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European Journal of Economics, Finance and Administrative Sciences ISSN 1450-2275 Issue 14 (2008) EuroJournals, Inc. 2008 http://www.eurojournals.

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Corporate Governance and Firm Performance: The Case of Nigerian Listed Firms
Kajola, Sunday O Department of Accounting, Olabisi Onabanjo University Ago-Iwoye, Nigeria Tel : 234-8033519371 E-mail: omobaaseye@yahoo.com Abstract This paper seeks to examine the relationship between four corporate governance mechanisms (board size, board composition, chief executive status and audit committee) and two firm performance measures (return on equity, ROE, and profit margin, PM), of a sample of twenty Nigerian listed firms between 2000 and 2006. Using panel methodology and OLS as a method of estimation, the results provide evidence of a positive significant relationship between ROE and board size as well as chief executive status. The implication of this is that the board size should be limited to a sizeable limit and that the posts of the chief executive and the board chair should be occupied by different persons. The results further reveal a positive significant relationship between PM and chief executive status. The study, however, could not provide a significant relationship between the two performance measures and board composition and audit committee. These results are consistent with prior empirical studies.

Keywords: corporate governance, firm performance, agency cost, Nigeria.

1. Introduction
The term "Corporate Governance" has been identified to mean different things to different people. Magdi and Nadereh (2002) stress that corporate governance is about ensuring that the business is run well and investors receive a fair return. OECD (1999) provides a more encompassing definition of corporate governance. It defines corporate governance as the system by which business corporations are directed and controlled. The corporate governance structure specifies the distribution of rights and responsibilities among different participants in the corporation such as, the board, managers, shareholders and other stakeholders, and spells out the rules and procedures for making decisions on corporate affairs. By doing this, it also provides the structure through which the companys objectives are set and the means of attaining those objectives and monitoring performance. This definition is in line with the submissions of, Wolfensohn (1999) Uche (2004) and Akinsulire (2006). Financial scandals around the world and the recent collapse of major corporate institutions in the USA, South East Asia, Europe and Nigeria such as Adelphia, Enron, World Com, Commerce Bank and recently XL Holidays have shaken investors faith in the capital markets and the efficacy of existing corporate governance practices in promoting transparency and accountability. This has brought to the fore once again the need for the practice of good corporate governance. Effective corporate governance reduces "control rights" shareholders and creditors confer on managers, increasing the probability that managers invest in positive net present value projects

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(Shleifer and Vishny, 1997). Thus, the relationships of the board and management, according to AlFaki (2006), should be characterized by transparency to shareholders, and fairness to other stakeholders. This will in effect mitigate the agency cost as predicted by Jensen and Meckling (1976). Corporate performance is an important concept that relates to the way and manner in which financial resources available to an organization are judiciously used to achieve the overall corporate objective of an organization, it keeps the organization in business and creates a greater prospect for future opportunities. This study is a contribution to the ongoing debate on the examination of the relationship that exists between corporate governance mechanisms and firm performance. Mixed and tenuous findings have been made from previous studies especially those ones that were conducted in the developed nations, particularly USA, UK, Japan, Germany and France. More so, few studies (see Adenikinju and Ayorinde, 2001 and Sanda, Mikailu and Garba, 2005) have been conducted so far on the Nigerian business environment; hence the study intends to reduce the knowledge gap. This work is empirical in nature and will utilize data of 20 non- financial firms listed on the Nigerian Stock Exchange between 2000 and 2006. This represents 140 firm- year observations. The rest of the paper is organized as follows: Section 2 discusses on the literature review, where both theoretical and empirical studies on previous works are looked into. It also incorporates the corporate governance mechanism in Nigeria. In section 3, the methodology of this study is considered. Empirical results and discussions are made in section 4, while section 5 concludes the study.

