CORPORATE GOVERNANCE CHARACTERISTICS AND RISK MANAGEMENT IN THE NIGERIAN BANKING INDUSTRY

ABSTRACT

The challenges and failure of corporate governance in Nigerian banking sector sterns from the culture of corruption and lack of institutional capacity to implement the code of conduct governing corporate governance and the effect on the risk management practice. Hence, there is need to examine the significant effect of corporate governance characteristics on risk management in the Nigerian banking industry. Corporate governance characteristics in term of board of directors’ attributes, such as board composition, board size, board independence ,board committee and executive compensation, and their significant effect on risk management practice

This study employed a longitudinal research design. The population comprises of all deposit money banks in Nigerian Stock Exchange while 14 deposit money banks formed the sample size. Data were analyzed using descriptive correlation analysis and panel regression analysis.

The study finds that Board Size, Board Independence and Executive Compensation had positive and significant effect on Risk Management while Board Composition and Board committees had positive but insignificant effect on Risk Management. One of the recommendations is that Board Size and number of board committee of quoted deposited money banks in Nigeria should not be too small to be compromised by the management as this will enhance effective and efficient risk management. It also recommends that risk management committee must be composed of competent and independent directors who hold no options to purchase the firm’s shares and ensure zero tolerance for corporate governance infractions.