IMPACT OF CORPORATE GOVERNANCE IN THE NIGERIAN BANKING INDUSTRY

ABSTRACT

The CBN Code of Corporate Governance stated that Corporate Governance refers to the processes and structure by which the business and affairs of an institution are directed and managed. The objectives of this study are to examine Corporate Governance in relation to the promotion of corporate fairness, transparency and accountability in banks, to establish the purpose of Corporate Governance on banks and determine the application of its procedure in the banking sector, to establish that poor Corporate Governance is a critical factor in banking system instability in Nigeria and to determine the relationship between board effectiveness and good Corporate Governance. The methodology employed in this research study is the use of primary and secondary data. The primary data involves the use of questionnaire and the secondary data involves the use of journals, articles and publications. The data is presented in a tabular form using descriptive statistics and the analysis is done using correlation. The research findings gathered from this study states that the issue of bad Corporate Governance has accounted for the instability in the Nigerian Banking Industry, and customers start to loose confidence in the ability of a bank to properly manage its assets and liabilities, including deposits which could in turn trigger a bank to run or liquidate. The study recommends that the banks should be made to provide a certain minimum amount of information requirement on Corporate Governance and that the observance of good Corporate Governance and Code of Ethics as spelt out by the Regulatory Bodies, thereby leading to a virile and efficient banking system.

TABLE OF CONTENTS

CONTENT   PAGE

Title Page

Front Page

Declaration………………………………………………………………………………..i

Certification……………………………………………………………………………... ii

Dedication………………………………………………………………………………..iii

Acknowledgement………………………………………………………………………..iv

Abstract…………………………………………………………………………………...v

Table of Contents………………………………………………………………………..vi-x

List of Tables…………………………………………………………………………….xi-xiv 

CHAPTER 1:  INTRODUCTION 

         1.1 Background of the Study……………………………………………………….1-4

         1.2 Statement of the Problem……………………………………………………….4-6

         1.3 Scope of the Study………………………………………………………………6

         1.4 Objectives of the Study………………………………………………………….6-7

         1.5 Research Questions……………………………………………………………….7

         1.6 Statement of Hypothesis…………………………………………………………7-8

         1.7 Methodology………………………………………………………………………8

         1.7.1 Data Source……………………………………………………………………...8

         1.7.2 Data Analysis……………………………………………………………………8

         1.8 Significance of the Study………………………………………………………….9

         1.9 Briefly on the four banks……………………………………………………….10-13

         1.10 Outline of Chapters………………………………………………………………13

CHAPTER 2: LITERATURE REVIEW

         2.0 Introduction…………………………………………………………………….14-15

         2.1 The Concept of Corporate Governance………………………………………...15-17

         2.2 Corporate Governance: The Nigerian Banking Sector Reform………………...17-18

         2.2.1 Briefs on Post Recapitalization……………………………………………….18-19

         2.2.2 Status of Corporate Governance in the Banking Sector……………………...19-21

         2.2.3 Regulatory Matters and Recent Efforts on Stabilization……………………..21-23

         2.3 Theoretical Framework…………………………………………………………….23

         2.3.1 Theories of Corporate Governance…………………………………………...23-24

         2.4 Legal and Regulatory Framework Governing Companies…………………………25

         2.5 Why Corporate Governance for Banks…………………………………………….26

         2.6 Corporate Governance: An appraisal of Disclosure in Nigerian Banks……………26

         2.6.1 Nigerian Bank Disclosure and Governance………………………………….26-27

         2.6.2 Disclosures in Corporate Governance………………………………………..27-29

         2.7 Ownership Concentration……………………………………………………....29-30

         2.8 Benefits of Corporate Governance……………………………………………..30-33

         2.9 Code of Corporate Governance for Banks in Nigeria Post Consolidation……..33-34

         2.9.1 Weaknesses in Corporate Governance of Banks in Nigeria……………………..34

         2.9.2 Challenges of Corporate Governance for Banks Post Consolidation………...35-38

         2.9.3 Principles and Practices that Promote Good Corporate Governance…………38-41

         2.9.4 Code of Corporate Governance for Banks Post Consolidation……………….41-43

         2.9.5 Industry Transparency, Due process, Data integrity, Risk Management and                     Disclosure Requirements………………………………………………………...44

