Corporate Governance and Organisational Performance: Analysis of Nigeria Stock Exchange Listed Companies

Olajide Solomon Fadun

Abstract


Corporate governance is relevant in both developed and emerging economies. The study investigated the impact of corporate governance on organisational performance, using thirty (30) randomly selected listed companies in the Nigeria Stock Exchange (NSE) in the year 2016. The study focused on three corporate governance variables (i.e., Board Size, Board Independence, CEO Duality/Tenure); and two performance variables - i.e., Returns on Asset (ROA) and Returns on Equity (ROE). The study does not cover the market measure performance variable of Tobin’s Q. The study is an empirical research, with analytical research design. Secondary data, extracted from published annual reports of selected quoted companies and NSE website, is used for the study. The findings revealed a positive correlation between board size, independence directors, and performance variables; but, showed a negative correlation between CEO tenure and performance variables. The result showed that number of directors was not positively related to performance in selected quoted companies in terms of ROA; but, it revealed a positive correlation between board size and performance in terms of ROE. It also showed that the correlation between CEO tenure and performance variables was negative on the two performance variables (ROA and ROE). Regarding relationship between CEO Duality and performance variables (ROA and ROE), the result showed that CEO Duality has a positive correlation with ROA; but had a negative relationship with ROE. Generally, the study revealed that adoption of sound corporate governance practices by listed companies can improve their performance. Companies can benefit from this improved corporate governance practices by way of increased investment from investors and reduced capital cost. Shareholders confidence would be enhanced with attendant improvement in shareholders wealth. The nation’s economy would also benefit from sound corporate governance practices by way of improved GDP. 


Keywords


Corporate governance, Organisational performance, Nigeria.

Full Text:

PDF

References


Abdulazeez, D. A., Ndibe, L. & Mercy, A. M. (2016). Corporate governance and financial performance of listed deposit money banks in Nigeria. Journal of Accounting and Marketing, 5(1), 1 – 6.

Adams, R. B., Hermalin, B. E. & Weisbach, M. S. (2010). The role of boards of directors in corporate governance: A conceptual framework and survey. Journal of Economic Literature, 48(1), 58 – 107.

Adegbite, E. & Nakajima, I. (2011). Corporate governance and responsibility in Nigeria. International Journal of Disclosure and Governance, 8(2), 252-271.

Adekoya, A. A. (2011). Corporate governance reforms in Nigeria: Challenges and suggested solutions. Journal of Business Systems, Governance, and Ethics, 6(1), 44 - 56.

Adekunle, S. A. & Achedo, E. M. (2014). Corporate governance and financial performance of selected quoted companies in Nigeria. European Journal of Business and Management, 6(9), 32 - 44.

Adenuga, A. O. (2010). Stock market development indicators and economic growth in Nigeria (1990-2009): Empirical investigations. Central Bank of Nigeria Economic and Financial Review, 48(1), 33 - 70.

Afolabi, A. A. (2015). Examining Corporate Governance Practices in Nigeria and South African Firms. European Journal of Accounting, Auditing, and Finance Research, 3(1), 10 - 29.

Afolabi, A. & Amupitan, M. D. (2015). Corporate governance in the Nigerian banking sector: Issues and challenges. European Journal of Accounting Auditing and Finance Research, 3(5), 64 – 89.

Ahmed, E. & Hamdan, A. (2015). The impact of corporate governance on firm performance: Evidence from Bahrain Bourse. International Management Review, 11(2), 21 - 37.

Akingunola, R. O., Adekunle, O. A. & Adedipe, O. A. (2013). Corporate governance and bank’s performance in Nigeria (Post – bank’s consolidation). European Journal of Business and Social Sciences, 2(8), 89 – 111.

Akinkoye, E. Y., & Olassanmi, O. O. (2014). Corporate governance practice and level of compliance among firms in Nigeria: Industry analysis. Journal of Business and Retail Management Research, 9(1), 18 - 27.

Ameer, R., Ramli, F. & Zakaria, H. (2010). A new perspective on board composition and firm performance in an emerging market. Corporate Governance, 10(5), 647 – 661.

Attig, N., El Ghoul, S. & Guedhami, O. (2009). Do multiple large shareholders play a corporate governance role? Evidence from East Asia. Journal of Financial Research 32(4), 395 – 422.

Babatunde, M. A. & Olaniran, O. (2009). Effects of internal and external mechanisms on governance and performance of corporate firms in Nigeria. Corporate Ownership, and Control, 7(2), 26 - 36.

Bakare, M. O. (2011). Corporate governance practices as a reflection of the socio-political environment. International Journal of Critical Accounting, 2(3), 133 - 170.

