CHAPTER ONE

INTRODUCTION

1.1 Background to the Study

Corporate governance is all about the connection between the owners and

managers in directing and controlling companies as separate entities (Onyema &

Major, 2021). Ogbeide and Obaretin (2018); Hasibuan and Khomsiyah (2019) state

that corporate governance is a system of directing and controlling corporate

entities, be it in the private sector, public sector or financial institutions to achieve

long term strategic goals, deal with the welfare of their employees and the local

community, maintain harmonious relations with their suppliers and customers and

work in compliance with the legal framework that exists in the nation and utilize

such processes of production that produce minimum externalities of the negative

kind of the country as a whole (Waluyo, 2017; Yuniarsih, 2018). It gives the

mechanisms, processes and structures by which management guarantees that

resources are effectively and efficiently managed to accomplish desired results by

the owners (Uchendu et al, 2016; Salawu & Adedeji, 2017). Worlu (2018)

maintains that corporate governance incorporates the efficient and effective

management of the resources of a firm within the ambit of regulatory, compliance

and risk management principles.

1
Poor corporate governance practice is a cankerworm that influences organizations

and has prompted the collapse of private and public entities across economic

sectors, in this way weakening overall economic performance. It manifests in the

sub-optimal deployment of organizations’ resources with negative macroeconomic

implications. For instance, in spite of the successful recapitalization of Nigerian

banks in 2006, Sanusi (2009) avers that poor governance prompted systemic

capital inadequacy and illiquidity just in the span of three years of the reform,

which led to the take-over of eight banks by the Central Bank of Nigeria (CBN)

and ensuing injection of six hundred and twenty billion naira bailout fund in the

distressed banks. From the eight banks, only Bank PHB (now Keystone Bank) and

Union Bank survived, indicating that mismanagement diverts resources away from

productive uses.

Good and sufficient corporate governance mechanisms support the going concern

principle of business and are basic elements of sustainable growth and

development. Business stakeholders such as host communities, shareholders,

consumers, employees, creditors, suppliers and the government are happy when

businesses are profitably managed on the grounds that their interests are well

catered for when firms create adequate cash flows. For instance, the government

receives steady revenue in the form of corporate tax, which is required for

infrastructural development, and through improved tax revenue, corporate

2
governance can improve capital formation (Okoye et al, 2016). For the banking

sector, Okafor (2011) contends that good corporate governance validates

management integrity and characterizes the quality of financial services offered by

banks, subsequently affecting the sector’s overall performance. Besides, sound

corporate governance practices protect investors, attract investments, stabilize and

strengthen financial markets, and promote firm performance (Cheema & Din,

2013).

Waluyo (2017) recommended that the main objective of good corporate

governance is for the most part connected with the accountability, responsibility

and mechanism of the company to guarantee a decent attitude of the firm to

safeguard the requirements of shareholders’ including the payment of corporate

and other taxes. The main objective of good corporate governance is to guarantee

the productive utilization of resources to diminish corporate fraud and

mismanagement, maximize shareholders' wealth and align the conflicting interests

of all stakeholders (Yimbila, 2017). Hasibuan and Khomsiyah (2019) express that

good corporate governance decreases agency problems and raises corporate

performance. Firm value is a vital part utilized to assess the performance of

managers in any given business entity. According to Nwaobia et al (2016), firm

value is an economic measure used to examine the market value of an entire

business. The authors submit that firm value is the sum of the market value of

3
equity and debt. Chukwudi et al (2020) believe that firm value is the price paid by

affluent investors once a company is sold and they further expressed that it is the

value from the eyes of the public concerning the corporate survival of a business.

The contention on the relationship between corporate governance and firm value is

inconclusive. According to Paniagua et al (2018), scholars recommend that the

connection between corporate governance structures and firm value is mixed,

inconclusive and complex (Boshnak, 2021; Kisangi, 2021; Marie et al, 2021).

According to Akinyele et al (2019), the absence of viable and productive corporate

governance structure in any entity without a doubt culminates in

underperformance. Joe and Kechi (2011) express that the relationship between

corporate governance and financial performance originates from the fact that the

ineffectiveness of corporate governance mechanisms reflects the incapability of

businesses to meet up the expectations of stakeholders because of the absence of

understanding of the dynamics of the organization. These researchers have laid out

numerous contradictory relationship between corporate governance structures and

the firm value of commercial banks. Consequently, this study investigates the

“Firm's value and corporate governance relationship: Evidence based on Nigerian

commercial banks”. The main purpose of this study is to empirically investigate

the effect of corporate governance structures on the firm value of commercial

banks in Nigeria for the period 2005–2021.

4
1.2 Statement of the Problem

Prior to the introduction of the Securities and Exchange Commission (SEC)

corporate governance code in 2003 in Nigeria, poor governance practices prompted

unending episodes of distress because of declining profitability and erosion of

public confidence in banking operations. Banks gave out loans without sufficient

collateral or no collateral (in some cases), directors gave loans to themselves

(Akpan & Riman, 2012), and staff colluded with outsiders to defraud banks,

prompting massive non-performing loans. However, the code was not directed

exclusively at the banking sector, it was intended to check corporate abuses and

support sustainable business practices.

Aside from the 2003 landmark corporate governance code, the regulators have

introduced some other corporate governance guidelines overtime to regulate

Nigeria’s financial system. Among them is the corporate governance code for

banks (2006) designed by the Central Bank of Nigeria (CBN) to check noticed

weaknesses in governance practices adopted by banks in the post-consolidation

period. There are likewise the revised CBN prudential guidelines for licensed

banks (2010), which contained specific provisions targeted at reinforcing and/or

complementing the 2006 corporate governance code 3. Other extant codes on

corporate governance include the PENCOM code of 2008 for pension fund

administrators, the NAICOM code (2009) for insurance companies, the Central
5
Bank of Nigeria code (2014), and the National Corporate Governance Code 2016

issued by the Financial Reporting Council of Nigeria.

Notwithstanding, regardless of the listed corporate governance mechanisms and

related sanctions for resistance, there are still episodes of bank failures. For

instance, of 25 banks that emerged from the banking consolidation, no less than

five banks have stopped existing because of corporate governance infractions,

lending credence to a 2003 survey by SEC, which produced proof of the huge

contribution of poor governance to most reported episodes of bank distress in

Nigeria (CBN, 2006).

Interestingly, with the persisting crises springing up in the Nigeria banking sector,

one would have expected to see recent studies in Nigeria investigating why these

banks continue to fail and the current role of corporate governance in mitigating

the crises. Nonetheless, the opposite is this case. Most studies in Nigeria in the area

of corporate governance and firm value are over a decade old and these calls for

updating of literature. It is based on these research problems and desire to fill the

identified gaps that this study attempted to investigate empirically corporate

governance and firm value in Nigerian commercial banks.

1.3 Research Questions

i. What effect does a bank’s board size have on its market value?

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 ii. What effect does a bank’s board independence have on its market value?

iii. What effect does a bank’s board gender diversity have on its market value?

1.4 Objectives of the Study

The broad objective of the study is to examine a firm’s value and corporate

governance relationship: evidence based on Nigerian commercial banks. The study

specifically sought to:

i. Examine the effect of bank’s board size on its market value.

ii. Examine the effect of bank’s board independence on its market value.

iii. Examine the effect of bank’s board gender diversity on its market value.

1.5 Research Hypotheses

For the purpose of evaluating or in order to efficiently and objectively analyze or

achieve the above objective, the hypotheses is formulated thus:

H01: Bank’s board size has no significant effect on its market value.

H02: Bank’s board independence has no significant effect on its market value.

H03: Bank’s board gender diversity has no significant effect on its market value.

1.6 Significance of the Study

This research work seeks to examine a firm's value and corporate governance

relationship: evidence based on Nigerian commercial banks, and to that effect, it

7
will contribute to the existing knowledge of past researchers, become relevant to

commercial banks in decision making process, it will also serves as a reference

material to students in various field of study which may include but not limited to

student of economics, banking and finance and other related professions that shall

deem it fit to be interested in the end result of these findings and in creating an

avenue for further research.

