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The aim of this paper is to measure the relationship between corporate governance and the performance of firms in Nigeria. To achieve this objective, we use Return on equity, Net profit margin, Sales growth, Dividend yield, and Stock prices/values as the key variables that defined the performance of the firm. On the other hand, for the measure of corporate governance, we use Board Independence, Board size, audit independence, ownership, and the progressive practices of the company. The study found that there is a high relationship between the board’s size of the companies use in the study and their performances. The study concludes that the more outsiders there are on a company’s board, the better the performance in terms of return on equity.







Title page

Approval page




Table of content



1.1        Background of the study

1.2        Statement of problem

1.3        Objective of the study

1.4        Research Hypotheses

1.5        Significance of the study

1.6        Scope and limitation of the study

1.7       Definition of terms

1.8       Organization of the study




3.0        Research methodology

3.1    sources of data collection

3.3        Population of the study

3.4        Sampling and sampling distribution

3.5        Validation of research instrument

3.6        Method of data analysis



4.1 Introductions

4.2 Data analysis


5.1 Introduction

5.2 Summary

5.3 Conclusion

5.4 Recommendation













  • Background of the study

Corporate Governance has become a central issue of policy debate for more than decades now. The mechanism of corporate governance and the type of information about corporate decisions on the one hand and on the other hand, the performances of the firm and the information that the corporation should make public, constitutes major issues of discussion in the corporate governance debate. Specifically, the issue of making corporate financial reporting more transparent to the stakeholders, and the extent to which, the oversight bodies set to oversee the firms becomes functional. The practice “good corporate governance” is seen as the ultimate objective of studies in this area, which the neoclassical theory of market economy defines as the maximization of shareholders‟ value. The theoretical foundation of this understanding is the fact that, in a develop or market economy, existence of well-functioning markets in capital, labor and products ensure the allocation of scarce economic resources to their best alternative uses to achieve the most efficient performance of the economy that is possible. In contrast to this theory, Alexander and Matts, (2003) observe that, corporate managers, rather than markets, exercise allocative control. Furthermore, Oliver (1985; 1996) observe that “ Asset Specificity” made it necessary for managerial control over the allocation of resources, thus creating agency problem for those principals who have made investments in the firm. Desai and Yetman (2004), Identified two areas of agency problems that made human ability to make allocative decision imperfect; the cognitive and behavioral limitations. The cognitive limitation is hidden information, also known as bounded rationality. This prevents investors from knowing a prior whether the managers, whom they have employed as their agents, allocate resources in the most efficient manner. The behavioral limitation, also known as opportunism, is hidden action that reflects the productivity, inherent in an individualistic society of managers as agents to use their positions for resources allocation to pursue their own selfish interest and not necessarily the interest of the firm‟s principals. This makes it very crucial and important to study the existence of the influence of corporate governance on the performance of firms. What it means is that, how a good governed firm does performed differently from a bad governed one. The concept of corporate governance has attracted a good deal of public interest in recent years, because of its apparent importance on the economic health of corporations and society in general. Basically, corporate governance in the banking sector requires judicious and prudent management of resources and the preservation of resources (assets) of the corporate firm; ensuring ethical and professional standards and the pursuit of corporate objectives, it seeks to ensure customer satisfaction, high employee morale and the maintenance of market discipline, which strengthens and stabilizes the bank. The issue of corporate governance has recently been given a great deal of attention in various national and International forays. This is in recognition of the critical role of corporate governance in the success or failure of companies. Corporate governance refers to the processes and structures by which the business and affairs of an institution are directed and managed. In order to improve long-term shareholder value by enhancing corporate performance and accountability, while taking into account the interest of other stakeholders. Corporate governance is therefore about building credibility, ensuring transparency and accountability as well as maintaining an effective channel of information disclosure that would Foster good corporate performance.

The strategy for addressing the challenges of corporate governance has taken various forms at both the national and International levels and have culminated in initiatives such as: the OECD Code; the Cadbury Report; the Basel Committee Guidelines on Corporate Governance; the King‟s Report of South Africa etc. It is therefore necessary to point out that the concept of corporate governance of banks and very large firms have been a priority on the policy agenda in developed market economies for over a decade. Further to that, the concept is gradually warming itself as a priority in the African continent. Indeed, it is believed that the Asian crisis and the relative poor performance of the corporate sector in Africa have made the issue of corporate governance a catchphrase in the development debate (Berglof and Performance may be defined as the reflection of the way in which the resources of a company (bank) are used in the form which enables it to achieve its objectives. According to Heremans, (2007), financial performance is the employment of financial indicators to measure the extent of objective achievement, contribution to making available financial resources and support of the firm with investment opportunities.