2. Literature Review
2.1. Corporate governance measures in Nigeria Over the years, Nigeria as a nation has suffered a lot of decadence in various aspects of her national life, especially during the prolonged period of military dictatorship under various heads. The political and business climate had become so bad that by 1999 when the nation returned to democratic rule, the administration of Obasanjo inherited a pariah state noted to be one of the most corrupt nations of the world. Most public corporations, such as NITEL, NNSL, NEPA, and NRC were either dead or simply drain pipes of public resources, while the few factories that were merely available were working below capacity. The banks with their super profits were collapsing in their numbers, leaving a trail of woes for investors, shareholders, suppliers, depositors, employees and other stakeholders. It was as a result of the messy state of the nation then that led to the government to make a bold step in initiating the corporate governance evolution. In view of the importance attached to the institution of effective corporate governance, the Federal Government of Nigeria, through her various agencies have come up with various institutional arrangements to protect the investors of their hard earned investment from unscrupulous management/ directors of listed firms in Nigeria. These institutional arrangements, provided in the code of corporate governance best practices issued in November 2003 are briefly discussed hereunder. (i) The roles of the board and the management (ii) Shareholders rights and privileges (iii) The role of the Audit Committee. 2.1.1. The roles of the board of directors (i) The business of a firm is managed under the direction of a board of directors who delegates to the CEO and other management staff, the day to day management of the affairs of the firm. (ii) The board sees to the appointment of a qualified person as the CEO and other management staff.

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(iii) The directors, with their wealth of experience, provide leadership and direct the affairs of the business with high sense of integrity, commitment to the firm, its business plans and long- term shareholder value. (iv) The board provides other oversight functions. The CEO and Management They are responsible for: (i) Operating the firm in an effective and ethical manner. (ii) Preparing the strategic plans and annual operating plans and budgets for the boards approval. (iii) The integrity of the firms financial reporting system that fairly presents its financial position. The financial reports are expected to comply with relevant statutory and professional pronouncements. (iv) Establishing an effective system of internal controls to give reasonable assurance that the firms books and records are accurate, its assets safeguarded and applicable laws complied with. 2.1.2. Shareholders Rights and Privilege (i) The board of the firm should have effective communication with shareholders to enable them understand the business, risk profile, financial condition and the operating performance of the firm. (ii) Shareholders should be involved in the appointment and removal of directors and auditors. (iii) Opportunity should be given to shareholders to ask questions about the direction of the firm and especially on the remuneration policy of key executive members and board members, which should be linked to performance. (iv) Shareholders holding at least 20% of the issued capital of a firm should, as far as possible have a representative on the board, except they are disqualified by the virtue of their being in competing business with the firm or they have other conflicts of interest. (v) There should be at least one director on the board representing the minority shareholders. 2.1.3. The role of the Audit Committee The Companies and Allied Matters Act, 1990 states that a public limited liability company should have an audit committee (maximum of six members of equal representation of three members each representing the management/ directors and shareholders) in place. The members are expected to be conversant with basic financial statements. The committee has the following objectives: (i) Increasing public confidence in the credibility and objectivity of published financial statements. (ii) Assisting the directors, especially the non- executive directors, in meeting their responsibilities of financial reporting. (iii) Strengthening the independent position of a firms external auditors by providing an additional channel of communication. The committee is expected to perform the following functions: (i) Provision of oversight functions on effective internal control, reliable financial reporting, which must comply with regulatory requirements and corporate code of conduct. This function is being exercised on behalf of shareholders. (ii) Review not only externals auditors reports but also, the report of the internal auditor. (iii) Maintain a constructive dialogue with external auditors and the board in order to enhance the credibility of financial disclosures. The following regulations were in place before the introduction of the governance code: (i) Companies and Allied Matters Act (1990): It prescribes the duties and responsibilities of managers of public limited liability companies. (ii) Investment and Securities Act (1999): It requires the Securities and Exchange Commission to regulate and develop the capital market, maintain orderly conduct, transparency and sanity in order to protect investors.

