Corporate Governance and Business Failures in Nigeria: A Focus on the Nigerian Banking Industry


Content

Abstract

The project examines the Corporate Governance and Business Failures in Nigeria: A Focus on the Nigerian Banking Industry. The study main objective is to find out the relationship between corporate governance and business failure. The primary source of data collection was used in gathering data from respondents. A structure questionnaire was designed by the researcher and validity by two experts from the statistics department was used to obtain data and chi-Square (X2) was used to test hypotheses formulated. It was discovered that business failure in Nigeria are caused by poor corporate governance. It also found that government and corporate codes i.e. best practices play a crucial role in the corporate governance of firms. It was concluded that the different roles of the participants in corporate governance are pre-requisite for the survival of a firm. As a way of recommendation, corporate Nigeria therefore needs to raise the consciousness and institutionalize good corporate governance and business sustainability beyond lip service.

 

 

 

TABLE OF CONTENTS

Title Page                                                                        

Certification                                                            

Dedication                                                              

Acknowledgments                                                   

Abstract                                                                  

Table of Contents                                                    

Chapter One: Introduction                                   

1.1   Background to the Study                                                

1.2   Statement of Problem                                             

1.3   Research Questions                                                        

1.4   Objectives of the Study                                           

1.5   Statement of Hypotheses                                        

1.6   Significance of the Study                                                

1.7   Scope of the Study                                                  

1.8   Limitations of the Study                                         

1.9   Definition of Terms                                                 

Chapter Two: Review of Related Literature         

2.1    Introduction

2.2    Overview of Corporate Governance

2.3    Why do Organization Exist

2.4    Theories of Corporate Governance

2.5    Codes of Corporate Governance

2.6    Principles of Corporate Governance
2.6.1 Rules and Principles as a Tool of Corporate Governance

2.6.2 Challenges and Acceptable Principles of Corporate Governance

2.7    Pillar of Corporate Governance
2.8    Essence of Good Corporate Governance

2.9    Problem of Corporate Governance

2.10  Participants and their Roles in Corporate Governance

2.11 Shareholder/Investors’ Grievance Committee

2.12  Audit Committee

2.12.1 Role of the Audit Committee

2.12.2 Auditor’s Certificate on Corporate Governance
2.13  Corporate Governance Structure

2.14  Corporate Failure

2.14.1 Types of Failure

2.14.2 Causes of Failure

2.14.3 Symptoms of Failure

2.15 Dealing with Failure

2.16  A Look at the Cadbury Nigeria Plc Saga

Chapter Three: Research Method and Design      

3.1   Introduction                                                            

3.2   Research design                                                      

3.3   Description of the Population of the Study                     

3.4   Sample Size                                                            

3.5   Sampling Techniques                                             

3.6   Method of Data Collection                                      

3.7   Method of data Presentation                                   

3.8   Method of Data Analysis                                         

Chapter Four: Data Presentation, Analysis         

and Hypothesis testing                                 

4.1   Introduction                                                            

4.2   Presentation of Data                                               

4.3   Data Analysis                                                          

4.4   Hypothesis Testing                                                

 

Chapter Five: Summary of Findings, Conclusion

and Recommendations                                         

5.1   Introduction                                                            

5.2   Summary of Findings                                             

5.3   Conclusion                                                             

5.4   Recommendations                                                  

References                                                              

Appendix I                                                              

Appendix II                                                             

                                       


 

 

 

CHAPTER ONE

INTRODUCTION

1.1      Background to the Study

Long before the highly publicized corporate scandal and failures worldwide, the global community has shown increasing concern on the issue of corporate governance.

The reason for this trend is viewed from the perspective that corporate governance is about ensuring that the business is run well and investors receive a fair return (Magdi & Nadereh, 2002).

According to Wolfensohn (1999) and Akinsulire (2006), the distribution of rights and responsibilities amongst different participants such as the board, managers, shareholders and other stakeholders in spelling out the rules and procedures for making decision on corporate affairs is basically specified by the corporate governance structure.

