EFFECT OF CORPORATE GOVERNANCE ON FINANCIAL PERFORMANCE OF BANKS IN NIGERIA

Abstract

This study sought to examine the effect of corporate governance on the financial performance of banks in Nigeria. This study examined the board size, board committee and audit committee size on Return on equity (ROE) of a sample of five selected banks among the total population of 21 banks in Nigeria. Secondary data were source from the annual reports and audited financial statement of the selected banks issued for ten (10) years from the year 2009 – 2018. Linear Regression technique aided by SPSS 20 was employed in evaluating the relationship between the selected variables. The study found that all measures of corporate governance are not significant predictors of financial performance of money deposit banks in Nigeria. The overall R value of the board size, board committee, and audit committee size was 0.232 which show a low positive relationship of (23.2%) between the return on equity and the independent variables jointly. While the R squared value of 0.054 (5.4%) depict the value of variation in return on equity that can be attributed to the three independent variables jointly. The F- statistics of 0.868 and the corresponding overall p-value of the three independent variable of 0.404 were found to be insignificant in explaining the profitability of money deposit banks in Nigeria. Based on the findings, another study should be conducted to determine the other corporate governance variables that affect the financial performance of money deposit banks. Financial institutions are the key engines of growth in many developing economies. The study recommend that there should also be in existence, a proper internal control structure and self-government regulation so as to detect early rule violations and also monitor systemic problems for early remediation and solutions. Money deposit banks also must conduct their activities in such a manner so as not to compromise the financial well-being of all its stakeholders.