CHAPTER ONE

INTRODUCTION

1.1. Background to the study.

Corporate governance is typically linked with private sector organizations. The owners of the

company, the shareholders, employ managers as their agents to manage the business and take strategic

and operational decisions in the interest of the firm and shareholders. Because the agents and owners

are separate individuals and groups, the relationship between them often bring conflicts of interest.

Whereas the managers are employed to maximize returns to shareholders and also look after the

interests of all other stakeholders, they often pursue self-interest to the detriment of the financial

interest of their principals (Haji, 2014; Smith, 2019). By using insider knowledge, managers of

corporations could hide and use price-sensitive information to benefit themselves (Appuhami & Bhuyan,

2017; Liu, Valenti, & Chen, 2018).

Abdulrahman (2018) said that the prevailing economic and corporate financial scandals that occurred in

previous years had necessitated critical studies on African economic position with the experience of the

various organization such as Worldcom, Enron Tyco, and Parmalat ,that were characterized by different

financial irregularities which resulted in substantial loss to different stakeholders. It was also noticed

that the effectiveness of corporate governance depended on the ways applied for the benefit of

different stakeholders.

This failure has frequently been linked to flaws in operating environments and internal control systems,

as well as a lack of commitment to upholding high ethical standards. Sometimes organizational

designers and controllers willfully or purposefully create these shortcomings, and Other times, the

collapse be the outcome of the naive belief that persons in charge of managing tasks are capable of
doing so and will always operate in a way that implies or encourages enlightened self-interest, which

should eventually have the goal of advantages for all parties involved (Donaldson & Preston, 1995).

The collapse and scandal of many large corporations led to the introduction of the Sarbanes-Oxley Act,

which demonstrated the need to advance corporate governance standards. The objective of Sarbanes-

Oxley is to protect present and potential investors and creditors of corporations by regulating the

content, accuracy, and reliability of corporate disclosures in the financial statements (Dah, 2016). One of

the most profound changes brought by the SOX is the establishment of the Public Companies

Accounting Oversight. Board (PCAOB). The PCAOB has the mandate to (a) register all public accounting

firms that audit public companies; (b) establish auditing, quality control, ethical, and independence

attestation standards required of external auditors; (c) periodically assess the degree to which audit

firms comply with the rules of the PCAOB and professional standards; and (d) establish procedures for

investigating and disciplining registered firms and persons associated with them (Sarbanes-Oxley, 2002).

The SOX (2002) also requires public companies to ensure independent directors are in a majority on the

boards of directors and to have audit committees composed entirely of independent directors. These

provisions should ensure that governance mechanisms have the potential to reduce agency problems

and enable the firms to function effectively (Baran & Forst, 2015).

While a private sector corporation the topic of governance is frequently discussed and studied, but we

also need to pay attention to the public enterprise governance in the sector. The concept of governance

in business organizations is neither new to the world of business nor is new to economic literature but

has attracted greater attention since the early 1990s due to the increasing wave of globalization,

requirements for increased financial reporting, and rising episodes of corporate failures.

Nigeria’s Public Enterprises are generally corporate entities other than ministerial departments; they

derive their existence from special statutory instruments and engage in business type of activities to
provide goods and services for the cultural, social, and economic upliftment of the citizen. These include

corporations, authorities, In the public sector, corporate governance is described as machinery set up in

corporations or organizations to manage and control their activities in such a way as to ensure that they

fulfil the purposes for which they were established (Badejo-Okusanya, 2011).

The World Bank (1997) noted that bad governance has many features, among which are failure to make

a clear separation between what is public and what is private, hence a tendency to divert public

resources for private gain, failure to establish a predictable framework for law and government behavior

that is conducive to development or arbitrariness rules, regulations, licensing requirements among

others which impede the functioning of markets and encouragement of rent seeking; priorities that are

inconsistent with development, thus resulting in misallocation of resources.

Onah (2006) contends that government intervention in business in any capitalist economy is to

maintain the principle of price competition by promoting entry of enterprises into the industry. Thiswill

eliminate cheating, fraud, monopoly and discrimination. In the case of the mixed economy, government

involvement is based on the idea that most of the essential services the individuals need are costly that

left for them, these individuals could not produce and provide them. Also, it aims at avoiding

unnecessary proliferation of some of these essentials services such as water, electricity supply, and

indiscriminate construction of roads and airports. It also tries to maintain a fair distribution of social

services by collecting from the rich and giving to the poor through taxation, grants and subsides. The

advocates of government participation base their arguments that some goods that are regarded as

public goods such as water supply, electricity supply, and roads should not be left in the hands of the

individuals alone but should be taken care by the government. This gives rise to a welfare state ideology

of the government and the more a state is able to provide to every one of it’s citizens. The minimum

guarantee for material welfare such as medicare, education, housing among others. State welfare is
based on the idea that each individual is a human being and as such is entitled to a fair share of welfare,

his lack of possession of the resources to support and secure it notwithstanding. In Nigeria, the need for

corporate governance came to the fore in the wake of the financial crisis of the early 1990s. Poor

corporate governance was identified as one of the major factors in almost all the known instances of

distress in the financial sector in Nigeria (Ofo, 2013). The onus of corporate governance discussion is

based on the premise that by adopting sound corporate governance practices, business entities will

record superior performance and competiveness (Denis andMcConnell, 2003).

