Impact of Corporate Governance on the Performance of Nigerian Deposit Money Banks Okereke EJ & Abu S
University of Port Harcourt, Rivers State, Nigeria Imo State University Owerri
Key Words Corporate Governance Index Deposit Money Banks Bank Performance Index Information Disclosure This study examined the relationship between corporate governance practices in Nigerian Deposit Money Banks (DMBs) vis-à-vis their financial performances (2002-06). To accomplish this, data were collected through the use of questionnaire administered to Corporate Affairs Managers in twenty-four Deposit Money Banks (DMBs) and from the Central Bank of Nigeria (CBN) annual report and statement of accounts and Nigeria Stock Exchange (NSE) Fact Books. The data was descriptively and quantitatively analysed and the hypotheses tested using Statistical Package for Social Sciences (SPSS). The regression result of our analysis and test indicated a significant relationship and positive correlation between corporate governance and banks’ performance. It is therefore recommended, among others, that Deposit Money Banks (DMBs) in conjunction with the regulatory authorities should model various functions performed by banks and factor in all aspect of corporate governance variables as it may concern a highly regulated industry like the banking industry. This will go a long way in the designing of an optimal governance mechanism for the Deposit Money Banks (DMBs) in Nigeria and beyond.
It is often said that there is no resting place for an organization or its chief executive, especially in a competitive environment saddled with government interventions. Banking in Nigeria has passed through several legislative and regulatory changes with a view to repositioning, sanitizing, galvanizing and stabilizing the institution (Agundu et al, 2002). These efforts of the regulators specially the Central Bank of Nigeria (CBN) tend towards fraud detection/prevention and other unethical practices, bad debt recovery, corporate reorganization/reconstruction, statutory (mandatory) financial recapitalization and above all, the need to engender good corporate governance. Research Paper
Corporate Governance (CG) according to Okereke et al (2009) is a way of life that moulds and directs the roles, responsibilities and rights of management and Board of Directors (BODs) of organizations / institutions with a view to achieving the corporate objectives of the
Indian Journal of Corporate Governance
organization and capturing the interests of various stakeholders. It provides decorum on the roles, responsibilities and rights of management and BODs and the need to have respect for each other. It involves mainly disclosure, transparency, fairness, equity, and accountability. It is complying with the rules of the ‘game’. That is, doing what the law, policy, procedures and methods specified in a very strict manner with the key elements of CG (transparency, accountability, trust, respect, fairness and honesty) at the background. There is a renewed emphasis by the regulators – Central Bank of Nigeria (CBN), Nigeria Deposit Insurance Corporation (NDIC), Nigeria Stock Exchange (NSE) & Stock and Exchange Commission (SEC) on the need to improve the corporate governance of the Deposit Money Banks (DMBs) because of the exigency to re-examine the capacity building following the consolidation of the banking sector in 2004. Banks’ distress and failure have been attributed to poor or lack of corporate governance. Vanguard of 19 November 2007 report indicated that, “the distress and eventual collapse of these banks was occasioned by factors relating to corporate governance”. A study by the Nigeria Deposit Insurance Corporation (NDIC) in 2003 listed the factors that caused severe distress in banks and accounted 51.1% to issues relating to corporate governance. This has therefore raised a number of issues. It ranges from financial disclosure, market...
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