1.7 Scope of the Study

This research work shall have its findings limited to Nigeria context, and will also

be keenly interested in making use of bank’s board size, bank’s board

independence and bank’s board gender diversity, as the basis of evaluating market

value as a proxy for firm's value. The life span of data to be used shall range within

the period of 2005–2021 (17 years).

1.8 Organization of the Study

The research work is segmented into five chapters. The first chapter, Chapter 1,

covers Introduction; background of the study, statement of the problem, research

questions, objectives of the study, research hypotheses, significance of the study,

scope of the study, organization of the study, and definition of operational terms.

The following chapter, Chapter 2, covers discussions on the Conceptual review;

the concept of corporate governance, corporate governance and its relevance,

8
corporate governance mechanisms, firm value and its characteristics, financial

performance, the Theoretical review of the study; the agency theory, stewardship

theory, stakeholder theory, the market theory and the Empirical review of the

study. Chapter 3 which follows, contains information on the research methods to

be used for the study, and they include research design, population of the study,

sources and methods of data collection, estimation techniques, model specification

and definition of variables.

1.9 Definition of Operational Terms

Board Gender Diversity: This clarifies the number of women among the board of

directors of a firm.

Board Independence: This is the extent of members of the board who are non-

executive directors that impacts board oversight.

Board Size: This is the number of individuals that comprise the board of directors

of a firm.

Corporate Governance: This alludes to how firms are managed, i.e., how the

resources of a firm are utilized in the pursuit of the set objectives of the

organization.

Firm Value: Firm value or total enterprise value is the economic measure

reflecting the market value of a business.

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Market Value: This is the price at which an asset would trade in a competitive

auction setting.

10
 References

Akpan, E. S. & Riman, H. B. (2012). Does corporate governance affect bank

profitability? Evidence from Nigeria. American International Journal of

Contemporary Research, 2(7), 135–145.

Boshnak, H. A. (2021). Corporate governance mechanisms and firm performance

in Saudi Arabia. International Journal of Financial Research, 12(3), 446–

465.

Cheema, K. U. & Din, M. S. (2013). Impact of corporate governance on the

profitability of firms: A case study of cement industry in Pakistan. Journal

of Business Management Sciences, 1(4), 44–46.

Chukwudi, U. V., Okonkwo, O. T. & Asika, E. R. (2020). Effect of tax planning

on firm value of quoted consumer good manufacturing firms in Nigeria.

International Journal of Finance and Banking Research, 6(1), 1–10.

Hasibuan, D. & Khomsiyah, O. (2019). Does corporate governance affect tax

aggressiveness? Evidence from Indonesia. Journal of Accounting, Business

and Financial Research, 7(1), 8–16.

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Kisangi, F. N. (2021). Effect of corporate governance on the financial performance

of commercial banks in Kenya. IOSR Journal of Economics and Finance,

12(1), 46–80.

Okafor, F. O. (2011). Fifty years of banking sector reforms in Nigeria (1960–

2010): Past lessons-future imperatives. Ezu Books Ltd, Enugu, Nigeria.

Okoye, L. U., Evbuomwan, G. O., Achugamonu, U. & Araghan, I. (2016). Impact

of corporate governance on the profitability of the Nigerian banking sector.

ESUT Journal of Accountancy, 7(1), 281–292.

Salawu R. O. & Adedeji, Z. A. (2017). Corporate governance and tax planning

among nonfinancial quoted companies in Nigeria. African Research Review:

An International Multi-Disciplinary Journal, 11(3), 42–59.

Yuniarsih, N. (2018). The effect of accounting conservatism and corporate

governance mechanism on tax avoidance. Academic Research International,

9(3), 68–76.

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 CHAPTER TWO

LITERATURE REVIEW

2.1 Introduction

This section assesses existing literature about a firm's value and corporate

governance relationship: evidence based on Nigerian commercial banks overtime

in order to deepen our understanding in a similar regard. It is systematically

organized to contain 3 sections; the Conceptual review of the study (to facilitate an

understanding of the different concepts related with corporate governance on firm's

value over the years), the Theoretical review section (to provide theoretical

references to the topic of discourse), and the Empirical review section (to review

works done on this topic by different researchers for the purpose of expanding

views about this topic).

2.2 Conceptual Review

2.2.1 The Concept of Corporate Governance

The concept of corporate governance is very extensive, bearing in mind the mode

and fashion it has entered the minds of several academics. Consequently, the

conception has numerous meanings from the accounting, economic, political and

13
legal points of view. Despite these, corporate governance can be broadly divided

into at least two; the narrow and the broad view.

The narrow interpretation which brings up the “Anglo-Saxon conception” is

concerned with the arrangements within which a corporate entity receives its basic

orientation and direction (Omesi & Appah, 2021). The advocates of the narrow

interpretation think through the interest of the shareholders, issues relating to

shareholders protection, management control and the popular principal-agency

problem of economic theory are given prominent attention. They stated that

corporate governance explains the association between corporate managers and

shareholders. They further suggested that suppliers of finance have a sole

relationship with the firm as they allow their investment to be placed at risk, while

the productive asset they finance remains the property of the firm.

The second class comprises the advocates of the wider view denoted as the

“Franco-German Conception” which is the core of both a market economy and a

democratic society (Sullivan, 2000). This conception of corporate governance

deliberates the interest of the stakeholders, that is, the shareholders, managers,

directors, creditors, customers, society, government and legal authorities/agents. In

addition to this, Sullivan (2000) in Omeis and Appah (2021) resolved the resulting

difficulties of the privatization action, conversion economy, questions of

institutional, legal and capacity building as well as the rule of law at the very core
14
of corporate governance. According to Appah (2019), corporate governance is all

about the association between the owners and managers in directing and

controlling companies as separate entities. It is a structure of directing and

controlling corporate entities, be they in the private sector, public sector or be they

financial institutions to fulfil long term strategic goals, take care of the welfare of

their employees and the local community, maintain harmonious relations with their

suppliers and customers and work in compliance with the legal framework that

exists in the country and use such processes of production that generate minimum

externalities of the negative kind of the nation as a whole. It provides the

mechanisms, processes and structures by which management ensures that

resources are effectively and efficiently managed to achieve desired results by the

owners (Appah, 2019). Corporate governance provides control, transparency and

accountability of reports as well as the decision of selecting accounting methods

that may influence the decision to plan the financial performance of listed firms.

Yuniasih (2018) states that corporate governance are those structures, systems, and

processes utilized by the various organs of a firm in an effort to provide value

added firm sustainability in the long term by taking into consideration the interests

of stakeholders based on beliefs, ethics, norms and rules. It is based on

professional ethics in the firm.

15
The major aim of good corporate governance is to ensure the efficient use of

resources to reduce corporate fraud and mismanagement with the purpose of

maximizing shareholders' wealth and aligning the conflicting interests of all

stakeholders (Yimbila, 2017). Hasibuan and Khomsiyah (2019) noted that good

corporate governance reduces agency problems and improves corporate

performance. Murni, Sudarmaji and Sugihyahi (2016) made the submission that

good corporate governance inspires confidence in investors, liberalization of

financial markets and improvement of the basis for the establishment of a new

corporate value system.

2.2.2 Corporate Governance and its Relevance

Corporate governance refers to how firms are managed, that is, how the resources

of a firm are employed in the pursuit of the set goals of the organization (Chiejien,

2010). It includes transparency, independence, accountability, fairness, corporate

social responsibility, timely and accurate disclosure of information and corporate

discipline. Good corporate governance is expected to regulate the relationship and

interconnectivity amongst shareholders, board of directors and management

(Hassan, 2010; Murinda, Islahuddin & Nuraini, 2021).

Good corporate governance should be preoccupied with giving direction to the

firm, in terms of its operations, resource derivation and resource allocation. It

16
ensures transparency in the operations of the firm. The relevance of corporate

governance is usually judged from its contribution to economic growth and

efficient utilization of resources. Other concrete relevance of corporate governance

should include:

i. Enhanced accessibility to external finance: According to Claessens

(2003), better creditor and shareholder rights are seen to be related with in-

depth and better developed banking and capital markets.

ii. Influences firm value positively: This attracts investors and attracts lower

cost of capital, as well as leads to higher growth and employment

opportunities.

iii. Promotes optimal and efficient allocation of resources and better firm

operations.

iv. Acts as a shock absorber in times of economic crises, thereby reducing and

mitigating risks, and promoting the firm’s reputation.

v. Creates better relations amongst various stakeholders.

