Corporate Governance And Bank Performance

Corporate Governance And Bank Performance

Chapter One

Preface

Background To The Study

The bank is committed to the principle of stylish practice in commercial governance which aims at icing integrity, openness, credibility, translucency and responsibility in all angles of its business, Annual Report( Zenith, 2009). Commercial Governance is the process by which a board of directors through its operation attendants an institution in the fulfillment of its commercial charge with a view to cover functional liabilities.

Commercial Governance thus, involves a network or relationship between commercial directors, directors and providers of capital, Central Bank of Nigeria( 2008).

It’s seen as a means of icing that business associations are controlled and directed to align with the interest of the possessors of the business or association. It aims at icing that commercial directors in whom coffers are entrusted don’t betray this trust bestowed on them by the possessors of the coffers.

Accordingly, resource possessors vest the control of the association on commercial directors while appointing a board of directors to oversee the conditioning of the commercial directors. It’s on this platform that oversight function of the board of directors is being established. Commercial director thus work towards maximizing the wealth of their shareholders. Periodic reports are set and these are done through the donation of fiscal statement.

still, there are other interested parties( stakeholders) who make use of these reports presented by the pots.

This pushes the liabilities of the pots beyond the focus of the shareholders alone to include other interested parties.

The fiscal statement represents the only means by which stakeholders can estimate the performance of the banks.

These fiscal statements give the banks with the openings of presenting their performances generally on the base of earnings. directors, as a result of their day to day involvement in the control of the pot have access to information which stakeholders( except inside directors) don’t have access to as similar employ the use of fiscal statement to communicate these information to stakeholders.

The operation of earnings as done by manages connotes manipulation of income( profit) to produce an emotional or favourable perception to stakeholders. Bank directors indulge in several acts of managing earnings.

Statement Of Research Problem

The credibility of reported fiscal statement by commercial realities has come a cause of concern to controllers, investors, judges and other stakeholders. The Nigerian Stock Market Annual Report( 2004 200) points that commercial directors indulge in several unholy acts similar as understating losses, overdoing profit, covering bad debt and other unlawful acts. These have come regular features in the commercial world and have spoiled the commercial image of the nation.

This exploration is to address commercial governance issues similar as board size covering, composition of board, chance of directors ’ power, race plan and number of directors.

Exploration Suppositions

1. There’s a positive relationship between a bank’s board size and bank performance.

2. There’s a positive relationship between a bank’s race plan and bank performance.

3. There’s a positive relationship between chance of directors ’ power and bank performance.

4. There’s a positive relationship between number of directors in a bank and bank performance.

Exploration Questions

1. Is there a positive relationship between a bank’s board size and bank performance?

2. Is there a positive relationship between a bank’s race plan and bank performance?

3. Is there a positive relationship between chance of directors ’ power and bank performance?

4. Is there a positive relationship between number of directors and bank performance?

Compass Of Study

This study was confined to Public Limited Companies( banks) quoted on the Nigeria Stock Exchange( NSE) as at 2009 fiscal time end. This is done in order to critically examine the banks ’ performances. The choice of limiting the study to the quoted banks is to permit a manageable size for the study rather than fastening on a wide compass which may prove to be taskful to effectively carry out this study with a large sample size.

Exploration Ideal

1. To find out if there’s a positive relationship between a bank’s board size and bank performance.

2. To find out if there’s a positive relationship between race plan and bank performance.

3. To find out if there’s a positive relationship between chance of directors ’ power.

4. To find out if there’s a positive relationship between number of director and bank performance.

Significance Of The Study

The need for believable or quality fiscal statement in any frugality can not be overemphasized. Its applicability lies in the effective and effective allocation of profitable resource. More importantly, for a developing country similar as Nigeria which requires the flux of foreign direct investments into her fiscal system, a transparent, believable, responsible and dependable fiscal reporting system is a prerequisite for attracting foreign investors.

This study will also help in

1. Maintaining good commercial values and safe business terrain which allows for healthy competition among commercial realities.

2. Boosting the confidence of the investing public as a consequence of believable fiscal reports made by the banks.

3. Enabling the nonsupervisory authorities direct or align their sweats duly in bridling the optional geste of bank directors.

4. Eventually help the collapse of the bank in the future.

Limitations Of Study

It’s confined to 14 named banks in the finance assiduity. It’s done in other to get the effect of commercial governance on banks ’ performance.

Performance can be estimated in different ways. Return on capital employed is been used as an index of the banks ’ performances. The limitations encountered during this study included

1. Difficulty in getting primary data from the banks concerning fiscal matters and business proceedings.

2. The cross sectional differences in account styles of colorful companies under study.

3. Different commercial governance live in the banks used, thereby making comparison delicate.

4. Another constraint was the sample size. A larger size couldn’t be attained due to specialized crunches and time factor.

5. Eventually, non exposure of full commercial governance practice by the banks in their periodic reports, some banks didn’t state explicitly in their periodic reports, the status of its directors( i.e. either superintendent ornon-executive).

Statement Of Suppositions

From the exploration study, it was discovered that some banks have effective and effective commercial governance while some have a veritably poor bone .

Accordingly, the following suppositions as tested empirically in the course of this exploration work and the result is the base of conclusion.

H0 There’s no positive relationship between commercial governance and bank performance.

H1 There’s positive relationship between commercial governance and bank performance.

H0 Banks with board president position different from principal administrative officer aren’t performance conscious( profitability).

H2 Banks with board president position different from principal administrative officer are performance conscious( profitability).

H0 Banks with bigwig- stranger power aren’t maximizing profit.

H3 Banks with bigwig- stranger power are interested in the maximization of profit.

Functional Description Of Terms

1. Commercial Governance This term refers to the process by which a board of directors through its operation attendants an association to achieve its commercial pretensions.

2. director optional Behaviour It refers to those conduct of a commercial director, which don’t align with the anticipation of the stakeholders.

3. Commercial directors It refers to those charged with the responsibility of performing directorial functions similar as planning, directing, organizing, controlling and coordinating.

4. Empirical counting on observation and trial, not on proposition, questionnaire and retrogression analysis.

5. Bridling There are rules and regulations, checks and balances that restrain the commercial directors from placing their particular pretensions before the organizational pretensions.