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(iii) Banks and Other Financial Institutions Act (1991): It requires the Central Bank of Nigeria to register and regulate the banks and allied institutions. (iv) The Nigerian Accounting Standards Board Act (2003): It empowers the NASB to enforce compliance with Statement of Accounting Standards issued by it by all the public limited liability companies. (v) The Insurance Act (2003): It empowers the Nigerian Insurance Commission to register and regulate the insurance business in Nigeria. The above regulations and the code of corporate governance are the yardsticks, which guide the operations of limited listed companies in Nigeria. The level of compliance with the above clearly distinguishes a well- governed firm from others. 2.2. Corporate Governance Mechanisms There are many factors or variables that may constitute yardsticks by which corporate governance can be measured in an organization. Some of these mechanisms are briefly discussed below. 2.2.1. Board Size Limiting board size to a particular level is generally believed to improve the performance of a firm because the benefits by larger boards of increased monitoring are out weighed by the poorer communication and decision making of larger groups. Empirical studies on board size seem to provide the same conclusion: a fairly clear negative relationship appears to exist between board size and firm value. Too big a board is likely to be less effective in substantive discussion of major issues among directors in their supervision of management. Lipton and Lorsch (1992) argue that large boards are less effective and are easier for the CEO to control. When a board gets too big, it becomes difficult to coordinate and for it to process and tackle strategic problems of the organisation. Yermack (1996), using data from Finland and Liang and Li (1999), with Chinese data, also find negative correlation between board size and profitability. Eisenberg, Sundgren and Wells (1998) and Mak and Kusnadi (2005) also report that small size boards are positively related to high firm performance. Mak and Yuanto (2003) using sample of firms in Malaysia and Singapore, find that firm valuation is highest when board has 5 directors, a number considered relatively small in those markets. In a Nigerian study, Sanda et al (2003) report that firm performance is positively correlated with small, as opposed to large boards. 2.2.2. Board Composition Enhanced director independence, according to Young (2003) is intuitively appealing because a director with ties to a firm or its CEO would find it more difficult to turn down an excessive pay packet, challenge the rationale behind a proposed merger or bring to bear the skepticism necessary for effective monitoring. The proponents of agency theory say that corporate governance should lead to higher stock prices or better long-term performance, because managers are better supervised and agency costs are decreased. However, Gompers and Metrick (2003) submit that the evidence of a positive association between corporate governance and firm performance may have little to do with the agency explanation. Empirical studies of the effect of board membership and structure on firm value or performance generally show results either mixed or opposite to what would be expected from the agency cost argument. Some studies find better performances for firms with boards of directors dominated by outsiders (see Weiback 1988, Resenstein and Wyatt, 1990 Mehran, 1995 and John and Senbet 1998), while Weir and Laing (2001) and Pinteris (2002) find no such relationship in terms of accounting profit or firm value. Also, Forsberg (1989) find no relationship between the proportion of outside directors and various performance measures. In the same vein, Hermalin and Weisbach (1991) and Bhagat and Black (2002) find no correlation between the degree of board independence and four measures of firm performance,

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controlling for a variety of other governance variables, including ownership characteristics, firm and board size and industry. They find that poorly performing firms were more likely to increase the independence of their board. Mac Avoy, Dana, Cantor and Peck (1983), Baysinger and Butler (1985) and Klein (1998) find that firm performance is insignificantly related to a higher proportion of outsiders on the board. Thus, the relation between the proportion of outside directors and firm performance is mixed. Studies using financial statement data and Tobin's Q find no link between board independence and firm performance, while those that used stock returns data find a positive relationship. In the case of a sample of 228 small, private firms in China Liang and Li (1999) report that the presence of outside directors is positively associated with higher returns on investment. 2.2.3. Audit Committee Klein (2002) reports a negative correlation between earnings management and audit committee independence. Anderson, Mansi and Reeb (2004) find that entirely independent audit committees have lower debt financing costs. 2.2.4. CEO Status Several studies have examined the separation of CEO and chairman of the board, positing that agency problems are higher when the same person occupies the two positions. Using a sample of 452 firms in the annual Forbes Magazine rankings of the 500 largest USA public firms between 1984 and 1991, Yermack (1996) shows that firms are more valuable when the CEO and the chairman of the board positions are occupied by different persons. However Liang and Li (1999) do not find a positive relation on the separation of the position of CEO and board chair.

