CORPORATE
GOVERNANCE AND
FIRMS
GROWTH IN NIGERIA: EVIDENCE OF
INSURANCE
INDUSTRY IN NIGERIA
RESEARCH
PROJECT
BY
YOUR NAME
MATRIC NUMBER...........
PRESENTED TO THE POST GRADUATE
STUDIES, UNIVERSITY OF....... IN PARTIAL FULFILLMENT OF THE REQUIREMENT FOR THE
AWARD OF THE DEGREE OF MASTER OF SCIENCE (M.Sc.) ACCOUNTING OF
UNIVERSITY........
JANUARY, 2018
CHAPTER
ONE
INTRODUCTION
1.1 Background of the Study
There
have been widespread and growing interests in empirical analysis of corporate governance
and growth of firms for insurance industry. Corporate government remains the
central issue and factor that foster the economic decisions of not only the
investors (providers of capital) but also various stakeholders. Firms having good
corporate governance performance measures, performed well as compared to the
firms having no or less corporate governance practice. Establishing the
adequate corporate governance system is the necessary condition to enable the
sustainable growth of firms and Nigerian economy. Insurance industry is
considered vital for employment generation, social security, increase savings
of life and non-life insurance and significantly vital to economic growth.
In
many economies of the world, some identified significant contributions of
business firms include contribution to the economy in terms of output of goods
and services, creation of jobs, improvement of corporate social responsibility.
Certain actors are responsible for efficient performance of firms either small,
medium or large, even in industrialized countries. Such factors include
infrastructure and enabling environment, availability of investment capital,
production equipment, efficient manpower and availability of market.
In
spite of all these afore mentioned factors, existence of corporate frontier had
made many firms which had previously shown signs of spectacular success to be
built on sand. This is evidential in insurance industry in Nigeria. In the last
decade many firms in insurance industry in Nigeria finds it very difficult to meet
up with the capitalization policy. This is revealed by hot lied of fraud and
illicit dealings of the directors saddled with the responsibilities to run the
activities of the firms. Performance of the firm is affected by practicing good
corporate governance policies. Our focus in this study is to appraise the quality
of firms-level corporate governance and firm’s growth for a period of twenty
(20) years spanning from 1993 to 2013.
Meaning of Corporate Governance
The OECD (1999) defines corporate governance as
follows: “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. Good corporate governance
should provide proper incentives for the board and management to pursue
objectives that are in the interests of the company and its shareholders and
should facilitate effective monitoring”.
Uwuigbe
Olubukunola Ranti (2011) defines corporate governance in the context of banking
as the manner in which systems, procedures, processes and practices of a bank
are managed so as to allow positive relationships and the exercise of power in
the management of assets and resources with the aim of advancing shareholders‟
value and shareholders‟ satisfaction together with improved
accountability, resource use and transparent administration.
The
importance of effective corporate governance cannot be overemphasized. Corporate Governance is important to
companies, to the communities as well as to the country. The need for corporate
governance have been attributed to factors such as globalization,
privatization, democratization, competition, high profile corporate abuse and
failures, shareholders and stakeholders’ activism and the internalization of
capital.
Corporate
Governance becomes a vital issue when it is realized that good corporate
performance leads to good financial performance. In other words if the
management of a company manages the company’s asset efficiently there is a
greater possibility that the company will be able to attract stable long term,
inexpensive capital and will be able to improve its financial performance. More
often than none the required fund needed to improve the financial and economic
performance of these companies are sought from the capital market and companies
are aware that with improved corporate governance on their part, the investing
public is encouraged to become shareholders which invariably reduces the
company’s cost of capital because investors are able to discount governance as
a risk factor. In essence companies need to put in place arrangements that
respond to the concerns of investors.
The
application of good corporate governance is also important because it provides
innumerable benefits not only to the company but also to the economy as a whole
because a company that practices good corporate governance will certainly
attract both local and foreign investment flow resulting to increase in profit
and growth than a company that is lack good corporate practices, this is in
addition to the fact that the latter company has high probability to fall or
collapse.
Good
corporate governance practices and responsible corporate behavior contribute to
the long-term performance of public companies and are critical to well-functioning
securities markets. Strong corporate governance helps reduce investment risk
and ensures that shareholder capital is used effectively.
Research shows that growth is particularly strong for those
industries most dependent on external finance. The quality of corporate
governance can also affect firms’ behavior in times of economic shocks.
