Corporate Governance and Investment Decisions in Deposit Money Banks in Nigeria

Document Type: Original Research

Authors

Department of Accounting, Bells University of Technology, Ota Ogun State, Nigeria

Abstract

Recently, following financial crises in the global world, the focus of attention has been moved towards how a company is being managed. This study examined the effect of corporate governance on investment decisions of shareholders of listed banks in the Nigerian capital market from 2005 to 2015. The study adopted the secondary method of acquiring data which was sourced from financial statements of eight banks listed. Panel Regression Analysis was employed in the analysis of the data collected with the use of electronic views. The results revealed that there exists a positive and significant relationship between corporate governance (board size, board independence and audit committee independence) and investment decisions of shareholders. Consequently, it is recommended that to further provide effective corporate governance measures, strengthening of corporate governance and accounting standards in Nigeria would go a long way in promoting investors’ confidence and thereby create positive investing decision.

Keywords


Abdelsalam, O. El-Masry, A. & Elsegini, S. (2008). Board composition, ownership structure and dividend policies in an emerging market further evidence from CASE 50. Managerial Finance, 34(12), 953-964.
Adedipe, R. (2004). The dividend puzzles. The Journal of Portfolio Management 12: 52-56.
Adeyemo, K. A., (2016). Fraud cases in Nigerian banks: Nature, deep-seated causes, aftermaths and probable remedies.
Ambode (2016). Ambode reiterates corporate governance at banking awards. Vanguard News Paper.
Baker, M., Stein, J. & Wurgler, J. (2003). When does the market matter? Stock prices and the investment of equity-dependent firms. The Quarterly Journal of Economics, 118(3), 969-1005. http://dx.doi.org/10.1162/00335530360698478
Bushee, B. J., Carter M. E., & Gerakos J. (2007). Institutional investor preferences for corporate governance mechanisms. Working Paper, University Of Pennsylvania.
Chen, I.J., Lin, S.H., (2013). Managerial optimism, investment efficiency, and firm valuation. Forthcoming in Multinational Finance Journal.
Choe H., Kho B., & Stulz R.M. (2005). Do domestic investors have an edge? The trading experience of foreign investors in Korea. The Review of Financial Studies, 18.
Conyon, M. J. & S. I. Peck. (1998). Board control, remuneration committees and top management compensation. Academy of Management Journal, 41(2), 146-157.
Covrig, V. M., Lau S. T. & Ng L. K. (2006). Do domestic and foreign fund managers have similar preferences for stock characteristics. Journal of International Business Studies, 37.
Daily, C. M. & A. A. Cannella, (2003). Corporate governance: Decades of dialogue and data. Academy of Management Review, 28, 371-382.
Damilola, F. E., Olamide, O. A., Wisdom, O., Emmanuel, O., Godswill, O., Simon, O. I. Olufemi, A. O. (2018). Board meeting frequency and firm performance: Examining the nexus in Nigerian deposit money banks. Heliyon, 4, 1-14.
Dong, M., Hirshleifer, D., & Teoh, S. H. (2007). Stock market misevaluation and corporate investment. MPRA Paper. University Library of Munich, Germany.
Fama, E. F., (1980). Agency problem and the theory of the firm. Journal of Political Economy, 88, 288-298.
Freeman, G.I. & O.P. Reed (2010). Corporate governance and institutional investment. New York: Kens Publications.
Jensen, M.C., Meckling, W.H. (1976). Theory of the firm: managerial behaviour, agency costs and ownership structure. Journal of Financial Economics 3 (4), 305-360.
Kang, J., & Stulz R. (1997). Why is there a home bias? An analysis of foreign portfolio equity ownership in Japan. Journal of Financial Economics, 46.
La Porta, R., F. Lopez-de-Silanes, A. Shleifer, & R. W. Vishny. (2000). Investor protection and corporate governance. Journal of Financial Economics, 58(1-2), 3-27.
Leuz, C., Lins K. V., & Warnock F. E. (2007). Do foreigners invest less in poorly governed firms? Review of Financial Studies, forthcoming.
Mashcyekhi, B. & Buzaz, M. Z., (2008). Corporate governance and firm operating performance. Review of Quantitative Finance and Accounting, 32(2), 129-144.
Mehdi, I.K. (2007). Empirical evidence on corporate governance and firm operating performance. Review of Quantitative Finance and Accounting, 32(2), 129-144.
Merton, R. (1987). A simple model of capital market equilibrium with incomplete information. Journal of Finance, 42.
Mitton, T. (2002). A cross-firm analysis of the impact of corporate governance on the East Asian financial crisis. Journal of Financial Economics. 64, 215-241.
Monsen, R. J., Jr. & A. Downs. (1965). A theory of large managerial firms. Journal of Political Economy, 73(3), 221-236.
Nweze, C. (2016). Bank in credit crisis. Vanguard News Paper.
Ogbowu, C.N., (2014). Corporate governance structure, financial performance and institutional investment: Evidence from quoted Nigerian companies. Ph.D Dissertation Submitted to College of Graduate Studies. University of Port Harcourt.
Ojeka, S., Iyoha, F. & Obigbemi, (2014). Effectiveness of audit committee and firm performance in Nigeria: An empirical analysis. Journal of Accounting and Auditing: Research and Practice, Vol. 2014 (2014): 1-12.
Okere, W. Imeokparia, L., Ogunlowore, J. A. & Isiaka, M. (2018). Corporate Social Responsibility and Investment Decisions in Listed Manufacturing Firms in Nigeria. Journal of Economics, Management and Trade21(4): 1-12.
Okere, W., Eluyela, D. F., Lawal, A. I., Oyebisi, I., Eseyin, O., Popoola, O. & Awe, T. E. (2019). Foreign expatriates on board and financial performance:  A study of listed deposit money banks in Nigeria.
Oluyemi, S. A. (2007). The implication of banks profitability on implementing the risk-based capital requirements. Nigeria Deposit Insurance Corporation Quarterly 6(2) 53 -69.
Ricciardi, V., & Simon, K.H. (2000). What is behavioural finance? Business, Education and Technology Journal, 1-9.
Shiller, R. (1998). Human behaviour and the efficiency of the financial system. National Bureau of Economic Research, working paper n° w 6375.
The Organisation for Economic Co-operation and Development (2004) OECD, Principles of corporate governance, http://www.oecd.org/dataoecd/58/58/34625094.pdf [Accessed 17.02.2011].
Theo, C., Hans, U. & Elmer, M. D., (2013). Corporate governance on firm performance and institutional investment. Journal of Accounting & Finance, 23(7), 289-305.
Tosi, H. L., Jr. & L. R. Gomez-Mejia. (1989). decoupling of CEO pay and performance: an agency theory. Administrative Science Quarterly, 34(2), 169-189.
Uwuigbe, U., Daramola, S. P. & Anjolaoluwa, O., (2014). The effects of corporate governance mechanisms on earnings management of listed firms in Nigeria. Accounting and Management Information Systems, 13(1), 159-174.