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CORPORATE GOVERNANCE MECHANISMS AND FINANCIAL PERFORMANCE OF LISTED DEPOSIT MONEY BANKS IN NIGERIA

Authors: Udeme Charles Joe & Professor Nkanikpo Ibok

ABSTRACT

The effectiveness of corporate governance mechanisms has a direct impact on the overall financial health and sustainability of any entity and it is one of the major key indicators adopted by investors when making their investment choices. The main objective of this study was to examine the effect of corporate governance mechanisms on the financial performance of listed deposit money banks in Nigeria. The independent variable being corporate governance mechanism was proxied by board size, board independence, and board diligence while the dependent variable financial performance was proxied by return on equity. The research design adopted for this study was the ex post facto research as the secondary data were employed. The population of this study was fourteen listed deposit money banks in Nigeria. The method of data analysis employed was the ordinary least square regression analysis and the statistical package employed was SPSS version 21. Based on the analysis of this study, it was found out that board size has no significant positive effect on return on equity; board independence has a significant positive effect on return on equity; board diligence has a significant positive effect on return on equity on return on equity of listed deposit money banks in Nigeria. Thus it was concluded that board monitoring mechanisms have significant effect on financial performance of listed deposit money banks in Nigeria. Based on this, it was recommended that the management of deposit money banks in Nigeria should prioritize appointing independent non-executive directors to their boards. It was also recommended that listed deposit money banks should ensure regular and effective board meetings as this have positive influence on their financial performance.

Keywords: Corporate governance, financial performance, return on assets, board size, board independence.

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