ABSTRACT
This study examines the relationship between corporate governance mechanisms and financial performance in the Nigerian financial services sector, with a particular focus on deposit money banks.
The research adopts an ex-post facto design, utilizing secondary data collected from the annual reports and financial statements of ten randomly selected banks over a specified period. Key corporate governance variables, including board size, board audit committee presence, and directors' equity interest, are analyzed alongside financial performance measured by Return on Equity (ROE). Descriptive statistics, correlation analysis, and regression techniques are employed to explore the statistical properties and relationships among the variables.
The findings reveal that corporate governance structures significantly influence financial performance. Board size exhibits a negative relationship with ROE, suggesting that oversized boards may lead to inefficiencies. The presence of a well-constituted audit committee demonstrates limited direct impact on financial outcomes, indicating that the effectiveness of the committee's functioning may matter more than its size. Directors’ equity interest positively correlates with ROE, highlighting the importance of ownership alignment in promoting shareholder value. Additionally, firm size and firm age, as control variables, show mixed effects on financial performance, with larger firms benefiting from economies of scale and longer-established firms leveraging market expertise. The study concludes that effective corporate governance is crucial for enhancing financial stability and performance in Nigeria's financial services sector. Recommendations include optimizing board size, enhancing the functional effectiveness of audit committees, and leveraging directors’ equity interest to align decision-making with shareholder goals. These findings provide valuable insights for policymakers, regulators, and industry leaders aiming to strengthen corporate governance frameworks and promote sustainable financial performance in Nigeria.
