Corporate Governance and Financial Performance

ABSTRACT

The study examined the empirical link between corporate governance and financial performance. The specific objectives of the study was to examine the effect of board size on the financial performance of deposit money banks in Nigeria, to determine the effect of board composition on the financial performance of deposit money banks in Nigeria. The research design adopted in this research work is quantitative research design, because the researcher seeks to examine the relationship between corporate governance (as the independent variable using board size and board composition as relevant proxies) and financial performance (as the dependent variable with return on assets as the relevant performance indicator) without necessarily and directly manipulating or controlling the independent variables. This study employed the multiple regression analysis with Ordinary Least Squares (OLS) econometric technique of data analysis. This is because multiple regression analysis concerns itself with the description of cause and effect relationship between three or more variables. From the findings it was revealed that all variables of corporate governance have a significant effect on return on asset. However, the study concludes that corporate governance has significant effect on financial performance of commercial banks in Nigeria. It is recommended that o convince policy makers that the solution to the Nigerian banking crises lies in the improvement of the corporate governance practices of the DMBs, subsequent research should take into account more measures of corporate governance practices and should, more importantly, test for differences in performance of banks with better corporate governance practices to those with weak corporate governance practices.