Well-governed companies have less volatile share prices in times of crisis. Good
corporate governance can help family-owned or -controlled companies survive
succession battles that doom most such companies, say Joseph Fan, a finance
professor and co-director of the Institute of Economics and Finance at the
Chinese University of Hong Kong (The
Economist Intelligence Unit, 2002)
1.2 Statement of the Problem
The
quest for good corporate governance and ethical behaviour has a vital role in
the growth process and pattern of the firm. The underlying principles of good
corporate governance are based around the actions of the board of directors,
how it is constituted, how it operates, how it sets the values for the growth
of firms, and how it governs itself. According to McConvill James (2005), there is a growing perception that
company directors and executives are self interested actors, using their
position in the company to pursue their own ends rather than being focused on
pursuing what is best for the company and its stakeholders. This perception is
aided by recent news of the record 25-year jail sentence handed down to former World.Com
boss Bernard Ebbers for his part in the fraud that caused the $11 billion
collapse of that company.
In
public companies where the separation of ownership from management is much
wider, Corporate Governance is much relevant because it is concerned with how
power is shared and exercised by different group to ensure that the objectives
of the organization are achieved. The thrust of Corporate Governance are the
rights of shareholders and other stakeholders, how power is shared and
exercised by the directors, and how holders of power in a company should be
held accountable for what they do (Securities and Exchange Commission Journal
Vol. 6, (2009).
The recent financial scandals affecting major
American firms such as Enron, WorldCom, and Arthur Andersen, and the resulting
loss of confidence by the investing public in the stock market have led to
dramatic declines in share prices and substantial financial losses to millions
of individual investors. Both the public and the experts have identified failed
corporate governance as a principal cause of these scandals, and have therefore
brought corporate governance issues to the fore front of management. When a company suffers a major governance failure, whether it’s
due to an ethical or accounting violation, faulty risk management and oversight
or ineffective board decision-making, the effects can be far-reaching. The
share price can fall sharply, affecting shareholders and sometimes even the
industry sector in which the company operates. The company might ultimately
fail, leading to job losses and other harmful consequences for the region where
it operates. In some extreme cases such as government bailouts, taxpayers can
be left repaying the costs.
1.3
Objectives of the Study
The cardinal objective of this study is to identify the impact of
corporate governance on the growth of firms in Nigeria, evidenced in insurance
industry. Other objectives of this study include the following:-
(i)
Establish the contribution
of corporate governance to the growth of firms in Insurance Industry in
Nigeria/
(ii)
Establish the contributions
of corporate governance to the economic growth in Nigeria.
(iii)
Examine the impact of
external corporate governance policy to growth of firms in insurance industry.
(iv)
Evaluate the response of
investors to both internal and external corporate governance policies.
(v)
Examine the causal
relationship between corporate governance and performance of firms in the
insurance industry.
1.4
Research Questions
The following questions are examined in this study:
i)
To what extent does
corporate governance contribute to the growth of firms in insurance industry in
Nigeria?
ii)
To what extent does
corporate governance contribute to the economic growth in Nigeria?
iii)
To what degree does external
corporate governance policy impact on the growth of firms in insurance industry
in Nigeria?
iv)
How have investors responded
to both internal and external corporate governance policy in Nigeria?
1.5
Research Hypotheses
The following are the hypotheses of this study:-
1)
H0: There is no
significant contribution of corporate governance to the growth of firms in
insurance industry.
2)
H0: There is no
significant contribution of corporate governance to the economic growth in
Nigeria.
3)
H0: There is no
significant impact of external corporate governance policy on growth of firms
in insurance industry.
4)
H0: There is no
significant causality between the corporate governance and growth of firms in
Nigeria.
1.6
Significance of the Study
Globally, insurance industry is noted for their immense
contributions to the development process and is one of the engines for economic
growth. The importance of insurance-growth relationship is growing due to the
increasing share of the insurance industry in the financial sector. This growth
in importance is also reflected in the business volume of insurers, (Back and
Webb, 2003).
They further asserted that insurance provides individuals and the
economy as a whole with some financial services. First, insurance takes
increasing magnitude as a way for individuals and families to manage
income-risk. Next, insurance products expedite long-run savings and the
re-investment of substantial sums in private and public sector projects.
Insurance offer a means for disciplined contractual savings and have become
effective as instrument for boosting substantial amount of savings.
Skipper (1997) noted that the insurance market activity, both as a
provider of risk transfer and indemnification and as an institutional investor,
may contribute to economic growth in the following ways:- a) mobilization
domestic savings, b) allowing different risks to be managed more efficiently,
thereby encouraging the accumulation of new capital, c) boosting financial
stability, d) facilitating trade and commerce (the most efficient ancient
insurance activity), e) supporting to reduce or mitigate losses, more
efficiently allocation of domestic capital.
Many studies have been carried out with respect to insurance
industry in Nigeria; productivity growth has been slow in Nigeria over last two
decades, especially in comparison with the other countries. It has been argued
that the lack of product market competition and poor corporate governance are
two main reasons for the phenomenon. The performance of the sector still falls
below the standard that will make it serve as catalyst for economic growth and
development.
The significance of this study can further be understood by
considering the importance of corporate governance in accomplishing corporate
objectives. The importance of good governance practices is
evidenced in strong leadership, a positive culture and robust risk management.