3. Methodology
3.1. Sample/ Research Design The data used for this study were derived from the audited financial statements of the firms listed on the Nigerian Stock Exchange (NSE) between 2000 and 2006. The sample of the firms were selected using the combination of non- probability sampling technique (firms with the required information were initially selected) and stratified random technique (firms were then selected based on their sectorial classification). A total of 20 non- financial firms were finally used as sample. Panel data methodology was adopted because it combined time series and cross sectional data. The method of analysis is that of multiple regressions and the method of estimation is Ordinary Least Squares (OLS). 3.2. Model Specification The economic model used in the study (which was in line with what is mostly found in the literature) is given as: Y= 0 + Fit + eit (1) Where, Y is the dependent variable. 0 is constant, is the coefficient of the explanatory variable (corporate governance mechanisms), Fit is the explanatory variable and eit is the error term (assumed to have zero mean and independent across time period). It is important to state that this study employs two financial ratios (ROE and PM) to measure the firms performance. In the empirical literature, Tobins Q (the market value of equity plus the market value of debt divided by the replacement cost of all assets) has been used extensively as a proxy for measuring firms performance. It is however difficult to get the required information relating to the market value of debt issued by Nigerian firms, since these are not usually disclosed in their financial

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reports. In order to mitigate this problem, many scholars (see Adenikinju and Ayorinde, 2001 and Miyajima, Omi and Saito, 2003, and Sanda et al 2005) used modified form of Tobins Q. This study does not follow their line of assumption, because the various modifications made on the original Tobins Q are considered to be subjective, and in line with the dictates of the writers and may influence the outcome of the study. Unlike Hermalin and Weisbach (1991), Cho (1998), Himmelberg, Hubbard and Palia (1999), Palia (2001) and Demsetz and Villalonga (2001) that use managerial compensation as the only corporate governance mechanism; Kim, Hubbard and Palia (2004) that examine leverage only; Bhagat and Black (2002) and Coles, Daniel and Naveen (2008) that examine board characteristics only, this study examines four corporate governance mechanisms together. By adopting the economic model as in equation (1) above specifically to this study, equation (2) below evolves. PERF = 0 + 1BSIZE + 2BCOMP + 3CEO + 4AUDCOM + eit (2) 3.3. Variable Description Tables 1a and 1b below show the variables and their descriptions as used in this study.
Table 1a: Dependent variable description
Variable ROE = Return on Equity PM = Profit Margin Description/ measurement Profit after tax Total equity shares in issue Profit after tax Turnover

Table 1b: Independent variable description


Variable BSIZE = Board size BCOMP = Board composition CEO = Chief executive status AUDCOM = Audit committee Description/ measurement Number of directors on the board Proportion of outside directors sitting on the board Value zero (0) for if the same person occupies the post of the chairman and the chief executive and one (1) for otherwise. The composition of the audit committee, that is, outside as a proportion of the total member for firm i in time t.

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4. Empirical Results and Discussion


4.1. Descriptive Statistics Table 2 below shows the descriptive statistics of all the variables used in the study.
Table 2: Descriptive statistics
ROE 0.9029 0.4750 0.10 1.5703 2.378 8.164 11.35 -1.98 9.37 126.40 140 0 PM 0.0254 0.0500 0.02 0.1837 -5.601 42.457 1.94 -1.56 0.38 3.55 140 0 BSIZE 9.2571 9.0000 9.00 2.3700 0.471 -0.368 11.00 5.00 16.00 1296.00 140 0 BCOMP 6.8143 7.0000 7.00 2.3154 0.423 -0.496 9.00 3.00 12.00 954.00 140 0 CEO 0.8571 1.0000 1.00 0.3512 -2.063 2.290 1.00 0.00 1.00 120.00 140 0 AUDCOM 0.8662 0.8300 0.83 0.1175 -0.441 -0.125 0.50 0.50 1.00 121.27 140 0

Mean Median Mode Std. Dev Skewness Kurtosis Range Minimum Maximum Sum N Valid Missing

The mean ROE of the sampled firms is about 90% and the mean PM is 2.5%. The results indicate that, on the average, for every N100 turnover of the sampled firms, N2.50 was the profit earned. The average board size of the 20 firms used in this study is 9, while the proportion of the outside directors sitting on the board is about 7. The result also indicates that 85.7% of the sampled firms have separate persons occupying the posts of the chief executive and the board chair, while mere 14.3% of the firms have the same person occupying the two posts. A majority of the firms (86.6%) have audit committees composed of at least 83% of outside members. The Nigerian Companies and Allied Act, 1990 prescribes a 6-member audit committee (3 members representing the shareholders and 3 representing the management/ directors). One can therefore infers that majority of the boards of the sampled firms are independent. 4.2. Regression Results and Discussion Tables 3a and 3b present the correlations among the variables. From Table 3a, using the Pearson correlation, ROE is positively correlated with the firms board size and is significant (sig 0.000). Similar results appear for board composition and chief executive status. However, ROE has a negative relationship with audit committee, but not significant (sig 0.434). Table 3b indicates that PM is positively correlated with three of the corporate governance variables and significant except for audit committee that is not significant (sig 0.15).

