EFFECT OF CORPORATE GOVERNANCE ON SHAREHOLDERS WEALTH MAXIMIZATION IN SELECTED DEPOSIT MONEY BANKS IN NIGERIA

CHAPTER ONE INTRODUCTION 1.1 Background to the study An organization's economic success is determined not only by efficiency, innovation, and quality management but also by adherence to corporate governance principles. In recent years, corporate governance has been viewed as a system of checks and balances between/among the board of directors, management, and investors in order to build a well-functioning organization that is optimally suited to generate long-term value (Ademola et al., 2022; Appah, 2023). Jayashree (2006) defines corporate governance as a system of making directors accountable to shareholders for effective management of the companies in the best interest of the company and the shareholders along with concern for ethics and values. It is the management of companies through the board of directors that hinges on complete transparency, integrity and accountability of management. It aims to increase transparency and accountability in an organization's procedures in order to meet obligations to shareholders, employees, customers, and the community in which it operates (Olaifa, 2022). The Cadbury Report (1992) was set up by the Committee on the Financial Aspects of Corporate Governance, known as the Cadbury Committee in May 1991 by the Financial Reporting Council, the London Stock Exchange, and the accountancy profession. The report made far reaching recommendations on corporate governance concerning the way in which companies are directed and controlled. The central components of the voluntary code of corporate practice are: that there be a clear division of responsibilities at the top, primarily that the position of Chairman of the Board be separated from that of Chief Executive, or that there be a strong independent element on the board; that the majority of the Board be comprised of outside directors; that remuneration committees for Board members be made up in the majority of non-executive directors; and that the Board should appoint an Audit Committee including at least three non- executive directors (Onakoya, Ofoegbu & Fasanya, 2012). The importance of a well-managed board of directors for the efficient performance of companies is undeniable, and the above empirical evidence has shown this (Martín & Herrero, 2018). Moreover, several issues related to the composition of the board, such as the fact that the chairman of the board is a member of the executive board (Fich, 2005), the effect of appointing directors that are also executive directors in other firms (Murayev, Talavera, & Wei, 2016), the professionalisation of directors (Andreas et al., 2012) and the impact of the proxy advisers (McCahery et al., 2016), have all been studied in recent years. Wessels & Wansbeek (2014) relate governance to the exercise of authority, direction and control. It is a concept that has a history that could be traced to Chaucer, which carries with it the implication of prudence. Corporate governance represent methods through which organizations are being administered, a structure through which the welfare of different parties with vested interests are harmonized, showing group of interaction between a company’s administration, its board, its shareholders and other interested parties (Adedeji & Ajulo, 2021). The importance of a vibrant, transparent and healthy banking system in the mobilization and intermediation of fund, for the growth and development of the economy need not be over-emphasized (Suberu & Aremu, 2010). Worthy of is the fact that the level of functioning of the financial sector depend on the perception and patronage of the citizens towards its services (Al- Faki, 2006). The situation where the public losses confidence in the financial institutions, can result in panic and consequential financial and economic woes. The absence of confidence in any organization is attributable to opaque management practices with deleterious effect on its performance. Organizational performance can be assessed in terms of the level of profit that is generated by an organization as a result of effective and judicious utilization of scarce resources by the management (Aman, Beekes & Brown, 2018). Financial performance of an organization guarantees timely payment of salaries to employees, interest to lenders, dividend to shareholders, and taxes to government revenue authorities (Usman & Yakubu, 2019). The measure of performance in this case is not limited to the financials (turnover and profit) but also customer satisfaction, employee welfare, social corporate responsibility, indeed, the whole gamut of balanced score card. Given the nature of banking business and the antecedents of the operators such as unrecoverable loans, unethical bank practices, illiquidity, etc of Nigeria banks, corporate governance is fundamental to the nation’s financial stability (Okoye et al., 2020). Mohammed (2012) posits that sound corporate governance, therefore, enhances corporate performance, value as well as providing meaningful and reliable financial report on firms operations. The experience of business failure and financial scandals around the world brought about the need for good governance practices. There is therefore the need for the banks to recognize the need to adopt strategies that will improve their corporate governance which has significant effect on their image. Failure to do this will mean less customer and low capital base, hence liquidation. 1.2 Statement of the problem A bank with poor corporate governance gradually loses public confidence. A bank that lacks proper corporate governance is exposed to various internal risks. The effect of poor corporate governance on banks is seen in loss of customer patronage, loss of shareholders, internal crisis, constant scrutiny from regulatory authority and collapse. The Nigerian financial environment is being affected by governance problems, systemic instability and failure of financial institutions to comply with lending practices which has affected the growth and development of the economy. Ibitamuno, Onuchuku, & Nteegah (2018) argued that the recent global financial crisis and erosion of commercial banks investment in Nigeria results in lack of compliance with credit management practices which is associated with poor corporate governance despite the management board size. The question is whether the board composition and board size have contributed to sound corporate governance vis a vis asset quality of deposit money banks in Nigeria. Hence the need for this study. The consolidation policy of 2006 which led to reduction in commercial banks from 89 to 25 and currently 24 is an indication of erosion in best practices and high sharp dealings in the banking industry which resulted in liquidity crisis. High rate of improper accounting practices by Oceanic Bank, Intercontinental Bank, Union Bank, Afri Bank, Fin Bank and Spring Bank in 2009 and sacking of Chairman and Managing director of Skye Bank in July, 2016 for improper management of funds were indication of challenges of corporate governance in the Nigeria banking industry (Oluwole, 2021). Given the high rate of instability in the banking system which resulted in the takeover of some banks like Skye Bank and Intercontinental Bank an, Diamond Bank Plc; the major concern of regulatory authority is on the extent audit size and audit quality have enhanced sound corporate governance practices among banks. Though, studies have been conducted on corporate governance and banks performance in Nigeria, there is paucity of studies on how board composition impacts on asset quality of deposit money banks in recent years. Owing to the above problems, this study seeks to find out whether corporate governance can impact on corporate performance and the extent corporate governance has being adopted by Zenith Bank of Nigeria Plc. 1.3 Objectives of the study This study assessed the impact of corporate governance on shareholders wealth maximization in Nigeria deposit money banks. Other objectives of the study include: i. to investigate the extent shareholders funds impacts on return on equity of deposit money banks in Nigeria. ii. to determine the impact of board size on deposit money banks’ return on equity. iii. to examine the impact of audit size on deposit money bank’ return on equity. iv. to find out the effect of board composition on deposit money banks’ return on equity. 1.4 Research questions This study is aimed at finding answers to the following relevant questions: i. To what extent do shareholders funds impact on return on equity of deposit money banks in Nigeria? ii. What impact does board size on deposit money banks’ return on equity? iii. What is the impact of audit size on deposit money banks’ return on equity? iv. What effect does board composition on deposit money bank’ return on equity? 1.5 Research hypotheses The following hypotheses were tested in the study: H01: Shareholders funds have no significant impact on return on equity of deposit money banks in Nigeria H02: Board size has no significant impact on deposit money banks’ return on equity H03: Audit size has no significant impact on deposit money banks’ return on equity H04: Board composition has no significant impact on deposit money banks’ return on equity 1.6 Significance of the study The study is also relevant in the following ways: The government: It brings enlightenment on the effect of bank corporate governance on the Nigerian banks. It may help the government to formulate policies that strengthens corporate governance implementation in the Nigerian banking industry. The regulatory agencies will be able to identify what roles are expected of them in ensuring full compliance to corporate governance in the banking industry. The business organizations: It establishes the fact about banks corporate governance and impact on the growth of the industry. This study will also afford the general public the opportunities of assessing whether or not the Nigerian banks have performed better during the era of corporate governance. To the academia: It adds to existing literature on the subject matter as well as serves as reference material for future researchers. 