SOURCE:

Faculty: Management Sciences
Department: Accountancy

CONTRIBUTORS:

Eginiwin J. Ese
Okafor R. G.

ABSTRACT:

This study was initiated to empirically examine corporate governance mechanisms and firms’ financial performance in Nigeria: A parallel survey of the banking and consumer goods sectors. The aim of the study was to carry out a simultaneous analysis of the impact of corporate governance mechanisms – board size, non-executive directors, female board membership and audit committee independence on firms’ financial performance measures of return on equity, return on assets and earnings per share in both the banking sector; and the consumer goods sector in Nigeria. Firm size measured with total assets of firms was used as control variable in the study. Data collected for the study were restricted to the period the Security and Exchange Commission introduces the new improved corporate governance codes of 2011. Hence, data representing the period of 2012-2016 financial years were obtained from the audited financial statement/annual reports of the listed deposit money banks and consumer goods firms used for the study. The data gathered with respect to the concerned sectors were analyzed using the multiple regressions model via the special package for social sciences (SPSS) version 23.Based on the results from the regression analysis, our findings revealed that while there is positive and insignificant relationship between the board size and firms’ financial performance with respect to ROE, ROA, EPS in the banking sector; the result shows a negative and insignificant relationship between board size and firms’ financial performance in the consumer goods sector. The result equally revealed that there is positive and significant relationship betweennon-executive directors and firms’ financial performance in the banking sector; while that of the consumer goods sector indicated a negative and insignificant relationship between non-executive and firms’ financial performance with respect to ROE, ROA, EPS. More revelation by the study shows that there is negative and insignificant relationship between female board member and firms’ financial performance in the banking sector; while that of the consumer goods sector exhibited a positive and insignificant relationship female board member and firms’ financial performance with respect to ROE, ROA, EPS. Further revelation from the study indicated that there is positive and insignificant relationship between audit committee independence and firms’ financial performance in the banking sector, while that of the consumer goods sector indicated a positive and significant relationship between audit committee independence and firms’ financial performance with respect to ROE, ROA, EPS. Finally, the study revealed that there is negative and insignificant relationship between firm size and financial performance in the banking sector; while that of the consumer goods sector shows a positive and insignificant relationship between firm size and firms’ financial performance with respect to ROE, ROA, EPS. On the strength of the above, the researchers concluded that corporate governance practice has no significant influence on firms’ financial performance in both the banking and consumer goods sectors in Nigeria. The researchers, however recommended that firms should discourage the practice of large/big board size as this will reduce the directors’ emolument cost, and that companies should encourage more non-executive directors as well as audit committee independence as this will help boost shareholders and other stakeholders confident.