. 140-147.
Ochieng, B. C. (2011). How Corporate Governance Affect Bank Performance in Kenya. Maters’ Thesis, University of Nairobi
Okafor, F.O. (2011). 50 years of Banking Sector Reforms in Nigeria (1960-2010. Past Lessons): Future Imperatives, Enugu: Ezu Books Ltd, pp. 52-57
Okoi, I. O.; Stephen, O. & Sani, J. (2014). The Effects of Corporate Governance on the Performance of Commercial Banks in Nigeria. International Journal of Public Administration and Management Research (IJPAMR), 2 (2), pp. 219-234
Okoye, L. U.; Evbuomwan, G. O.; Achugamonu, U. & Aragham, I. (2016). Impact of Corporate Governance on the Profitability of the Nigerian Banking Sector. ESUT Journal of Accountancy, 7 (1), pp. 281-292.
Olabisi, J. & Omoleye, O. (2011). Corporate Governance and the Performance of Nigerian Banking Sector. International Journal of Development and Management Review. 6, pp. 72-85.
Omondi, O. M. & Muturi, W. (2013). Factors Affecting the Financial Performance of Listed Companies at the Nairobi Securities Exchange in Kenya. Research Journal of Finance and Accounting, 4 (15), pp. 99 – 104.
Adegbemi, B. O. O.; Donald, I. O. & Ismail, O. F. (2013). Corporate Governance and Bank Performance: A Pooled Study of Selected Banks in Nigeria. European Scientific Journal, 8 (28), pp. 155-164.
Adekunle, S. A. &Aghedo, E. M. (2014). Corporate Governance and Financial Performance of Selected Quoted Companies in Nigeria. European Journal of Business and Management. 6(9), pp. 23-34
Adeleke, D. (9 May, 2019). A new Moody’s report reveals exactly how Diamond Bank failed. https://www.pulse.ng/bi/finance/a-new-moodys-report-reveals-exactly-how-diamond-bank-failed/t6tqb6x.
Adigwe, P. K.; Nwanna, I. O. & John, E. I. (2016). Effect of Corporate Governance Mechanism on the Financial Performance of Banks in Nigeria. Journal of Social Development, 5 (2), pp. 41-50.
Agbaeze, E. K. & Ogosi, C. D. (2018). Corporate Governance and Profitability of Nigerian Banks. European Journal of Scientific Research, 148 (3), pp. 358-367.
Ahmad, B. A. & Mensur, L. K. (2012). Corporate Governance and Financial Performance of Banks in the Post-consolidation Era in Nigeria. International Journal of Social Sciences and Humanity Studies. 4 (2), pp. 12-28.
Ahmed, M. A. (2015). The Effect of Corporate Governance on Bank Performance: Evidence from the Arabian Peninsula. Research Gate Journal, pp. 1-32.
Ahmed, M. A. (2014). The Role of Audit Committee in Corporate Governance: A Descriptive Study. Conference Paper in SSRN Electronic Journal, pp. 1-26.
Ajala, O. A.; Amuda, T. & Arulogun, L. (2012). Evaluating the Effects of Corporate Governance on the Performance of Nigerian Banking Sector. Review of Contemporary Business Research, 1 (1), pp. pp. 32-42.
Anastasia, S. & Olga, I. (2012). Role of Corporate Governance in Banking Sector: Evidence from All over the World. Journal of corporate Finance Research, 4 (24), pp. 80-86.
Ashenafi, B. F.; Kelifa, S. K. & Yodit, K. W. (2013). Corporate Governance and Impact on Bank Performance. Journal of Finance and Accounting. 1 (1), pp. 19-26.
Ayorinde, A. O.; Toyin, A. & Leye A. (2012). Evaluating the Effect of Corporate Governance on the Performance of Nigerian Banking Sector. Review of Contemporary Business Research.1, pp. 32 – 42.
Badu, E. A. & Appiah, K. O. (2017). The Impact of Corporate Board Size on Firm Performance: Evidence from Ghana and Nigeria. Research in Business and Management, 4 (2), pp. 1-12.