1.7 Scope of the study The scope of this study centers on corporate governance and shareholders wealth maximization with focus on selected deposit money banks in Nigeria. It covers Zenith Bank and Guaranty Trust Bank Plc. It lays emphasis on board size, board composition, audit size and shareholders’ fund and their relationship with the banks’ return on equity. The time frame for the study is 2013 to 2023. 1.8 Limitations of the study Some of the limitations of this study are:- 1. Lack of finance: This study was faced with the problem of finance owing to high cost of transportation, expenses typing, searching for research materials online, visiting of libraries and at the same time photocopying the materials. However, the scope of this research was reduced to match available resources. 2. Time factor: Limited time was available to adequately carry out this study owing to the fact that the study was carried out at the same time lecture were going on. However, the researcher had to put in extra hours to see to the completion of this research within record time. 1.9 Organization of study The work was structured into chapters and consists of five chapters. Chapter one is the general introduction bringing to fore the background to the study, statement of the problems, objectives of the study, research questions, research hypotheses, significance of the study, scope of study, and definition of operational terms. Chapter two reviewed relevant literature on the subject matter of the study, under the subheading of conceptual framework, theoretical framework, empirical review and summary of literature. Chapter three dealt with methodology. It shows the research design, selection of data, collection of primary data, design and administration of the questionnaire, sample size determination, model, and data analysis techniques. Chapter four treated the presentation and analysis of data. Chapter five dealt with summary of findings, conclusion, recommendations based on the findings, and suggestion for future studies. 1.10 Definition of operational terms Audit size: Auditor size is defined by three criteria: the wealth of the audit partners; the size of the partners' client portfolios; and the number of audit partners in the firm. Board size: Board size is taken to refer to the total number of members serving on a firm's board. Board composition: Board composition refers to the people in an organization's board of directors and what they bring to the board table, such as their management background and skills. Deposit money banks: This is the business of receiving money from outside sources as deposits irrespective of the payment of internet, the granting of loan, acceptance of credit or the purchase of bills, cheque and sales of securities and the purchase and sales of securities on behalf of customers. Corporate governance: Corporate governance is a group of mechanism that stakeholders use to guarantee that directors effectively manage corporate resources, a task that includes the way in which quasi rents are developed and distributed. Impact: It is the measure of the tangible and intangible effects of one thing or entity’s action or influence upon another. Return on equity: This is a financial metric that measures how well a company generates profit from its shareholders' investment and calculated by dividing a company's net income by its average shareholders' equity. Shareholders: This is a person or entity that owns shares in a corporation. Wealth maximization: is a financial strategy that aims to increase the value of a business over time, which in turn increases the value of its shares and the wealth of its shareholders. CHAPTER TWO REVIEW OF RELATED LITERATURE 2.1 Conceptual framework This section has been structured as follows: 2.1.1 Corporate governance The word governance is synonymous with the exercise of authority, direction and control. Corporate governance could be thought of as the combined statutory and non-statutory framework within which boards of directors exercise their fiduciary duties to the organizations that appoint them (Egiyi, 2022). The key issue is that ‘directors owe to shareholders, or perhaps to the corporation, two basic fiduciary duties: the duty of loyalty and the duty of care’. The primary goal of corporate governance is to enhance the value of a company through ethical behaviour, espousing a policy of openness and fairness and ensuring informed decision making throughout the company. Unfortunately, the centre of corporate ethics—the board of directors—in certain cases became a magnet for unethical practices (Garba & Otomewo, 2015). Corporate governance involves a set of relationships between a company’s management, its board, its shareholders and other stakeholders. Corporate governance also provides the structure through which the objectives of the company are set, and the means of attaining those objectives and monitoring performance are determined (Isaac, 2014). According to Isaac, it addresses the need for organizational stewards or managers to act in the best interest of the firm’s core stakeholders, particularly, minority shareholders or investors, by ensuring that only actions that facilitates delivery of optimum returns and other favourable outcomes are taken at all times. Corporate governance relates to relationship between firm’s various legitimate stakeholders. Corporate governance is about making certain that the company is directed appropriately for reasonable return on investments (Magdi & Nadereh, 2002). It is considered to be a process in which affairs of the firm are directed and controlled so as to protect the interest of all stakeholders (Sullivan, 2009). 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 (Ademola, Kazeem & Ajayi, 2022). Metrick & Ishil (2002) see corporate governance from the investors’ perspective as “both the promise to repay a fair return on capital invested and the commitment to operate a firm, efficiently given investments.” Corporate governance involves a system by which governing institutions and all other organizations relate to their communities and stakeholders to improve their quality of life (Ato, 2002). It is therefore important that good corporate governance ensures transparency, accountability and fairness in reporting. In this regard, corporate governance is not only concerned with corporate efficiency, it relates to a much wider range of company strategies and life cycle development. (Mayer, 2007). It is also concerned with the ways parties (stake holders) interested in the wellbeing of firms ensure that managers and other insiders adopt mechanism to safeguard the interest of the shareholders (Ahmadu & Tukur, 2005). Corporate governance is based on the level of corporate responsibility a company exhibits with regard to accountability, transparency and ethical values. 2.1.2 Importance of corporate governance Corporate performance is an important concept that relates to the way and manner in which financial, material and human 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. The overall effect of good corporate governance should be the strengthening of investor’s confidence in the economy of our country. Corporate governance is therefore about building credibility, ensuring transparency and accountability as well maintaining an effective channel of information disclosure that would foster good corporate performance. It is therefore crucial that banking sector observe a strong corporate governance ethos (Onakoya, Ofoegbu & Fasanya, 2012). Isaac (2014) opined that Corporate Governance is majorly to ensure a strong and reliable banking industry where there is safety of depositors’ money and also to develop the required flexibility to support the economic development of the nation by effectively performing its functions. He stressed further that Corporate governance also aims to create an atmosphere whereby Nigerian banks will comply with the laid down rules and regulations without compromise. This will in the end lead to transparency in the banking institutions, proper risk management, adoption of best practices in carrying out duties, strong internal control system, restoration of public confidence, rapid economic growth and in all prevent bank distress which might eventually lead to bank failure. 2.1.3 Composition of corporate governance According to Rwegasira (2000), corporate governance is simply concerned with the institutions that provide an entity with essential orientation and direction. As a result, corporate governance includes the relationships between the company's management structure, board of directors functions, shareholders, and stakeholders, as well as the organizational structure for business control and direction. The core theme of corporate governance, according to Kazmi (2008), is regulating the relationship between an organization's directors and management and other stakeholders. The overarching goal of corporate governance is to resolve agency conflict and promote accountability in the institution's operations to improve long-term value for its stakeholders by increasing returns on their invested capital. 1. Board of directors The board of directors is frequently the governing body of an organization. Its primary responsibility is to ensure that the organization achieves its shareholders' goals. Consequently, these stockholders hold the board of directors accountable (Al-Baidhani, 2015). Top executives are appointed, fired, and compensated by the board of directors (Johnson, Scholes, & Whittington, 2008). The organization's assets and invested capital are therefore safeguarded. In addition to determining the bank's objectives (including earning returns for shareholders), the board of directors' senior management influences how banks operate their daily operations, meet their requirements for shareholder accountability, and considers the interests of other recognized stakeholders. Independent directors on boards are usually seen as essential because they act as true monitors who can discipline management and enhance business performance (Duchin, Matsusaka, & Ozbas, 2010). Inside directors are better than outside directors at enhancing shareholder wealth. One of the aspects that can help to reduce agency disputes within the organization is the board's composition and size (Ademola, Kazeem & Ajayi, 2022). Board size refers to the total number of directors on a board (Levrau & Van den Berghe, 2007). According to Goshi (2002), the number of executive and non- executive directors on a board should be kept to a minimum. Kajola (2008) thinks that limiting board size to a specific level improves a company's performance since the benefits of having a larger board with enhanced monitoring are outweighed by poor communication and slower decision- making. Furthermore, Uwuigbe and Fakile (2012) claimed that banks with fewer than thirteen board members are more sustainable than those with more than thirteen. They also reported that banks with larger boards of directors earned less than banks with smaller boards of directors. 