These all encourage and reinforce behaviours that ensure company
representatives act to protect the long-term interests of the company and its
shareholders. The application of good corporate governance is also important
because it provides innumerable benefits not only to the company but also to
the economy as a whole because a company that practices good corporate
governance will certainly attract both local and foreign investment flow
resulting to increase in profit and growth than a company that is lack good
corporate practices, this is in addition to the fact that the latter company
has high probability to fall or collapse.
It is hoped that the findings of
this study
shall be made available to
organizations by hosting this work on the net and at the library. The society
at large shall also benefit from this work in the sense that when
organizations are successful,
this
will lead to the improvement
in the larger society.
1.7
Scope of the Study
This study will be limited to
insurance industry in Nigeria. The availability of data leads us to consider
for this current study the period 1993-2013. In an attempt to achieve our objectives,
data and information shall be sourced from reliable institutions such as
chartered.
Nigerian Stock Exchange, Nigerian
Bureau of Statistics (NBS), UK Principles of Corporate Governance, USA
Principles of Corporate Governance, Code of Corporate Best Practices in Nigeria
as well as other relevant bodies to augment the impact of corporate governance
on growth of insurance industry in Nigeria between the specified period.
1.8 Structure of the
Work
The introductory chapter examines the background of the study,
statement of the problem, objectives of the study, research questions, research
hypotheses, as well as the justification/significance of the study. We equally
formulated research questions which are expected to be answered by the
objectives of the study.
The second chapter shall be devoted to review of relevant
literatures, explain conceptual issues and provide a detailed overview of
corporate governance. The theoretical framework shall as well be examined in
this chapter focusing on theory of firm, the determinants of firm’s growth and
growth of insurance industry in Nigeria.
The methodology of the study shall be highlighted in chapter
three. The chapter outlines data collection methods and techniques, population,
sample size and sampling technique, model specification and research instrument
reliability and validity tests.
The fourth chapter shall present and analyze the results obtained
from the field and the estimated models and various tests of the hypotheses
shall be carried out. The hypotheses shall be restated for emphasis; the
results of the hypotheses test shall be presented and discussed in detail.
The concluding chapter, that is chapter five, summarizes our
findings, presents our conclusions, identifies areas of future studies and makes
recommendations to management for action.
1.9 Definition of Terms
Words Definitions
Corporate Forming
a whole, united, organization, an entity, a firm.
Corporate Governance Corporate governance is the system by which
business corporations are directed and controlled. “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.
Corporation A body of people acting as one for
administrative or business purposes.
Environment Surroundings in which someone or an
organization lives and operates
Ethical Having to do with right
behaviour, Justice, duty, just honourable
Governance The act of controlling, ruling, administering an entity, an
organization or a country; to control and direct the affairs of a group, a
firm, or a country.
Leadership Leadership
is the process of influencing the activities of an individual or a group
towards the achievement of a goal in a given situation.
Management The art of managing a business, those in charge of a business. Management
involves planning, organizing, leading and controlling the activities of
employees and of utilizing organizational resources to accomplish
organizational goals effectively and efficiently.
Moral Of correct or acceptable behaviour
or character, principles and standards of behaviour
Obligation A promise or a duty by which someone is
bound. Debt of gratitude for a favour received.
Performance The act of doing something, the level of success of something, a
car or an organization.
Profitability Gain, benefit, money gotten by selling an article for a higher
price that was paid for it.
Social Relating to society or to a community, living in communities, of
companionship.
Social Responsibility This refers to those actions taken
by a business organization which in some ways assist the society to achieve the
objectives of the society and enable the citizens to live better life.
Society Humanity considered as a whole, a
community of people, company, and companionship.
References
Gabrielle
O’ Donovan (2000), The Ethics of Business,
New-York: Oxford University Press.
OECD (1999). Principles of
Corporate Governance. Organisation for Economic Co-operation and Development
Security
and Exchange Commission (2009), Review on
the Code of Corporate Governance, The Guardian,
September 30, 2009
The Economist Intelligence Unit (2002) Corporate governance -The new strategic
imperative, A white
paper from the Economist Intelligence Unit sponsored by KPMG International, www.eiu.com
McConvill James (2005), Positive Corporate Governance and its Implications for Executive Compensation, German Law Journal,
Uwuigbe
Olubukunola Ranti (2011), Corporate
Governance and Financial Performance of Banks: A study of Listed Banks in
Nigeria,
The
complete part of this project is available for sale
PROJECT PROPERTIES
Project Status
|
Available
|
Number
of Chapters
|
5
|
Number
of Pages
|
120
|
Number
of Words
|
15,751
|
Number
of References
|
10
|
Project
Level
|
M.Sc.
|
Price
|
N15,000
(Non-Negotiable)
|
Abstract,
Sample of Questionnaire are included
|
|
How
to Pay for this Project . . . .23408028177177 or via email danikingconsulting@yahoo.com
|
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