ASSESSMENT OF EFFECTIVENESS OF CORPORATE GOVERNMENT IN NIGERIAN’S BANKING INDUSTRY

CHAPTER ONE

INTRODUCTION

1.1 Background of the Study

Corporate governance is an important concept, it is the process and structures by which the business and the affairs of an institution are directed and managed in order to improve the long-term shareholder value by enhancing corporate performance and accountability, taking into account the interest of other shareholders. Retention of public confidence through the enthronement of public confidence is very crucial given the rule of the industry in the mobilization of funds. The allocation of credit to the needy, the payment system as well as the implementation of monetary policy.

Corporate governance is one of the most critical issues on the financial industry across the globe. Failure of the industry in the past has made it imperative to promote corporate governance. Financial scandals and poor corporate governance and the globe was identified as one of the major factors in the country. It was against this background that 13-point agenda was introduce during the banking sector consolidation in 2004 thereby enforcing a new code of corporate governance for banks. The emergence of mega bank in the post consolidation era task the skill and competence of board and management in improving shareholder values and balance some against other stakeholders’ interest in a competitive environment and the major area that the corporate governance code seek to address in the enhancement of skills through financial institutions training centres (FITC) bank directors skill and knowledge was upgrade.

1.1-1 Historical Background of Diamond Bank Plc

Diamond Bank Plc began as a Practice Limited Laboratory Company on March 21, 1991. Ten years later, in February 2001, they become a universal bank.

In January, 2005, following a highly successful private placement share after which substantially raised the bank’s equity based Diamond Bank become a listed in the Nigerian stock exchange, moreover, in January 2008, Diamond Bank’s Global Depository Receipt (GDR) was listed on the professional securities market of the London stock exchange, the first Bank in Africa to record that feat.

1.2 Statement of the Problem

A review of the poor adherence to corporate governance by many banks in Nigeria was a result both poor audit control and directors’ negligence to observe due diligence and acceptable standard practices. This research work will evaluate empirically, the possible relationship that exist between corporate governance and corporate performance (in terms of profit after tax).

1.3 Objectives of the Study

To ascertain the impact of such policies on the anticipated growth of the banking industry.
To Evacuate the effect of corporate governance on lending rate in Nigerian banks.
To examine the challenges and prospects of financial sector development in Nigeria faced by corporate governance.
1.4 Research Questions

What impact corporate governance policies had on the anticipated growth of the banking industry?
What impact has corporate governance policies had on lending rate in Nigeria?
What are the challenges and prospects of financial sector development in Nigeria faced by corporate governance?
1.5 Significance of the Study

The study of the corporate governance shed some light and contribute to the ongoing. Emerging and extremely important, research stream that relate to financial services. This research highlight some important elements of corporate governance in a dynamic sector that has a strong influence on national economy, particularly on the emerging marlacts. Also this study of research on corporate governance i8n the banking industry is needed particularly on the effectiveness of boards and the impact on bank performance, it is about enhancing corporate strategic choice, acknowledging and responding to the interest and concern of stakeholders. This study examined corporate governance practices in Nigerian banks with regard to boards’ characteristics, performance, culture and processes and impact on board effectiveness.

1.6 Scope and Limitation of the Study

This study focuses on effectiveness of corporate governance in ensuring development of the financial sector in Nigerian banking industries. It seeks to review the various functions of the corporate governance and the critical rule it plays in ensuring financial stability in economy. The study will be review commercially between the period of 2004 to 2013 to ensure proper assessment.

1.7 Organization of the Study

The study is structured into chapters and consist of five chapters. Chapter one introduces the study with the background, statement of problem, research objective question, significance, scope, definition of terms. Chapter two reviews various authors, literature on the subject matters of the study, chapter three consist of research methodology used in carrying out the study. Chapter four presents, analyze and interprete the collected data. Chapter five provides the summary of findings, conclusion and recommendations.

1.8 Definition of Terms

Bank: The bank is the financial intermediary and money creator that creates money by lending money to borrower, thereby creating a corresponding deposit on the banks’ balance sheet.

Corporate Governace: This is the process and structures by which the business and affairs of an institution as directed and managed on order to improve the long-term shareholder value.