2.2.3 Corporate Governance Mechanisms

Organizational policies, processes, and resources that foster a trustworthy and

transparent atmosphere are collectively referred to as corporate governance

mechanisms. The many means through which stakeholders monitor and influence

17
participant actions to ensure they forward goals. A nation's corporate governance

system is made up of the processes and tools used to execute and enforce the

corporate governance legislation and business laws of the country (Adekoya,

2012). It’s important to also take note of concepts below.

i. Board Composition: The composition of the board, which should include

both executive and nonexecutive members, is an integral aspect of any

board's organizational framework. Both the agency theory and the

stewardship theory may be modified by the existence of a board of directors.

Agency theory might be reassuring when there are multiple non-dependents

serving on a board.

ii. Board Size: The number of board members is called board size. The optimal

board size and how it impacts the board's efficiency is a topic of continuous

dispute. Academic authorities have emphasized on the need for smaller

board sizes.

iii. Board Tenure: The average number of years a director has spent on the

board of directors is a common indicator of how long that person has been

on the board (Hambrick & D'Aveni, 1992; Finkelstein & Hambrick, 1990).

There is a strong correlation between the board of directors' average tenure

and the chief executive officer’s effectiveness in their role. Longer serving

18
 board members are certain to be more familiar with all aspects of the

company (Hillman & Dalziel, 2003; Forbes & Milliken, 1999).

iv. Banking Industry in Nigeria: The role of the banking system is crucial to

the health of the national economy. Monetary policy and the related payment

and settlement systems couldn't function without it. Good governance

measures are needed from management to guarantee the organization's

success and protect against the loss of trust that might result from a failure to

meet its goals (Muhammed, 2013). To its clients, a bank is a financial

organization that offers various banking and financial services. It is often

accepted that deposit and lending services are the defining characteristics of

a bank. Additionally, there are nonbanking entities that provide limited

banking services without technically being banks. Financial institutions,

such as banks, make up the broader sector known as financial services

(Muhammed, 2013). As of right now (2023), Nigeria has 22 commercial

banks, 916 microfinance banks, 5 discount houses, 103 Finance Companies,

and 6 development finance banks. These institutions, along with others like

Bureau de Change (BDCs), Finance Companies (FCs), and Primary

Mortgage Institutions (PMIs), are subject to the oversight and regulation of

the Central Bank of Nigeria (CBN). Its principal role is to establish policy

and keep an eye on the financial sector to make sure everyone is playing by

19
 the rules in terms of currency, credit, and interest rates. Commercial banks in

Nigeria primarily serve as depository institutions, loan originators, and

facilitators of other financial transactions.

v. Duties of Banks: The responsibilities of banks in Nigeria includes reserve

fund maintenance; dividend restriction; disclosure of interests by directors,

managers, and officers; prohibition of employment of certain persons and

interlocking directorship; limitations on certain banking activities;

acquisition of shares in small and medium scale industries; agricultural

enterprises; venture capital companies; limitations on the operations of

merchant banks; and public disclosure.

2.2.4 Firm Value and its Characteristics

Firm value or total enterprise value is the economic measure reflecting the market

value of a business. It reflects the value of a business at a given date. Theoretically,

it is the amount that an individual or firm would be willing to pay to buy or to take

over a business entity and can be determined on the basis of either book value or

market value (Kurniansyah, Saraswati & Rahman, 2021). However, market value

is commonly used in determining the value of a business. It is the sum of claims by

all claimants. These claimants include creditors (secured and unsecured creditors),

and shareholders (preference shareholders and ordinary shareholders).

20
Varying findings from different authors in most studies related to factors

influencing firm value have been reviewed. For instance, Anabestani and

Shourvarzi (2014) discovered that profitability negatively affects firm value.

Antounian, Dah and Harakeh (2021) found profitability to positively influence firm

value. Similarly, the findings of Danoshana and Ravivathani (2019) showed that

leverage is positively related to firm value; the findings of El-Deeb, Halim and

Elbayoumi (2021) found that size of the firm is positively connected to firm value,

while Garay and Gonzalez (2008) indicated that size of the firm has negative

relationship with firm value.

2.2.5 Financial Performance

There are many different ways to measure financial performance, but all measures

should be taken in aggregation. Line items such as revenues from operations,

operating income, or cash flow from operations can be used, as well as total unit

sales. Bank performance refers to how well a bank is doing, especially its

profitability index and income statement. To understand how well a bank is doing,

we need to start by looking at a bank's income statement, describing the sources of

income and expenses that affect the bank's profitability. The bank's profitability

can also be seen as a measure of its return on asset (Emeka & Bello, 2016).

21
Santos and Brito (2012) identified that superior financial performance, which can

be represented by profitability, growth, and market value, underpins corporate

governance practice in organizations. Profitability measures a firm's past ability to

generate returns, while growth demonstrates its past ability to increase its size.

Increasing size, even at the same profitability level, will increase its absolute profit

and cash generation. Their research shows that larger firm size can bring

economies of scale and market power, leading to enhanced future profitability. On

the other hand, the market value represents the external assessment and expectation

of firms' future performance, which must correlate with historical profitability and

growth levels while incorporating future market changes and competitive moves.

The nonfinancial performance facets are customers’ satisfaction, employees'

satisfaction, environmental performance and social performance.

George and Karibo (2014) defined it as the success in meeting predefined

objectives, targets, and goals within a specified time target. Some of the aspects

that must be considered when defining performance are time frame and its

reference point. It is possible to differentiate between past and future performance.

Moreover, it has been shown that past superior performance does not guarantee

that it will remain superior in the future.

2.3 Theoretical Review

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2.3.1 The Agency Theory

The agency of corporate governance literature was advocated in 1972 by Alchain

and Demsetzem and further developed by Jensen & Mickling in 1976. The theory

has to do with difficulties that occur in agency associations owing to unaligned

objectives or diverse dislike levels of risk. The most common agency relationship

in finance occurs between shareholders (principal) and many company executives

(agents). This association arises with conflict usually recognized as agency

conflicts or conflicts of interest between principals and the agents. Agency theory

explains the problems that occur due to variances between the goals of the

principal and the agent. This condition could occur since the owners are not aware

of the activities of the managers or are barred by resources from acquiring the

information. However, shareholders that desire high current capital growth may be

unaware of these plans. It is also possible for the managers not to be interested in

venturing into more lucrative concepts for their own individual goals.

Okpolosa (2018) suggests that the degree to which managers of business

establishments employ managerial resources in the best interest of shareholders to

decrease cost is an essential subject. Some other concerns that shareholders might

also have is how difficult it is to employ the most skilful managers and also

safeguard decisions in line with shareholders' interests. All these constitute agency

cost; which talks about the cost the owner must bear to guarantee that all managers
23
are encouraged to be able to maximize shareholders’ wealth rather than their own

self-interest. According to Okpolosa (2018), agency cost could be seen from three

viewpoints namely; cost incurred on managerial activities such as audit cost,

secondly, the cost of structuring the company in such a way that will limit

undesirable managerial behavior, this includes appointing nonexecutive directors,

business restructuring and restructuring management hierarchy, and thirdly,

opportunity cost which is incurred when restrictions by shareholders limit the

ability of the managers to take actions that positively impacts shareholders wealth.

According to Kisangi (2021), the agency theory is important to the study of

corporate governance and firm’s value because it investigates the association

between board characteristics and their impact on the market value of firms.

2.3.2 Stewardship Theory

The theory adopts sociological and psychological approaches to governance. As

opposed to the opportunistic, individualistic, and self-serving assumption of

agency theory, stewardship theory projects managers as collectivists, pro-

organizational, and trustworthy. The theory depicts managers as stewards who

protect and maximize shareholder value through firm performance (Davis,

Schoorman, & Donaldson, 1997). The theory posits that managers find fulfillment

from their organizations’ success and place the interest of their principals above

24
their own interests. It is, therefore, an organization centered theory of management.

It aims at creating value for shareholders through sustained improvements in

business performance.

