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Corporate Governance Mechanism and Bank Performance, New Insights from Emerging Economy: Evidence from Nigeria Banking Sector

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  • Olusola Enitan Olowofela

    (Department of Finance and Investment Management, College of Business and Economics, University of Johannesburg, Johannesburg 2092, South Africa)

  • Hermann Azemtsa Donfack

    (Department of Finance and Investment Management, College of Business and Economics, University of Johannesburg, Johannesburg 2092, South Africa)

  • Celestin Wafo Soh

    (Department of Mathematics & Statistical Science, College of Science, Engineering and Technology, Jackson State University, Jackson, MS 39217, USA)

Abstract

We investigated the relationship between corporate governance mechanisms and bank performance in the Nigerian banking sector. We focused on data from 2012 to 2022 extracted from the balance sheets of deposit money banks in Nigeria. We employed the Generalized Method of Moments (GMM) with Stata 13 and Python library to analyze the data. The research underscores the positive influence of non-executive directors and effective credit risk management on risk-adjusted return on assets in the Nigerian banking sector. Conversely, larger board sizes and higher levels of independence negatively impact performance. Notably, corporate governance variables do not significantly determine risk-adjusted return on equity, except for a negative association with lending rates. Practical implications include advocating for non-executive directors, optimizing board size and prioritizing robust credit risk management for enhanced financial outcomes. This research contributes to understanding the crucial role of corporate governance in the Nigerian banking sector, emphasizing its significance for prudent risk management and stakeholder confidence.

Suggested Citation

  • Olusola Enitan Olowofela & Hermann Azemtsa Donfack & Celestin Wafo Soh, 2025. "Corporate Governance Mechanism and Bank Performance, New Insights from Emerging Economy: Evidence from Nigeria Banking Sector," JRFM, MDPI, vol. 18(2), pages 1-19, February.
    • Handle: RePEc:gam:jjrfmx:v:18:y:2025:i:2:p:92-:d:1586261
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    References listed on IDEAS

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    1. Hossain Majumder, Md. Tofael & Li, Xiaojing, 2018. "Bank risk and performance in an emerging market setting: the case of Bangladesh," Journal of Economics, Finance and Administrative Science, Universidad ESAN, vol. 23(46), pages 199-229.
    2. Md. Tofael Hossain Majumder & Xiaojing Li, 2018. "Bank risk and performance in an emerging market setting: the case of Bangladesh," Journal of Economics, Finance and Administrative Science, Emerald Group Publishing Limited, vol. 23(46), pages 199-229, November.
    3. Saghi-Zedek, Nadia & Tarazi, Amine, 2015. "Excess control rights, financial crisis and bank profitability and risk," Journal of Banking & Finance, Elsevier, vol. 55(C), pages 361-379.
    4. Erick Rading Outa & Paul Eisenberg & Peterson K. Ozili, 2017. "The impact of corporate governance code on earnings management in listed non-financial firms," Journal of Accounting in Emerging Economies, Emerald Group Publishing Limited, vol. 7(4), pages 428-444, November.
    5. Brahmaiah Bezawada & Sager Reddy Adaelli, 2020. "Corporate Governance, Board Characteristics and Performance of Indian Banks: An Empirical Study," International Journal of Economics and Financial Issues, Econjournals, vol. 10(3), pages 83-87.
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