Barth, J. R., Caprio, G. & Levine, R. (2006). Governance and bank valuation. Journal of Financial Intermediation, 16(4), 584 - 617.

Bathala, C. T. & Rao, R. P. (1995). The determinants of board composition: An agency theory. Perspective Managerial and Decision Economics, 16, 59 - 69.

Baysinger, B. & Butler, H. (1985). Corporate governance and board of directors: performance effects of changes in board composition. Journal of Law, Economics, and Organization, 1, 101 – 124.

Bonn, I., Yoshikawa, T. & Phan, P. H. (2004). Effects of board structure on firm performance: A comparison between Japan and Australia. Asian Business & Management, 3, 105 – 125.

Boubakari, A. & Jin, D. (2010). The role of stock market development in economic growth: Evidence from some Euronext countries. International Journal of Financial Research, 1(1), 14 - 20.

Brickley, J. A. & Jarrell, G. (1997). Leadership Structure: Separating the CEO and chairman of the board. Journal of Corporate Finance, 3(3), 189 - 220.

Buckley, R. P. & Arner, D. W. (2012). From crisis to crisis: The global financial system and regulatory failure. Law Research Paper No. 2012/002, Hong Kong: University of Hong Kong Faculty of. Retrieved from: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=198001 [Accessed: 16/06/2017].

Byrd, J. W. & Hickman, K. A. (1992). Do outside directors’ monitor managers? Evidence from the tender offers bids. Journal of Financial Economics, 32(2), 195 - 221.

Calabrese, A., Costa, R., Menichini, T., Rosati, F. & Santelice, G. (2013). Turning corporate social responsibility-driven opportunities into competitive advantages: A two–dimensional model. Knowledge and process management, 20(1), 50 - 58.

Chen, J., Dar-Hsin, C. & Chung, H. (2006). Corporate control, corporate governance and firm performance in New Zealand. International Journal of Disclosure & Governance, 3(4), 236 – 276.

Coles, J. L., Nareen D. D. & Lalitha N. (2008). Boards: Does one size fit All? Journal of Financial Economics, 87, 329 - 356.

Coskun, Y. (2012). Financial failure and risk management. Sermaye Piyasası Dergisi, 10(2), 100 - 109.

Daianu, D. & Lungu, L. (2008). Why is this financial crisis occurring? How to respond to it? Romanian Journal of Economic Forecasting, 9(4), 59 - 87.

Daily, C. M. & Dalton, D. R. (1992). The relationship between governance structure and corporate performance in entrepreneurial firm. Journal of Financial Economics, 43, 195 - 218.

Daily, C. M., Dalton, D. R. & Canella, A. A. (2003). Corporate governance: Decades of dialogue and data. Academy of Management Review, 28(3), 371 - 382.

Davis, J. H., Schoorman, F. D. & Donaldson, L. (1997). Toward a Stewardship Theory of Management. Academy of Management Review, 22, 20 – 37.

Eisenhardt, K. M. (1989). Agency theory: An assessment and review. International Journal of Management, 5, 341 - 353.

Ertimur, Y., Ferri, F. & Stubben, S. R. (2010). Board of directors’ responsiveness to shareholders: Evidence from shareholder proposals. Journal of Corporate Finance, 16(1), 53 – 72.

Fadun, O. S. (2013). Corporate governance and insurance firms’ performance: Empirical study of Nigerian experience. Journal of Insurance Law & Practice, 3(1), 11 - 31.

Faatihah, S., Syahrina, S. F., AbdulHalim, A. & Julizaerma, M. K. (2016). Board independence and firm performance. Procedia Economics and Finance, 37, 460 – 465.

Finkelstein, S. & D’Aveni, R. A. (1994). CEO duality as a double – edge sword: How board of directors’ balance entrenchment avoidance and unity of command. Academy of Management Journal, 37(5), 107 – 108.

Garuba, A. O. (2015). Corporate governance in the Nigerian banking industry: Issues and challenges. African Research Review: An International Multidisciplinary Journal Ethiopia, 9(2), 104 – 117.

Haniffa, R. & Hudaib, M. (2006). Corporate governance structure and performance of Malaysian listed companies. Journal of Business, Finance & Accounting, 33(2), 1034 – 1062.

Heenatigala, K. (2011). Corporate governance practices and firm performance of listed companies in Sri Lanka. Retrieved from: http://nla.gov.au/aubd.bib-an47223522 (Accessed: 20/08/2017)

Higgs, H. T. (2003). Review of the role and effectiveness of non-executive directors. London: The Department of Trade and Industry.

Hutchinson, M. (2002). An analysis of the association between firms’ investment opportunities, board composition and firm performance in Asia-Pacific. Journal of Accounting and economics, 9, 17 - 39.