Under the stewardship theory, the positions of chief executive officer and board

chairman are invested in one executive, with a board comprised mostly of in-house

members to allow for intimate knowledge of organizational operations and deep

commitment to success. This is premised on the assumption that having a single

leader creates one channel to communicate business needs to the shareholders and

the shareholders’ needs to the business, thereby minimizing episodes of confusion

and conflict of interest.

2.3.3 Stakeholder Theory

The stakeholder theory is a capitalism postulation that emphasizes the interrelated

relationships existing between a business and its various stakeholders such as

customers, suppliers, employees, investors, communities, etc. The theory states

that managers of businesses must of necessity take into consideration the needs of

all stakeholders and that these constituents impact its operations and is impacted by

its operations (Lemmon & Lins, 2003). The theory postulates that a business must

seek to maximize value for its stakeholders. It takes into cognizance both

25
economical and ethical considerations, while promoting fairness for everyone

involved in the company and gives the managers clear objective.

Despite its seeming importance, many scholars such as Haat, Ralman and

Mahenthiran (2008) and, Hamad, Saeed and Sharif (2021) have criticized the

stakeholder theory. They argued that the theory lacks specificity and as such

cannot be operationalized in a way that allows scientific observation. They pointed

out that it can be difficult to consider the differing interests of various stakeholders.

Some feel that the theory offers no decision making standard that could provide a

benchmark for governance. Others argued that the stakeholder theory is vacuous

and unrealistic of the actual operations of organizations.

This study hinges on the stakeholder theory that bank managers and directors in

Nigeria are in those banks for the interest and reward of stakeholders and not for

their own personal interest. The study further found support from the agency

relationship theory which was first pointed out by Jensen and Meorching (1976) as

a contract under which one or more persons (the principal) engage another person

(the agent) to perform some services on their behalf. Here, the shareholders

(owners/principal) of the firm hire the agents (managers and directors) to oversee

the activities of the firm.

2.3.4 The Market Theory

26
The market theory is one of the several approaches to ensuring proper protections

to shareholders and firm adherence to existing regulations. This school of thinking

maintains that shareholders may readily penalize companies whose directors are

not providing enough returns on investment by selling their shares of stock. Many

Enron shareholders (including many of its employees) were unable to sell their

shares (many of which were held in pension plans) once it became clear that the

firm's governance was wholly inadequate, dealing a fatal blow to the extent to

which this theory was held during the corporate scandals of the turn of the century

(Akingunola, Adekunle & Adedipe, 2013).

The most significant advantage of this theory is its ability to respond dynamically

to changes. In the short term, corporate leadership responds to the changes in the

market price and of the firm’s stock. In the long run, the dynamism of a market

based governance system makes it much easier for new business practices to be

established. On the other hand, one of the most significant issues to this theory is a

tendency toward a short-termism, according to governance experts.

2.4 Empirical Review

Lawrence, Felicia, Johnson, Felix and Rhoda (2020) explored the nexus between

governance practices and bank profitability in Nigeria. They adopted the size of

bank board and directors’ stake as proxies for corporate governance, with return on

27
assets and return on equity as representations for financial performance. Their

research incorporated firm size as a controlled variable. The estimation technique

of the Generalized Method of Moments was employed. Evidence from their

research revealed that board size, directors’ equity, and firm size substantially

affect Nigerian banks’ financial performance. Besides, their study showed a robust

effect of lagged return on equity on the current level of performance. Therefore,

their study asserts that governance in business entities strongly affects their

financial performance and recommends maintaining optimum board size to

minimize boardroom conflicts. They further prescribed that the requirement for

substantial equity stake by directors of banking institutions be sustained, as it

secures commitment to governance practices that support profitability.

Panan and Livinus (2021) investigated the effects of corporate governance on the

financial performance of commercial banks in Nigeria. Their study used the survey

research design. A secondary source of data was used for their research. Their data

were collected from financial statements of five (5) commercial banks selected

from the Nigerian Stock Exchange listing for fourteen financial years (2003–2017).

Their study utilized the panel Least Squares Regression Analysis as the method.

Their result indicated that board size had significant effects on financial

performance (return on asset) of commercial banks in Nigeria, board composition

had significant effects on financial performance (return on asset) of commercial

28
banks in Nigeria, board gender diversity had significant effects on financial

performance (return on asset) of commercial banks in Nigeria, the audit committee

has no significant effects on financial performance (return on asset) of commercial

banks in Nigeria, and board independence had significant effects on financial

performance (return on asset) of commercial banks in Nigeria. Their study,

therefore, concluded that the weak corporate governance structure in Nigeria

contributed immensely to the recent crisis experienced in the Nigerian banking

sector. Their study recommended that banks develop and implement strategic

training for board members and senior bank managers. Nigerian banks should

appropriately adopt the international codes of corporate governance to meet the

need of the Nigerian environment, among other recommendations.

Appah (2022) investigated the effects of corporate governance mechanisms on the

value of deposit money banks in Nigeria from 2010–2020. His specific objectives

include investigating the relationship between board size and Tobin q; evaluating

the relationship between board independence and Tobin q; determining the

relationship between board ownership and Tobin q; investigating the effect of

gender diversity on Tobin q and evaluating the relationship between board

meetings and Tobin q. His study population consisted of all deposit money banks

and the Taro Yamene method of sample size determination was applied. His

secondary data for the study was from the published financial statements of

29
sampled banks for the period after the validity and reliability test of data. His data

obtained were tested using univariate, bivariate and multivariate analysis. His

results from the multiple regression results disclosed that board independence, the

board size, ownership structure, gender diversity and board meetings positively

and significantly influence the value of deposit money banks in Nigeria. His study

concluded that corporate governance attributes positively and significantly affect

the value of deposit money banks in Nigeria. His study made several

recommendations amongst others that board sizes should be enhanced as this

allows for the appropriate combination of directors. A large board increases the

chance of directors having appropriate knowledge, skill and networks. The

knowledge, skill and networks of directors may increase the financial performance

of an organization. Also, deposit money banks in Nigeria should have

nonexecutive directors who act as professional advisers to ensure that competition

among insiders encourages measures consistent with the maximization of

shareholder value. Hence, the implication of his study provided that the

implementation of corporate governance characteristics enhances the value of

firms in deposit money banks in Nigeria.

Ejike, Habiba and Abdullahi (2022) investigated the relationship between

corporate governance and firm value of Nigerian banks using the quantitative

research design. Their study adopted a similar model used by Haat, Ralman and

30
Mahenthiran (2008) and Hamad, Saeed and Sharif (2021) to estimate the combined

effects of corporate governance proxies (board size, board composition, firm

ownership structure financial disclosure and transparency, and composition of

audit committee) on firm value measures (net assets per share, dividend per share

and return on investments) of eight selected commercial banks. Their data was

collected from the published financial reports of the selected banks for the year

2010–2020. Data obtained was analyzed using descriptive and inferential statistics

(Ordinary Least Squares regression) via the Statistical Package for Social Sciences

(SPSS). Their findings indicated that corporate governance proxies have

significant effect on the return on investment, dividend per share and net assets per

share of the selected banks in Nigeria. Their paper recommended that all the

stakeholders involved in monitoring the institutionalization of an effective system

of corporate governance in Nigeria banks should do more to ensure that bank

directors adhere to good and transparent corporate governance to reverse the

continuous trend of bank failures in Nigeria in order to enhance the value of the

firm.

Okunola and Obera (2022) examined the effect of corporate governance on deposit

money bank in Nigeria. They specifically examined the effect of board size on

profitability of deposit money banks in Nigeria, and also examined the effect of

board tenure on profitability of deposit money banks in Nigeria. Their survey

31
based study looked at the impact of corporate governance on the bottom lines of

Nigerian deposit money institutions. Utilizing a well-structured questionnaire,

primary data were collected from their study's intended respondent pool to examine

the impact of cooperative governance on the financial performance of deposit

money banks in Nigeria. Their findings suggested that a strong board of directors

is linked to a prosperous financial firm. Their results for board composition

showed a positive and statistically significant effect on return on asset, and their

results for the audit committee showed a negative and statistically insignificant

impact on return on asset. Board size was found to have a positive and statistically

significant effect on return on asset. Their research showed that corporate

governance is significantly related to the financial performance of Nigeria's deposit

money institutions. Their paper advised increasing board size up to the maximum

allowed under corporate governance law in the banking sector.

