Corporate governance and financial performance

Abstract

With the emergence of joint stock and public limited companies, the performances of corporate activities have become diverse and complex and also corporate financial scandals are on the increase. This has aroused the need for corporate governance. Corporate governance has to do with laws, ethics, values, practices and norms that has to do with the planning, organizing and arrangement of the day to day activities of a firm. In recent times, corporate governance and its relationship with financial performance have been made popular as researchers want to know more and have indebt knowledge about these variables. Even though several researchers in this field have been called to make an indebt study on this topic, theres no absolute conclusion. Moreover, there were several results gotten from previous researchers, each with a different conclusion, definitely contrasting each other. The main objective of carrying out this study is to ascertain the importance and effect of corporate governance on financial performance of firms in Nigeria, the sample was selected from banks quoted in the Nigerian stock exchange as at 2014. The research design utilized was quasi-experimental research design (survey).the sampling method used was the purposive sampling technique. The statistical tools used to test the postulated hypothesis are spearmans rank correlation and regression analysis through SPSS. As indicated in the outcome, the number of those that make up the board, that is, its size has significant links with the amount or say, level of what comes in to the firm in the form of Returns, particularly on its Equity; in the same light there is a significant connection between the kind of freedom allowed to committees specifically the audit committee and the Return that the firms eke out on their Asset. Companies, especially Public Limited companies have been advised to measure how well it is performing in terms of its corporate governance, making sure to understand if its leadership ethics and principles are being followed properly, its board composition and how independent they are, how its members especially the executives are being compensated, how true and open is their report to the public, how active the stake holders are participating, and finally, if its members carry out its activities lawfully. However, as the improvement of a firms financial performance is very crucialin a company, it is also important to note that the improvement of corporate governance and its sustainable financial performance should also be among the companys priority as they are also important factors in a firm.