Effect of corporate governance on the financial performance of commercial banks in Nigeria
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Author(s)Lawrence Uchenna OkoyeLink to ORCID Index: https://orcid.org/0000-0001-6999-0100
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Felicia OlokoyoLink to ORCID Index: https://orcid.org/0000-0003-0176-0194
,
Johnson I. Okoh
,
Felix Ezeji
,
Rhoda Uzohue
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DOIhttp://dx.doi.org/10.21511/bbs.15(3).2020.06
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Article InfoVolume 15 2020, Issue #3, pp. 55-69
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- 2626 Views
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2001 Downloads
This work is licensed under a
Creative Commons Attribution 4.0 International License
Banks are expected to operate within acceptable standards of governance for consistent profitable operations. They run heavily on customer deposits, which is confidence-driven. Since the quality of governance is critical to winning and retaining customer confidence and patronage, the imperative for good governance practices in banks cannot be overemphasized. This research paper explores the nexus between governance practices and bank profitability in Nigeria. It adopts the size of bank board and directors’ stake as proxies for corporate governance, with return on assets and return on equity as representations for financial performance. The research incorporates firm size as a controlled variable. The estimation technique of the Generalized Method of Moments was employed. Evidence from the research reveals that board size, directors’ equity, and firm size substantially affect Nigerian banks’ financial performance. Besides, the study shows a robust effect of lagged return on equity on the current level of performance. Therefore, the study asserts that governance in business entities strongly affects their financial performance and recommends maintaining optimum board size to minimize boardroom conflicts. It further prescribes that the requirement for substantial equity stake by directors of banking institutions be sustained, as it secures commitment to governance practices that support profitability.
Acknowledgment
The authors acknowledge the support of Covenant University towards the publication of this paper.
- Keywords
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JEL Classification (Paper profile tab)C14, C23, G21, G34
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References86
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Tables0
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Figures0
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Determinants of financing decision: empirical evidence on manufacturing firms in Indonesia
Sutomo Sutomo , Sugeng Wahyudi ,
Irene Rini Demi Pangestuti ,
Harjum Muharam
doi: http://dx.doi.org/10.21511/imfi.16(2).2019.14
Investment Management and Financial Innovations Volume 16, 2019 Issue #2 pp. 159-170 Views: 2343 Downloads: 327 TO CITE АНОТАЦІЯThis study aims to contribute to the emergence of the literature focusing on exploring the factors influencing the financing decision, as well as examining the relationship between the firm size, profitability and firm growth towards the corporate debt. Questions such as how relevant firm size, profitability and firm growth to debt are, quantitatively, had not been fully answered in the business literature. The purpose of this study is to fill this large gap by examining the role of the firm size, profitability, investment and firm growth for the corporate debt. This study tries to examine the determinants of debt in the financial literature which include size, growth, business risk, and profitability in accordance with the capital structure theory, in manufacturing firms in Indonesia. The sample contained financial data from 150 firms for the period 2012–2017. The results showed that the manufacturing firms in Indonesia had high debt levels, especially the size, profitability, firm growth and profitability had proven to be the debt determinants, which also confirmed the Pecking Order Theory. This study also found that the management preference of manufacturing firms in Indonesia for risk was the risk-seeker or risk-neutral ones. This finding implies that the choice of funding sources originating from debt still provided greater returns compared to the capital cost needed due to business uncertainties.
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Corporate governance quality, firm size and earnings management: empirical study in Indonesia Stock Exchange
Yulia Saftiana , Mukhtaruddin ,
Krisna Winda Putri ,
Ika Sasti Ferina
doi: http://dx.doi.org/10.21511/imfi.14(4).2017.10
Investment Management and Financial Innovations Volume 14, 2017 Issue #4 pp. 105-120 Views: 1956 Downloads: 521 TO CITE АНОТАЦІЯEarnings management (EM) is manipulation done by management in preparing financial statement in order to gain management advantages or to increase the firm value. EM can reduce the quality of financial statements because it does not show the real earning periodical. This research aims to identify the effect of good corporate governance (GCG) (institutional ownership, managerial ownership, frequency of board meetings, frequency of audit committee (AC) meetings), firm size, and leverage on the EM. Population comprises the companies in LQ 45 index of Iindonesia Stock Exchange (IDX) for the period 2010–2014. Samples of the research were taken using purposive sampling method, and the variables are tested using multiple linear regression analysis. The results of the research show that partially, only leverage has significant effect on EM, while institutional ownership, managerial ownership, frequency of board meeting, frequency of AC meetings, and firm size have no significant effect on EM, but all of the variables have simultaneously significant effect on EM. Limitations of the research are the only used 6 independent variables and 21 companies as samples of the research.
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The impact of working capital management on cash holdings of large and small firms: evidence from Jordan
Mohammad Fawzi Shubita
doi: http://dx.doi.org/10.21511/imfi.16(3).2019.08
Investment Management and Financial Innovations Volume 16, 2019 Issue #3 pp. 76-86 Views: 1785 Downloads: 1149 TO CITE АНОТАЦІЯLiquidity is a firm’s ability to pay its current obligations as they come due and thus remain in business in the short run, which reflects the ease with which assets can be converted to cash. The objective of working capital management (WCM) is to minimize the cost of maintaining liquidity while guarding against the risk of insolvency, working capital policy applies to short-term decisions, and capital structure finance applies to long-term decisions.
Several studies have been conducted on the impact of WCM on cash holding levels. The impact of WCM on liquidity and cash holding levels is analyzed in this study. The study also makes a comparison between large- and small-scale firms. Panel data for 62 Jordanian industrial firms covering an eleven-year period (2006–2016) have been analyzed. The descriptive analysis indicates that large firms hold more cash than small firms, as well as more debt, cash flow and growth.
The findings of the data set indicate that WCM, as a variable (working capital net of cash), is a strong predictor of firm cash holding levels. When a firm has several cash substitutes, it will maintain low cash levels. The separate analysis shows that there are significant differences between small- and large-scale firms for determinates related to cash holding levels. Firm size and cash flow ratios were strong predictors of cash holding levels for both samples.