         2.10 Role of Auditors…………………………………………………………………..45

         2.10.1 Internal Auditors………………………………………………………………..45

         2.10.2 External Auditors……………………………………………………………….45

         2.11 Nigerian Banks urged to strengthen Corporate Governance……………………...46

         2.12 Ensuring Credibility and Corporate Governance in the Banking Industry……46-47

CHAPTER 3: RESEARCH METHODOLOGY

          3.1 Introduction…………………………………………………………………….....48

          3.2 Research Questions………………………………………………………………..48

          3.3 Research Design and Data Sources……………………………………………….50

          3.4 Instrument of Data Collection………………………………………………….50-51

          3.5 Sampling Designs and Procedures………………………………………………..51

          3.6 Tests for Reliability and Validity……………………………………………........51

          3.7 Method of Data Presentation and Analysis………………………………………52

CHAPTER 4: DATA PRESENTATION AND ANALYSIS

          4.0 Introduction……………………………………………………………………….53

          4.1 Presentation of Data According to Response…………………………………..53-73

          4.2 Advanced Data Analysis………………………………………………………….73

          4.2.0 Descriptive Statistics…………………………………………………………73-87

          4.3 Cranbach’s Reliability Test……………………………………………………….88

          4.4 Testing of Hypothesis………………………………………………………….88-91

CHAPTER 5: SUMMARY, CONCLUSIONS AND RECOMMENDATIONS

          5.1 Summary……………………………………………………………………….92-93

          5.2 Conclusion……………………………………………………………………..93-94

          5.3 Findings……………………………………………………………………………94

          5.3.1 Theoretical Findings………………………………………………………....94-95

          5.3.2 Empirical Findings…………………………………………………………...95-96

          5.4 Recommendations……………………………………………………………...96-97

          5.5 Limitation of the Study………………………………………………………...97-98

BIBLIOGRAPHY………………………………………………………………………99-103

APPENDIX: QUESTIONNAIRE………………………………………………………….104

LIST OF TABLES

Table 4.1.1 Analysis of Rate of Respondents

Table 4.1.2 Analysis of Gender of Respondents

Table 4.1.3 Analysis of Age of Respondents

Table 4.1.4 Analysis of Marital Status of Respondents

Table 4.1.5 Analysis of Academic Qualification of Respondents

Table 4.1.6 Analysis of Current Position of Respondents

Table 4.1.7 Analysis of Number of Years in Position of Respondents

Table 4.1.8 Analysis of Professional Qualification of Respondents

Table 4.1.9 Analysis of General Developments

Table 4.1.10 Analysis of Importance

Table 4.1.11 Analysis of Application of Corporate Governance

Table 4.1.12 Analysis of Effective Adoption of Corporate Governance

Table 4.1.13 Analysis of Benefit from Corporate Governance

Table 4.1.14 Analysis of Public Confidence

Table 4.1.15 Analysis of Government Intervention

Table 4.1.16 Analysis of Corporate Governance Impact on Banking Policies and Procedures

Table 4.1.17 Analysis of Better Corporate Performance

Table 4.1.18 Analysis of Company Policies Encouragement

Table 4.1.19 Analysis of Development and Succession Plan

Table 4.1.20 Analysis New Code of Corporate Governance

Table 4.1.21 Analysis of Agreement with Contents of New Code

Table 4.1.22 Analysis of Official Presentation of Code to Staffs

Table 4.1.23 Analysis of Excesses of Management in Boards

Table 4.1.24 Analysis of Code Relevance

Table 4.1.25 Analysis of Critical Factor in Bank Instability

Table 4.1.26 Analysis of Unethical Behaviour

Table 4.1.27 Analysis of Adequate and Transparency and Disclosure

Table 4.1.28 Analysis of Recent Recapitalization

Table 4.1.29 Analysis of Economic Improvement

Table 4.1.30 Analysis of Management and Board Conflict

Table 4.1.31 Banks System of Credit Risk Assessment

Table 4.2.1 Do you think you are conversant with the general developments in the Nigerian Banking Industry?

Table 4.2.2 Do you think Corporate Governance is important in the Nigerian Banking Industry?

Table 4.2.3 Should Corporate Governance be applied in all aspects of the Banking Industry?

Table 4.2.4 Do you think Corporate Governance has been effectively adopted into the Nigerian Banking Industry?

Table 4.2.5 Do you think shareholders and stakeholders have benefited immensely from Corporate Governance?

Table 4.2.6 Does Corporate Governance enhance public confidence in the Nigerian Banking Industry?

Table 4.2.7 Is Government Intervention of utmost importance in the setting up of Corporate Governance in the Banking Industry?

Table 4.2.8 Does Corporate Governance have an impact on you banking procedures and policies?

Table 4.2.9 Do you think better Corporate Governance is supposed to head to better corporate performance?

Table 4.2.10 Do you agree that company policies put in place encourage Corporate Governance?

Table 4.2.11 In relation to Corporate Governance, do you agree that the bank has an appropriate management development and succession plan in place?

Table 4.2.12 Is the bank aware of the new code of Corporate Governance

Table 4.2.13 Do you agree with its contents?

Table 4.2.14 Has the code been officially presented to members of staff?

Table 4.2.15 Do you think the code will help check excesses of management in boards?

Table 4.2.16 Do you think the code is relevant to the Nigerian Banking Industry?

Table 4.2.17 Is Corporate Governance a very critical factor in bank instability in Nigeria?

Table 4.2.18 Do you agree that Corporate Governance helps guide against unethical behaviour?

Table 4.2.19 Is there adequate Transparency and Disclosure in your bank?

Table 4.2.20 Has the recent recapitalization helped in ensuring transparency and disclosure in your bank through diversification in bank ownership?

Table 4.2.21 Do you think Corporate Governance has led to economic improvement in Nigeria over the years?

Table 4.2.22 Do you think that Corporate Governance will reduce management and board conflict?

Table 4.2.23 Do you agree that banks system of credit risk assessment includes an evaluation of the client’s Corporate Governance practise?

Table 4.3.0 Reliability Statistics