Academic journal article Journal of Emerging Trends in Economics and Management Sciences

Corporate Governance and Organizational Performance in the Nigerian Banking Industry

Academic journal article Journal of Emerging Trends in Economics and Management Sciences

Corporate Governance and Organizational Performance in the Nigerian Banking Industry

Article excerpt

Abstract

The failure associated with corporate governance has assumed multifarious dimensions, as a. In spite of several reforms put together by government to strengthen this sector, banks appear result the survival and stability of any financial sector appear to be dependent on the quality of its governance still prone to failure. The broad objective of this study is the impact of corporate governance on organizational performance in the Nigerian Banking Industry. Specifically the study also focused on the effect of ethical conduct on employees' productivity. The survey research design method was employed. The research instrument was a validated structured questionnaire. The major analytical tools comprised the correlation and multiple regression analysis. It is revealed that unethical behavior by employees seems to affect individuals, work teams, and even the organization. The study concludes that corporate governance through ethical behavior has positive effect on employees' productivity. Corporate governance is about ensuring transparency, building credibility and ensuring accountability as well as maintaining an effective channel of information disclosure that would enhance good corporate performance. Faithful adoption of corporate governance practices will help in contributing to effective organizational performance of the banking sector and the stability of the economy. It is recommended that organizations should emphasize on moral conduct of individual employees to avoid negative effect.

Keywords: corporate governance, ethical behavior, corporate social responsibility, corporate culture, employees' productivity, and organizational effectiveness

INTRODUCTION

In recent times, there has been increasing attention on corporate management hence the recent upsurge of interest in researches on corporate governance. No doubt, banks intermittently face uncertainty and chaotic capital problems and rapid change in processes, towards enhanced competitive advantage and effectiveness. There seems to be several corporate failures and large scale misappropriation of funds, which points to management style and audit independence, ethics, corporate social responsibilities, professionalism, conflict of interest and nefarious practices of board members. Good corporate governance in our contemporary economy appears paramount to the success of banks and other private and public establishments in Nigeria.

In 1997, for instance, 26 banks were liquidated as a result of loan (a large scale insider misappropriation of funds) to management staff, directors, some major stakeholders and their relations and companies (Sanusi, 2003). Nigerian banking system has over time experienced hiccups and corporate governance failures, which has compelled researchers to seek solutions to this menace. Corporate governance seems to be multi-faceted. Several definitions by various scholars have been given. According to O' Donovan (2003), corporate governance appear to be internal system encompassing policies, processes and people which serve the needs of shareholders and other stakeholders, by directing and controlling activities with good business savvy, objectivity, accountability and integrity. The perceived quality of a company's corporate governance seems to influence its share prices as well as the cost of raising capital.

Gopalsamy (2006) viewed corporate governance as not just corporate management but something broader to include a fair efficient and transparent administration to meet certain predetermined objectives. It is a system of restructuring, operating and controlling a company with a need to achieving long term strategic goals to satisfy shareholders, creditors, employees, customers and suppliers and then complying with the legal and regulatory requirements apart from meeting environmental and local community needs. The survival and stability of any financial sector appear to be dependent on the quality of its governance. …

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