Corporate Governance and Financial Distress in the Banking Industry: Nigerian Experience

Abstract

The study investigates the effect of corporate governance on financial distress in the Nigerian banking industry and examines the discriminatory power of corporate governance mechanism of the board, audit committee, executive management and auditor in one model for financial distress prediction. Secondary data obtained from annual financial statements of twenty banks between 2005 and 2015 were used for the study. The data were analyzed using descriptive statistics and generalized quantile regression model. The empirical evidence from the study suggests that financially distressed banks are characterized by large board size with members who may not be well versed in banking complexities, chairmen and CEOs with significant shareholding both individually and collectively. Furthermore, the evidence also shows that distressed banks suffer major decline in customer deposits despite increase in size. The study concludes that financial distress can be caused by poor corporate governance mechanism.

Corporate board and default risk of financial firms

“…The relationship found between board size and distance to default suggests that the risk of bankruptcy is positively and significantly related to the size of the board of directors. This result is in line with the work of Switzer et al (2018), Fel ıcio et al (2018, John and Ogechukwu (2018) and Baklouti et al (2016). All other boardrelated variables do not show a significant relationship to the risk of default.…”

“…Likewise, the empirical evidence on the effect of board size on default risk for financial firms is mixed. Switzer et al (2018), Fel ıcio et al (2018, John and Ogechukwu (2018) and Baklouti et al (2016) find a positive effect; Andries and Brown (2017) and Akwaa-Sekyi and Moreno (2017) find no effect; while a negative effect is found by Lu and Boateng (2018) and Fields et al (2012).…”

Effect of Governance on the Efficiency of the Indonesian Banking Industry

“…The population of this observation is that all banks in the 2012-2017 study year were listed on the Indonesia Stock Exchange (IDX). Determination of population in banking companies, due to banks playing an important role in society, which has an important position in the process of driving economic growth and financial system stability (John et al ., 2018). The sampling technique in this observation uses a purposive sampling method, which is a determination based on certain conditions of the researcher.…”

Determinan Shopping Opinion: Perspektif Klien Dan Kantor Akuntan Publik

“…Kebangkrutan terjadi ketika perusahaan tidak dapat memenuhi kewajibannya dan berlaku untuk periode keringanan dalam menata ulang hutangnya atau untuk melikuidasi asetnya (Bryan, Fernando, and Tripathy 2013). Dampak buruk dari terjadinya financial distress pada perusahaan adalah menurunnya jumlah nasabah (John and Ogechukwu 2018). Menurut penelitian John and Ogechukwu (2018) salah satu penyebab terjadinya financial distress adalah buruknya mekanisme tata kelola perusahaan.…”

“…Dampak buruk dari terjadinya financial distress pada perusahaan adalah menurunnya jumlah nasabah (John and Ogechukwu 2018). Menurut penelitian John and Ogechukwu (2018) salah satu penyebab terjadinya financial distress adalah buruknya mekanisme tata kelola perusahaan.…”