TABLE OF CONTENTS
CHAPTER ONE: INTRODUCTION
1.1 Background to the Study
1.2 Statement of the Problem
1.3 Objective of the Study
1.4 Research Questions
1.5 Hypotheses
1.6 Justification for the Study
1.7 Scope of the Study
1.8 Significance of the Study
1.9 Operational Definition of Terms
CHAPTER TWO: REVIEW OF LITERATURE
2.1 Conceptual Review
2.1.1 Agency Concept
2.1.2 Agency Problem
2.1.3 Agency Cost
2.1.4 Corporate Governance Mechanisms
2.1.4.1 Board Size
2.1.4.2 CEO Duality
2.1.4.3 Ownership Concentration
2.1.5 Firm Performance Measures
2.1.5.1 Return on Assets
2.1.5.2 Return on Equity (ROE)
2.2 Theoretical Review
2.2.1 Stakeholder Theory
2.2.2 Stewardship Theory
2.2.3 Resource Dependency Theory (RDT)
2.2.4 Agency Theory
2.2.5 Theoretical Framework
Content
2.3 Empirical Review
CHAPTER THREE: METHODOLOGY
3.1 Research Design
3.2 Population
3.3 Sample size and sampling Technique
3.4. Sources of Data
3.5 Method of Analysis
3.5.1 Justification of Method of Analysis
3.5.2 Estimation Technique
3.5.3 Model Specification
3.6 Instrument
3.7 Apriori Expectation
3.8 Ethical Consideration
CHAPTER FOUR: DATA PRESENTATION, RESULTS AND
DISCUSSION OF FINDINGS
4.1 Data Analysis
4.2 Results
4.2.1 Descriptive Analysis Result
4.2.2 Correlation Analysis Result
Content
4.2.3 Regression Analysis Result
4.3 Discussion of Result
CHAPTER FIVE: SUMMARY, CONCLUSION AND
RECOMMENDATIONS
5.1 Summary
5.1.1 Summary of Findings
5.2 Conclusion
5.3 Recommendations
5.4 Contribution to Knowledge
5.5 Limitation of the Study
5.6 Suggestion for further Research
References
Appendices
CHAPTER ONE
INTRODUCTION
1.1 Background to the Study
The issue of corporate governance has brought about research interests with respect to principal-agent relationship currently existing in publicly quoted companies. This is in corroboration with Claessens and Fan (2002) who opined that corporate governance has received much attention in recent years due to failure of some firms in Asia.
Corporate governance reform has emerged as a critical business issue, thrust on the world stage by a number of high profile corporate failures (Strandberg, 2005). The famous corporate accounting scandals of Enron Corporation, World Com, Tyco, and Parmalat have led to contemporary discussion on the best mechanisms for protecting stakeholder’s interest and ensuring shareholders wealth maximization. Also, in Nigeria the emphasis on the need for corporate governance reform sprung up with the incidence of fraudulent financial reporting as reported in the case of Cadbury Nigeria Plc.In Nigeria, the growing incidence of corporate fraud has meant that investors’ confidence in the capital market has declined due to the current down turn in the market which is been blamed on the fraud at the Nigerian Stock Exchange (NSE) and investors in Cadbury (Nig) plc also lost heavily as the share price of the company took a downward turn. Organizations have monitoring mechanisms aimed at ensuring good corporate governance and minimization of corporate fraud. The primary objective of corporate governance is to try to align managerial incentives with that of stakeholders so that managers work in the best interest of the stakeholders (Nworji, Adebayo, & David, 2011).
In the area of monitoring, the non-executive members of the board of Cadbury were passive. The audit committee was ineffective while the internal auditor was compromised. Collusion among some members of top management ensured internal control override. In the case of the NSE, conflict of interest did not allow the non-executive directors to exercise their oversight function effectively as top management were behind the cases of asset misappropriations and reclassification of accounts, the internal control system could not work. The Nigeria stock exchange had no internal audit unit and audit committee although under the current Nigerian Law it was not mandatory for it to have one. The Nigeria stock exchange and Cadbury Nig Plc external auditors did not give an unqualified result and the auditors were indicted by SEC for negligence and lack of professional skepticism while the fees paid to the Auditor in the case of the Nigerian Stock Exchange was described as excessive.(Osundina, Olayinka & Chukwuma, 2016)
In both cases, members of the public, employees and shareholders of the organization lost their investments. Costly litigation has also resulted for both firms. Perhaps for the first time in Nigeria, an audit firm had been indicted and warned. The firms have been audited for many years by the same firm. The performance of some Nigerian auditors has led to the Central bank of Nigeria imposing selective ban on auditors providing non-audit services to its bank audit clients. It has also led to calls for mandatory rotation of auditors in all Public limited companies. On Cadbury ( Nig) Plc scandal, one said” What kind of organizational structure was in place in Cadbury(Nig.) Plc that would allow two persons to mindlessly, as reported, affect the health of the company?” Another queried the relevance of a board that still pleads excuses for its negligence for presiding over a staggering fraud to the tune of fifteen billion Naira (Solanke, 2007).
Abor and Biekpe (2005) intricately define corporate governance as the process and structure used to enhance business prosperity and corporate accountability with the ultimate objective of realizing long-term shareholder value, whilst taking into account the interest of other stakeholders. Kyereboah (2007) submits that corporate governance is represented by the structures and processes lay down by a corporate entity to minimize the extent of agency problems as a result of separation between ownership and control. Simply put, corporate governance in an organizational context is the totality of the control, monitoring and directing mechanism utilized by strategic management in the best interests of its stakeholders.
The concept of performance supports the effective and efficient use of financial resources of the company to achieve overall objectives which include both shareholders wealth maximization and profit maximization objectives. Performance is a quality of any company or firm which can be achieved by valuable results. For example, a firm having high return on assets (ROA) is said to be performing well and high ROA is not a sign of good performance: there are some other variables to be considered such as sales, profit and expenses which will be highlight in this study. Performance can be analyzed by various methods, such as parametric (Stochastic Frontier Approach) and non-parametric (such as Data Envelopment Approach). The focus of this study is on accounting ratio, the non-parametric method. Many studies have focused on this aspect (Ertugrul & Hegde, 2013).
Financial ratio is helpful and easy tool to identify weakness and strength (performance) of any company by looking at their financial statements. Through this, the study can identify the ratios across time for example the 10-year period which have been taken for this study and this study can compare the ratios to other companies in different time periods. Beside its advantages, the disadvantage is that performance analysis cannot be done only by financial ratios which are based on traditional accounting data as they can no longer meet information needs.
Performance of any organization is directly related to efficiency. In other words, performance will be higher, if it achieves desired output with minimum consumption of input and time. There are numerous studies available which have been done on performance evaluation and efficiency analysis to support and guide the business organizations to achieve their objectives. Performance can be measured using long term market performance measures and other performance measures that are non-market-oriented measures or short term measures (Zubaidah, Nurmala, & Kamaruzaman, 2009). The measure of firm performance employed in this study is from a non-market oriented perspective which is most common and requires the use of accounting ratios which are the profitability and investor ratios. This study intends to contribute to the few researches on the Nigerian environment as most of the researches on firm performance and corporate governance which resulted in mixed outcomes were conducted in the United States of America, the United Kingdom, Pakistan and Malaysia (Ertugrul & Hegde, 2013; Gisper, Jong, kabir & Renneboog, 2012; Javid & Iqbal, 2009; Zubaidah et al 2009). It would also provide credible findings to support deliberations on this topical issue.