research project was on the impact of corporate governance mechanism on firm
performance in Nigeria. The objectives of the research were to assess the
effectiveness of the processes of corporate governance in Nigeria organization,
to ascertain the extent to which the composition of the Board of Directors
impact on the firm's financial performance. The research methodology involves
survey method and the research design involves analysis of responses through
questionnaires being distributed. The research found that corporate governance
promotes effective management and administration of organization in Nigeria,
Corporate governance mechanism and control reduce the inefficiencies that arise
from moral hazard and adverse selection. It is recommended that all parties to
corporate governance must be determined to observe the key elements of
corporate governance and also all accepted principles of corporate.
1.1 Background of the Study
1.2 Statement of Problem
1.3 Objectives of the Study
1.4 Research Questions
1.5 Research Hypothesis
1.6 Significance of the Study
1.7 Scope of the Study
1.8 Limitations of the Study
1.9 Definitions of Terms
1. O LITERATURE REVIEW
2.1 Historical of Corporate
2.2 Impact of Corporate Governance
2.3 Role of Institutional Investors
2.4 Parties to Corporate Governance
2.5 Principles of Good Corporate Governance
2.6 Mechanisms and Controls
2.7 Internal Corporate Governance Control
2.8 External Corporate Governance Controls
2.9 Role of the Accountant
2.10 Rules versus Principles
2.11 Action beyond Obligation
2.12 Corporate Governance Models around the World
2.23 Anglo - American Model
2.14 Codes and Guidelines
2.15 Corporate Governance and Firm Performance
2.16 Board Composition
2.17 Remuneration / Compensation
2.18 Systemic Problems of Corporate Governance
RESEARCH METHODOLOGY AND ANALYSIS
3.1 Research Design
3.2 Sources of Data Collection
3.3 Population of the Study
3.4 Samples Size and Sampling Techniques
3.5 Data Collection Instruments
3.6 Method of Data Analysis
4.0 DATA PRESENTATION AND
4.2 Presentation of Data Collected From the
4.3 Test of Hypothesis
FINDINGS OF SUMMARY, AND
CONCLUSIONS AND RECOMMENDATIONS.
5.1 Summary of Findings
5.4 Suggestion for Further Research
OF THE STUDY
Corporate governance is the set of process,
customs, policies, laws, and institutions' affecting the way a corporation was
directed, administered or controlled. Corporate governance also includes the
relationships among the many stake holders are the shareholders, management,
and the board of directors. Other stakeholders include labor (employers)
customers, creditors (e.g. banks, bondholders), suppliers, regulators and the
community at large. (Dignam and Lowry 2006).
Corporate governance is a multi-faceted subject. An
important theme of corporate governance is to ensure the accountability of
certain individuals in an organization through mechanisms that tries to reduce
or eliminate the principal agent problem.
A related but separate thread of discussions focuses
on the impact of a corporate governance system in economic efficiency, with a
strong emphasis shareholders' welfare. There are yet other aspects to the
corporate governance subject, such as the stakeholders view and the corporate
governance models around the world.
Corporate governance was defined in Cadbury report
(1992) as; 'the system by which companies are directed and controlled. The role
of shareholders is to appoint the directors and the external auditors, and to
satisfy themselves that an appropriate governance structure is in place. The
directors are responsible for setting the company's strategic arms, providing
the leadership to put these into effect, supervising the management of the
business and reporting to shareholders on their stewardship. The financial
aspects of corporate governance are identified as the way in which the board
sets financial policy 'and oversees its implementation (including the use of
financial controls) and the process of reporting to the shareholders on the activities
and development of the company.
According to Kwakwa and Nzekwu (2003), governance
is a vital ingredient in the maintenance of the dynamic balance between the need
for order and equality in society; promoting the efficient production and
delivery of goods and services; ensuring accountability in the house of power
and the protection of human rights and freedoms. Governance is, therefore
concerned with the processes, systems, practices and procedures that govern
institutions, the manner in which these rules and regulations are applied and
followed, the relationships created by these rules and nature of the
The concern with good corporate govern once
emanated from the ripples and the challenges of the scandals associated with
the collapse of the scandals associated with the collapse of ENRON Corporation,
WorldCom, TYCO, Global crossing and ADELPHIA in the USA and the recent
accounting disclosure in lever brothers (now Unilever) are Cadbury Nig. Plc.
The scandals revealed hope accounting fraud and corporate abuses (CBN Bullion
Good corporate Governance in the banking sector is
vital because many banks are now global in terms of size of shareholders'
finds, foreign investment inflow and lending activities. Good corporate
governance is also in line with global best practices.
David Smith (2002), President and CEO of the
Canadian Institute of Chartered Accountant sees corporate governance as a
"culture that has a common understanding of the roles of management and
board.' To him corporate governance is a culture of mutual respect that both
parties have for each other role. It is a culture of continuous open dialogue
and communication. In rounding up his views on corporate governance, smith
noted that it is about people, "people doing not just what the roles say
but about doing what is right.
Corporate governance is an internal system
encompassing policies, processes and people, which serve the needs of
shareholders and other stakeholders, by directing and controlling management activities
with good business savvy, objectivity and integrity. Sound corporate governance
is dependent on external market place commitment and legislation plus a healthy
board culture that safeguards policies and processes. (Definition of Gabrielle 0' Donovan).
