The Effect of Corporate Governance on Firm Performance: A study of Selected Companies in the Nigeria Stock Exchange

THE EFFECTS OF CORPORATE GOVERNANCE ON FIRM PERFORMANCE.

(A STUDY OF SELECTED COMPANIES IN NIGERIAN STOCK EXCHANGE)

BY

ONYENWEH IFEANYI EMMANUEL

2012154085

DEPARTMENT OF ACCOUNTANCY,

FACULTY OF MANAGEMENT SCIENCE,

CHUKWUEMEKA ODUMEGWU OJUKWU UNIVERSITY,

IGBARIAM CAMPUS

AUGUST, 2016.

TITLE PAGE

THE EFFECTS OF CORPORATE GOVERNANCE ON FIRM PERFORMANCE.

(A STUDY OF SELECTED COMPANIES IN NIGERIAN STOCK EXCHANGE)

BY

ONYENWEH IFEANYI EMMANUEL

2012154085

BEING A PROJECT PRESENTED TO THE DEPARTMENT OF ACCOUNTANCY, FACULTY OF MANAGEMENT SCIENCE, CHUKWUEMEKA ODUMEGU OJUKWU UNIVERSITY, 

IGBARIAM CAMPUS

IN PARTIAL FULFILMENT OF THE 

REQUIREMENTS FOR THE AWARD OF BACHELOR OF SCIENCE DEGREE (B.Sc.) IN ACCOUNTANCY.

AUGUST, 2016.

APPROVAL PAGE

This research project “the effect of corporate governance on firm performance (a study of selected quoted companies in Nigerian Stock Exchange)” has been approved by the Department of Accountancy in partial fulfillment for the award of Bachelor of Science (B.Sc.) in Accounting.

_____________________________________________________

    Ven. J.K.J. OnuoraDate

(Supervisor)

_____________________________________________________

       Dr. A.S. AnichebeDate

     (Head of Department)

______________________________________________________

     External ExaminerDate

CERTIFICATION

This is to certify that this research project titled “the effect of corporate governance on firm performance (a study of selected companies quoted in the Nigerian Stock Exchange” was carried out by Onyenweh Ifeanyi Emmanuel with Registration No. 2012154085 of the Department of Accountancy, Faculty of Management Science. It is adequate in scope and quality for the award of Bachelor of Science (B.Sc.) Degree in Accountancy, in Chukwuemeka Odumegwu Ojukwu University, Igbariam Campus.

   

__________________________________________

Ven. J.K.J. OnuoraDate

(Supervisor)

DEDICATION

This work is dedicated to Almighty and ever living God; the maker of the whole universe, the source of my energy, Knowledge, wisdom and understanding.

I also dedicate it to my parents, Mr. and Mrs. Anthony Onyenweh for their inestimable support, outstanding inputs, and prayers in my life and to my siblings for wishing me the best in life. 

This project is also dedicated to my guardian Mr. and Mrs. Wilfred Onyenweh for their love, support, and contribution in my life.

ACKNOWLEDGEMENTS

I sincerely appreciate God almighty for his endless mercies and wisdom throughout this research exercise. 

I appreciate and acknowledge the efforts and positive criticism and necessary corrections of my capable, wonderful and intellectual Supervisor; Ven. J.K.J. Onuora, who took time to ensure compliance and orderliness in my work. The Lord shall reward you.

My gratitude goes to my lecturers- Prof. Ifurueze M.S., Prof. Nwadialor E.O Dr. A.S. Anichebe, Dr. Mrs. Nkechi Ofor, Dr. Nwaorgu, Mrs. Agubata, Rev. R.U.C Okpalukeje, Mrs. Emeka-Nwokeji, Ichie Anyigbo, Mrs Evelyn and Mr. Okpalugo for their immense contributions from beginning to the end of this work and for all the knowledge I got through their teachings.

I am extremely grateful to my parents, Mr. and Mrs. Anthony Onyenweh and my sweet siblings and cousins for their unflinching support which has made this project a reality and a success. I love you all. 

I am extremely grateful to my guardian, Mr. and Mrs. Wilfred Onyenweh for their contributions and advice and support throughout my career pursuit in school.

I wish to express my heartfelt gratitude to all those who made this project a huge success in the person of Okoye Chidiebere, Obinze Adaobi, Kaneme Jemanus and Ndukwu Ifeoma.

I also wish to thank my friends, Effort Tokoni, Okafor George, Ugoka Chima for their support and encouragement. May God bless you all.