32
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suggested solution. Journal of Business System, Governance and Ethics,

6(1), 38–50.

Akingunola, K. I., Adekunle, M. O. & Adedipe, O. A. (2013). Effect of corporate

social responsibility on organization performance: Banking industry Kenya,

Kakamega County. International Journal of Business and Management

Invention, 3(4), 37–51.

Anabestani, Z. & Shourvarzi, M. R. (2014). Cash holdings, firm value and

corporate governance. Asian Journal of Research in Banking and Finance,

4(4), 128–143.

Antounian, C., Dah, M. A. & Harakeh, M. (2021). Excessive managerial

entrenchment, corporate governance and firm performance. Research in

International Business and Finance, 56(1), 101–392.

Appah, E. (2019). Financial management: Theory, strategy and practice. Vinson

Publishing and Printing Venture.

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Appah, E. (2022). Corporate governance characteristics and firm value of deposit

money banks in Nigeria. British Journal of Management and Marketing

Studies, 5(2), 109–129.

Danoshana, S. & Ravivathani, T. (2019). The impact of the corporate governance

on firm performance: A study on financial institutions in Sri Lanka. SAARJ

Journal on Banking & Insurance Research, 8(1), 62–67.

Davis, J. H., Schoorman, F. D. & Donaldson, L. (1997). Toward a stewardship

theory of management. Academy of Management Review, 22(1), 20–47.

Ejike, S. O., Habiba, M. U. & Abdullahi, N. (2022). Corporate governance and

firm value: Is poor corporate governance responsible for the persistent crises

in Nigeria banking sector? Journal of Contemporary Issues in Accounting

(JOCIA), 3(1), 95–109.

El-Deeb, M. S., Halim, Y. T. & Elbayoumi, A. F. (2021). Disclosure tone,

corporate governance and firm value: Evidence from Egypt. Asia Pacific

Journal of Accounting and Economics, 1(1), 1–22.

Emeka, E. E. & Bello, A. I. E. (2016). The effect of corporate governance on

bank’s financial performance in Nigeria. Journal of Business and

Management, 18(3), 99–107.

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Garay, U. & Gonzalez, M. (2008). Corporate governance and firm value: The case

of Venezuela. Corporate Governance: An International Review, 16(3), 194–

209.

Hasibuan, D. & Khomsiyah, O. (2019). Does corporate governance affect tax

aggressiveness? Evidence from Indonesia. Journal of Accounting, Business

and Financial Research, 7(1), 8–16.

Haat, M. H. C., Ralman, R. A. & Mahenthiran, S. (2008). Corporate governance,

transparency and performance of Malaysian companies. Managerial

Auditing Journal, 1(1), 1–15.

Hamad, K. Q., Saeed, Q. & Sharif, R. J. M. (2021). Effectiveness and adequacy of

disclosure provisions in Tehran stock exchange. PalArch’s Journal of

Archaeology of Egypt/Egyptology, 18(8), 2379–2388.

Hassan, Y. A. (2010). Corporate governance and performance of deposit money

banks in Nigeria. Nigerian Journal of Accounting and Finance, 1(1), 16–27.

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37
 CHAPTER THREE

RESEARCH METHODS

3.1 Introduction

This chapter outlines the method adopted in the conduct of the study. It specifies

information on the research methods to be used for the study, and they include

research design, population of the study, sources and methods of data collection,

estimation techniques, model specification and definition of variables.

3.2 Research Design

This study employed ex post facto and correlational research designs. These

designs are chosen and applied because of the fact that the various elements of the

design are not under the control of the researcher. The data for this study already

exists hence; it is used for secondary data study.

3.3 Population of the Study

Appah (2020) opined that the target population is the entire population to which

the findings of the study are applicable. He noted that the target population is the

entire group of items which the researcher wishes to study and generalize. In this

research, the target population consisted of all market value, bank’s board size,

38
bank’s board independence and bank’s board gender diversity for the period 2005–

2021 (17 years).

3.4 Sources and Methods of Data Collection

The sources used in collecting data in any study or investigation depends on the

type of data needed and the purpose of the investigation. However, in achieving the

set objectives of this study, this study will employ the use of secondary data

collection. It relied on time series annual report of four major banks in Nigeria

which are Access Bank PLC, Guaranty Trust Bank PLC, Fidelity Bank PLC and

Zenith Bank PLC. The data collected are on annually basis from 2005–2021 (17

years).

3.5 Estimation Techniques

Ordinary Least Square (OLS) method would be used to analyze the relationship

between the dependent variable and the independent variables using E-Views 10.0

Output Statistical Software.

3.6 Model Specification

To achieve the study's objective, the mathematical equation has been developed to

examine a firm's value and corporate governance relationship: evidence based on

Nigerian commercial banks. Hence, the corporate governance variables include;

bank’s board size, bank’s board independence and bank’s board gender diversity,
39
while market value was used to measure the firm's value of the listed commercial

banks. The data used for this study were obtained from the secondary source

derived from the annual reports of the sampled banks for seventeen (17) years from

2005–2021.

The following model was used to examine the relationship between firm's value

and corporate governance;

MV = f (BS, BI, BG) ---------- (2)

MV = β0 + β1BSit + β2BIit + β3BGit + µit ---------- (3)

Where:

MV = Market Value.

BS = Bank’s Board Size.

BI = Bank’s Board Independence.

BG = Bank’s Board Gender Diversity.

µ= Stochastic error term/ random error term.

I = Cross-section dimension and ranges from 1 to n number of period.

T = Time-series dimension and ranges from 1 to t number of banks.

β1, β2 and β3 = the parameters to be estimated.

40
β0 = Intercept.

3.7 Definition of Variables

Board Gender Diversity: This clarifies the number of women among the board of

directors of a firm.

Board Independence: This is the extent of members of the board who are non-

executive directors that impacts board oversight.

Board Size: This is the number of individuals that comprise the board of directors

of a firm.

Market Value: This is the price at which an asset would trade in a competitive

auction setting.

41
 References

Appah, E. (2020). Research methodology: Principles, methods and techniques.

Ezevin Publishing.

42
 CHAPTER FOUR

DATA PRESENTATION, ANALYSIS AND INTERPRETATION

OF RESULTS

4.1 Introduction

Firm’s value and corporate governance data (MV, BS, BI and BG) used in this

study are presented in the appendix (after references) for the period of 2005–2021.

The analysis and discussion of results started with the Descriptive Statistics,

Correlation Matrix, Stationarity Test, the Johansen Co-Integration Test Results,

Pool OLS, Fix Effect Model, Random Effect Model and Hausman Test.

4.2 Preliminary Tests

4.2.1 Descriptive Statistics

These measures the individual characteristics of the variables used in this study.

The result of the descriptive statistics is presented in Table 4.1 below.

43
Table 4.1: Descriptive Statistics Results

MV BS BI BG
Mean 2.280009 14.01471 7.323529 2.397059
Median 1.690009 14.00000 7.000000 2.000000
Maximum 9.660009 19.00000 15.00000 6.000000
Minimum 34953351 6.000000 3.000000 0.000000
Std. Dev. 2.060009 1.943167 2.010726 1.584813
Skewness 1.504179 -0.955318 1.692003 0.529960
Kurtosis 5.147754 6.672436 7.175852 2.361227

Jarque-Bera 38.71200 48.55573 81.85281 4.339147

Probability 0.000000 0.000000 0.000000 0.114226

Sum 1.550011 953.0000 498.0000 163.0000

Sum Sq. Dev. 2.840020 252.9853 270.8824 168.2794

Observations 68 68 68 68
Source: Researcher’s Computation, 2024.

Table 4.1 shows the descriptive statistics of each of the variables. In summary, the

Jarque-Bera statistics show that the variable BG follow a normal distribution

having it p-value (0.114226) greater than 0.05 level. On the contrary, the variable

MV, BS and BI are not normally distributed since their p-values (0.000000,

0.000000 and 0.000000 respectively) are less than 0.05 level. The result showed

that MV has a minimum value of 34953351 and a maximum value of 9.660009;

BS has a minimum value of 6.000000 and a maximum value of 19.00000; BI has a

minimum value of 3.000000 and a maximum value of 15.00000 and; BG has a

minimum value of 0.000000 and a maximum value of 6.000000. The Standard

44
deviations of the variables show a moderate dispersion from the means of the

variables. The standard deviation of 2.060009 showed that MV deviates from the

mean by 2.060009; the standard deviation of 1.943167 showed that BS deviates

from the mean by 1.943167; the standard deviation of 2.010726 showed that BI

deviates from the mean by 2.010726 and; the standard deviation of 1.584813

showed that BG deviates from the mean by 1.584813.