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Table 3a: Correlations (Pearson)- ROE as a firm performance proxy


ROE 1.000 0.428 0.390 0.245 -0.014 0.000 0.000 0.002 0.434 140 140 140 140 140 BSIZE 0.428 1.000 0.773 0.209 -0.079 0.000 0.000 0.007 0.176 140 140 140 140 140 BCOMP 0.390 0.773 1.000 0.303 0.221 0.000 0.000 0.000 0.004 140 140 140 140 140 CEO 0.245 0.209 0.303 1.000 0.001 0.002 0.007 0.000 0.497 140 140 140 140 140 AUDCOM -0.014 -0.079 0.221 0.001 1.000 0.434 0.176 0.004 0.497 140 140 140 140 140

ROE BSIZE BCOMP CEO AUDCOM Sig (1-tailed) ROE BSIZE BCOMP CEO AUDCOM N ROE BSIZE BCOMP CEO AUDCOM

Table 3b: Correlations (Pearson) - PM as a firm performance proxy


PM BSIZE BCOMP CEO AUDCOM Sig (1-tailed) ROE BSIZE BCOMP CEO AUDCOM N ROE BSIZE BCOMP CEO AUDCOM PM 1.000 0.090 0.143 0.312 0.088 0.145 0.046 0.000 0.150 140 140 140 140 140 BSIZE 0.090 1.000 0.773 0.209 -0.079 0.145 0.000 0.007 0.176 140 140 140 140 140 BCOMP 0.143 0.773 1.000 0.303 0.221 0.046 0.000 0.000 0.004 140 140 140 140 140 CEO 0.312 0.209 0.303 1.000 0.001 0.000 0.007 0.000 0.497 140 140 140 140 140 AUDCOM 0.088 -0.079 0.221 0.001 1.000 0.150 0.176 0.004 0.497 140 140 140 140 140

Tables 4a and 4b show the analysis of variance (ANOVA) of the variables. With F- values of 9.058 (sig 0.000) and 4.010 (sig 0.004) for ROE and PM as performance proxies respectively, it clearly shows that there is a strong relationship between the dependent variables (ROE and PM) and the independent variables (the four corporate governance mechanisms- board size, board composition, chief executive status and audit committee) at 1%, 5% and 10% levels.
Table 4a: ANOVA- ROE as a dependent variable
Model 1 Regression Residual Total Sum of Sq 72.527 270.220 342.747 df 4 135 139 Mean Sq 18.132 2.002 F 9.058 Sig 0.000

Predictors: (Constant), audcom, ceo, bsize, bcomp Dependent variable: ROE

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Table 4b: ANOVA- PM as a dependent variable


Model 1 Regression Residual Total Sum of Sq 0.498 4.192 4.690 df 4 135 139 Mean Sq 0.125 0.031 F 4.010 Sig 0.004

Predictors: (Constant), audcom, ceo, bsize, bcomp Dependent variable: PM

Table 5 shows the results of the coefficient estimates. Board size has a coefficient of 0.209. This indicates a positive relationship between it and ROE and is statistically significant at 5% and 10% levels. The relationship between the chief executive status and ROE is positive and statistically significant at 10% level. However, both board composition and audit committee show no significant relationship with ROE at 1%, 5% and 10% levels.
Table 5: Coefficient estimates Dependent variables
ROE 0.209 [2.388]** {0.018} 0.070 [0.745] {0.457} 0.659 [1.827]* {0.070} -0.162 [-1.40] {0.889} 0.212 0.188 9.058*** 140 0.704 PM 0.002 [0.163] {0.871} 0.001 [0.094] {0.925} 0.158 [3.527]*** {0.001} 0.136 [0.947] {0.345} 0.106 0.080 4.010*** 140 1.501

Independent variables BSIZE

BCOMP

CEO

AUDCOM R square Adjusted R square F- Statistics Number of observation Durbin Watson

t- Statistics are shown in the form [ ], while p- values are in the form { }. *, **, *** indicate significant at 10%, 5% and 1% respectively