Banafa, A. S.; Muturi, W & Ngugi, K (2015). The Impact of Leverage on Financial Performance of Listed Non-Financial Firm in Kenya. International Journal of Finance and Accounting, 4 (7), pp. 1-20.
Basman, A. (2017). Does Corporate Governance Affects the Financial Performance? Analysis of Findings from Jordanian Bank. International Journal of Business and Management. 12 (4), pp. 1-7.
Basuony, M. A.; Mohamed, E. K. A. & Al-Baidhani, A. M. (2014). The Effect of Corporate Governance on Bank Financial Performance: Evidence from the Arabian Peninsula. Corporate Ownership and Control. 11 (2), pp. 178-191.
Belkhir, M. (2009). Board of Directors’ Size and Performance in the Banking Industry. International Journal of Managerial Finance, 5 (1), pp. 23-56
Boussaada, R. & Karmani, M. (2015), Did Board of Directors Have an Impact on MENA Bank Performance? International Journal of Economics and Finance, pp. 46-56.
Davis, J. H.; Schoorman, F. D. & Donaldson, L. (1997). Toward a stewardship theory of management. Academy of Management Review, 22, pp. 20–47.
Eissa, A. A.; Faozi, H. & Anwar, A. (2019). Impact of Corporate Governance Mechanism on Financial Performance of Hotel Companies: Empirical Evidence from India. African Journal of Hospitality, Tourism and Leisure, 8 (2), pp. 1-21.
Emeka, E. E.; Alem, I. E., & Bello, A. (2016). The Effect of Corporate Governance on Financial Performance of in Nigeria. Journal of Business and Management. 18 (11), pp. 99-107.
Farah, N.; Farrukh, I. & Faizan, N. (2016). Financial performance of firms: Evidence from Pakistan Cement Industry. Journal of Teaching and Education, 5 (1), pp. 81-94
Freeman, R. E. (1984). Strategic management: A stakeholder approach. Boston: Pitman.
Friedman, M. (13 September, 1970). The Social Responsibility of Business is to Increase its Profits. N.Y. Times, 6 (30), pp. 126-127.
Gadi, D. P.; Emesuanwu, C. E. & Shammah, Y. (2015). Impact of Corporate Governance on Financial Performance of Microfinance Banks in North Central Nigeria. International Journal of Humanities Social Sciences and Education (IJHSSE), 2 (1), pp. 153-170.
Giuliana, B.; Stefano, D. A.; Antonia, P. I. & Marco, S. (2018). Composition and Activities of the Board of Directors: Impact on ESG Performance in the Banking System. Journal of Sustainability, pp. 1-20.
Gul, S.; Faiza, I. & Khalid, Z. (2011). Factors Affecting Bank Profitability in Pakistan. The Romanian Economic Journal, 2 (3), pp. 6-9.
Hani, E. C. (2014). The Impact of Corporate Governance on Performance of Lebanese Bank. The International Journal of Business and Financial Research. 8 (5), pp. 1-12.
Harun, A. (2017). Corporate Governance and its Effect on Financial Performance of the Ethiopian Private Commercial Banks. Published Master’s Thesis, Addis Ababa University
Herdjiono, I. & Sari, I. M. (2017). The Effect of Corporate Governance on the Performance of a Company. Some Empirical Findings from Indonesia. Journal of Management and Business Administration, 25 (1), pp. 33-52.
Ibrahim, E. A. (2017). The Impact of Corporate Governance on Islamic Banking Performance: The Case of UAE Islamic Banks. Journal of Banking & Finance, 2017(9), pp. 1-10.
James, N. O. & Ibezim, A. U. (2015). The Effect of Poor Corporate Governance on the Performance of Nigerian Banks. African Journal of Innovative Research and Advanced Studies. 3 (1), pp. 1-44.
Jensen, M. C. & Meckling, W. H. (1976). Theory of the Firm: Managerial Behavior, Agency Costs and Ownership Structure. Journal Finance Econ, pp. 305-360.
Julizaerma, M. K., & Sori, Z. M. (2012). Gender Diversity in the Boardroom and Firm Performance of Malaysian Public Listed Companies. Procedia-Social and Behavioural Sciences, 65, pp. 1077-1085.