I will not fail to acknowledge my Grandma for staying all this while to see me attain this level and her support and advice, I appreciate all of your prayers and your love for me. God bless you mama.

ABSTRACT

This study examined the effect of corporate governance on firm performance of some selected companies listed on the Nigerian Stock Exchange. The intent of the study was to determine whether corporate governance mechanisms- CEO duality, board size audit committee, and ownership concentration have an effect on firm performance surrogated by return on assets (ROA); return on equity (ROE), profit margin (PM). Data was sourced from annual report of selected companies. It provides empirical evidence for five (5) non-financial firms in Nigeria for a period of 2010 to 2014. In order to achieve this objective, data collected was analyzed using descriptive statistics and Jarque-Bera statistics to test for normality of variables; Pearson correlation matrix was used to check for multi co-linearity presence in a model and to explore the relationship between the explanatory variables and the dependent variable; The Ordinary Least Square (OLS) multiple regression is employed to test the hypotheses. The results reveal that; a) board size has a negative significant effect with return on asset (ROA), return on equity (ROE), earnings per share (EPS) and profit margin (PM); audit committee had a negative significant effect with return on equity (ROE), earnings per share (EPS) and profit margin (PM), but has a positive significant effect on return on asset (ROA); ownership concentration has a negative significant effect on return on asset (ROA), return on equity (ROE), earnings per share (EPS) and profit margin (PM). It is also observed that CEO duality has a negative significant effect on return on asset (ROA), return on equity (ROE), earnings per share (EPS) and profit margin (PM). The advocacy is for the Securities and Exchange Commission to take into cognizance industry specific effects before formulating codes of corporate governance that determine the characteristic of board structure. Proposition is also made for the Corporate Governance Committee of companies to endeavor to do a regular appraisal of their corporate governance compliance status so as to understand its effect on performance.

TABLE OF CONTENTS

Title page

Approval page

Certification

Dedication

Acknowledgements

Abstract

Table of contents

CHAPTER ONE

1.0INTRODUCTION

1.1BACKGROUND OF STUDY

1.2STATEMENT OF PROBLEM

1.3OBJECTIVE OF STUDY

1.4RESEARCH QUESTION

1.5RESEARCH HYPOTHESIS

1.6SIGNIFICANCE OF STUDY

1.7SCOPE OF THE STUDY

1.8LIMITATION OF STUDY

CHAPTER TWO

2.0REVIEW OF RELATED LITERATURE

2.1CONCEPTUAL FRAMEWORK

2.1.1FIRM PERFORMANCE 

2.1.2RETURN ON ASSET

2.1.3RETURN ON EQUITY 

2.1.4 EARNINGS PER SHARE

2.1.5PROFIT MARGIN

2.1.6CORPORATE GOVERNANCE

2.1.7BOARD SIZE

2.1.8CEO DUALITY

2.1.9 OWNERSHIP CONCENTRATION

2.1.10AUDIT COMMITTEE 

2.2THEORETICAL FRAMEWORK

2.2.1 AGENCY THEORY

2.2.2STEWARDSHIP THEORY

2.2.3RESOURCE DEPENDENCY THEORY

2.3EMPIRICAL FRAMEWORK

2.3.1BOARD SIZE AND FIRM PERFORMANCE 

2.3.2CEO DUALITY AND FIRM PERFORMANCE

2.3.3OWNERSHIP CONCENTRATION AND FIRM PERFORMANCE

2.3.4 AUDIT COMMITTEE AND FIRM PERFORMANCE

2.3.5SUMMARY OF RELATED LITERATURE

CHAPTER THREE

3.0RESEARCH METHODOLOGY

3.1AREA OF THE STUDY

3.2RESEARCH DESIGN

3.3POPULATION OF STUDY

3.4SAMPLE SIZE AND SAMPLE TECHNIQUES

3.5SOURCE OF DATA

3.6MODEL SPECIFICATION

3.7DETERMINATION OF THE MODEL

3.8METHOD OF DATA COLLECTION

3.9METHOD OF DATA ANALYSIS

CHAPTER FOUR

4.0DATA PRESENTATION AND ANALYSIS

4.1INTRODUCTION

4.2DESCRIPTIVE STATISTICS

4.3CORRELATION ANALYSIS

4.4PANEL MULTIPLE REGRESSION RESULTS

CHAPTER FIVE

5.0SUMMARY OF FINDINGS, CONCLUSION AND RECOMMENDATION

5.1SUMMARY OF FINDINGS

5.2CONCLUSION

5.3RECOMMENDATION

5.4FURTHER STUDIES

REFERENCES

APPENDIX