2. Audit committee The Audit Committee acts as a "guard dog" to ensure that procedures are adhered to. As the ultimate supervisory mechanism in the assurance process for company financial reporting, the audit committee is highly relevant (Tsui & Gul, 2003). According to Bhuiyan, Hossain, & Biswas (2007), the audit committee aids the board of directors in assessing and establishing effective internal control systems, as well as monitoring and focusing on financial risk and risk management. As a result, the audit committee supports recognizing and addressing trouble signals, reducing potential damage and boosting shareholder value. The audit committee serves as a vital link between a company and its external shareholders (Bolton, 2010). 3. Shareholders Shareholders play a key role in the provision of corporate governance. Small or diffuse shareholders exert corporate governance by directly voting on critical issues, such as mergers, liquidation, and fundamental changes in business strategy and indirectly by electing the boards of directors to represent their interests and oversee the myriad of managerial decisions (Adedeji & Ajulo, 2021). Incentive contracts are a common mechanism for aligning the interests of managers with those of shareholders. The Board of directors may negotiate managerial compensation with a view to achieving particular results. Thus small shareholders may exert corporate governance directly through their voting rights and indirectly through the board of directors elected by them. 4. Debt holders Debt purchasers provide finance in return for a promised stream of payments and a variety of other covenants relating to corporate behaviour, such as the value and risk of corporate assets (Adedeji & Ajulo, 2021). If the corporation violates these covenants or default on the payments, debt holders typically could obtain the rights to repossess collateral, throw the corporation into bankruptcy proceedings, vote in the decision to reorganize, and remove managers. However, there could be barriers to diffuse debt holders to effectively exert corporate governance as envisaged. Small debt holders may be unable to monitor complex organization and could face the free-rider incentives, as small equity holders. Also, the effective exertion of corporate control with diffuse debts depends largely on the efficiency of the legal and bankruptcy systems. Large creditors for example, as noted by Myers (1997) may induce the company to forego good investments take on too little risk because the creditor bears some of the cost but will not share the benefits. 2.1.4 Code of corporate governance for banks in Nigeria As documented in the CBN (2019), the code of corporate governance is in different dimensions: 1. Equity ownership The practice of free, non-restrictive equity holding has led to serious abuses by individuals and their family members as well as governments in the management of banks. However, to encourage a private sector-led economy, holdings by individuals and corporate bodies in banks should be more than that of governments. It is also recognized that individual who form part of management of banks in which they also have equity ownership have a compelling business interest to run them well. Such arrangements should be encouraged. Government direct and indirect equity holding in any bank shall be limited to 10% by end of 2007. An equity holding of above 10% by any investor is subject to CBN’s prior approval. 2. Organizational structure Executive Duality: The responsibilities of the head of the Board, that is the Chairman, should be clearly separated from that of the head of Management, i.e. MD/CEO, such that no one individual/related party has unfettered powers of decision making by occupying the two positions at the same time. No one person should combine the post of Chairman/Chief Executive Officer of any bank. For the avoidance of doubt, also no executive vice-chairman is recognized in the structure. No two members of the same extended family should occupy the position of Chairman and that of Chief Executive Officer or Executive Director of a bank at the same time. 3. Quality of board membership Institutions should be headed by an effective Board composed of qualified individuals that are conversant with its oversight functions. Existing CBN guidelines on appointment to the board of financial institutions should continue to be observed. Only people of proven integrity and who are knowledgeable in business and financial matters should be on the Board. Regular training and education of board members on issues pertaining to their oversight functions should be institutionalized and budgeted for annually by banks. The Board should have the latitude to hire independent consultants to advise it on certain issues and the cost borne by the banks. The number of non-executive board members should be more than that of executive directors subject to a maximum board size of 20 directors. At least two (2) non-executive board members should be independent directors (who do not represent any particular shareholder interest and hold no special business interest with the bank) appointed by the bank on merit. A committee of non-executive directors should determine the remuneration of executive directors. There should be strict adherence to the existing Code of Conduct for bank directors, failing which the regulatory authorities would impose appropriate sanctions including removal of the erring director from the board. Non-executive directors’ remuneration should be limited to sitting allowances, directors’ fees and reimbursable travel and hotel expenses. In order to ensure both continuity and injection of fresh ideas, non-executive directors should not remain on the board of a bank continuously for more than 3 terms of 4 years each, i.e. 12 years. Banks should have clear succession plans for their top executives. 4. Board performance appraisal While adherence to corporate governance principles is recognized as necessary for successful performance of Boards, it is often not a sufficient condition. Hence, the need for Board performance reviews or appraisals as a new concept to ensure successful or exceptional performance. Each Board should identify and adopt, in the light of the company’s future strategy, its critical success factors or key strategic objectives. Boards should determine the skills, knowledge and experience that members require to achieve those objectives. A Board should work effectively as a team towards those strategic objectives. There should be annual Board and Directors review/appraisal covering all aspects of the Board’s structure and composition, responsibilities, processes and relationships, as well as individual members’ competencies and respective roles in the Board’s performance. The review should be carried out by an outside consultant. The review report is to be presented at the AGM and a copy sent to the CBN. 5. Quality of management Appointments to top management positions should be based on merit rather than some other considerations. Existing guidelines on appointments to top management of banks should continue to be observed. Track record of appointees should be an additional eligibility requirement. Such records should cover both integrity (fit and proper’ as revealed by the CBN ‘blackbook’, CRMS etc) and past performance (visible achievements in previous place(s) of work). 6. Reporting relationship Officers should be held accountable for duties and responsibilities attached to their respective offices. The structure of any bank should reflect clearly defined and acceptable lines of responsibility and hierarchy. 7. Industry transparency, due process, data integrity and disclosure requirements These are core attributes of sound corporate governance practices that are essential to installing stakeholders’ confidence. Where board directors and companies/entities/persons related to them are engaged as service providers or suppliers to the bank, full disclosure of such interests should be made to the CBN. Chief Executive Officers and Chief Finance Officers of banks should continue to certify in each statutory return submitted to the CBN that they (the signing officers) have reviewed the reports, and that based on their knowledge: 1. The report does not contain any untrue statement of a material fact 2. The financial statements and other financial information in the report, fairly represent, in all material respects the financial condition and results of operations of the bank as of, and for the periods presented in the report. False rendition to CBN shall attract very stiff sanction of fine plus suspension of the CEO for six months in the first instance and removal and blacklisting in the second. In addition, the erring staff would be referred to the relevant professional body for disciplinary action. There should be due process in all the procedures of banks. All insider credit applications pertaining to directors and top management staff (i.e. AGM and above) and parties related to them, irrespective of size, should be sent for consideration/approval to the Board Credit Committee. The Board Credit Committee should have neither the Chairman of the Board nor the MD as its chairman. Any director whose facility or that of his/her related interests remains non-performing for more than one year should cease to be on the board of the bank and could be blacklisted from sitting on the board of any other bank. The Board Credit Committee should be composed of members knowledgeable in credit analysis. The practice/use of Anticipatory Approvals by Board Committees should be limited strictly to emergency cases only ratified within one month at the next committee meeting. Banks’ Chief Compliance Officers (CCO) should, in addition to monitoring compliance with money laundering requirements, monitors the implementation of the corporate government code. Banks should also establish ‘whistle blowing’ procedures that encourage (including by assurance of confidentially) all stakeholders (staff, customers, suppliers, applicants etc) to report any unethical activity/breach of the corporate governance code using among others, a special email or hotline to both the bank and the CBN. The CCO shall make monthly returns to the CBN on all whistle blowing reports and corporate governance related breaches. The CCO together with CEO of each bank should certify each year to the CBN that they are not (apart from 6.1.14) aware of any other violation of the Corporate Governance Code. The corporate governance compliance status report should be included in the audited financial statements. 