4.2.2 Correlation Matrix

Table 4.2: Correlation Analysis Matrix

MV BS BI BG
MV 1 0.245055 -0.086645 0.452888
BS 0.245055 1 0.629062 0.589360
BI -0.086645 0.629062 1 0.258846
BG 0.452888 0.589360 0.258846 1
Source: Researcher’s Computation, 2024.

The correlation analysis of the set of variables in the model as presented in Table

4.2 shows that BG with a correlation coefficient of 0.452888 have the highest

strength of relationship with MV. With a coefficient of -0.086645, BI is behind BS

(0.245055). The result likewise shows that the association between bank’s board

size, bank’s board independence, bank’s board gender diversity and market value

are mixed i.e. some of the results are negative and the others positive. The results

45
indicates the absence of multi-correlation problem among the variables since the

association among the variables is not very strong.

4.3 Empirical Results

4.3.1 Stationarity Test

Unit root test was conducted on the selected Firm’s value and corporate

governance indicators (market value, bank’s board size, bank’s board

independence and bank’s board gender diversity), were examined using the

Augmented Dickey-Fuller (ADF) test statistics to decide their stationarity status.

Statistical theory expects that variables be stationary before the utilization of

standard econometric techniques. This was done in order to avoid misleading

results. The results of the Augmented Dickey-Fuller (ADF) unit root test are

presented in Table 4.3 below.

Table 4.3: Unit Root Test results using ADF procedure

Variables Level First Difference Order of

Integration
MV 4.095238 -1.434623 I(0)
BS -2.070117 -3.770824 I(1)
BI -1.580075 -3.536322 I(1)
BG -1.232964 -3.085775 I(1)
5% Level 5% Level
MV -3.065585 -3.081002
BS -3.065585 -3.081002
BI -3.081002 -3.081002
BG -3.065585 -3.081002

46
Source: Author’s E-Views Computation, 2024.

The Augmented Dickey-Fuller (ADF) test results in Table 4.3 showed that MV

was integrated at level. While BS, BI and BG were integrated at first difference. In

other words, all the selected variables (MV, BS, BI and BG) were found to be

stationary at first difference. This implies that the hypothesis of non-stationarity is

rejected for all the variables at the level indicated. This justified the need to test for

co-integration.

4.3.2 Long Run Relationship Test using the Johansen Co-integration Test

Co-integration test was carried out to examine the long run relationship among the

variables using Johansen co-integration test.

Decision Rule: Reject the null hypothesis in absolute terms, if trace statistic of the

variable is greater than the critical value but do not reject the null hypothesis, if

trace statistic of the variable is less than the critical value.

Table 4.4: Johansen Co-Integration Test

Hypothesized Eigenvalue Trace 0.05 Critical Prob.**

No. of CE(s) Statistic Value
None* 0.938718 69.57155 47.85613 0.0001
At most 1 0.654203 27.68749 29.79707 0.0859
At most 2 0.517548 11.75893 15.49471 0.1689
At most 3 0.053566 0.825806 3.841466 0.3635
Source: Author’s E-Views Computation, 2024.

47
In conclusion, since 1 co-integration equation at the 0.05 level in Table 4.4 is

greater than the critical values at 5%, we say they are co-integrated.

4.3.3 Panel Data Analysis

Pool OLS, Fix Effect Model and Random Effect Model results will be presented in

this section. The results of Pool OLS will be used to test the hypotheses.

Table 4.5: Pool OLS

Variable Coefficient Std. Error t-Statistic Prob.

C 3.980008 1.810009 0.219281 0.8271

BS 2.130008 1.770008 1.200883 0.2342
BI -3.290008 1.430008 -2.294277 0.0251
BG 5.430008 1.750008 3.099960 0.0029

R-squared 0.266192 Mean dependent var 2.280009

Adjusted R-squared 0.231795 S.D. dependent var 2.060009
S.E. of regression 1.810009 Akaike info criterion 45.52337
Sum squared resid 2.090020 Schwarz criterion 45.65393
Log likelihood -1543.795 Hannan-Quinn criter. 45.57510
F-statistic 7.738763 Durbin-Watson stat 0.164858
Prob(F-statistic) 0.000173

Source: Author’s E-Views Computation, 2024.

Pool OLS results in Table 4.5 above show that, BI had a negative effect on MV.

BS and BG on the other hand, have a positive effect on MV.

48
Table 4.6: Fix Effect Model

Variable Coefficient Std. Error t-Statistic Prob.

C 2.600009 1.400009 1.856555 0.0682

BS -3.530008 1.480008 -2.386564 0.0201
BI 2.170008 1.270008 1.700699 0.0941
BG 1.260009 1.600008 7.923489 0.0000

Effects Specification

Cross-section fixed (dummy variables)

R-squared 0.637795 Mean dependent var 2.280009

Adjusted R-squared 0.602168 S.D. dependent var 2.060009
S.E. of regression 1.300009 Akaike info criterion 44.90557
Sum squared resid 1.030020 Schwarz criterion 45.13405
Log likelihood -1519.789 Hannan-Quinn criter. 44.99610
F-statistic 17.90213 Durbin-Watson stat 0.470370
Prob(F-statistic) 0.000000

Source: Author’s E-Views Computation, 2024.

Fix effect model results in Table 4.6 above show that, BS had a negative effect on

MV. BI and BG on the other hand, have a positive effect on MV.

49
Table 4.7: Random Effect Model

Variable Coefficient Std. Error t-Statistic Prob.

C 3.980008 1.310009 0.304711 0.7616

BS 2.130008 1.280008 1.668742 0.1001
BI -3.290008 1.030008 -3.188119 0.0022
BG 5.430008 1.260008 4.307693 0.0001

Effects Specification
S.D. Rho

Cross-section random 317.6969 0.0000

Idiosyncratic random 1.300009 1.0000

Weighted Statistics

R-squared 0.266192 Mean dependent var 2.280009

Adjusted R-squared 0.231795 S.D. dependent var 2.060009
S.E. of regression 1.810009 Sum squared resid 2.090020
F-statistic 7.738763 Durbin-Watson stat 0.164858
Prob(F-statistic) 0.000173

Unweighted Statistics

R-squared 0.266192 Mean dependent var 2.280009

Sum squared resid 2.090020 Durbin-Watson stat 0.164858

Source: Author’s E-Views Computation, 2024.

50
Random effect model results in Table 4.7 above show that, BI had a negative effect

on MV. BS and BG on the other hand, have a positive effect on MV.

4.3.4 Hausman Test

Hausman test will be utilized to know the exact model (i.e. Pool OLS, Fix Effect

Model and Random Effect Model) that is appropriate for this analysis. Hausman

test helps us to select which model is more efficient out of the three model.

Decision Rule: If p-value is significant (i.e. p-value < 0.05), use fix effect model.

If p-value is insignificant (i.e. p-value > 0.05), use random effect model.

Table 4.8 Hausman Test Result

Test Summary Chi-Sq. Statistic Chi-Sq. d.f. Prob.

Cross-section random 62.582619 3 0.0000
Source: Author’s E-Views Computation, 2024.

Following the decision rule, since p-value of 0.0000 is less than 5% level of

significance (i.e. 0.0000 < 0.05), the results of fix effect model in Table 4.46 will

be used to test the hypotheses.

4.4 Test of Hypotheses

In light of the preceding study of the data used to examine a firm’s value and

corporate governance relationship: evidence based on Nigerian commercial banks,

it's vital to compare and contrast the initial hypotheses stated and the subsequent

51
outcomes. The hypothesis was tested for the significance of the independent

variables using the student’s t-test at 0.05 level of significance.

Decision Rule: Reject the null hypothesis if the t-calculated is greater than t-

tabulated; if otherwise, do not reject the null hypothesis.

