Effects of Corporate Governance on Organizational Performance in Nigeria’s Insurance Industry
CHAPTER ONE
Objectives of the Study
The major objective of the study is to examine the effect of corporate governance on organizational performance in the insurance industry. Other specific objectives are as follows:
- To explore the relationship between corporate governance and organizational performance.
- To find out the effect of corporate fraud on organizational survivability
- To investigate the effect of corporate dividend policy on shareholders’ interest
- To identify the role of Corporate Regulatory Agencies in ensuring transparency and ethics in the Nigerian insurance industry.
CHAPTER TWO
LITERATURE REVIEW
Conceptual framework
Corporate Governance requires corporations exercising menses accountability to shareholders and the public, and also monitoring the management of organizations in running their businesses. Corporate Governance is normally of two categories namely: self and statutory. Self-regulation involves aspects of Corporate Governance that are difficult to legislate. The issues in this category involve the human element. This expresses the relationship and the independence of the board of directors with the management and the appraisal of directors’ performance. On the other hand, self-regulation is the frame work of Corporate Governance that can be explained in legal terms. The legislative and regulatory rules include duties ,obligations, rights and liabilities of directors, controlling shareholders and company officers and disclosure and transparency (Abubakar 2009:28).Organization for Economic Co-operation and Development (OECD, 2009) views the role of Corporate Governance as twofold: first, it covers the manner in which shareholders, managers, employees, creditors, customers and other stakeholders interact with one another in shaping corporate strategies; and second, it relates to public policy, and an adequate legal regulatory framework, which are essential for the development of good systems of governance (OECD, 2009). Corporate Governance increases investors’ confidence and goodwill. It also ensures transparency, accountability, responsibility and fairness (Olajide 2012)
Corporate Governance in Nigeria
Corporate governance has become an important issue which has received wide attention of government, firms, law makers, shareholders and researchers for more than three centuries. The literature provides some forms of meaning on corporate governance which include words like: manage governance, regulate and control. This means that there could be different meaning to corporate governance depending on the person defining it. Consequently, corporate governance models can be flawed because scholars may develop their own scopes and concepts about the subject. For example, Cadbury Committee (1992) emphasises that corporate governance entails how companies ought to be run, directed and controlled. From financier perspective, Shleifer and Vishny (1997) view corporate governance as tool which ensures that suppliers of finance to corporations get a return on their investment. Metrick and Ishii (2002) also describe corporate governance from the perspective of the investor as, both the promise to repay a fair return on capital invested and the commitment to operate a firm efficiently with a given investment. For Mayer (1997), corporate governance is concerned with ways of aligning interests of investors and managers to ensure that firms are run for the benefit of investors. Likewise, corporate governance is concerned with the relationship between internal governance tools of corporations and society‟s conception of the scope of corporate accountability (Deakin and Hughes, 1997). Oyejide and Soyibo (2001) view corporate governance as the relationship of the enterprise to shareholders; or in the wider sense, as the relationship of the enterprise to society as a whole. According to Denis and McConnell (2003), corporate governance aims at reducing conflicts of interest, short-sightedness of writing costless perfect contracts and monitoring of controlling interest of the firm, the absence of which firm value is decreased. Consequently, corporate governance entails set of rules which controls relationship between a firm management, shareholders and stakeholders (Ching et al., 2006). However, firm level governance may be more important in developing markets with weaker institutions because it helps to distinguish among firms (Metrick and Ishii, 2002). This implies that corporate governance centres on how the organisation relates with other stake holders within an environment; and its impact on the collective welfare of society. Basically, there are two main traditional approaches to the study of corporate governance: institutional and functional. An institutional approach to corporate governance focuses on the appraisal of the existing institutions to maximise efficiency of services offered and improve governance generally. This approach views institutions in the light of regulatory, legal and financial frameworks which binds the governance system. On the other hand, the functional approach considers how different institutional framework function, subject to individual institution peculiar features. The functional approach to corporate governance is flexible, as it provides for examining of other possibilities. This implies that corporate governance issue is complex. However, it is relevant to consider influence of corporate governance theoretical perspective to facilitate better understanding of firms‟ governance.
CHAPTER THREE
RESEARCH METHODOLOGY
INTRODUCTION
In this chapter, we described the research procedure for this study. A research methodology is a research process adopted or employed to systematically and scientifically present the results of a study to the research audience viz. a vis, the study beneficiaries.
RESEARCH DESIGN
Research designs are perceived to be an overall strategy adopted by the researcher whereby different components of the study are integrated in a logical manner to effectively address a research problem. In this study, the researcher employed the survey research design. This is due to the nature of the study whereby the opinion and views of people are sampled. According to Singleton & Straits, (2009), Survey research can use quantitative research strategies (e.g., using questionnaires with numerically rated items), qualitative research strategies (e.g., using open-ended questions), or both strategies (i.e., mixed methods). As it is often used to describe and explore human behaviour, surveys are therefore frequently used in social and psychological research.