8. Risk management The Board/Board Risk Management Committee should establish policies on risk oversight and management. Banks should put in place a risk management framework including a risk management unit that should be headed by a Senior Executive, in line with the directive of the Board Risk Management Committee. The internal control system should be documented and designed to achieve efficiency and effectiveness of operations; reliability of financial reporting, and compliance with applicable laws and regulations at all levels of the bank. External auditors should render reports to the CBN on bank’ risk management practices, internal controls and level of compliance with regulatory directives. 9. Role of auditors: internal auditors Internal auditors should be largely independent, highly competent and people of integrity. The Head of Internal Audit should not be below the rank of AGM and should be a member of a relevant professional body. He should report directly to the Board Audit Committee but forward a copy of the report to the MD/CEO of the bank. Quarterly reports of audit must be made to the Audit Committee, and made available to examiners on field visits. Members of the Board Audit Committee should be non-executive directors and ordinary shareholders appointed at AGM and some of them should be knowledgeable in internal control processes. One of such appointed ordinary shareholders should serve as the Chairman of the Committee. The Audit Committee will be responsible for the review of the integrity of the bank’s financial reporting and oversee the independence and objectivity of the external auditors. The Committee should have access to external auditors to seek for explanations and additional information without management presence. Internal Audit Unit should be adequately staffed. External Auditors: External auditors should maintain arms-length relationship with the banks they audit. Appointment of External Auditors will continue to be approved by the CBN. The tenure of the auditors in a given bank shall be for a maximum period for ten years after which the audit firm shall not be reappointed in the bank until after a period of another ten years. A bank’s external auditors should not provide the following services to their clients: 1) Bookkeeping or other services related to the accounting records or financial statements of the audit client; 2) Appraisal or valuation services, fairness opinion or contribution-in-kind reports; 3) Actuarial services; 4) Internal audit outsourcing services; 5) Management or human resource functions including broker or dealer, investment banking services and legal or expert services unrelated to the audit contract. Quality assurance auditing should be engaged whenever the CBN suspects a cover-up by auditors, and where proved, erring firms would be blacklisted from being auditors of banks and other financial institutions for a length of time to be determine by the CBN. An audit firm would not provide audit services to a bank if one of bank’s top officials (Directors, CFO, and CAO etc) was employed by the firm and worked on the bank’s audit during the previous year. 2.1.5 Wealth maximization Wealth maximization is a financial strategy that aims to increase the value of a business over time, which in turn increases the value of its shares and the wealth of its shareholders. It's also known as net worth maximization. The imperative of sustaining wealth maximization which is premised on the steady growth in the market value and profitability ratio of the organization speaks volume of how shareholders and investors will relate to the organization (Raposo, Ferreira & Fernandes, 2014). The performance factors are measured in both financial and non-financial terms. From the perceptive of this study, the financial performance measures of organizations have over the years engaged the attention of various scholars (Ntim, 2015). Nonetheless, the non-financial performance measures are also evaluated as a crucial part in sustaining the organization in terms of values, culture and interactions with its external environment (Fernando, Sharfman & Uysal, 2017). 2.1.6 Corporate governance and banking performance Corporate financial reporting provides fundamental information to a wide range of policy makers in both the corporate and non-corporate sectors of the economy – shareholders, management, government, creditors and society at large. This information is a vital input to effective and efficient management, and requires attention in practices. More specifically, a dynamic and competing financial institution environment calls for improved observations, measurement and transparent disclosure of operations. The consequences of institutional failure (considering the multiplier effect of financial institutional failure on the real sector of the economy) are unacceptably costly to a developing country like Nigeria. This affects the level of confidence the public has in various corporate establishments. The consequences of ineffective governance systems leading to corporate failure will not only affect the shareholders but also, the employees, suppliers, consumers and the nation as a whole. Thus, a governance system that will promote ethical value, professionalism and transparent application of best practices is desirable. Corporate governance is based on the level of corporate responsibility a company exhibits with regard to accountability, transparency and ethical values (Mohammed, 2012). The management has multiple objective functions to optimize which might conflict with those of the shareholders. In the search for a set of socially legitimate objective functions that would resolve these conflicts, management may focus on short term outcomes and loses sight of ethical issues such as efficient corporate management, professionalism, transparency, accountability, compliance with regulatory requirements and adequate supervision. Inadequate consideration for ethical values and good governance hinders banks’ performance as experienced in the failures of All States Trust Bank Plc, Lead Bank Plc, Assurance Bank Nigeria Limited, Trade Bank Plc, Metropolitan Bank Limited, City Express Bank Limited, Hallmark Bank Plc., Societe Generale Bank of Nigeria Plc., African Express Bank Plc., Gulf Bank of Nigeria Plc etc. Whose licenses were revoked by the Central Bank of Nigeria (CBN) in 2006 and the recent failures of Intercontinental Bank Plc, Oceanic Bank Ltd, Bank PHB in 2011. The impact of good governance on a firms’ reputation cannot be over emphasized. Good corporate governance promotes goodwill and confidence in the financial system (Mohammed, 2012). Recent studies from academic researches shows that good corporate governance lead to increased valuation, higher profit, higher sales growth and lower capital expenditure (Wolfgang, 2003). 2.1.7 Board composition and banks performance Board composition can reflect various degrees of heterogeneity (Bhagat & Black, 2002). Common measures of board composition include the ratio of independent non-executive directors and board size (Rashid, 2011), which is the measure used in this research. Other measures of board composition in the literature include gender and age diversity. However, to date there have been inconclusive findings as regards the relationship between board composition and firm performance (Rashid, De Zoysa, Lodh & Rudkin, 2010). Other differences in board composition are considered here to represent 'board diversity'. More independent board composition can result in enhanced decision making through increased information flows, although this may entail a cost (Sanda, Garba & Mikailu, 2011). In light of this, Eklund, Palmberg & Wiberg (2009) stress board heterogeneity entails a trade-off between "information efficiency" in the case of heterogeneous boards, which typically are better informed on 'outside' issues, versus "decision efficiency" of homogenous boards deriving from higher trust, shared experience and values. In terms of this tension, however, agency theory is in favour of a majority of independent nonexecutive directors (Rashid, 2011). It is stressed that the board should include a balance of executive and non-executive directors, with a majority of independent non-executive directors, as this reduces the possibility of conflicts of interest (IOD, 2009). The corporate governance literature tends to advocate expanding the independent/outsider elements on corporate boards (Sanda, Garba & Mikailu, 2011). Sahin, Basfirinci & Ozsalih (2011) however, observe that previous literature does not offer consistent evidence on the impact of the proportion of non-executive to executive directors on financial performance. There are several explanations for the inconclusive results on the relationship between executive versus independent non-executive directors and firm performance. One such explanation is that the simultaneity between key variables of interest confounds the interpretation of the results in studies that focus on direct relationships (Finegold et al., 2007). Yet another explanation is that performance and board characteristics are jointly endogenous, and thus firm performance is not only a function of past board independence, but also influences board structure (Panasian, Prevost & Bhabra, 2008). 