These are factors which play a role in shaping the financial status of a company. Most studies divide the determinants of a firm’s financial performance into two categories, namely internal and external factors. Internal determinants of profitability, which are within the control of firm’s management, can be broadly classified into two categories, i.e. financial statement variables and nonfinancial statement variables, (Linyiru, 2006). While financial statement variables relate to the decisions which directly involve items in the balance sheet and income statement; non-financial statement variables involve factors that have no direct relation to the financial statements. The examples of non-financial variables within the this category are number of branches, status of the branch (e.g. limited or full-service branch, unit branch or multiple branches), location and size of the bank, Sudin (2004). Several events are therefore responsible for the heightened interest in corporate governance especially in both developed and developing countries. The subject of corporate governance leapt to global business limelight from relative obscurity after a string of collapses of high profile companies. Enron, the Houston, Texas based energy giant and WorldCom the telecom behemoth, shocked the business world with both the scale and age of their unethical and illegal operations. -Thadden, 1999).



In developing economies, the manufacturing sector among other sectors has also witnessed several cases of collapses, some of which include the Benue cement, Ajaokuta steel company, international equitable Aba (all in Nigeria).  In Nigeria, the issue of corporate governance has been given the front burner status by all sectors of the economy. For instance, the Securities and Exchange Commission (SEC) set up the Peterside Committee on corporate governance in public companies. The Bankers‟ Committee also set up a sub-committee on corporate governance for banks and other financial institutions in Nigeria. This is in recognition of the critical role of corporate governance in the success or failure of companies (Ogbechie, 2006:6). Corporate governance therefore refers to the processes and structures by which the business and affairs of institutions are directed and managed, in order to improve long term share holders‟ value by enhancing corporate performance and accountability, while taking into account the interest of other stakeholders. It is in view of these that the researcher intends to investigate the impact of corporate governance on firms’ performance in Nigeria.



It is pertinent to note that the main objective of the study is to investigate the impact of corporate governance on firm’s performance in Nigeria. But to aid the completion of the study, the researcher intends to achieve the following objectives

  1. To investigate the effect of corporate governance on firm’s performance
  2. To ascertain the relationship between corporate governance and profitability
  • To investigate the effect of noncompliance to corporate governance principle on the profitability of manufacturing firm
  1. To ascertain if there is any change in the manufacturing sector since corporate governance was adopted

For the successful completion of the study, the following research hypotheses were formulated:

H0corporate governance have no effect on the performance of manufacturing firm

H1corporate governance have effect on the performance of manufacturing firm

H0there is no relationship between corporate governance and profitability of manufacturing firm

H2there is a significant relationship between corporate governance and profitability of manufacturing firm


It is believed that at the completion of the study, the findings will be of great importance to the standard organization of Nigeria who are charged with the responsibility of regulating the activities of the manufacturing firms to ensure strict compliance with the corporate governance guideline. The study will also be of great importance to the managers of manufacturing firms as the findings will remind them of the tremendous benefit of corporate governance practice.

The study will also be of great benefit to researchers who wishes to embark on a study in similar topic as the study will serve as a guide to them. Finally the research will be of great importance to student, teachers, lecturers, academia’s and the general public.



The scope of the study covers the effect of corporate governance on the performance of manufacturing firms in terms of profitability. In the course of the study, the researcher encounters some constrain which limited the scope of the study. Some of these constrain are stated below:

  • Availability of research material: The research material available to the researcher is insufficient, thereby limiting the study.
  • Time: The time frame allocated to the study does not enhance wider coverage as the researcher has to combine other academic activities and examinations with the study.
  • Finance: The finance available for the research work does not allow for wider coverage as resources are very limited as the researcher has other academic bills to cover.


Management (or managing) is the administration of an organization, whether it is a business, a not-for-profit organization, or government body.

Manufacturing firm

Manufacturing firms produce a wide range products. Large manufacturers include producers of , cars, computers, and furniture.

Corporate Governance

The methods by which suppliers of finance control managers in order to ensure that their capital cannot be expropriated and that they earn a return on their investment.


Profitability is ability of a company to use its resources to generate revenues in excess of its expenses. In other words, this is a company’s capability of generating profits from its operations.

  • Organization of the study

This research work is organized in five chapters for easy understanding as follows Chapter one is concern with the introduction which consist of the (overview, of the study), statement of problem, objectives of the study, research question, significance or the study, research methodology, definition of terms and historical background of the study. Chapter two highlights the theoretical framework on which the study it’s based thus the review of related literature. Chapter three deals on the research design and methodology adopted in the study. Chapter four concentrate on the data collection and analysis and presentation of finding.  Chapter five gives summary, conclusion and recommendations made of the study.


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