Corporate Governance and Profitability of Deposit Money Banks in Nigeria

Abstract

Effective corporate governance has become a key concept in modern banking systems, which determines how financial institutions manage risks and deliver value. Therefore, this study examined the implications of corporate governance on the profitability of deposit money banks (DMBs) in Nigeria. The study analyzed how audit committee size, board size, and independent board members (independent variables) affect profitability, as determined by stock returns (dependent variable). A longitudinal correlational research design was employed to determine the relationships among the specified variables between 2009 and 2024. The population comprised 13 DMBs listed on the Nigerian Exchange Group with 12 of them selected as sample size. Data were gathered from the audited financial statements of the sampled banks. A multiple regression analysis technique was employed to measure the associations among the variables under study. Audit committee size (β = 0.883, p < 0.05) and board size (β = 0.026, p < 0.05) positively and significantly affect banks’ profitability. Independent board members (β = -0.040, p > 0.05) have a negative but statistically insignificant effect on profitability. The study concluded that proper corporate governance contributes to better financial performance among banks. Therefore, it was recommended that deposit money banks improve their governance mechanisms, particularly through an appropriately structured board, a more effective audit committee and a larger board for greater financial performance and institutional integrity.