2.1.8 Board size and banks performance A board of directors fulfils various functions (Solomon, 2010). While independent non-executive directors monitor the executive management and advise the CEO on business strategy, information is also conveyed to outsiders. Much of the literature on board size has, however, argued for the benefits of smaller boards (Wu, 2003), based on the notion that smaller groups are more cohesive and more productive, and are also able to monitor the firm more effectively than larger groups (Pablo, Valentin & Felix, 2005). Similarly, larger groups are fraught with problems such as social loafing and higher coordination costs, and are thus less effective in terms of monitoring (Rashid, 2011). Lipton and Lorsch cited in Muchemwa, Padia & Callaghan (2016) argue that boards comprising eight or nine members are the most effective. According to these authors, when the board exceeds this optimal size, it becomes difficult for all the board members to express their ideas and opinions in the limited time available at board meetings. Jensen (1993) concurs with this view and argues that boards of more than seven or eight members function less effectively and are easier for the CEO to control than smaller boards. According to the body of literature that argues that board size is positively associated with firm performance, larger boards provide a host of advantages (Wu, 2003). From an agency perspective, it may be argued that a larger board is more likely to be vigilant with regard to agency problems simply because a greater number of people will be reviewing management actions (Nicholson & Kiel, 2003). Accordingly, Mak & Li (2001) showed a significant and positive correlation between Tobin's Q and board size for Singapore firms in OLS regressions. Nevertheless, agency theorists recognise that there is an upper limit to boards (Huse, 2007). Jensen (1993) suggests this limit to be approximately eight directors, as a greater number would interfere with group dynamics and inhibit the performance of the board. Alternatively, it may be argued that it is not the size of the board that is critical, but rather the number of independent non- executive members on the board (Muchemwa, Padia & Callaghan, 2016). This study therefore tests both of these dimensions. From a resource dependence theory perspective, it may be argued that a larger board offers greater opportunities for external linkages and hence access to resources (Nicholson & Kiel, 2003). A host of studies (Hillman, Cannella, & Paetzold, 2000) argue that boards link a firm to its external environment; one of the functions of directors is to provide assistance in obtaining resources from outside the firm (Nicholson & Kiel, 2003). Similarly, Ferris, Jagannathan and Pritchard (2002) found a positive and significant association between the log of board size in 1995 and the ratio of market-to-book value for firms requiring debt financing. In fact, Adams & Mehran (2003) found that boards devote significant resources - up to 52 per cent of total director meetings - to activities that are not traditionally considered to be monitoring activities. Regarding the size of the board, it could be argued that larger boards are associated with more complex companies with a greater need for guidance, and this should be reflected in better performance, a result that is observed by Rehman & Shah (2013). 2.1.9 Auditing and banks performance Financial reporting is one of the primary responsibilities of management which enables them give account of their stewardship. Bank management and board of other companies are to ensure that the annual report detailing the financial transactions of these entities are prepared and presented to the owners of the companies which are the shareholders and other relevant users including creditors, analysts, government, and the general public to enable them assess the performance and financial position of the reporting entity. The focal point for financial reporting therefore is the information supply on the financial performance and position of the reporting entity that is useful to different users, to enable them put the stewardship of management to an assessment and facilitate reasonable economic decision making (Amahalu, Okoye & Obi, 2019). For an auditor to perform his or her task, he or she must follow the set down rules and regulations in order to achieve the highest audit quality. Ghadhab, Matrood & Hameed (2019) suggested the need to strengthen the role of external auditing through various means such as the delivery of proper instructions, measures and safeguards that boost both the accounting and auditing profession. Audit quality is vital for organizations to achieve efficient and effective resources management because it can lead to rapid improvement of firm's financial performance. The functions of external auditors reflect on financial report or information quality that companies keep in order to raise the confidence of the different stakeholders and at such maintain efficiency, effectiveness and credibility of audit firms (Kwabena, 2017). Audit of financial statements is therefore an important part of the regulatory and supervisory framework which is significant to public interest. The extent to which audit lends credence to the reliability of financial statements in turn depends on the quality of audit services rendered (Simi, 2016). Audit quality in form of fees charged for audit services serves a vital role in ensuring market environment that is effective and efficient, audit quality that is not just independent but also proves to show the integrity and credibility of financial reports which is essential for well-functioning markets and enhanced financial performance (Eneisik & Akani, 2021). ORJI, and Uche (2022) stated that the investors and other stakeholders or users rely on the audited financial statement reports to determine the firm value and financial performance of the banks. The external or independent auditors is expected to comply with relevant and procedure in auditing the financial statement of banks. The rise in corporate failure of recent time has necessitated the emphasis on audit quality. Audit quality increase investor’s confidence in a going concern audited reports and lead to improve firm value. 2.2 Theoretical framework Two theories were discussed which are stewardship theory and agency theory. 2.2.1 Stewardship theory Stewardship theory as proposed by Donaldson and Davis in 1991 projects managers as collectivists, pro-organizational, and trustworthy. The theory depicts managers as stewards who protect and maximize shareholder value through firm performance (Davis, Schoorman, & Donaldson, 1997). The theory posits that managers find fulfillment from their organizations’ success and place the interest of their principals above their own interests. It is, therefore, an organization-centered theory of management. It aims at creating value for shareholders through sustained improvements in business performance. Under the stewardship theory, the positions of Chief Executive Officer (CEO) and Board Chairman are invested in one executive, with a board comprised mostly of in-house members to allow for intimate knowledge of organizational operations and deep commitment to success. This is premised on the assumption that having a single leader creates one channel to communicate business needs to the shareholders and the shareholders’ needs to the business, thereby minimizing episodes of confusion and conflict of interest. 2.2.2 Agency theory Propounded by Jensen & Meckling (1976), when it comes to companies and concerns about corporate control, agency theory sees corporate governance systems, particularly the board of directors, as an important monitoring device that guarantees that any difficulties caused by the principal-agent relationship are mitigated (Kumar, 2010). Managers are likely to be the owners' agents, but they must be supervised, and institutional frameworks must provide certain checks and balances to ensure that they do not misuse their position. The costs of abusing their position, and also the costs associated with monitoring and regulating them to avoid exploitation, are referred to as agency costs (Kim, 2010). The agency theory serves as the underpinning theory as it applies to corporate governance in the banking sector. This theory connotes how the alignment of the audit committees, board composition, and size successively improve banks performance (Ademola, Kazeem, & Ajayi, 2022). The Agency theory has also had its fair amount of criticism due its assertion that managers will not get the job done without outside monitoring. In contrast to this general view, managers are motivated to serve the interests of their shareholders and be trusted with responsibility while being accountable (Donaldson & Davis, 1991). 2.2.3 Stakeholder theory Stakeholder theory can be defined as any group or individual who can affect or is affected by the achievement of the organization’s objectives. Stakeholder theorists suggest that managers in organizations have a network of relationships to serve – this include the suppliers, employees and business partners. And it was argued that this group of network is important other than owner-manager- employee relationship as in agency theory. Wheeler et al, (2002) argued that stakeholder theory was derived from a combination of the sociological and organizational disciplines. On the other end, Sundaram & Inkpen (2004) contend that stakeholder theory attempts to address the group of stakeholders deserving and requiring management’s attention. 2.2.4 Resource dependency theory Whilst, the stakeholder theory focuses on relationships with many groups for individual benefits, resource dependency theory concentrates on the role of board directors in providing access to resources needed by the firm. Hillman, Canella and Paetzold (2000) contend that resource dependency theory focuses on the role that directors play in providing or securing essential resources to an organization through their linkages to the external environment. Indeed, Johnson et al, (1996) concurs that resource dependency theorists provide focus on the appointment of representatives of independent organizations as a means for gaining access in resources critical to firm success. For example, outside directors who are partners to a law firm provide legal advice, either in board meetings or in private communication with the firm executives that may otherwise be more costly for the firm to secure. It has been argued that the provision of resources enhances organizational functioning, firm’s performance and its survival (Daily et al, 2003). According to Hillman, Canella and Paetzold (2000) that directors bring resources to the firm, such as information, skills, access to key constituents such as suppliers, buyers, public policy makers, social groups as well as legitimacy. 