Corporate Governance And Banks Profitability In Nigeria

Abstract

This paper is the report of a research undertaking which empirically evaluated the influence of corporate governance on the profit of banks. The research design is a case study of seven (7) DMBs in Nigeria. The materials and methods includes collection of secondary data from purposely selected annual report and accounts of seen (7) DMBs published in Nigeria Stock Exchange (NSE) Factbook with the requisite data, namely; First Bank of Nigeria (FBN), Access Bank, Diamond Bank, Guarantee Trust (GT) Bank, Sterling Bank, UBA and Zenith Bank respectively, covering a period between 2008 –2014. The Nigerian 2011 Securities and Exchange Commission (SEC) Corporate Governance Code provisions which were the independent variables in this study includes Board Composition (BCOMP), Directors Remuneration (DRM), Board Committee (BDCOMT) Audit Composition (ADCOMP) respectively. Banksize and age were the intervening variables. The transactional cost theory forms the theoretical framework of the investigation. The Net Profit After Tax (NPAT) of the sample banks was the dependent variable and profitability proxy of the study. The method of estimation includes descriptive statistics, analysis of correlation matrix and ordinary least square techniques together with model specification. Findings from the evaluation of the slope-coefficients of independent variables (i.e. BCOMP, DRM, BCOMT and ADCOMP) reveals the existence of positive relationship between these variables inter-alia and profitability of the sample banks. Although, Directors Remuneration (DRM) and Board Committee (BCOMT) appears to exert a negative relationship with banks profitability but which were not statistically significant at 5% level. In conclusion, the new draft code of corporate governance absolute mandatory mechanism embedded into it should be enforceable in Nigeria without further delay to strengthen the success of the existing 2011 SEC Code of Corporate Governance Code in Nigeria.