The tabulated t values were obtained from the student’s t-distribution and 14

degrees of freedom. Where; n = number of observations, and k = number of

parameter estimates. Then, (df) degree of freedom = n – k i.e. 17 – 3 = 14. From

the t-table, t tabulated at 5% level of significance = 2.145. The result of Pool OLS

in Table 4.5 above will be used to test the hypotheses.

Hypothesis 1

H0: Bank’s board size has no significant effect on its market value.

The t-calculated of the estimated coefficient of the variable (BS) in Table 4.6

above i.e. -2.386564, was compared with the t-tabulated value of 2.145 to test the

hypothesis. Following the rule above, since t-tabulated is lesser than t-calculated,

we reject the null hypothesis and conclude that bank’s board size has a significant

effect on its market value.

Hypothesis 2

H0: Bank’s board independence has no significant effect on its market value.

52
The t-calculated of the estimated coefficient of the variable (BI) in Table 4.6 above

i.e. 1.700699, was compared with the t-tabulated value of 2.145 to test the

hypothesis. Following the rule above, since t-tabulated is greater than t-calculated,

we do not reject the null hypothesis and conclude that bank’s board independence

has no significant effect on its market value.

Hypothesis 3

H0: Bank’s board gender diversity has no significant effect on its market value.

The t-calculated of the estimated coefficient of the variable (BG) in Table 4.5

above i.e. 7.923489, was compared with the t-tabulated value of 2.145 to test the

hypothesis. Following the rule above, since t-tabulated is lesser than t-calculated,

we reject the null hypothesis and conclude that bank’s board gender diversity has a

significant effect on its market value.

4.5 Discussion of Findings

The results from the tested hypotheses above revealed that bank’s board size has a

significant effect on its market value, bank’s board independence has no significant

effect on its market value and bank’s board gender diversity has a significant effect

on its market value. This implies that in the long run, there is a causality between

bank’s board size with its market value, there is no causality between bank’s board

53
independence with its market value and there is a causality between bank’s board

gender diversity with its market value.

54
 CHAPTER FIVE

SUMMARY, CONCLUSION AND RECOMMENDATIONS

5.1 Introduction

The study’s last chapter contains a summary of all findings derived and analyzed

by the researcher, as well as a conclusion based on these findings and

recommendations to banks and board of directors on the true nature of a firm’s

value relationship with corporate governance. The chapter concluded with

recommendations for future research on the subject of discourse.

5.2 Summary

This section contains a summary of the study’s principal conclusions, which are

based on the examination of a firm’s value and corporate governance relationship:

evidence based on Nigerian commercial banks. As a result, it is more convenient to

summarize these findings as follows:

i. Bank’s board size has a negative and significant effect on its market value.

This implies that an increase in a bank’s board size will lead to a decrease in

its market value.

55
 ii. Bank’s board independence has a positive and insignificant effect on its

market value. This implies that an increase in a bank’s board independence

might lead to an increase in its market value.

iii. Bank’s board gender diversity has a positive and significant effect on its

market value. This implies that an increase in a bank’s board gender

diversity will lead to an increase in its market value.

5.3 Conclusion

The study concentrated on a firm’s value and corporate governance relationship:

evidence based on Nigerian commercial banks. Data were obtained from time

series annual report of four major banks in Nigeria which are Access Bank PLC,

Guaranty Trust Bank PLC, Fidelity Bank PLC and Zenith Bank PLC for the period

of 2005–2021. This data were fitted into a linear single equation model in which

market value (MV) represented the dependent variable, while bank’s board size

(BS), bank’s board independence (BI) and bank’s board gender diversity (BG)

represented the independent variables in the model.

The specific objectives of the study were to examine the effect of bank’s board

size, bank’s board independence and bank’s board gender diversity on its market

value. The result showed that bank’s board size has a negative and significant

effect on its market value, bank’s board independence has a positive and

56
insignificant effect on its market value and bank’s board gender diversity has a

positive and significant effect on its market value.

5.4 Recommendations

The following recommendations for banks and board of directors should be made

based on the major conclusions that emerged from this study:

i. Board size should be maintained at an optimal level to enhance performance

because having a sizable board of directors will efficiently manage conflicts

between investors and management and, in turn, improve bank performance.

ii. Firm should have non-executive directors (i.e. board independence) who act

as professional advisers to ensure that competition among insiders

encourages measures consistent with the maximization of shareholder value.

iii. There should be gender diversity among board members in a bank since it

has a positive and significant effect to its market value which leads to

improvement in bank performance.

57
 Appendix

Statistical Data

Access Bank PLC

YEAR MV BS BI BG
2005 66918315 9 6 0
2006 174553866 11 8 1
2007 328615194 12 6 0
2008 1031842021 13 7 1
2009 700215331 14 10 1
2010 796216768 14 10 1
2011 949382097 14 8 1
2012 1515754463 15 7 2
2013 1704094012 15 5 3
2014 1981955730 16 6 4
2015 2411944061 16 7 5
2016 3094960515 16 7 5
2017 3499683980 16 7 5
2018 3968114608 16 7 5
2019 6307588216 16 8 6
2020 7624979718 17 9 6
2021 9660760557 17 9 6

Guaranty Trust Bank PLC

YEAR MV BS BI BG
2005 167897704 12 5 2
2006 305080565 11 5 1
2007 478369179 11 5 1
2008 918278756 12 6 2
2009 1019911536 14 7 2
2010 1083304116 14 7 2
2011 1523527545 14 7 2

58
 2012 1620317223 14 7 3
2013 1904365795 14 7 3
2014 2126608312 14 8 3
2015 2277629224 15 8 3
2016 2613340074 16 8 3
2017 2824928985 15 7 4
2018 2712521494 14 7 4
2019 3097248495 14 7 4
2020 4061543605 14 7 4
2021 4562051793 6 3 2

Fidelity Bank PLC

YEAR MV BS BI BG
2005 34953351 14 8 1
2006 119985801 14 9 1
2007 217144465 13 8 1
2008 533122233 13 8 1
2009 504163720 13 7 2
2010 478020000 15 12 3
2011 739508000 19 15 3
2012 914360000 18 14 3
2013 1081217000 16 13 3
2014 1187025000 15 10 4
2015 1231722000 15 7 4
2016 1298141000 15 7 4
2017 1379214000 14 7 4
2018 1719883000 13 7 4
2019 2114037000 14 7 3
2020 2758148000 15 7 3
2021 3289479000 15 8 4

Zenith Bank PLC

YEAR MV BS BI BG

59
 2005 332885096 12 5 0
2006 610768300 12 5 0
2007 883940926 13 6 1
2008 1680302005 14 6 1
2009 1573196000 15 7 1
2010 1789458000 13 5 1
2011 2169073000 15 6 1
2012 2436886000 14 7 1
2013 2878693000 15 7 1
2014 3423819000 13 7 1
2015 3750327000 12 7 1
2016 4283736000 13 6 1
2017 4833658000 14 6 1
2018 4955445000 14 6 1
2019 5435073000 14 6 2
2020 7124987000 14 7 2
2021 7872292000 14 7 2

Aggregate

YEAR MV BS BI BG
2005 602654466 47 24 3
2006 1210388532 48 27 3
2007 1908069764 49 25 3
2008 4163545015 52 27 5
2009 3797486587 56 31 6
2010 4146998884 56 34 7
2011 5381490642 62 36 7
2012 6487317686 61 35 9
2013 7568369807 60 32 10
2014 8719408042 58 31 12
2015 9671622285 58 29 13
2016 11290177589 60 28 13
2017 12537484965 59 27 14
2018 13355964102 57 27 14
2019 16953946711 58 28 15
2020 21569658323 60 30 15
60
 2021 25384583350 52 27 14