2.3 Empirical review Otieno et al., (2015) sought to find out the effect of corporate governance on financial performance of savings and credit cooperatives. The study did a survey of three Sacco's which have the majority of Sacco members using Spearman’s rank correlation to analyze and present findings in tables showing percentages, frequency distribution, and also bar graphs, and pie charts. It found out that there was a significant relationship between financial reporting and financial performance of savings and credit cooperatives. Sacco’s with more frequent financial reporting structures showed better financial performance. The study recommended that financial reporting should be done as frequently as possible, and management should use a leadership style that is most comfortable to employees. Okoye et al., (2020) explored the nexus between governance practices and bank profitability in Nigeria. It adopts the size of bank board and directors’ stake as proxies for corporate governance, with return on assets and return on equity as representations for financial performance. The estimation technique of the Generalized Method of Moments was employed. Evidence from the research reveals that board size, directors’ equity, and firm size substantially affect Nigerian banks’ financial performance. Besides, the study shows a robust effect of lagged return on equity on the current level of performance. Therefore, the study asserts that governance in business entities strongly affects their financial performance and recommends maintaining optimum board size to minimize boardroom conflicts. It prescribes that the requirement for substantial equity stake by directors of banking institutions be sustained. Wilcox & Osho (2020) evaluated the effect of corporate governance characteristics on financial Performance of banks in Nigeria. The data used for the study were sourced from the annual reports of five selected banks in Nigeria and the data collected were analysed using panel data regression analysis. Three variables, profit after tax, return on assets and return on equity were used as proxy for financial performance, while audit committee, board size and board composition were used as proxy for corporate governance characteristics. Findings suggested that audit committee, board size and board composition had significant influence on the return on equity and return on assets of banks while it had no significant influence on the profit after tax, making the study conclude that corporate governance characteristics significantly influenced financial performance of banks in Nigeria. The study among other things recommend that audit committee is encouraged to maximize expertise and experience, ensure accountability obligations to shareholders are carried out with proper assessment of internal control systems. Adedeji & Ajulo (2021) examined the relationship that exists between corporate governance and bank performance of selected commercial banks in Nigeria using regression analysis of 5 years ranging from 2014 – 2018. The stock performance being the response variable was captured by Market price per share while the explanatory variables included Board Size (BS), Corporate Governance Disclosure Index, Non-Executive Director and Number of Female Director are the regressors used in achieving this objective. Descriptive analysis was used to ascertain the mean, median, Maximum, Minimum. Correlation was carried out and a positive and strong relationship was generated. Post estimation diagnostic test of Hausman test and redundant fixed effect test were adopted in selecting the most appropriate model to capture the impact of corporate governance characteristics on stock performance of banks. The test indicated that random effect is not an appropriate model and non-normality of the variables will not encourage the use of ordinary effect, therefore, in estimating the parsimonious model of the variable, fixed effect will be an appropriate assumption. 86.78% of the stock performance of banks was accounted for by the explanatory variables. The work suggested that efforts should be made to improve corporate governance focus on the stock performance of deposit money banks since the stock performance is a measure of the wealth of shareholders. Ademola et al., (2022) examined the effect of corporate governance on the performance of MFBs in Nigeria. Corporate governance was proxied by audit committees, board size and composition while Return on Equity (ROE) was used as the measure of financial performance. Twelve MFBs were randomly selected from South West, Nigeria. Secondary data was obtained from the annually published reports of the selected licensed microfinance banks in Nigeria between ten years period of 2011 and 2020. Data were analyzed using regression and correlation techniques. The results demonstrated that board size correlates favourably and significantly with MFBs performance, implying that larger boards improve bank performance. Board composition exhibited a strong positive relationship with MFBs’ performance. Furthermore, audit committees correlate positively and significantly with MFBs’ performance, demonstrating that audit committees are important components of corporate governance. Finally, the study found that corporate governance proxies (audit committees, board size and composition) have a positive and significant effect on MFBs performance in Nigeria. Consequentially, the study suggested that an operational audit committee be established if MFBs’ credibility, efficiency, competitiveness, and sustainability are to be ensured. Egiyi (2022) focused on the relationship between corporate governance and firm performance in Nigerian publicly traded enterprises. Ex post facto research was used in the study to analyse data from 20 manufacturing listed companies. The data, which spans the years 2010 through 2020, was evaluated using System GMM. Profit margin and return on asset were used to measure firm performance. The study's findings demonstrated that corporate governance metrics (such as board size, audit committee size, and audit quality) have a significant impact on a company's profitability. The findings suggested that the government and the pertinent authorities create legislation on institutional and governmental ownership to serve as a regulator and, in the long run, improve corporate performance. Okoye et al., (2020) explored the nexus between governance practices and bank profitability in Nigeria. It adopts the size of bank board and directors’ stake as proxies for corporate governance, with return on assets and return on equity as representations for financial performance. The estimation technique of the Generalized Method of Moments was employed. Evidence from the research reveals that board size, directors’ equity, and firm size substantially affect Nigerian banks’ financial performance. Besides, the study shows a robust effect of lagged return on equity on the current level of performance. Therefore, the study asserts that governance in business entities strongly affects their financial performance and recommends maintaining optimum board size to minimize boardroom conflicts. It prescribes that the requirement for substantial equity stake by directors of banking institutions be sustained. Olaifa (2022) sought to find out the impact of corporate governance on the performance of specialized banks. The specific objectives were to analyse the effect of board nationality on return on equity of specialized banks and to find the effect of board size on capital adequacy of specialized banks. The study made use of secondary data from annual reports of the selected banks from 2015-2020. Using the purposive sampling technique, this study selected two out of the six specialized banks (development finance institution) in Oyo state, Nigeria. Methods of descriptive statistics, regression analysis and t-test analysis were employed in the data analysis. The results of the analysis using t-test showed shows that ethnic diversity has significant positive effect on the ROE of selected specialized banks in Nigeria. Ethnic diversity brings diverse experience and expertise to bear on the operations of banks which has significant positive effect on the ROE of selected specialized banks in Nigeria for the period under analysis. The study concluded that there exists a positive relationship between board size and capital adequacy. Oloyede (2022) in study assessed the influence of corporate governance mechanisms such as board independence, board size, board effectiveness and board gender diversity on financial performance measures, like Return on Equity (ROE) and Return on Assets (ROA). The study adopted the quantitative research method. Data were also obtained from annual reports of the selected Microfinance banks from 2017 to 2021. Multiple regression model was adopted to analyze data obtained from the field. The findings of the study revealed that corporate governance mechanisms such as; board independence, board size, board gender diversity, have an insignificant relationship with corporate financial performance (ROA and ROE), however, board effectiveness have a significant relationship with corporate financial performance (ROA and ROE). The study recommended that corporate governance should be examined from a broader perspective, in all areas, in other to realize the main essence of corporate governance vis-à-vis day to day performance. Tsetima & Tyonande (2022) examined the effect of corporate governance on financial statement quality of listed deposit money banks in Nigeria. The study adopted the cross-sectional survey design involving 86 management staff of 15 of listed deposit money banks in Makurdi, Benue