EFFECTS OF BOARD RISK MANAGEMENT COMMITTEE ON FINANCIAL PERFORMANCE OF DEPOSIT MONEY BANKS IN NIGERIA

ABSTRACT

Board risk management committee, which is a subset of corporate governance and its effects on financial performance, has been under-researched for a period of time in empirical investigations. In this regard, this study examined the effects of Board risk management committee on financial performance. While Board risk management committee was operationalized using Board size, Board independence and Board meetings, financial performance was depicted by stock returns. Three hypotheses were formulated and tested. Secondary data were collected from annual reports of eleven deposit money banks in Nigeria. The data collected were analysed using statistical tools such Pearson correlation, unit root, as well as OLS Regression Analysis. Findings indicated that Board risk management committee size has negative and significant effect on stock returns of Deposit money banks in Nigeria (p- value=0.0019< 0.05); While Board risk management committee independence has no significance impact on stock returns of Deposit money banks in Nigeria. (p- value=0.4785>0.05); Results also shows that Board risk management committee meetings has negative and significant relationship with Stock returns of Deposit money banks in Nigeria (p- value= 0.0259 < 0.05). Based on findings, the study concluded that increase in board risk management committee size and meetings have negative effect on stock returns due to the impact of exogenous factors on stock returns. It was recommended that Deposit money banks should control their Board size, include independent (non- executive) directors (although not significant but recommended) and reduce number of meetings held in other to maximize stock returns.

KEW WORDS: Board risk management committee, Board size, Board independence, Board meetings, financial performance, Stock returns, Deposit money banks.

TABLE OF CONTENTS

TITLE                                                                                                                                  PAGES

Title Page                                                                                                                               i

Integrity Attestation                                                                                                              ii

Certification                                                                                                                           iii

Dedication                                                                                                                             iv

Acknowledgements                                                                                                              v

Table of Contents                                                                                                                  vii

Abstract                                                                                                                                  xi

CHAPTER ONE:    INTRODUCTION

1.1 Background to the Study                                                                                              1

1.2 Statement of the Problem                                                                                             5

1.3 Research Objective                                                                                                        7

1.4 Research Questions                                                                                                       8

1.5 Research Hypothesis                                                                                                    8

1.6 Scope of the Study                                                                                                        9

1.7 Significance of the Study                                                                                             10

1.8 Operational Definition of Terms                                                                                 10

CHAPTER TWO:   LITERATURE REVIEW

2.1 Preamble                                                                                                                         12

2.2 Conceptual Review                                                                                                       12

2.2.1 Corporate governance                                                                                               12

2.2.2 Board risk management committee                                                                         13

2.2.3 General role of the risk committee                                                                          14

2.2.4 Board risk management committee size                                                                 15

2.2.5 Board risk management committee independence                                                           16

2.2.6   Board risk management committee meetings                                                      18

2.2.7   Financial performance                                                                                            19

2.2.8   Stock returns                                                                                                             20

2.3       Conceptual framework                                                                                            22

2.4       Theoretical review                                                                                                   23

2.4.1   Stakeholders theory                                                                                                 23

2.4.2   Stewardship theory                                                                                                  24

2.4.3   Signaling theory                                                                                                       25

2.4.4   Agency theory                                                                                                          26

2.5       Empirical review                                                                                                      29

CHAPTER THREE: RESEARCH METHODS

3.1 Preamble                                                                                                                         32

 3.2 Research Design                                                                                                           32

3.3 Area of the study                                                                                                           32

3.4 Population of the study                                                                                                33

3.5 Sampling size and sampling techniques                                                                    33

3.6 Type and source of data                                                                                               34

3.7 Measurements of variables                                                                                          34

3.7.1.  Dependent variable                                                                                                 34

3.7.2 Independent variables                                                                                                           35

3.8 Model specification                                                                                                      36

3.9 Methods of data analyses                                                                                             37

3.10 Limitations of the methodology                                                                                38

CHAPTER FOUR:  DATA PRESENTATION, ANALYSIS AND INTERPRETATION

4.1 Preamble                                                                                                                         39

4.2 Descriptive Analyses                                                                                                    39

4.2.1 Correlation Analysis                                                                                                  41

4.2.2 Test for Normality                                                                                                      42

4.2.3 Panel Unit Root Test                                                                                                  43

4.3 Test of hypotheses                                                                                                        45

4.3.1 Hypothesis One                                                                                                          45

4.3.2 Hypothesis Two                                                                                                          45

4.3.3 Hypothesis Three                                                                                                       45

4.4 Discussion of Findings                                                                                                 48

CHAPTER FIVE:   SUMMARY, CONCLUSION AND RECOMMENDATIONS

 5.1 Preamble                                                                                                                        51

5.2 Summary of   Findings                                                                                                  51

5.3 Conclusion                                                                                                                     52

5.4 Recommendations                                                                                                         53

5.5 Suggestions for further Studies                                                                                   53

5.6: Contributions to Knowledge                                                                                      54

REFERENCES                                                                                                                    55

APPENDIX                                                                                                                           62