Effect of Corporate Governance on Organization Performance in Nigeria : Current School News

Effect of Corporate Governance on Organization Performance in Nigeria: A Study of Selected Banks

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Effect of Corporate Governance on Organization Performance in Nigeria: A Study of Selected Banks.

ABSTRACT

This study examines the effect of cooperate governance on organizational performance in Nigeria. The study adopted an ex-post-facto research design and covers a period of ten years.

Data collected were analyzed using regression analysis and the findings from the data collected indicate that variables such as board size and board independence play a very vital role in the performance of a corporate organization.

Findings from the result obtained show that an increase in board size and board independence will lead to an increase in the performance of an organization.

Result also shows that CEO-Duality in a firm has a negligible effect on the performance of a firm as long as the board is independent and board size is increased.

The regression result indicates that the findings of the study are statistically significant at P<0.05.

It is recommended in a study that Organizations having a small board size should make avenues to increase their board size in order to ensure effective performance and board independence should be practiced in a firm in order for the board to be able to manage and monitor the performance of the firm.

While organizations which already have large board size should equally grant the board the permission to oversee the activities of the firm for effective performance.

CHAPTER ONE

INTRODUCTION

1.1 Background of the study

Corporate governance is regarded as the key foundation for effective organizational performance and for organizations to be more productive, governed, and controlled.

The level of the collapse of institutions and the failure of firms across the world has also emphasized the need to study the ways by which organizations are governed and controlled.

Lee (2008) defined corporate governance as a system by which business corporations are directed and controlled.

The corporate governance structure specifies the distribution of rights and responsibilities among different participants in the corporation, such as the board, managers, shareholders, and other stakeholders, and spells out the rules and procedures for making decisions on corporate affairs.

By doing this, it provides the structure through which the company objectives are set and the means of attaining those objectives and monitoring performance.”

It has been reported that the survival of firms is associated with the type of corporate governance and management followed in the organization.

Corporate Governance also includes the relationships among the many stakeholders involved and the goals for which the corporation is governed.

In contemporary business corporations, the main external stakeholder groups are shareholders, debt holders, trade creditors, suppliers, customers, and communities affected by the corporation’s activities.

Informal stakeholders are the board of directors, executives, and other employees.

It guarantees that an enterprise is directed and controlled in a responsible, professional, and transparent manner with the purpose of safeguarding its long-term success which is intended to increase the confidence of shareholders and capital market investors.

The World Bank (2009) states that corporate governance comprises two mechanisms, internal and external corporate governance.

Internal corporate governance, giving priority to shareholder’s interest, operated on the board of directors to monitor top management.

On the other hand, external corporate governance monitors and controls manager’s behaviors by means of external regulations and force, in which many parties, such as suppliers, debtors (stakeholders), accountants, lawyers, and providers of credit and investment bank.

In the past, so many corporate organizations have been caught of getting involved in unethical practices, for example, the discovery of financial scam by the Central Bank of Nigeria after the consolidation exercise, involving seven top bank executives in Nigeria, which puts the credibility of their corporate image under suspicion, which further shocking investors’ confidence.

Consequently, the corporate governance mechanism has been a crucial issue in organizational performance.

It is on this background that the researcher sees the subject matter and intends to study the effect of cooperate governance on organizational performance in Nigeria.

1.2  Statement of the Problem

In the past, so many organizations such as banks in Nigeria have been involved in unethical practices, which puts the credibility of their corporate image in doubt.

As such, banks in Nigeria just like other company have been constraint with issues arising from customer’s complaints of exploitations of customers by the banks through some illegal deductions before or after banking transactions. Previous researches into the subject have brought to light the poor governance of so many companies with indebted accounts in Nigeria’s economy.

Sometimes, the accounting systems of this organization do not reflect the firm financial status. A typical example is the financial scam of Oceanic and Intercontinental Bank after the consolidation (Modesty 2013). Most management of such outfits

was not accountable to stakeholders of the companies. Besides, the regulatory agencies were short of authority, corruption and kickbacks were part of the system in the companies.

The problem is that they are several corporate organization with a different kind of policies governing their system of operation

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CSN Team.

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