Corporate governance and the financial performance of Pension Fund Administrators in Nigeria

ABSTRACT

This study was designed to empirically investigate the effect of corporate governance on the financial performance of pension fund administrators in Nigeria within the period of 2004 – 2014. The study employed the use of secondary data sourced from the websites and audited financial statements of pension fund administrators in Nigeria. For the purpose of the study, board size and board composition were used as the proxy for corporate governance and return on asset was used a proxy for the financial performance of pension fund administrators. These variables were then subjected to a multiple regression analysis using the Ordinary Least Squares (OLS) estimator at 5% level of significance with the return on asset as the dependent variable. From the study, it was found that board size has a positive and statistically insignificant relationship with the return on asset of pension fund administrators. On the other hand, board composition measured by ratio of board members with financial expertise (experience in banking/investment, insurance and/or pension), to total number of the board members was found out to have a negative but no statistically significant relationship with the return on asset of pension fund administrators. This could be as a result of involving more board members who are not financial expertise in the board of pension fund administrators and as such, their decisions and their inexperience of financial matters tends to be detrimental to the performance of the pension fund administrators in Nigeria. The study therefore recommended that, in board composition, there should be a reduction in the number of board members who do not have financial expertise especially in the area of banking/investment, insurance and/or pension as this professional expertise is vital for high profitability of pension fund administrators in Nigeria.

TABLE OF CONTENTS

Title Page                                                                   i

Declaration                                                                ii

Certification                                                               iii            

Dedication                                                                 iv             

Acknowledgment                                                         v             

Abstract                                                                     vi           

Table of Contents                                                        vii    

CHAPTER ONE

INTRODUCTION

1.1   Background to the Study                                                    1

1.2   Statement of Problem                                                          4

1.3   Objective of the Study                                                         5

1.4   Research Question                                                              5

1.5   Statement of Hypothesis                                                      6

1.6   Significance of the Study                                                     6

1.7   Scope of the Study                                                              7

1.8   Limitation of the Study                                                       8

1.9   Definition of Terms                                                            8

1.10Organization of the Study                                                   10

Reference                                                                                  11

CHAPTER TWO

REVIEW OF RELATED LITERATURE

2.1 Theoretical Framework                                                         12

2.1.1 Theories of Corporate Governance                                       12

2.1.2 Theories of Pension Fund                                                   18

2.1.3 Discussion of the Theoretical Framework                              20

2.2   Conceptual Framework                                                        21

2.2.1 An overview of Corporate Governance and pension funds       21

2.2.2 Overview of the Pension Reform Act                                      23

2.2.3 Pension Administration in Nigeria                                         25

2.2.4 Reasons for the creation of corporate governance in Nigeria     26

2.2.5 Corporate Governance and the Pension Reform Act 2004         27

2.2.6 Factors challenging the Corporate Governance

 practices in Nigeria                                                             34

2.2.7        Relationship between corporate governance and

the financial performance of pension fund

Administrators in Nigeria                                                      35

2.3 Empirical Review                                                                      36

2.4 Gap in Literature                                                                      43

References                                                                                     45

CHAPTER THREE

RESEARCH METHODOLOGY                                        

3.0   Introduction                                                                         50

3.1   Research Design                                                                   50

3.2   Population of the Study                                                         50       

3.3   Sample Size and Sampling Techniques                                   50

3.4   Data Collection Techniques                                                   51

3.5   Operational Measure of Variables                                          51

3.6   Model Specification                                                             51

3.6   Method of Data Analysis                                                      53

References                                                                                 54

CHAPTER FOUR

DATA PRESENTATION AND ANALYSIS

4.1   Data Presentation                                                                55

4.2   Data Analysis                                                                       56

4.3   Discussion of Findings                                                          57

4.4   Hypothesis Testing                                                               58

CHAPTER FIVE

SUMMARY OF FINDINGS, CONCLUSION AND RECOMMENDATION

5.1   Summary of Findings                                                          60

5.2   Conclusion                                                                          61

5.3   Recommendations                                                               61

Bibliography                                                                                63

Appendices                                                                                  64