Effect of Corporate Governance on Financial Performance of Deposit Money Banks in Nigeria

Abstract

The study focused on effect of corporate governance on financial performance of deposit money banks in Nigeria. For corporate organization to achieve its goal, there should be effective corporate governance such as adequate board size, independent board members, and effective audit committee members. In other words, effective corporate governance is paramount to the growth and performance of business organization. To achieve the objective of this study ex-post facto research design was adopted. The sample size of the study is made up of ten selected deposit money banks in Nigeria. The selection is based on availability of data used in this study. The data collected were analyzed using descriptive statistics, correlation matrix, panel regression analysis and histogram analysis was used as the post estimation test to check the present of autocorrelation and multicollinearity. The correlation result revealed that there is positive relationship between corporate governance mechanisms (board size, board independence, CEO duality and audit committee size) and financial performance (return on asset). The regression analysis results revealed that board size, board independence and CEO duality have no significant effect on bank’s return on asset. However, audit committee size has significant effect on bank’s performance. The histogram normality test showed that the variables meet normality assumption. Based on the findings the study concludes that the performance of deposit money banks can be affected by their corporate governance mechanisms. Therefore, the study recommends that deposit money banks ought to ensure the independence of their boards in order to advance effective corporate governance and foster company success. Deposit money banks should also make sure that they abide by the corporate code of conduct with reference to board size. If the board has the required number of members or is the right size, their performance will improve.