CHAPTER TWO: LITERATURE REVIEW
2.2 Literature Review on Variables
2.3 Review of Previous Studies
2.4 Theoretical Framework
CHAPTER THREE: METHODOLOGY
3.2 Research Design
3.3 The Population And Sampling
3.4 Sources of Data
3.5 Research Instrument
3.6 Model Specification and Analyses Plan
3.7 Operationalization Of Variables
CHAPTER FOUR: DATA ANALYSIS AND INTERPRETATION
4.2 Data Analysis and Interpretation
4.3 Model Summary and Analysis of Result
4.4 Test of Hypotheses
CHAPTER FIVE: SUMMARY OF FINDINGS, CONCLUSION AND RECOMMENDATIONS
5.2 Summary of Findings
This study is motivated by a desire to examine the corporate governance and bank failure in Nigeria for a period of 6 years (2006 – 2011). In light of the empirical review and other discussions, a number of questions arose as to whether there is significant relationship between board size, board composition, board independence and bank failure. Using the Ordinary Least Square (OLS) regression technique with the aid of a computer software, the empirical findings revealed among other things that, there is a significant relationship between board size, board composition and bank failure. It furthermore reveals that there is no significant relationship between board independence and bank failure. We therefore recommend that companies should attention to their audit tenure as it influence auditor selection among Nigerian quoted companies.
1.1 BACKGROUND TO THE STUDY
Mohammed (2011) opine that corporate financial reporting is fundamental to all stakeholders - shareholders, management, government, creditors and society at large. It requires vital attention in practice considering the effect on institutional failures and abuse of power. The dynamic business environment, therefore, calls for improved recognition, measurement and transparent disclosure on firm's operation. He further posit that, the rate of business failure is sporadic as evidenced by Enron, Worldcom, Sunbeam, Cadbury Nigeria Plc and other high-profile scandals. The causes of such failure, according to him are excessive short-term strategies which undermine market credibility and discourage long term value creation and investment. Mohammed (2011) buttress that the consequences of institutional failure on economic growth and sustainable development are unbearable to a developing country like Nigeria, this affect the level of confidence the public has in various corporate establishments. The consequences of ineffective corporate governance will not only affect the shareholders but also, the employees, suppliers, consumers and the nation as a whole. Thus, a governance system that will promote ethical value, professionalism and sound management practice is desirable.
Nworji, Adebayo, and David (2011) support that the consistent bank failures and financial crisis during the last two decades has raised questions on the consistency of the corporate governance practices in the banking system. According to them, the turmoil in the Nigerian banking system has required the government to set up some policies in form of corporate governance to stem the tide of bank failures and distress in Nigeria. Therefore the CBN in conjunction with other supervisory institutions has decided to place emphasis on the monitoring of credit risk and provide incentives on prudent management of banks to aid transparency in the banking system, so that the Nigerian economy can forge ahead.
Lemo (2010) states that corporate governance is the body of rules of the game by which companies are managed and supervised by the board of directors in order to protect the interest and financial stakes of shareholders that are far removed from the management of the firm. It is a system by which corporations are governed and controlled with a view to increasing shareholders value and meeting expectation of other stakeholders.
Okene (2010) maintain that corporate governance was used as a term forty years ago. The root of the term “governance” was from the Latin words “gubarnare” and “gubernator” which refer to “steering a ship” and to the “steerer or captain of the ship” respectively.
Mensah (2003) states that corporate governance is an institutional arrangement which provide the discipline and checks over excesses of controlling managers. Corporate governance enforcement mechanisms through proxy contest, takeover and buy out permit control of the company: to be sold and bought facilitating the replacement of non-performing managers.
In the light of the above discussion, the study intends to investigate corporate governance and bank failure in Nigeria.
1.2 STATEMENT OF THE RESEARCH PROBLEM
The banking institution occupies vital position in the stability of the nation's economy. It plays essential roles on fund mobilization, credit allocation, payment and settlement system as well as monetary policy implementation. Management is expected to exhibit good governance practices to ensure achievement of it objectives and avoid the consequences of failure resulting from weak governance practices. In this regard, corporate governance considered to be of special importance in ensuring stability in the economy and successful achievement of banks' strategy.
Against this backdrop, the following research questions were raised:
1. Is there relationship between board Size and bank failure?
2.Is there relationship between board composition and bank failure?
3.Is there relationship between board independence and bank failure?
1.3 OBJECTIVES OF THE STUDY
The broad objective of this study is to empirically investigate corporate governance and bank failure in Nigeria.
The specific objectives of this study are:
1. To ascertain the relationship between board size and bank failure.
2. To investigate the relationship between board composition and bank failure.
3. To examine the relationship between board independence and bank failure.
1.4 RESEARCH HYPOTHESIS
The following null hypotheses have been formulated to serve as a base for this research;
1. Ho: There is no significant relationship between board size and bank failure.
2. Ho: There is no significant relationship between board composition and bank failure.
3. Ho: There is no significant relationship between board independence and bank failure.
CORPORATE GOVERNANCE AND CORPORATE FAILURE IN NIGERIA