SOURCE:

Faculty: Management Sciences
Department: Banking And Finance

CONTRIBUTORS:

Ubi, H. U.
Okaro, C. S.
Okonkwo, V. I.

ABSTRACT:

This study examined the effect of corporate governance practices on profitability and efficiency of deposit money banks in Nigeria from 2005 to 2017. The research was motivated by conflicting findings in literature regarding the real effect of corporate governance practice on profitability and efficiency. Specifically, this study ascertained the effect of board size, number of outside directors on board, independence of audit committee, block shareholders, and director’s shareholdings on return on assets, return on equity, net income margin, assets utilization, operating efficiencyy as well as Tobin’s Q. The study used secondary data from audited financial statement of deposit money banks from 2005 to 2017. The study applied the panel data research design using Ordinary Least Square (OLS) technique. The result revealed that Board size, independent audit committee and block shareholding have positive relationship with return on assets; Board size, independent audit committee and directors’ shareholding have positive relationship with return on equity; Board size and independent audit committee have positive relationship with net income margin. The result also revealed that board size, Block shareholding and director’s shareholding have significant effect on return on assets, return on equity and net income margin. In view of the findings, Board size should be increased by Nigerian listed firms but not beyond ten that is the average number of directors revealed by this study. This is to prevent communication gap and reduce cost in terms of remuneration to the directors. Block shareholders or/and institutional shareholders should be encouraged by Nigerian listed firms as it serves as external monitoring mechanisms by checkmating the management from taking risky projects at the expense of resources providers.