Khrawish, H. A. (2011). Determinants of commercial banks performance: Evidence from Jordan. International Research Journal of Finance and Economics. Zarqa University, 5 (5), pp. 19-45.
Kumari, P. & Pattanayak, J. K. (2017). Linking Earnings Management Practices and Corporate Governance System with the Firms’ Financial Performance: A study of Indian Commercial Banks. Journal of Financial Crime, 24 (2), pp. 223-241.
Macey, J. R. & O’Hara, M. (2011). The Corporate Governance of Banks. Federal Reserve Bank of New York Economic Policy Review.
Michael. (2016). The Effect of Corporate Governance on the Performance of Banking Institutions Listed on the Ghana Stock Exchange. Published Masters’ Thesis. University of Accra
Mohammed, F. (2012). Impact of Corporate Governance on Banks Performance in Nigeria. Journal of Emerging Trends in Economics and Management Sciences (JETEMS), 3 (3), pp. 257-260.
Mohamed, A. B.; Ehab, K. A. & Ahmed, M. A. (2014). The Effect of Corporate Governance on Bank Financial Performance: Evidence from the Arabian Penisula. Corporate Ownership and Control, 11 (2), pp. 177-131.
Mohammed, R. A. & Fahmida, A. (2017). Impact of Corporate Governance on Performance of Commercial Banks in Bangladesh. The Cost and Management, 45 (4), pp. 1-9
Mugisha, S. X.; Jaya, S.; Joseph, O. & Mbabazi, M. (2015). Effect of Corporate Governance on the Financial Performance of Banking Industry in Rwanda: A Case Study-Commercial Banks in Rwanda. International Journal of Small Business and Entrepreneurship Research, 3 (6), pp. 29-43.
Muller-Kahle, M. & Lewellyn, K. B., (2011). Did Board Configuration Matter? The Case of US Subprime Lenders. Corporate Governance: An International Review, 19 (5), pp. 405–417.
Mutuku, D. M. (2016). Effects of Corporate Governance on Financial Performance of Savings and Credit Cooperative Societies in Machakos and Athi-river sub-counties. Doctoral Dissertation.
Narwal, K. P. & Jindal, S. (2015). The Impact of Corporate Governance on the Profitability: An Empirical Study of Indian Textile Industry. International Journal of Research in Management, Science & Technology, 3 (2), pp. 81-85.
Noredi, A. B. M. & Noriza, B. M. S. (2010). Working capital management: The Effect of Market Valuation and Profitability in Malaysia. International Journal of Business and Management, 5 (11), pp. 140-147.
Ochieng, B. C. (2011). How Corporate Governance Affect Bank Performance in Kenya. Maters’ Thesis, University of Nairobi
Okafor, F.O. (2011). 50 years of Banking Sector Reforms in Nigeria (1960-2010. Past Lessons): Future Imperatives, Enugu: Ezu Books Ltd, pp. 52-57
Okoi, I. O.; Stephen, O. & Sani, J. (2014). The Effects of Corporate Governance on the Performance of Commercial Banks in Nigeria. International Journal of Public Administration and Management Research (IJPAMR), 2 (2), pp. 219-234
Okoye, L. U.; Evbuomwan, G. O.; Achugamonu, U. & Aragham, I. (2016). Impact of Corporate Governance on the Profitability of the Nigerian Banking Sector. ESUT Journal of Accountancy, 7 (1), pp. 281-292.
Olabisi, J. & Omoleye, O. (2011). Corporate Governance and the Performance of Nigerian Banking Sector. International Journal of Development and Management Review. 6, pp. 72-85.
Omondi, O. M. & Muturi, W. (2013). Factors Affecting the Financial Performance of Listed Companies at the Nairobi Securities Exchange in Kenya. Research Journal of Finance and Accounting, 4 (15), pp. 99 – 104.
Published
2020-12-16
How to Cite
Ogunmakin, A. A., Fajuyagbe, S. B., & Alayo, R. A. (2020). Corporate Governance and Financial Performance of Deposit Money Banks in Nigeria: Array. EuroEconomica, 39(3). Retrieved from https://dj.univ-danubius.ro/index.php/EE/article/view/744
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