Another school of taught viewed corporate governance from two perspectives:

A “Narrow’ one that basically concerned with the structure within which a corporate entity or enterprise receives its basic orientation and direct ion (Rwegasira, 2000).

A “Broad” perspective that is regarded as the heart of both a market economy and a democratic society (Sullivan, 2000).

However, these ideologies have been compromised and the resultant effect t is seen in prob5ressive increase in mortality rates of hitherto global corporate giants in developed economies.
Enron, Pamalat, Barynx Bank and WorldCom are recent and vivid examples and as such the study intends to examine these issues and suggest the way forward.

1.2   Statement of Problem

In Nigeria like most countries, the failure of companies can be due to internal or external factors or in rare cases, the combination of both which basically has to do with poor corporate governance.

The researcher intends to focus on reforms as aspect of corporate governance and indicators of business failure as well as the linkage between the two concepts.

The study also intends to raise the consciousness and institutionalize good corporate governance and business sustainability.

For effective corporate governance reduces “control rights” shareholders and creditors confer on managers, increasing the probability that managers invest in positive net present value projects (Shieifer & Vishny, 1997).

1.3   Research Questions

The following questions direct the thrust of the study:

i.      Is there any significant relationship between corporate governance and business failure?

ii.     What is the role of the participants in corporate governance structure as regard business failure?

iii.    What are the roles played by corporate governance participants?   

 

1.4   Objective of the Study

i.      To find out if there is any significant relationship between corporate governance and business failure.

ii.     To find out the relationship between participants in corporate governance structure and business failure.

iii.    To find out the role played by corporate governance participants.

1.5   Statement of Hypothesis

Hypothesis One

HO:   There is no significance relationship between corporate governance and business failure.

HI:    There is a significance relationship between corporate governance and business failure.

Hypothesis Two

HO:   There is no significant relationship between business failure and the role played by corporate governance participants.

HI:    There is a significant relationship between business failure and the role played by corporate governance participants.  

1.6      Significance of the Study

In regards to the relevance of the study, it covers areas which are useful to the board of directors as regards to their mission, vision, objectives and strategy of a company. It is relevance to shareholders by boosting their confidence to invest in a particular business which involves protecting their rights.

Companies will benefit as it ensures the financial viability of business. It also indicates the way in which companies are directed and controlled through basic governance principles of disclosure and accountability of a company. It is also relevant to the public sector. Public sector will benefit as it will ultimately improve economic growth and functional position of the country on a global level. It is also used as a determinant in developing policy, social economic analysis and poverty resolute issue.

1.7      Scope of the Study

The study is not directed at explaining or providing solutions to all corporate failures in Nigeria because some failures are actually outside the organization’s frontiers.

It is narrowed down to those failures that could be averted if organization would embrace corporate codes and play by the rules.

The geographical scope of this study is Nigeria and Edo State in particular and a sample size of 96 was used.

1.8   Limitations of the Study

Corporate governance is not a physical phenomenon, so it cannot be measured ordinarily as there are different dimensions to the concept.

The factors that militate against the researcher’s ability to come out with concrete findings during the course of researching includes:

a.           Lack of necessary materials: The materials sought were not sufficient for the research as for text works and business journal needed were not gotten at the right time.

b.          The problem of retrieving the questionnaire: Some questionnaires issued to respondents were lost during the attitudes of the respondents to disclose their personal information.

1.9   Definition of Terms

1.     Corporate Governance: It is the system by which business corporations are directed and controlled (OECD, 1999)

2.     Business Failure: It is a situation in which a company finds itself unable to generate enough funds both internally and from outside source to finance its operations (Osaze & Anao, 1990).

3.     Corporate Governance Structure: This constitutes yardsticks by which corporate governance can be measured in an organization i.e. (board size, board composition, CEO status, audit committee).

4.     Participants in the Corporate Governance Structure: They are the various groups which has stake in the company i.e. (Board of Dir3ector, Shareholders, Stakeholders, etc).

5.     Corporate Codes: These are institutional arrangements and regulatory authority providing the best practices for companies in Nigeria.

6.     OECD: The Organization for Economic Cooperation and Development. 

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