Corporate Governance and Bank Performance: A case of the Nigerian Financial Sub- Sector

Abstract

This study examined the link between company governance and its fiscal returns, using director's stock ownership, in the Nigerian banking sector. The 2009 banking scandals and their aftermath effects in the Nigerian banking sector, which arose from poor corporate control, amongst other factors, paved the way for research in this discourse, its importance has attracted attention over time, and even in the 21st century. Directors’ stock ownership was used to proxy company governance, with leverage, liquidity, and corporate size controlled for. Firm performance was proxy by Returns on Asset with keen interest on deposit money banks. This study used a purposive sampling technique of fourteen (14) deposit money banks from 2014 – 2018 as the sample of the study, which was sourced from the Nigeria Stock Exchange (NSE) annual publication 2018. The Panel Least Squares methodology was employed to examine the variables and their effects. The panel Fixed Effect as selected by the Hausman test result shows that director’s stock ownership and liquidity were statistically significant on banks' returns in Nigeria, while leverage and corporate size have no significant consequence on banks performance in Nigeria during the period under review. To this end, the study suggests that; the regulatory bodies should strengthen the corporate governance framework to improve bank performance in Nigeria. Secondly, strategies should be put in place to boost up liquidity level to enhance more liquidity for its effect to remain positive and significant to bank's performance in Nigeria.