ABSTRACT

The background of corporate governance dates back to the 19th Century when state corporation laws enhanced the rights of corporate boards without unanimous consent of shareholders. The concept propounds that corporation should have a good board structure in order to enhance performance. It is firmly rooted on the assumption that good corporate governance practices enhance corporate performance. However, there is no consensus on the impact of corporate governance on profitability. The Nigerian banking environment is a vibrant and challenging financial environment and is endemic with systemic governance problems, capacity constraints and defaulting in compliance and implementation of laws which has inhibited economic growth. Therefore, the current investigation focuses on association between corporate governance and profitability of banks in Nigeria, This study made use of secondary data obtained from the audited financial statements of two banks for a period of 13 years (2004-2016). Data were analyzed using multiple regression analysis. Four indicators of corporate governance mechanism (board size, board composition, board diversity and board committee) were incorporated in the study. The results of the multiple regression analysis revealed the existence of negative but non-statistically significant association between board composition and profitability on one hand; and board diversity and profitability on the other hand. While board size and board committee both show a positive and sign fIcant relationship with profitability in the Nigerian banks. However, the fundamental of éorporate governance is to promote fairness, transparency, accountability as well as guide corporate bodies in their action and deed. Based on the findings of the study, the study recommends that Banks therefore are to ensure that corporate governance become their watchword. This will enhance the efficiency and profitability and encourage an environment for the cultivation of the other attributes of corporate transparency.