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 1.1 Background of the Study
 Corporate governance is concerned with the ways in which the shareholders of corporations assure themselves of getting a return on their investment (Shleifer and Vishny, 1997). It also deals with the mechanisms by which shareholders of a corporation exercise control over management such that the interests of the shareholders are protected (John and Senbet, 1998). The organisation for Economic Cooperation and Development (OECD) Principles of Corporate Governance (2004) define corporate governance as involving “a set of relationships between a company’s management, its board, its shareholders, and other stakeholders”. Corporate governance also provides the structures through which the objectives of the company are set, the means of determining the attainment of those objectives, and establishing performance-monitoring mechanisms. OECD (2004) also posits that good corporate governance should provide proper incentives for the board and management to pursue objectives that are in the interests of the company and its shareholders, and should facilitate effective monitoring. The presence of an effective corporate governance system, within an individual company and across an economy as a whole, helps to provide a degree of confidence that is necessary for the proper functioning of a market economy. Corporate governance is, therefore, about what the board of a company does and how it sets the values of the company, and is to be distinguished from the day-to-day operational management of the company by full-time executives (Financial Reporting Council, 2010). Corporate governance research is influenced by the agency theory. The primary reason for corporate governance is the separation of ownership and control, and the agency problem it engenders (John and Senbet, 1998). Agency cost arises in organisations where the owners (shareholders) are not the managers. Usually, the interests of shareholders may not wholly match the interests of managers. Shareholders are interested in maximizing the value of the firm, but managers’ objectives may also include the increase in perquisite consumption and job security (Belkhir, 2006). Given various attributes of the management-shareholder relationship, corporate governance mechanisms such as equity ownership by managers (Jensen and Meckling, 1976); equity ownership by outside blockholders (Kaplan and Minton, 1994); executive compensation (Mehran, 1995); compensation contracts (Adams and Mehran, 2003), among others, may help align the interest of managers with those of shareholders, thereby mitigating the agency problem. In addition, the board of directors also may play a central role in monitoring managers (Fama, 1980), and minimizing losses in shareholders’ interest (Nicholson and Kiel, 2004). Hence, the board is known as one of the most important instruments of solving the corporate governance problem (Jensen, 1993). Since the mid-1980S, the issue of corporate governance has attracted a great deal of attention both in academic research and in practice (Levrau and Van den Berghe, 2007). Corporate scandals across the world, especially in Europe and America, such as Adelphia Communications, Arthur Anderson, Enron, Health South, Tyco, WorldCom and Ahold, among others, set off a fresh round of debate on the effectiveness of corporate governance laws, which also shifted the spotlight to the board of directors (Levrau and Van den Berghe, 2007). In the wake of these series of high profile scandals, the Sabones-Oxley Act 2002 (SOX) was passed in the United States of America (Dalton and Dalton, 2007; Romano, (2005), and similar regulations in other jurisdictions. Corporate governance has also been at the forefront of the policy agenda of international bodies. The OECD, in 1999, promulgated the Principles of Corporate Governance, which was revised in 2004 (OECD, 2004). Similarly, the European Association of Securities Dealers (EASD), in 2000, issued the Corporate Governance Principles and Recommendations, while the International Corporate Governance Network (ICGN), in 2005, issued the Statement on Global Corporate Governance Principles, revising its 1999 version (EASD, 2000; ICGN, 2005). Also, the Basel Committee on Banking Supervision promulgated a set of corporate governance principles in 1999, which was revised in 2006, following the 2005 Consultative Document (see Basel Committee on Banking Supervision, 1999, 2005, 2006). One of the major objectives of these recommendations is the design of an optimal board structure that would prevent the failure of the firms’ governance, as well as maximize their financial performance. In Nigeria, the Central Bank of Nigeria, CBN, in 2006, responded to this trend by establishing the Code of Corporate Governance for Banks in Nigeria Post Consolidation. The major recommendations of the code include: that the board should have a minimum of four meetings in a financial year; that the number of non-executive directors should be more than that of executive directors and that, bank board size should not be more than twenty, among others. The rationale for these recommendations was to make commercial bank boards in Nigeria effective. However, the recent global financial crisis, which also triggered banking crisis in Nigeria, has come as a surprise to practitioners and scholars given the low level of integration of the Nigeria financial system to the global financial market. Investigation carried out by the Central Bank of Nigeria revealed that the causes of the post-consolidation crisis were as a result of macro-economic instability caused by large and sudden capital inflows; major failures in corporate governance at banks; lack of investor and customer sophistication; inadequate disclosure and transparency about financial position of banks; critical gaps in regulatory framework and regulations; uneven supervision and enforcement; unstructured governance and management processes at the CBN/weakness within the CBN; and weaknesses in the business environment (Sanusi, 2010). According to Sanusi (2010), failure in corporate governance of banks was, indeed, a principal factor contributing to the financial crisis in Nigeria. This raises an important research question on the effectiveness of the recommendations of the Code of Corporate Governance for Banks in Nigeria Post Consolidation in promoting good corporate governance among Nigerian banks. Corporate governance of banks is important for banks themselves as well as for the whole economy (Caprio and Levine, 2002). First of all, banks are themselves corporations. Sound corporate governance is essential for banks to perform efficiently. Moreover, since banks exert a strong impact on economic development (Levine 1997), corporate governance of banks is crucial for growth and development. Banks play a central role in mobilizing the social savings and channeling them to the most productive projects. Bank lending is a major source of external finance for other firms, especially in developing and emerging economies. Sound corporate governance of banks is essential for bank managers to allocate social capital efficiently and to enhance the performance of the economy. Banks also play a critical role in the corporate governance of other firms (Franks and Mayer, 2001; Santos and Rumble, 2006), as creditors or equity holders of firms. Thus, it is also essential that banks, themselves, face sound corporate governance so that they can exert effective governance over the firms they fund. As suggested by both practitioners and academicians, banks’ governance mechanisms are key factors influencing bank performance. Research on governance issues related to banks has been limited, as prior research tends to focus on firms in the non-financial sector (Handley-Schachler et al., 2001; Adams and Mehran, 2003). Hence, only few papers focus on bank corporate governance and its association with performance (e.g. Adams and Mehran, 2005; Caprio et al, 2007, Levine, 2004; Macey and O’Hara, 2003; Andres and Vallelado, 2008; Dahya et al., 2008). This could be attributed to the peculiar nature of bank governance problem.

Project detailsContents
Number of Pages90 pages
Chapter one Introduction
Chapter two Literature review
Chapter three  methodology
Chapter  four  Data analysis
Chapter  five Summary,discussion & recommendations
Chapter summary1 to 5 chapters
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