Panel Data

BANK CROSSID YEAR MV BS BI BG

Access 1 2005 66918315 9 6 0
Access 1 2006 174553866 11 8 1
Access 1 2007 328615194 12 6 0
Access 1 2008 1031842021 13 7 1
Access 1 2009 700215331 14 10 1
Access 1 2010 796216768 14 10 1
Access 1 2011 949382097 14 8 1
Access 1 2012 1515754463 15 7 2
Access 1 2013 1704094012 15 5 3
Access 1 2014 1981955730 16 6 4
Access 1 2015 2411944061 16 7 5
Access 1 2016 3094960515 16 7 5
Access 1 2017 3499683980 16 7 5
Access 1 2018 3968114608 16 7 5
Access 1 2019 6307588216 16 8 6
Access 1 2020 7624979718 17 9 6
Access 1 2021 9660760557 17 9 6
GTB 2 2005 167897704 12 5 2
GTB 2 2006 305080565 11 5 1
GTB 2 2007 478369179 11 5 1
GTB 2 2008 918278756 12 6 2
GTB 2 2009 1019911536 14 7 2
GTB 2 2010 1083304116 14 7 2
GTB 2 2011 1523527545 14 7 2
GTB 2 2012 1620317223 14 7 3
GTB 2 2013 1904365795 14 7 3
GTB 2 2014 2126608312 14 8 3
GTB 2 2015 2277629224 15 8 3
GTB 2 2016 2613340074 16 8 3
GTB 2 2017 2824928985 15 7 4
GTB 2 2018 2712521494 14 7 4
GTB 2 2019 3097248495 14 7 4
61
 GTB 2 2020 4061543605 14 7 4
GTB 2 2021 4562051793 6 3 2
Fidelity 3 2005 34953351 14 8 1
Fidelity 3 2006 119985801 14 9 1
Fidelity 3 2007 217144465 13 8 1
Fidelity 3 2008 533122233 13 8 1
Fidelity 3 2009 504163720 13 7 2
Fidelity 3 2010 478020000 15 12 3
Fidelity 3 2011 739508000 19 15 3
Fidelity 3 2012 914360000 18 14 3
Fidelity 3 2013 1081217000 16 13 3
Fidelity 3 2014 1187025000 15 10 4
Fidelity 3 2015 1231722000 15 7 4
Fidelity 3 2016 1298141000 15 7 4
Fidelity 3 2017 1379214000 14 7 4
Fidelity 3 2018 1719883000 13 7 4
Fidelity 3 2019 2114037000 14 7 3
Fidelity 3 2020 2758148000 15 7 3
Fidelity 3 2021 3289479000 15 8 4
Zenith 4 2005 332885096 12 5 0
Zenith 4 2006 610768300 12 5 0
Zenith 4 2007 883940926 13 6 1
Zenith 4 2008 1680302005 14 6 1
Zenith 4 2009 1573196000 15 7 1
Zenith 4 2010 1789458000 13 5 1
Zenith 4 2011 2169073000 15 6 1
Zenith 4 2012 2436886000 14 7 1
Zenith 4 2013 2878693000 15 7 1
Zenith 4 2014 3423819000 13 7 1
Zenith 4 2015 3750327000 12 7 1
Zenith 4 2016 4283736000 13 6 1
Zenith 4 2017 4833658000 14 6 1
Zenith 4 2018 4955445000 14 6 1
Zenith 4 2019 5435073000 14 6 2
Zenith 4 2020 7124987000 14 7 2
Zenith 4 2021 7872292000 14 7 2

62
Descriptive Statistics Results

MV BS BI BG
Mean 2.28E+09 14.01471 7.323529 2.397059
Median 1.69E+09 14.00000 7.000000 2.000000
Maximum 9.66E+09 19.00000 15.00000 6.000000
Minimum 34953351 6.000000 3.000000 0.000000
Std. Dev. 2.06E+09 1.943167 2.010726 1.584813
Skewness 1.504179 -0.955318 1.692003 0.529960
Kurtosis 5.147754 6.672436 7.175852 2.361227

Jarque-Bera 38.71200 48.55573 81.85281 4.339147

Probability 0.000000 0.000000 0.000000 0.114226

Sum 1.55E+11 953.0000 498.0000 163.0000

Sum Sq. Dev. 2.84E+20 252.9853 270.8824 168.2794

Observations 68 68 68 68

Correlation Analysis Matrix

MV BS BI BG
MV 1 0.245055 -0.086645 0.452888
BS 0.245055 1 0.629062 0.589360
BI -0.086645 0.629062 1 0.258846
BG 0.452888 0.589360 0.258846 1

63
Pool OLS

Variable Coefficient Std. Error t-Statistic Prob.

C 3.980008 1.810009 0.219281 0.8271

BS 2.130008 1.770008 1.200883 0.2342
BI -3.290008 1.430008 -2.294277 0.0251
BG 5.430008 1.750008 3.099960 0.0029

R-squared 0.266192 Mean dependent var 2.280009

Adjusted R-squared 0.231795 S.D. dependent var 2.060009
S.E. of regression 1.810009 Akaike info criterion 45.52337
Sum squared resid 2.090020 Schwarz criterion 45.65393
Log likelihood -1543.795 Hannan-Quinn criter. 45.57510
F-statistic 7.738763 Durbin-Watson stat 0.164858
Prob(F-statistic) 0.000173

Fix Effect Model

Variable Coefficient Std. Error t-Statistic Prob.

C 2.600009 1.400009 1.856555 0.0682

BS -3.530008 1.480008 -2.386564 0.0201
BI 2.170008 1.270008 1.700699 0.0941
BG 1.260009 1.600008 7.923489 0.0000

Effects Specification

64
Cross-section fixed (dummy variables)

R-squared 0.637795 Mean dependent var 2.280009

Adjusted R-squared 0.602168 S.D. dependent var 2.060009
S.E. of regression 1.300009 Akaike info criterion 44.90557
Sum squared resid 1.030020 Schwarz criterion 45.13405
Log likelihood -1519.789 Hannan-Quinn criter. 44.99610
F-statistic 17.90213 Durbin-Watson stat 0.470370
Prob(F-statistic) 0.000000

Random Effect Model

Variable Coefficient Std. Error t-Statistic Prob.

C 3.980008 1.310009 0.304711 0.7616

BS 2.130008 1.280008 1.668742 0.1001
BI -3.290008 1.030008 -3.188119 0.0022
BG 5.430008 1.260008 4.307693 0.0001

Effects Specification
S.D. Rho

Cross-section random 317.6969 0.0000

Idiosyncratic random 1.300009 1.0000

Weighted Statistics

R-squared 0.266192 Mean dependent var 2.280009

Adjusted R-squared 0.231795 S.D. dependent var 2.060009
65
 S.E. of regression 1.810009 Sum squared resid 2.090020
F-statistic 7.738763 Durbin-Watson stat 0.164858
Prob(F-statistic) 0.000173

Unweighted Statistics

R-squared 0.266192 Mean dependent var 2.280009

Sum squared resid 2.090020 Durbin-Watson stat 0.164858

Hausman Test Result

Correlated Random Effects - Hausman Test

Equation: Untitled
Test cross-section random effects
Test Summary Chi-Sq. Statistic Chi-Sq. d.f. Prob.
Cross-section random 62.582619 3 0.0000
** WARNING: estimated cross-section random effects variance is zero.

Cross-section random effects test comparisons:

Variable Fixed Random Var(Diff.) Prob.

BS -352506390.862105 213104751.062326 5508377420657000.0 0.0000
BI 216569146.004922 -329076434.632821 5561507365540141.9 0.0000
BG 1263882599.524233 542824841.797934 9564471732110773.8 0.0000

Cross-section random effects test equation:

Dependent Variable: MV
Method: Panel Least Squares
Date: 01/29/24 Time: 14:56
Sample: 2005 2021

66
Periods included: 17
Cross-sections included: 4
Total panel (balanced) observations: 68
Variable Coefficient Std. Error t-Statistic Prob.
C 2.600009 1.400009 1.856555 0.0682
BS -3.530008 1.480008 -2.386564 0.0201
BI 2.170008 1.270008 1.700699 0.0941
BG 1.260009 1.600008 7.923489 0.0000
Effects Specification
Cross-section fixed (dummy variables)
R-squared 0.637795 Mean dependent var 2.280009
Adjusted R-squared 0.602168 S.D. dependent var 2.060009
S.E. of regression 1.300009 Akaike info criterion 44.90557
Sum squared resid 1.030020 Schwarz criterion 45.13405
Log likelihood -1519.789 Hannan-Quinn criter. 44.99610
F-statistic 17.90213 Durbin-Watson stat 0.470370
Prob(F-statistic) 0.000000

67