Corporate Governance Mechanism and Financial Performance of Quoted Deposit Money Bank in Nigeria
Abu Yusuf Abdulaziz
Igbinedion University, Okada, Benin City, Nigeria
Stephen Ebhodaghe Ughulu
Igbinedion University, Okada, Benin City, Nigeria
ABSTRACT:
The study examined how corporate governance mechanisms impact the financial performance of Nigeria’s Quoted Deposit Money Bank, with a specific focus on the effect of board ownership. Given the study’s scope, secondary data from 2014 to 2023 was utilized. To characterize the variables, descriptive statistics, a correlation matrix, and a normality test were conducted. A robust approach was applied to analyze the short-term behavior of the model after confirming variable stationarity. The data was further analyzed using modified ordinary least squares (MOLS). Results indicated that board ownership had a negative but insignificant relationship with the financial performance of deposit money banks in Nigeria. Return on Assets (ROA) showed a positive and significant correlation with the performance of deposit money banks in Nigeria. Similarly, Return on Equity (ROE) and Tobin’s Q were also positively and significantly related to the performance of these banks. The profit after tax margin (PATM) exhibited a positive and significant correlation as well. Additionally, the interaction between ROA and board size had a positive and significant effect. However, there was no significant impact observed from the interaction between ROA and board ownership on the performance of deposit money banks in Nigeria. As a result, the study suggests that when it comes to board size, organizations should carefully consider the membership of their boards to maintain the best balance of representation and effectiveness. While larger boards can bring a range of perspectives, they may also lead to challenges like added complexity and slower decision-making. Therefore, banks are encouraged to keep boards large enough to benefit from diverse expertise but not so large that it reduces efficiency. Regular evaluations of board composition and performance can help maintain this balance.
Published in: International Journal of Research in Interdisciplinary Studies (Volume 2, Issue 11, November 2024)
Page(s): 29-34
Date of Publication: 19/11/2024
Publisher: IJRIS
Cite as: Abu Yusuf Abdulaziz, Stephen Ebhodaghe Ughulu, “Corporate Governance Mechanism and Financial Performance of Quoted Deposit Money Bank in Nigeria,” in International Journal of Research in Interdisciplinary Studies, vol. 2, no. 11, pp. 29-34, November 2024.