There is positive relationship between the chief executive status (CEO) and the PM and it is significant at 1%, 5% and 10% levels. The table further reveals that the board size, board composition and audit committee have no significant relationship with PM. By analyzing Table 5 together with the descriptive statistics, it is clear that though there is positive relationship between board size and the two performance proxies, it is only significant with ROE and not with PM. The average board size is about 9, and this is considered small in the Nigerian context. Thus, this result is in agreement with previous empirical studies (see Yemack, 1996, Liang and Li, 1999, Yuanto, 2003, Sanda et al, 2005 and Bokpin, Coleman and Aboagye, 2006). The relationship between board composition and the two performance measures is not statistically significant. The implication of this is that for the sampled firms, there is no relationship between the firms financial performances and the outside directors sitting on the board. This outcome also has the support of Forsberg (1989), Weisbach (1991), Bhagat and Black (2002) and Sanda et al (2005). The result of the relationship between the chief executive status is clear with the two performance proxies- positive and significant relationship. It implies that the sampled firms, in the period under study, have separate persons occupying the posts of chief executive and the board chair. This has influence on the financial performance of the sampled firms and in line with the tenet of the

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code of corporate governance best practices of Nigeria. This outcome is consistent with previous empirical studies (see Yermack, 1996, Brown et al 2004 and Bokpin et al 2006). Audit committees being occupied by majority of outside members have no influence on the firms performance. This is because this study shows that the relationship between the audit committee and the two performance measures is not statistically significant. This result is not consistent with some previous studies such as Klein (2002) and Mansi and Reeb (2004), where they reported strong positive relationship between audit committee and the performance variables they used in their studies.

5. Conclusion
There is no doubt that several studies have been conducted so far (and is still on going) on the examination of the relationship between firm performance measures and corporate governance mechanisms, but the outcomes of these studies are mixed. This study examines the relationship that exists between firm performance, using two proxies, (ROE and PM) and four corporate governance mechanisms (board size, board composition, chief executive status and audit committee). A sample size of 20 non- financial firms listed on the Nigerian Stock Exchange between 2000 and 2006 is used. Panel data methodology is employed; the method of analysis is multiple regressions and the method of estimation is OLS. The study reveals the following results: (i) There is a positive and significant relationship between ROE and board size. (ii) There is a positive and significant (at 10% level) relationship between ROE and chief executive status. (iii) There is no significant relationship between ROE, board composition and audit committee. (iv) There is a positive and significant relationship between PM and chief executive status. (v) There is no significant relationship between PM and board size, board composition and audit committee. Regarding future line of research, efforts should be put at increasing the sample size and the corporate governance variables, particularly the inclusion of ownership concentration/characteristics. The need to examine the relationship between firm performance measures when leverage is introduced will make the outcome of the research to be more robust. More importantly, the empirical literature indicates a sample selection bias in favour of very big firms. It is hereby suggested that attention should be devoted to the study of small and medium scale firms in the African continent. This is because these firms account for at least 90% of the total number of firms in this part of the world.

Acknowledgement
The author would like to thank the participants at the Seminar of the Faculty of Management Science, Olabisi Onabanjo University, Ago-Iwoye, M Anil Kumar, Nigeria, particularly, Professor E.O. George, Professor (Mrs) Osoba, Dr. A.J. Abosede, Dr. A.B. Adesoye, Dr. Oladeji, Messrs. I.S. Osinubi, E.E. Daferighe, and Ganiyu Yinusa, for their valuable comments and suggestions in the earlier version of this paper.