State. The study employed questionnaire as the major instrument for data collection. Regression analysis was used in testing the data gathered from the survey. Analysis was done with the aid of Statistical Package for Social Sciences (SPSS 23). Findings revealed that board independence and audit committee have significant positive effect on financial statement quality of listed deposit money banks in Makurdi, Benue State. The study concludes that dimensions of corporate governance are statistically significant in explaining the quality of financial statements of listed deposit money banks in Makurdi, Benue State. Appah (2023) investigated the effects of corporate governance mechanism on the value of deposit money banks in Nigeria. The study population consisted of all deposit money banks and Taro Yamene method of sample size determination was applied. The secondary data for the study was from the published financial statements of sampled banks for the period after validity and reliability test of data. The data obtained was tested using univariate, bivariate and multivariate analysis. The result from the multiple regression result disclosed that board independence, board size, ownership structure, gender diversity and board meeting positively and significantly influences the value of deposit money banks in Nigeria. The study concluded that corporate governance attributes positively and significantly affects the value of deposit money banks in Nigeria. The study recommended amongst others that board sizes should be enhanced as this allows for the appropriate combination of directors. Oriakpono and Musiliu (2023) examined the relationship between corporate governance structure and financial performance of banks in Nigeria, with particular emphasis on quoted banks. The research adopted a cross sectional analysis of the financial report of quoted banks on first tier security market of Nigeria stock exchange. Data used in the study was basically secondary data generated from the published annual report of the studied bank. Hypothesis was tested with the use of regression correlation. Result showed that large board size impacted negatively on firm's financial performance as a result of increase in agency cost. The study concluded that the result of this study implies that large board size impacted negatively on firm’s financial performance, as a result of increase in agency cost and recommended that quoted banks should endeavor to comply with CBN and other financial, monetary and regulatory guide line to enable them achieve the objective of improving the Return on Asset. 2.4 Research gap The link of Corporate Governance with wealth maximization is a debated issue in the governance literature. The majority of empirical studies conducted (using board size, board independence, CEO duality, and number of board committees) in an effort to understand the impacts of board features on firm performance are largely normative and prescriptive. Also, the results from the studies are mixed. Based on the review, it can be seen that not much research have been conducted on the link between corporate governance and wealth maximization of deposit money banks in Nigeria a gap in literature that has necessitated this study. CHAPTER THREE METHODOLOGY 3.1 Research design This study adopts exposit facto design as it involves the use of time series data to determine the economic relationship between two or more variables and such data have already been documented thus cannot be manipulated. 3.2 Selection of data The data sourced for this study is mainly secondary source. In addition, secondary sources were also used in the literature which includes journals, textbooks and internet materials. 3.3 Collection of secondary data The data used for this study were collected and extracted from the summaries of financial reports of Zenith Bank and Guaranty Trust Bank Plc from 2012 to 2023. 3.4 Sample size determination The sample size of this study is two selected deposit money banks which are Zenith Bank and Guaranty Trust Bank Plc. The time frame covers from 2012 to 2023 which is 12 years. 3.5 Model specification The model is in the stated hypotheses are expressed in the following functions: Y= f (X) Where, Y= Dependent variable X= Independent variable H01: Shareholders funds have no significant impact on return on equity of deposit money banks in Nigeria H02: Board size has no significant impact on deposit money banks’ return on equity H03: Audit size has no significant impact on deposit money banks’ return on equity H04: Board composition has no significant impact on deposit money banks’ return on equity The model is developed as ROE= f (SHF, BCOMPOSITION, BSIZE, AUDSIZ)....................................(i) Mathematically, this can be restated as: ROE = β0+ β1SHFt + β2BCOMPt +β3BSIZEt +β4AUDSIZt +μ……………… (ii) Where: ROE = Return on equity SHF= Shareholders fund BCOMP= Board composition BSIZE= Board size AUDSIZ= Audit size 3.6 Data analysis techniques This study .made use of regression analysis to test the stated hypotheses. Regression analysis includes any techniques for modeling and analyzing several variables when the focus is on the relationship between a dependent variable and one or more independent variables (Freedman, 2005). The validity of this analysis will be based on the following criteria. Standard error test The standard error will show that the estimates are accurate only if estimated cofficient is less than the half of the coefficient. T test It is carried out in order to ascertain the significance of the parameters. The student-t distribution will test the null hypothesis H0 = β1 = 0 against the alternative hypothesis. H1 = β1 ≠ 0. Thus, we can derive the result whether the calculated t value, t (n-k) degree of freedom at 5% level of significance is greater or less than the tabulated t. if the probability estimate of t-statistics for independent variables is greater than 0.05 we accept the H0 that the estimate is not significantly different from zero. R2 coefficient of determination This reveals the proportion variation of SHF, BCOMPOSITION, BSIZE, AUDSIZ variable in the ROE variable that is explained by the independent variable of SHF, BCOMPOSITION, BSIZE, AUDSIZ. It maximum value is 1 or 100%. F test It reveals the significance of the overall regression equation for further prediction. This test, at (k-1) (n-k) degree and N is the number of observation and at 5% level of significance will indicate whether or not the expected variables is likely to have occurred by chance or not. The decision rule is that if the probability estimate of F-statistics is greater than 0.05 we accept the H0 that the estimate is not significantly different from zero.i.e. H0 = β1 = 0. Regression co-efficient These shows the value and sign attached to each of the parameters. The signs are very important, because they allow us to see whether our result confirm to the theory or not. If a positive relationship is expected between a dependent and the independent variables, then the sign of the regression coefficient is expected to be positive and the same goes for a negative relationship. CHAPTER FOUR DATA PRESENTATION AND ANALYSIS 4.1 Data presentation This chapter focuses on analyzing the relationship between the variables as stated in the hypothesis presented in chapter one of the study. This presentation of the data will be carried out first. Table 4.1: Data for analysis Company Year Board Size Board Composition Shareholders’ fund (N’000) Audit size Return on equity % Zenith Bank 2012 6 .53 438003 9 11.10 Zenith Bank 2013 6 .50 472622 9 21.87 Zenith 2014 6 .50 7 Bank 512707 17.95 Zenith Bank 2015 6 .53 546946 5 18.53 Zenith Bank 2016 6 .57 616353 6 17.74 Zenith Bank 2017 6 .57 697983 6 18.48 Zenith Bank 2018 6 .57 675032 7 22.21 Zenith Bank 2019 6 .57 778995 6 24.51 Zenith Bank 2020 6 .57 905232 8 24.63 Zenith Bank 2021 6 .57 1,049,775 6 23.66 Zenith Bank 2022 7 0.59 1,195,147 8 22.74 Zenith Bank 2023 7 0.71 1,806,248 20.31 GTB 2012 5 .53 234,180,056 9 3.39 GTB 2013 5 .50 281,826,941 9 5.26 GTB 2014 5 .50 326,995,647 7 4.49 GTB 2015 6 .53 364,714,298 5 4.19 GTB 2016 6 .57 413,561,938 6 4.14 GTB 2017 6 .57 501,692,225 6 4.85 GTB 2018 6 .57 620,038,669 7 5.71 GTB 2019 6 .57 576,277,241 6 5.62 GTB 2020 6 .57 687,337,468 8 5.24 GTB 2021 6 .57 814,395,677 6 4.07 GTB 2022 7 0.59 883,227,092 8 3.82 GTB 2023 7 0.67 931,149,202 8 2.62 Source: Various financial report various issues 4.2 Data analysis Table 4.2: Descriptive statistics Date: 02/02/25 Time: 17:43 Sample: 2012 2023 ROE SHF AUDSIZ BCOMP BSIZE Mean 27.68600 1825000. 6.500000 0.556000 6.300000 Median 28.38500 1775000. 6.000000 0.555000 6.000000 Maximum 31.60000 2410001. 9.000000 0.680000 7.000000 Minimum 21.20000 1400000. 4.000000 0.500000 5.000000 Std. Dev. 2.903646 300046.5 1.581139 0.051683 0.674949 Skewness -1.093481 0.621239 0.355556 1.295602 -0.365675 Kurtosis 3.683140 2.661259 2.422222 4.450838 2.294468 Jarque-Bera 2.187285 0.691040 0.349794 3.674693 0.430271 Probability 0.334994 0.707852 0.839543 0.159239 0.806432 Sum 276.8600 18250001 65.00000 5.560000 63.00000 Sum Sq. Dev. 75.88044 8.10E+11 22.50000 0.024040 4.100000 Observations 10 10 10 10 10 The descriptive statistics and normality test shows that an average 27.7% return on equity was witnessed within the period under review, shareholder funds averaged 182500, audit size averaged 6.5, board composition averaged 0.56, board size averaged 6.3. The Jaque Bera statistics shows probability values that are all above 0.05 or 5% for the various variables which implies that they are not significant but normally distributed. Table 4.3: OLS analysis Dependent Variable: ROE Method: Least Squares Date: 03/03/25 Time: 17:53 Sample: 2012 2023 Included observations: 24 Variable Coefficient Std. Error t-Statistic Prob. C 6.415048 18.16718 0.353112 0.7418 SHF 4.79E-06 1.04E-05 3.459153 0.0400 AUDSIZ 0.267793 0.620332 0.431693 0.6882 BCOMP -11.83496 38.75437 -0.305384 0.7753 BSIZE 2.213201 3.200925 0.691425 0.5273 R-squared 0.723191 Mean dependent var 27.68600 Adjusted R-squared 0.377181 S.D. dependent var 2.903646 S.E. of regression 2.291525 Akaike info criterion 4.780022 Sum squared resid 21.00435 Schwarz criterion 4.961573 Log likelihood -17.90011 Hannan-Quinn criter. 