THE IMPACT OF CORPORATE GOVERNANCE ON FIRM VALUE IN THE NIGERIAN BANKING SECTOR
HABIB ABDULKARIM *
Department of Accounting, Gombe State University, Gombe, Nigeria.
*Author to whom correspondence should be addressed.
Abstract
Corporate governance is very crucial to all listed firms, as it has been argued that listed firms are likely to get external finance, not only because of the reputation of the capital market and excessive investor optimism, but also due to assurances provided by their corporate governance systems.
This study aims to use a Corporate Governance Index (CGI) and assess whether good corporate governance practices/structures in the Nigerian banking sector enhances the market value of deposit money banks or otherwise. Using Tobin’s Q ratio as proxy for Firm Value, the study employed panel data regression method on extracted data from annual reports of listed (DMBs) deposit money banks in Nigeria for a period of twelve years, from 2006 to 2017.
The study finds that Firm value is positively associated with corporate governance and market capitalization. Hence DMBs with good corporate governance mechanisms in place and high profitability are valued more by investors in the capital market while those that are growing in size and age are likely to be valued less by investors in the market.
It is therefore recommended that DMBs in Nigeria should pay more attention to corporate governance practices in order to enhance their firm value and attract more investors in the capital market. Regulatory authorities such as as Central Bank of Nigeria (CBN), Nigeria Deposits Insurance Corporation (NDIC) and Securities and Exchange Commission (SEC) should develop and harmonize good corporate governance index for DMBs in Nigeria and ensure compliance by the DMBs so as to enhance the capital market and therefore assist in the growth and development of the economy in general.
Keywords: Corporate Governance Index (CGI), Tobin’s Q, firm value