It can be refers to the processes by which all
companies are directed and controlled corporate governance is also a system of
structuring, operating and controlling a bank, with a view towards attaining
long term strategic goals to maximize, shareholders (employers, depositors),
suppliers other customers, and other stakeholders)
Corporate governance is now widely accepted as
being concerned with improved stakeholder performance viewed from this
perspective, corporate governance is all about accountability, boards,
disclosures, investor involvement and related issues. Research has shown that
"firms with stronger shareholders rights had higher firm valves higher
profits, higher sales growth, lower capital expenditure and fewer corporate
acquisitions' (McRitchie, 2001).
1.2 STATEMENT OF PROBLEMS
The executive environment of firms is under siege
bankruptcy, insolvencies, massive unemployment, dwindling shareholders'
turnover, failing national economies, etc are just a few the many woes at
failure of corporate governance.
When companies go down because of a deliberate or
an unconscious neglect of the fundamentals of governance the impact can be felt
almost in every facet of man's endeavor in the society; be it social,
political, economical, or cultural. In fact, a failure of governance can 'lead
to a subjugation of the system with debilitating consequences as such mention
in the first paragraph.
That is the more reason why there has been a
renewed interest in the corporate governance practices of Modern Corporation
especially in the wake of the new millennium. This renewed interest is
particularly due to the high profile collapses of a number of large firms
across industries from banking to manufacturing.
To date, too much of corporate governance debate
and discussion have centered in legislative policy to defer fraudulent
activities and transparency policy, which misleads executives to treat the
symptoms and not the cause. Therefore, to restore confidence, get the real
sector working and provide the requisite filling needed by the economy, the
real issues of corporate governance needs to be addressed.
1.3 OBJECTIVES OF STUDY
The main objective of study is to critically the
impact of corporate governance mechanism on firm's financial performance in
Nigeria. Other objectives are:
To assess the
effectiveness of the processes of corporate governance in Nigeria organization.
the relationship between the ownership structure and effective adherence to
governance procedures and structure.
the extent to which the composition of the Board of Directors impact on the
firm's financial performance.
factors that hinder effective adherence and implementation of corporate
the relationship between corporate governance procedures and firm is financial
the relationship between the appointment of Chief Executive Officers (CEO) and
1.4 RESEARCH QUESTIONS
are the corporate governance procedures in Nigeria organization?
relationship between the ownership structure and effective adherence to
governance procedures and structure?
extent does the composition of the Board of Directors impact on the firm's
factors that hinder effective adherence and implementation of corporate
corporate governance procedure promote firm's financial performance (growth)
Is there a
significant relationship between the atonement of Chief Executive Officers
(CEO) and stakeholder's interest?
corporate governance procedure have effect on stakeholder?
What are the
impacts of corporate governance to Nigerian economy?
What are the
key elements of good corporate governance?
corporate governance mechanism and control reduce the inefficiencies that arise
from moral hazard and adverse selection?
Corporate governance policies are not made in most Nigerian organizations.
Hi: Corporate governance policies are made by most
Corporate governance mechanism and control does not reduce inefficiencies in
the operation of Nigerian organizations:
Hi: Corporate governance mechanism and control reduces
inefficiencies in the operation of Nigerian organizations.
there is no significant relationship between ownership structure and effective
adherence to governance procedures and structure.
Hi: there is a significant relationship between
ownership structure and effective adherence to governance procedures and
1.6 SIGNIFICANCE OF STUDY
This study is necessary and inevitable if we must
legends firms’ capacity for good
governance. It will provide insight into the mechanics of corporate governance
and the dividends enjoyable if properly pursued by corporate organizations. It
will promote internal corporation governance control that monitor activities
and then take corrective measures to accomplish organizational goals. It will
highlight the various core element of corporate governance such as honesty,
trust, performance orientation responsibility and account ability and full
commitment to the organization. Conclusively, the study will express the
results of good corporate governance to all associated with' the organization.
To build an ideal control system that regulates both motivation and ability in
This study will promote internal corporate
governance controls that monitor activities and then take corrective action to
accomplish organizational goals.
This work provides information that guides the decision
makers on how to maintain balance between different stakeholders in an
The study reveals the key elements of god corporate
governance principles, which include honesty, trust and integrity, openness,
performance orientation, responsibility and accountability, mutual respect, and
commitment to the organization.
1.7 SCOPE OF THE STUDY
The scope of this work
will be restricted to the impact of corporate governance mechanism and firm’s
financial performance in Nigeria taking its evidence from Cadbury Nigeria Plc
OF THE STUDY
The difficulty in obtaining information from the
staff of Cadbury Nigeria Pic is the major limitation of this study due to their
unwillingness to supply the needed information. There was also a limitation in
term of library facilities. It is only center for management and development
(CMD) library that have enough materials on corporate governance among all the
libraries visited by the researcher.
CORPORATE GOVERNANCE: The way in which organization are run and
controlled. It is also the system by which companies are directed and
DIRECTION: It involves the use of personal managerial authority to establish a
clear future strategy and how change will occur.
EFFECTIVENESS: This is a measure of the level of valve, which can be created from a
given level of resources.
OBJECTIVE: A statement of what is to be achieved and when results are to be
POLICY: A rule or guideline, which expresses the limits within which action
POWER: This is the extent to which individuals or groups are able to persuade,
induce or coerce others into following certain courses of action.
STAKEHOLDERS: They are those individuals or groups who depend on the organizations
fulfill their own goals and on whom in turn, the organization depends.
STRATEGY: This is the direction and scope of an organization over the long-term,
which achieves advantage for the organization through its configuration of
resources within a charging environment to meet the needs of markets and to
fulfill stakeholder expectation.