POPULATION OF THE STUDY
According to Udoyen (2019), a study population is a group of elements or individuals as the case may be, who share similar characteristics. These similar features can include location, gender, age, sex or specific interest. The emphasis on study population is that it constitutes of individuals or elements that are homogeneous in description.
This study was carried to examine effects of corporate governance on organizational performance in Nigeria. Niger insurance plc forms the population of the study.
CHAPTER FOUR
DATA PRESENTATION AND ANALYSIS
INTRODUCTION
This chapter presents the analysis of data derived through the questionnaire and key informant interview administered on the respondents in the study area. The analysis and interpretation were derived from the findings of the study. The data analysis depicts the simple frequency and percentage of the respondents as well as interpretation of the information gathered. A total of eighty (80) questionnaires were administered to respondents of which only seventy-seven (77) were returned and validated. This was due to irregular, incomplete and inappropriate responses to some questionnaire. For this study a total of 77 was validated for the analysis.
TEST OF HYPOTHESIS
Hypothesis One:
Ho1: There is no significant relationship between corporate governance and organizational performance
Hypothesis Two:
Ho2: Corporate fraud is not a significant predictor of organizational survivability
CHAPTER FIVE
SUMMARY, CONCLUSION AND RECOMMENDATION
Introduction
It is important to ascertain that the objective of this study was to ascertain effects of corporate governance on organizational performance in Nigeria. In the preceding chapter, the relevant data collected for this study were presented, critically analyzed and appropriate interpretation given. In this chapter, certain recommendations made which in the opinion of the researcher will be of benefits in addressing the challenges of effects of corporate governance on organizational performance in Nigeria
Summary
This study was on effects of corporate governance on organizational performance in Nigeria. Four objectives were raised which included; To explore the relationship between corporate governance and organizational performance, to find out the effect of corporate fraud on organizational survivability, to investigate the effect of corporate dividend policy on shareholders’ interest and to identify the role of Corporate Regulatory Agencies in ensuring transparency and ethics in the Nigerian insurance industry. A total of 77 responses were received and validated from the enrolled participants where all respondents were drawn from Niger insurance plc. Hypothesis was tested using Chi-Square statistical tool (SPSS).
Conclusion
Based on the findings of the analysis and data gathered to represents Corporate Governance and Performance of Insurance Companies in Nigeria, the study concluded that Corporate Governance does not have significant effect on the performance of insurance companies in Nigeria during the years under review. This is as a result of low compliance and slipped away from the laid down standard rule of Corporate Governance by most of insurance company in Nigeria.
Recommendation
Niger insurance plc should improve on supervision of the nation’s insurance industry activities by strengthening its inspection and enforcement divisions. This is necessary to ensure that the code of good Corporate Governance for insurance industry is strictly adhered to by practitioners and other stakeholders. Compliance with code of good Corporate Governance would promote safe and sound insurance practice in the insurance industry.
The management staffs have important roles to play in promoting sound internal control system in insurance companies. This would ensure that laid down procedures are reviewed regularly to promote good Corporate Governance. It is also necessary in order to redeem the image of the insurance industry, and perception of insurance by the public.
References
- Abor, J and Biekpe, N. (2005). Does corporate government affect the capital structure decisions of Ghanaian SMEs? Working paper, University of Stellenbosch Business School, South Africa.
- Abubakar, S. (2009). Ethics and corporate governance in non interest banking: Prudent financial management: as a key to achieving organizational growth. Journal of the chartered institute of banker of Nigeria.
- Adedokun, S. (2003). Corporate Governance and organizational performance. In A. Oladimeji (Ed) issues in corporate Governance. Lagos: Financial Institutions Training Centre.
- Barako, K., Hanco, D., and Izan, A. (2006). Factors influencing voluntary corporate disclosure by Kenya Companies. Corporate Governance: An International Review, 14(2), 107 – 125
- Bhagat S. and B., Black (2002): The non-correlation between board independence and longterm performance. Journal of Corporation Law, 24(2), 231-274
- Bhimani, A. (2008): Making Corporate Governance Count: The Fusion of Ethics and Economic Rationality. Journal of Management and Governance, 12(2), 135-14.
- Capital Markets Authority (2002). Guidelines on Corporate Governance in public listed Companies in Kenya. Kenya Gazette Notice No. 369, 122-128.
- Claessens, E.O. (2002).Disentangling the incentive and entrenchment effects of large shareholders. The Journal of Finance, 57(6), 2741-2771.
- Clark, T. (2004): Theories of Corporate Governance. The Philosophical foundation of Corporate Governance. New York: Routledge