International Finance Corporation (2004). The Russia corporate governance manual: Corporate governance introduced. Moscow, Russia: Alpina Business Books.

Iskander, M. R. & Chamlou, N. (2000). Corporate governance: A framework for implementation. Washington DC: The World Bank Group.

Jensen, M. & Meckling, W. (1976). Theory of the firm: Managerial behavior, agency costs, and ownership structure. In: L. Futterman, (1986), The economic nature of the firm. London: Cambridge University Press.

Jiang, Y. & Peng, M. (2011). Principal-principal conflicts during crisis. Asia Pacific Journal of Management, 28(4), 683 – 695.

Jormanainen, I. & Koveshnikov, A. (2012). International activities if emerging market firms: A critical assessment of research in top management journals. Management International Review, 52(5), 691 - 725.

Kolk, A. & Pinkse, J. (2010). The integration of corporate governance in corporate social responsibility disclosure. Corporate Social Responsibility and Environmental Management, 17(1), 15 - 26.

Lam, T. Y. & Lee, S. K. (2008). CEO duality and firm performance: Evidence from Hong Kong. Corporate Governance, 8(3), 299 – 316.

Li, J., Li, Y. & Shapiro, D. (2012). Knowledge seeking and outward FDI by emerging market firms: The moderating effect of inward FDI. Global Strategy Journal, 2(4), 277-295.

Lipman, F. D. (2007). Summary of major corporate governance principles and best practices. International Journal of Disclosure & Governance, 4(4), 309 - 319.

Lipton, M. & Lorsch, J. W. (1992). A modest proposal for improved corporate governance. Business Lawyer, 48, 59 - 77.

Mallin, C. A. (2004). Corporate governance. New York, Oxford University Press.

Miller, D. (1999). Stale in the saddle: CEO Tenure and the match between organization and environment. Management Science, 37, 34 - 52.

Nigerian Stock Exchange (2016). Market data. Nigeria: NSE [Online]. Retrieved from: http://www.nse.com.ng/ (Accessed: 07/07/2017).

Nowak, M. & McCabe, M. (2008). The independent director on the board of company directors. Managerial Auditing Journal, 23(8), 545 - 566.

Petra, S. T. (2005). Do outside independent directors strengthen corporate boards? Corporate Governance: The International Journal of Business in Society, 5(1), 55 – 64.

Prasad, E. S. (2009). Effects of the financial crisis on the U.S.-China economic relationship. CATO Journal, 29(2), 223 - 235.

Ramamurti, R. (2012). What is really different about emerging market multinationals? Global Strategy Journal, 2(1), 41 - 47.

Rechner, P. L. & Dalton, D. R. (1991). CEO duality and organizational performance: A longitudinal analysis. Strategic Management Journal, 12(2), 155 – 160.

Roberts, J., Kayande, U. & Srivastava, R. (2015). What’s different about emerging markets, and what does it mean for theory and practice? Customers Need and Solution, 2, 245 - 256.

Sarkar, J. & Sarkar, S. (2004). Board independence and corporate governance: Which way forward? Economic and Political Weekly, 39(48), 5074 - 5076.

Securities and Exchange Commission (2003). Code of best practices on corporate governance. Abuja, Nigeria: SEC.

Securities and Exchange Commission (2011). Code of best practices on corporate governance. Abuja, Nigeria: SEC.

Shahrokhi, M. (2011). The global financial crises of 2007-2010 and the future of capitalism. Global Finance Journal, 22(3), 193 - 201.

Sheth, J. N. (2011). Impact of emerging markets on marketing: Rethinking existing perspectives and practices. Journal of Marketing, 75, 166 – 182.

Todorovic, L. (2013). Impact of corporate governance on performance of companies. Montenegro Journal of Economics, 9(2), 32 - 45.

Tornyeva, K. & Wereko, T. (2012). Corporate governance and firm performance: Evidence from the insurance sector of Ghana. European Journal of Business and management, (4)13, 13 - 21.

Weisbach, M. S. (1988). Outside directors and CEO turnover. Journal of Financial Economics, 20, 431 - 460.




DOI: http://dx.doi.org/10.20525/ijfbs.v6i4.777

Refbacks

  • There are currently no refbacks.


Copyright (c) 2018 International Journal of Finance & Banking Studies (2147-4486)

Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.

Creative Commons License
International Journal Finance and Banking Studies (2147-4486) by Hasan Dinçer is licensed under aCreative Commons Attribution-NonCommercial 4.0 International License.
Based on a work at www.ssbfnet.com/ojs.

 

"SSBFNET SSBFNET SSBFNET