Empirical study of the Impact of Corporate Governance on the Performance of Financial Institutions in Nigeria

Abstract

This study investigates the effect of corporate governance on the performance of commercial banks in Nigeria, and the determination of governance effect on profitability of banks. This came as a result of the fact that corporate governance has been relied on statements which do not represent a true situation of the strength of banks. Four research hypotheses were formulated based on these variables - capital adequacy, asset base, policy shift, investment, liquidity ratio, inflation and their relationship with profitability. Descriptive research design was used for this study. Data were obtained from published annual reports and account of the selected commercial banks and the publication of Central Bank of Nigeria. Ordinary Least Square (OLS) technique was used to estimate the variables using multiple linear regression models. The result of the analysis revealed that the estimation of capital adequacy, asset base, policy shift, investment, liquidity ratio and inflation are prime determinants of corporate governance. The findings revealed that the profitability of banks increased within the years under review as assets base of the banks increased. It further shows that as policy shift and investment increases profitability of banks also increases. Consequently, it was recommended that the regulatory authority should restructure their regulatory framework and strengthen their supervisory capacity to ensure a smooth working relationship with banks, prevent distress and failure in the post-consolidation era. Finally, there should be a provision of heavy sanctions for those that violate banking regulation and other laws that guide bank business.