Corporate Governance and Firm’s Financial Performance: A Comparative Study of Manufacturing Companies and Banks in Nigeria

Abstract

This study examined the effect of corporate governance on the financial performance of manufacturing companies and banks in Nigeria from 2005 to 2014. The study used proxies such as; the size of the board, audit committee and board independence as proxy for corporate governance. The data for the study were analyzed using the pooled least square method of regression and paired t-test. The pooled ordinary least square regression results showed an R² of 0.71 (71%) for the manufacturing firms while the R-squared of 0.85 (85%) was obtained for the sampled banks. The study found that there was a positive and significant relationship between Board Size, Board Independence and ROA of the studied companies in the manufacturing and banking sectors. Furthermore, the result of the paired t-test shows that there is no significant difference in the corporate governance structures of Nigerian banks and manufacturing companies. The study recommended that board size of companies in Nigeria should be kept at manageable size to enhance decisions making and companies should embrace and strengthen their audit committees to ensure efficient financial reporting.