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Banking Sector Performance and Corporate Governance in Nigeria: A Discriminant Analytical Approach

Author

Listed:
  • Godwin Chigozie OKPARA

    (Abia State University, Nigeria)

  • Eugine IHEANACHO

    (Abia State University, Nigeria)

Abstract

This paper sets out to investigate the impact of corporate governance on the banking sector performance. Precisely, it examined firstly, how each variant in the corporate governance structure discriminates against the performance of the banking sector and secondly whether the executive directors and non executive directors are associated negatively and significantly with non performing loans. To accomplish these objectives, the researchers employed discriminant analysis, correlation coefficient and the spearman rank correlation as an alternate method. The results of the analysis revealed that foreign ownership contributed about 187.77 percent of the total discriminant score for the function thereby propelling foreign ownership as the most discriminant ownership variable in banks performance and also implying that a bank’s chance of belonging to the group of highly performing banks increases as its foreign ownership increases. The poor performance of the board ownership is not as severe as that of the institutional ownership and government ownership which made the poor and poorer contributions respectively. The results also show that both executive directors and non-executive directors are not significantly associated with non-performing loans. On the basis of these findings, the researchers recommend that the Central Bank of Nigeria in liaison with the Nigerian Deposit and Insurance Corporation should extend intensive surveillance on the role of the directors in the banking sector.

Suggested Citation

  • Godwin Chigozie OKPARA & Eugine IHEANACHO, 2014. "Banking Sector Performance and Corporate Governance in Nigeria: A Discriminant Analytical Approach," Expert Journal of Finance, Sprint Investify, vol. 2(1), pages 10-17, December.
  • Handle: RePEc:exp:finnce:v:2:y:2014:i:1:p:10-17
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    References listed on IDEAS

    as
    1. Okpara, Godwin Chigozie, 2012. "Soundness and unsoundness of banking sector in Nigeria: a discriminant analytical approach," MPRA Paper 36474, University Library of Munich, Germany, revised 06 Feb 2012.
    2. Denis, Diane K. & McConnell, John J., 2003. "International Corporate Governance," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 38(1), pages 1-36, March.
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    Cited by:

    1. Peterson K. Ozili, 2021. "Corporate governance research in Nigeria: a review," SN Business & Economics, Springer, vol. 1(1), pages 1-32, January.
    2. Ozili, Peterson K, 2020. "Corporate governance research in Nigeria: a review," MPRA Paper 98217, University Library of Munich, Germany.

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    More about this item

    Keywords

    Corporate Governance; Executive Directors; Non-Executive Directors; Return on Asset; non-Performing Loans; Discriminant Analysis;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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