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European Journal of Economics, Finance and Administrative Sciences - Issue 14 (2008) Adenikinju, O and F, Ayorinde (2001): Ownership structure, corporate governance and corporate performance: The case of Nigerian quoted companies, Unpublished final report presented at the AERC biannual research workshop, Nairobi, Kenya, May. Akinsulire, O (2006): Financial Management 4th Edition, Lagos, El-Toda Ventures. Al- Faki, M (2006): Transparency and corporate governance for capital market development in Africa: The Nigerian case study, Securities Market Journal, 2006 Edition, 9- 28. Anderson, R, S, Mansi and D, Reeb (2004): Board characteristics, accounting report integrity and the cost of debt, Journal of Accounting and Economics, Vol 37, pp 315- 342. Baysinger, B and H, Butler (1985): Corporate governance and the board of directors: performance effects of changes in board composition, Journal of Law, Economics and Organisation, Vol 1, pp 101- 124. Bhagat, S and B, Black (2002): The non- correlation between board independence and longterm firm performance, Journal of Corporation Law, Vol 27, pp 231- 274. Bokpin, G.A, A, Kyereboah- Coleman and A.Q.Q, Aboagye (2006): Corporate governance and shareholder wealth maximization: Evidence from listed companies in Ghana, Unpublished paper presented at the 3rd African Finance Journal Conference, Accra, Ghana, 12th 13th July. Banks and Other Financial Institutions Act (1991) Brown, L.D, J.M, Robinson and M.C. Caylor (2004): Corporate governance and firm performance, http://www.issproxy.com/pdf/corporate governance. Cho, M (1998): Ownership structure, investment and the corporate value: an empirical analysis, Journal of Financial Economics, Vol 47, pp 103- 121. Coles, J, N, Daniel and L Naveen (2008): Boards: does one size fit all? Journal of Financial Economics, Vol 79, pp 431- 468. Companies and Allied Matters Act (1990): Enacted by the Federal Government of Nigeria. Demsetz, H and B, Villalonga (2001): Ownership structure and corporate performance, Journal of Corporate Finance, Vol 7, pp 209- 233. Eisenberg, T, S, Sundgren and M, Wells (1998): Larger board size and decreasing firm value in small firms, Journal of Financial Economics, Vol 48, pp 35- 54. Fosberg, R (1989): Outside directors and managerial monitoring, Akron Business and Economic Review, Vol 20, pp24- 32. Hermalin, B.E and M.S, Weisbach (1991): The effects of board composition and direct incentives on firm performance, Financial Management, Vol 20, pp 101- 112. Himmelberg, C, G, Hubbard and D, Palia (1999): Understanding the determinants of managerial ownership and the link between ownership and performance, Journal of Financial Economics, Vol 53, pp 353- 384. Insurance Act (2003): Enacted by the Federal Government of Nigeria. Investment and Securities Act (1999): Enacted by the Federal Government of Nigeria. Jensen, M.C, and W.H. Meckling (1976): Theory of the firm: managerial behaviour, agency costs and ownership structure, Journal of Financial Economics, Vol 2, pp 305- 360. John, K and L.W, Senbet (1998): Corporate governance and board effectiveness, Journal of Banking and Finance, Vol 22, pp 371- 403. Kim, D, G, Hubbard and D, Palia (2004): The endogenous impact of leverage on firm value, Working paper, Rutgers University and Columbia University. Klein, A (1998): Firm performance and board committee structure, Journal of Law and Economics, Vol 41, pp 275- 303. Klein, A (2002): Audit committee, board of director characteristics and earnings management, Journal of Accounting and Economics, Vol 33, pp375- 400. Lipton, M and J.W Lorsch (1992): A modest proposal for improved corporate governance, Business Lawyer, Vol 48(1), pp 59- 77.

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European Journal of Economics, Finance and Administrative Sciences - Issue 14 (2008)

Appendix 1: List of Nigerian Firms Used in the Study


S/N 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Name of Firm Afprint Nigeria PLC Dunlop Nigeria PLC RT Briscoe PLC Guiness Nigeria PLC Nigerian Breweries PLC Glaxo Smithkliime Consumer PLC Vitafoam Nigeria PLC Vono Products PLC WAPCO PLC Berger Paints PLC CAP PLC PZ Industries PLC John Holts Nigeria PLC Julius Berger Nigeria PLC Longman Nigeria PLC Academy Press PLC 7up Bottling Company PLC Flour Mills Nigeria PLC Avon Crown Caps Containers PLC Beta Glass Company PLC Sector Agric/ agro- allied Automobile and tyre Automobile and tyre Breweries Breweries Healthcare Industrial and domestic product Industrial and domestic product Building materials Chemical and paints Chemical and paints Conglomerates Conglomerates Construction Printing and publishing Printing and publishing Food/beverages and tobacco Food/beverages and tobacco Packaging Packaging