Summary of Findings
This study made use of secondary data in analyzing the relationship between corporate governance and financial performance of banks in Nigeria using 15 banks that are listed on the Nigerian Stock Exchange as a case study.
The secondary data was obtained basically from published annual reports of the selected banks. Relevant data for the study were retrieved from the Nigerian Stock Exchange Fact Book for 2010 and corporate websites of the reviewed banks.
The descriptive statistics and regression analysis were used to find out whether there is a relationship between the variables to be measured (i.e. corporate governance and banks’ financial performance) and also to find out if the relationship is significant or not. The proxies that were used for corporate governance are; board size and directors’ equity interest and corporate governance disclosure index. Accounting measure of performance (return on equity and return on asset) as identified by First Rand Banking Group (2006) were used as the dependent variable.
Decisions were later taken based on return on assets.
However, in examining the level of corporate governance disclosures of the sampled banks, a disclosure index was developed using the CBN post consolidation code of best practices and guided by the papers prepared by the UN secretariat for the nineteenth session of ISAR (International Standards of Accounting and Reporting, 2001), entitled “Transparency and disclosure requirements for corporate governance” and the twentieth session of ISAR (2002), entitled “Guidance on Good Practices in Corporate Governance Disclosure” for the banks under study. Using this post consolidation code of best practices, issues in corporate governance disclosure are classified into 5 broad categories: Financial disclosures, non-financial disclosures, annual general meetings, timing and means of disclosure, and best practices for compliance with corporate disclosure. Under all these broad and subcategories, a total of 45 issues were considered (See Appendix I).
With the help of the list of disclosure issues, the annual reports of the banks were examined and a dichotomous procedure of content analysis was followed to score each of the disclosure issue. Each bank was awarded a score of “1” if it appears to have disclosed the concerned issue and “0” otherwise. The score of each bank was totaled to find out the net score of the bank. A corporate governance disclosure index (CGDI) was then computed.
