Corporate governance and firm performance

Project Abstract

<p> This study investigates the relationship that exists between corporate governance and firm<br>performance of some selected companies listed on the Nigerian Stock Exchange. The intent of<br>the study is to determine whether corporate governance mechanisms- CEO duality, board size<br>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).<br>It provides empirical evidence for fifty two (52) non-financial firms in Nigeria for a period of<br>2003 to 2008. The Generalised Least Square (GLS) regression is employed to examine the<br>relationship existing between the variables. The results reveal that board size, audit committee<br>independence, ownership concentration have a significant relationship with return on equity and<br>profit margin. It is also observed that CEO duality has no impact on firm performance. The<br>advocacy is for the Securities and Exchange Commission to take into cognisance industry<br>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<br>Corporate Governance Committee of companies to endeavour to do a regular appraisal of their<br>corporate governance compliance status so as to understand its effect on performance.<br>Keywords Corporate Governance, Firm performance, Agency Theory, Agency Costs <br></p>

Project Overview

<p> </p><p>Certification—————————————————————-..iii<br>Declaration——————————————————–………………..iv<br>Dedication —————————————————————-….v<br>Acknowledgment————————————————.———-…..vi<br>Abstract————————————————.————.——..vii<br>Table of Contents————————————————————..ix<br>List of Figures ————————————————————–.xiv<br>List of Table ————————————————————–….xv</p><p>Chapter One: Introduction—————————————-.——–..–.1<br>1.0 Background to the study———————————————-…..1<br>1.1 Statement of Problem————————————————–..2<br>1.2 Objectives of Study—————————————————-.3<br>1.3 Research Questions————————————————–……4<br>1.4 Hypotheses———————————————————-…4<br>1.5 Scope of Study——————————————————–.4<br>1.6 Significance of Study————————————————–…5<br>1.7 Limitations of Study—————————————————-.6<br>1.8 Methodology———————————————————-6<br>1.9 Definition of Terms————————————————–……7</p><p>Chapter Two: Literature Review—————————————-.–.—-.9<br>2.1 Introduction ——————————————————–.–.9<br>2.2 Conceptual Framework————————————————….10<br>2.2.1 Agency Concept—————————————————-……10<br>2.2.2 Corporate Governance Mechanisms for Reducing Agency Costs—————-..14<br>2.2.2.1 Board Size———————————————————-…14<br>2.2.2.2 CEO Duality——————————————————–….15<br>2.2.2.2 Ownership Concentration————————————————17<br>2.2.2.3 Audit Committee Independence——————————————..18<br>2.2.3 Summary of Theory, Hypothesis and Conceptual Model———————-….19<br>2.3 Theoretical Framework of Corporate Governance—————————-….21<br>2.3.1 Stakeholder Theory—————————————————-…22<br>2.3.2 Stewardship theory—————————————————-…22<br>2.3.3 Resource Dependency Theory (RDT)————————————……22<br>2.3.4 Agency theory——————————————————–…23<br>2.3.5 Assumptions of Agency Theory——————————————….24<br>2.3.6 Limitations of Agency Theory——————————————–..25<br>2.4. Measuring Firm Performance——————————————–….26<br>2.5 Measuring Control Variables——————————————–.–28<br>2.5.1 Company Size———————————————————-29<br>2.5.2 Leverage————————————————————…..28<br>2.6 Corporate Governance and Performance Measures—————————-…29<br>2.7 Methodological Review————————————————–.31<br>2.8 Corporate Governance Measures in Nigeria———————————-..32<br>2.8.1 The Role of the Board of Directors, Chairman, and Chief Executive Officer——–..32<br>2.8.2 The Role of the Audit Committee——————————————..33</p><p>Chapter Three: Research Methodology —————-.——————..——.34<br>3.1 Introduction————————————————————34<br>3.2 Research Design——————————————————–.34<br>3.3 Population of Study—————————————————-…34<br>3.4 Sample size and Sampling Technique————————————..–.34<br>3.5 Data Gathering Method————————————————–..35<br>3.5.1 Sources of Data——————————————————–. 35<br>3.5.2 Instruments of Data Collection—————————————-..—-35<br>3.5.3 Validity and Reliability of Instruments————————————–.35<br>3.6 Data Analysis Method————————————————–…36<br>3.6.1 Methods of Data Analysis————————————————.36<br>3.6.2 Instruments for Data Analysis (Including formulae) —————————-36<br>3.6.3 Model Specification—————————————————-…37</p><p>Chapter Four: Data Presentation and Analysis ——————–..——–.—-.. 39<br>4.1 Introduction———————————————————-..39<br>4.2 Data Presentation——————————————————..39<br>4.2.1 Industry Based Presentation———————————————-.39<br>4.3 Data Analysis ——————————————————–….41<br>4.3.1 Summary Statistics——————————————————41<br>4.3.2 Correlation Analysis—————————————————-..46<br>4.3.3 Econometric Analysis—————————————————-47</p><p>Chapter Five: Summary, Findings, Conclusion And Recommendations————–..52<br>5.1 Introduction———————————————————-..52<br>5.2 Summary of Work Done————————————————…52<br>5.3 Findings————————————————————–.53<br>5.3.1 Theoretical Findings—————————————————-..53<br>5.3.2 Empirical Findings——————————————————.54<br>5.4 Conclusion ——————————————————–…–.55<br>5.5 Recommendations——————————–..———————-55<br>5.6 Suggestions for Further Studies—————————————-………56</p><p>References —-…——————————————————.58<br>Appendices ————————————————————–…–66<br>Appendix 1 Sample Companies and Their Industries———————-.–66<br>Appendix 11 Generalised Least Square Regression Result Of Estimated Model (Fixed<br>Effects) ————————————————–68</p> <br><p></p>