ABSTRACT
This study investigates the relationship that exists between corporate governance and firm
performance of some selected companies listed on the Nigerian Stock Exchange. The intent of
the study is to determine whether corporate governance mechanisms- CEO duality, board size
audit committee independence, and ownership concentration have an impact on firm performance surrogated by return on assets (ROA); return on equity (ROE), profit margin (PM).
It provides empirical evidence for fifty two (52) non-financial firms in Nigeria for a period of
2003 to 2008. The Generalised Least Square (GLS) regression is employed to examine the
relationship existing between the variables. The results reveal that board size, audit committee
independence, ownership concentration have a significant relationship with return on equity and
profit margin. It is also observed that CEO duality has no impact on firm performance. The
advocacy is for the Securities and Exchange Commission to take into cognisance industry
specific effects before formulating codes of corporate governance that determine the characteristic of the audit committee or the board structure. Proposition is also made for the
Corporate Governance Committee of companies to endeavour to do a regular appraisal of their
corporate governance compliance status so as to understand its effect on performance.
Keywords: Corporate Governance, Firm performance, Agency Theory, Agency Costs
TABLE OF CONTENTS
Certification----------------------------------------------------------------iii
Declaration-------------------------------------------------------- - - - iv
Dedication ---------------------------------------------------------------- - v
Acknowledgment---------------------------------------------------------- - vi
Abstract------------------------------------------------------------------vii
Table of Contents------------------------------------------------------------ix
List of Figures --------------------------------------------------------------xiv
List of Table -------------------------------------------------------------- - xv
Chapter One: Introduction--------------------------------------------------110 Background to the study---------------------------------------------- - 1
11 Statement of Problem--------------------------------------------------2
12 Objectives of Study----------------------------------------------------3
13 Research Questions-------------------------------------------------- - 4
14 Hypotheses---------------------------------------------------------- - 4
15 Scope of Study--------------------------------------------------------4
16 Significance of Study-------------------------------------------------- - 5
17 Limitations of Study----------------------------------------------------6
18 Methodology----------------------------------------------------------6
19 Definition of Terms-------------------------------------------------- - 7
Chapter Two: Literature Review----------------------------------------------921 Introduction ----------------------------------------------------------9
22 Conceptual Framework------------------------------------------------ - 10
221 Agency Concept---------------------------------------------------- - 10
222 Corporate Governance Mechanisms for Reducing Agency Costs----------------
14
2221 Board Size---------------------------------------------------------- - 14
2222 CEO Duality-------------------------------------------------------- - 15
2222 Ownership Concentration------------------------------------------------17
2223 Audit Committee Independence------------------------------------------18
223 Summary of Theory, Hypothesis and Conceptual Model---------------------- - 19
23 Theoretical Framework of Corporate Governance---------------------------- - 21
231 Stakeholder Theory---------------------------------------------------- - 22
232 Stewardship theory---------------------------------------------------- - 22
233 Resource Dependency Theory (RDT)------------------------------------ - 22
234 Agency theory-------------------------------------------------------- - 23
235 Assumptions of Agency Theory------------------------------------------ - 24
236 Limitations of Agency Theory--------------------------------------------25
24 Measuring Firm Performance-------------------------------------------- - 26
25 Measuring Control Variables----------------------------------------------28
251 Company Size----------------------------------------------------------29
252 Leverage------------------------------------------------------------ - 28
26 Corporate Governance and Performance Measures---------------------------- - 29
27 Methodological Review--------------------------------------------------31
28 Corporate Governance Measures in Nigeria----------------------------------32
281 The Role of the Board of Directors, Chairman, and Chief Executive Officer--------32
282 The Role of the Audit Committee------------------------------------------33
Chapter Three: Research Methodology ----------------------------------------3431 Introduction------------------------------------------------------------34
32 Research Design--------------------------------------------------------34
33 Population of Study---------------------------------------------------- - 34
34 Sample size and Sampling Technique--------------------------------------34
35 Data Gathering Method--------------------------------------------------35
351 Sources of Data-------------------------------------------------------- 35
352 Instruments of Data Collection--------------------------------------------35
353 Validity and Reliability of Instruments--------------------------------------35
36 Data Analysis Method-------------------------------------------------- - 36
361 Methods of Data Analysis------------------------------------------------36
362 Instruments for Data Analysis (Including formulae) ----------------------------36
363 Model Specification---------------------------------------------------- - 37
Chapter Four: Data Presentation and Analysis -------------------------------- 3941 Introduction----------------------------------------------------------39
42 Data Presentation------------------------------------------------------39
421 Industry Based Presentation----------------------------------------------39
43 Data Analysis -------------------------------------------------------- - 41
431 Summary Statistics------------------------------------------------------41
432 Correlation Analysis----------------------------------------------------46
433 Econometric Analysis----------------------------------------------------47
Chapter Five: Summary, Findings, Conclusion And Recommendations--------------5251 Introduction----------------------------------------------------------52
52 Summary of Work Done------------------------------------------------ - 52
53 Findings--------------------------------------------------------------53
531 Theoretical Findings----------------------------------------------------53
532 Empirical Findings------------------------------------------------------54
54 Conclusion -------------------------------------------------------- - --55
55 Recommendations------------------------------------------------------55
56 Suggestions for Further Studies---------------------------------------- - - 56
References ---- - ------------------------------------------------------58
Appendices -------------------------------------------------------------- - --66
Appendix 1 Sample Companies and Their Industries------------------------66
Appendix 11 Generalised Least Square Regression Result Of Estimated Model (Fixed
Effects) --------------------------------------------------68