4.580861 F-statistic 3.090084 Durbin-Watson stat 1.444899 Prob(F-statistic) 0.037444 Source: Eviews 8 The model estimated is ROE = 6.41504843623 + 4.79452774906e-06*SHF + 0.267793122133*AUDSIZ - 11.834959324*BCOMP + 2.21320099233*BSIZE The R-squared at 72.31% implies that corporate governance proxies (board size, audit size, board composition, and shareholders fund) are strongly fitted on quality of asset of the companies. The Adjusted R-squared indicates that the proxies jointly explained the variation of 37% found in the asset quality of the firms. -3 -2 -1 0 1 2 3 20 22 24 26 28 30 32 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Residual Actual Fitted The F-statistics shows a prob value of 0.03744 which is less than 0.05 level of significance indicating that the variables jointly impacted on return on asset, in other words, corporate governance proxies jointly impacts on asset quality. 4.3 Test of hypotheses 4.3.1 Test of hypothesis 1 H0: Shareholders funds have no significant impact on return on equity of deposit money banks in Nigeria Ha: Shareholders funds have significant impact on return on equity of deposit money banks in Nigeria The results shows that shareholders fund is positively related (4.79E-06) with return on equity, in other words, shareholders are ready to invest in companies which operate under proper management. The t-statistics shows a prob value of 0.0400 which is significant at 0.05 level of significance, therefore the null hypothesis is rejected and we accept that shareholders funds have significant impact on return on equity of deposit money banks in Nigeria. 4.3.2 Test of hypothesis 2 H02: Board size has no significant impact on deposit money banks’ return on equity Ha2: Board size has significant impact on deposit money banks’ return on equity Board size shows a positive relationship (+ 2.21320099233) which implies that a higher board size will likely increase disclosure level of risk than a board with lower number of members. The t-statistics shows a prob value of 0.6882 which is insignificant at 0.05 level of significance, therefore the null hypothesis is accepted that Board size has no significant impact on deposit money banks’ return on equity. 4.3.3 Test of hypothesis 3 H03: Audit size has no significant impact on deposit money banks’ return on equity Ha3: Audit size has no significant impact on deposit money banks’ return on equity Audit size also shows a positive relationship (0.267793122133) with asset quality, which implies that auditing, is necessary for disclosure of risk especially in present state of company asset quality. The t-statistics shows a prob value of 0.7753 which is insignificant at 0.05 level of significance; therefore the null hypothesis is accepted that audit size has no significant impact on deposit money banks’ return on equity. 4.3.4 Test of hypothesis 4 H04: Board composition has no significant impact on deposit money banks’ return on equity Ha4: Board composition has significant impact on deposit money banks’ return on equity Board composition shows a negative function (- 11.834959324) which implies that the composition of the board in most cases does not really determine the return on equity and disclosure process. The t-statistics shows a prob value of 0.5273 which is insignificant at 0.05 level of significance; therefore the null hypothesis is accepted that board composition has no significant impact on deposit money banks’ return on equity. Normality test 0 1 2 3 4 -3 -2 -1 0 1 2 3 Series: Residuals Sample 2012 2021 Observations 10 Mean 5.33e-15 Median -0.030657 Maximum 2.130189 Minimum -2.239824 Std. Dev. 1.527684 Skewness -0.038541 Kurtosis 1.520256 Jarque-Bera 0.914827 Probability 0.632919 Figure 1: Histogram-Normality test Using the standardized residuals, figure 1 shows a skewness of -0.038541 and Kurtosis of 1.520256 indicating low level of significance. The Jarque Bera value of 0.914827 with a probability value of 0.632919 which insignificant to affect the normal distribution of the residuals. The residuals are jointly, normally distributed. Table 4.4: Breusch-Godfrey Serial Correlation LM Test: Breusch-Godfrey Serial Correlation LM Test: F-statistic 0.676477 Prob. F(2,2) 0.5965 Obs*R-squared 4.035111 Prob. Chi-Square(2) 0.1330 Source: Eviews 8 The BG, LM test in table 4.4 shows that the F-statistic and obs*R-Squared are insignificant to result to serial correlation, suggesting that there is no first order serial correction in the series. Table 4.5: Heteroskedasticity Test: Breusch-Pagan-Godfrey: Heteroskedasticity Test: Breusch-Pagan-Godfrey F-statistic 0.418904 Prob. F(5,4) 0.8171 Obs*R-squared 3.436729 Prob. Chi-Square(5) 0.6330 Scaled explained SS 0.398872 Prob. Chi-Square(5) 0.9954 Source: Eviews 8 Table 4.5 shows Breusch-Pagan-Godfrey test’s F-stat, obs* R2 and scaled explained SS stats respectively suggest that the residuals in our model were insignificantly influenced by the presence of heteroskedasticity. Therefore, there is homogeneity in our model. 4.4 Discussion of findings Findings in this study shows that shareholders fund impacted on return on equity which indicates that mismanagement of assets scares away investors. In other words, shareholders will commit more funds into companies that they perceive able to utilize their assets properly to make returns. As stakeholders of the company, shareholders are always seeking to maximize their profits which can only be achieved through corporate governance. The findings is in line with the observations of Appah (2023) that ownership structure positively and significantly influences the value of deposit money banks in Nigeria. Findings also showed that audit size has positive effect on return on equity which implies that a higher number of auditors reduces the potentiality of manipulation and errors in auditing process. This finding supports the work of Tsetima and Tyonande (2022) that board independence and audit committee have significant positive effect on financial statement quality of listed deposit money banks. In the third tested hypothesis, board composition showed a negative effect on asset quality. The implication is that the composition of the board management does not necessarily translate into efficient organizational management especially if most of the boards are non-executives or dormant partners who leave the management of the company for the executives or managers. In the fourth tests hypothesis, it was found that board size has positive effect on asset quality. This suggests that the more the number of the board members the higher the effect on asset management and thus asset quality. Appah (2023) showed that board size, ownership structure, gender diversity and board meeting positively and significantly influences the value of deposit money banks in Nigeria. It is contrary to the findings of Oloyede (2022) and Oriakpono and Musiliu (2023) that large board size impacted negatively on firm's financial performance as a result of increase in agency cost. as a result of increase in agency cost CHAPTER FIVE SUMMARY OF FINDINGS, CONCLUSION AND RECOMMENDATIONS 5.1 Summary of findings This study assessed the impact of corporate governance on the performance of deposit money banks in Nigeria. Data were collected from Guarantee Trust Bank and Zenith Bank of Nigeria financial summary from 2012 to 2023. Analyses were carried out using Multiple OLS regression and stability test. Findings revealed that 1. Shareholders’ funds have positive and significant impact on deposit money banks’ return on equity 2. Board size has positive and insignificant impact on deposit money banks’ return on equity 3. Audit size has positive and insignificant impact on deposit money banks’ return on equity. 4. Board composition has negative and insignificant impact on deposit money banks’ return on equity 5.2 Conclusion Empirical findings from the study have shown that corporate governance is always an aspect that is closely monitored by the regulatory authority in order to ensure the transparency and accountability of management of banking institutions and the curtailment of their risk appetite. Sound corporate governance, enhances corporate performance, value as well as providing meaningful and reliable financial report on firms operations. The experience of business failure and financial scandals around the world brought about the need for good governance practices. Banks are usually engaging in risky business of loans and advances which could default there is therefore the need for appropriate direction and over sighted the public on the various risks banks are exposed to and the need for good corporate governance by the banks to sustain the confidence of the public to avert the potential danger of loss of deposits due to mass withdrawal and loss of capital due to retirement by shareholders. Findings in this study has shown that shareholders fund, board size and audit size positively influence asset quality while board composition have negative influence on asset quality. In conclusion, the study has shown that corporate governance has impact on performance of deposit money banks in Nigeria. 5.3 Recommendations Based on the findings made in the study, the following recommendations were made to assist in the enforcing corporate governance in the banking industry: 1. There is need for bank management to continually provide quality audit report and financial statement to shareholders and other investors for better decision making in carrying the company forward for better performance. 2. The bank management should continue to engage the services of quality auditors while the audit committee size needs an increase. The independence of the audit committee should not be jeopardized. 3. The board composition needs restructuring as the present structure does not make any meaningful contribution to the growth of the bank. 4. There is the need to adopt a robust, practice and sophisticated board size as more needed to be done to ensure their contribution to corporate governance makes significant on the bank. 5.4 Contribution to knowledge The following contributions to existing body of knowledge were made: 1. The board size of the company as a component of corporate governance is a major determinant of corporate financial performance. 2. 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