Furthermore, there has been renewed interest in the corporate governance practices of public

corporations as it is suspected that countries with strong corporate governance practices attract capital

inflow. In addition, domestic and international investors are more likely to shy away from countries that

neither guarantee investor rights, nor provide adequate corporate disclosures to ensure sound board

practices (Osaze, 2007; Klynveld, Peat, Marwick and Goerdeler (KPMG) Report, 2010; Ilori, 2012).

These enterprises' (Nigerian Airways Ltd., Nigerian Railway Corporation, Nigerian Coal Corporation,

Ajaokuta Steel Complex, etc.) mismanagement by both foreign and domestic managers is documented,

extending and broadening the corporate profiles. Failures and deficient performance metrics. Poor

performance is described by Adebayo ( 2000: 3-4). Despite having substantial annual budgets, municipal

utilities are "as lifeless as telephones for several days," electricity that fluctuates and is uncertain

throughout months and years, inconsistent postal services and unreliable, with water taps that, no

matter how you crank them, will not drip." They include the due to the country's high levels of

inefficiency, corruption, squalor, poverty public infrastructure, and utilities failing to deliver the desired

goods and services how much. Even when managed by public officers or foreign consultants, the

scorecards of the majority of publicly traded enterprises consistently display poor financial and physical

performance. the selection of unproven local and international consultants’ Records or a lineage of
exceptional achievement caused more harm than good. The Loss of invested funds, associated

advantages, and expectations as a result Stakeholders at the altar of management failure and

ineptitude. These oddities are most likely brought on by reactive corporate governance procedures.

Moreover, the lack of limited the authority and scope of control and the freedom of the organized

interface. Management's performance in carrying out commercial duties could be a significant

element.The final result is that excellent corporate governance continues to lose its advantages and

potential.

In spite of the fact that the Nigerian Public Enterprises were created mainly for the purpose of

expediting and facilitating economic development, the Nigerian Public Enterprises have been and

continued to be criticized for her lack of productivity, efficiency, and transparency. This ill-nature of the

Nigerian Public Enterprises is well captured by the Nigerian Bureau of Public Enterprises: “There is

virtually no public enterprise in Nigeria today that functions well. While they were created to alleviate

the short-time of the private sector and spearhead the development of Nigeria, many of them have

stifled entrepreneurial development and fostered economic stagnation. NITEL, NEPA, and the Nigeria

National Petroleum Corporation (NNPC) is the best examples of these. Public enterprises have serrated

as platforms for patronage and the promotion of political objectives, consequently suffer from

operational interference by civil servants and political appointees which leads to corporate failure.

(Parson, (2012) in Nellis, 2013).

1.2. Statements Of The Problem

The imperative for sound corporate governance was, at early stages, underscored by the need to

safeguard shareholders’ interest, but over time, the scope was extended to include protection of other

important interests in business organizations (Jizi, Salama, Dixon, & Startling, 2014). The shift to
stakeholder emphasis derives from the argument that these other interests are equally threatened

when business organizations are poorly managed. The significance of sound governance practices to

business performance is well established in the literature. For instance, Kolk and Pinske (2010) posit that

strong corporate governance structures boost stakeholder confidence, strongly indicating management

commitment to the efficient and responsible management of business organizations. Good corporate

governance also minimizes exposure to risk for investors and promotes firm performance (Spanos,

2005).

Studies by Bae and Goyal (2010), Monda and Georgino (2013), P. Dua and S. Dua (2015), I. Yang, Yan, Li,

and H. Yang (2012), and Botosan (2006) show that enhanced stock performance correlates strongly with

improvements in corporate governance practices.

Ojeka, Iyoha, Ikpefan, and Osakwe (2017) estimated the relationship between governance and stock

market behavior in Nigeria and discover the robust positive effect of independent audit committee,

financial expertise of audit committee, and board independence on stock price, volume traded, earnings

per share, and market capitalization.

The work of Uwuigbe (2011) presents a negative correlation between bank profitability and board size,

while directors’ interest and degree of corporate disclosure correlate positively with financial

performance. It further shows a marked difference between healthy banks’ performance and rescued

banks but did not substantiate that the performance of banks whose boards are comation between

board size and business reputation but shows that board size correlates negatively with financial

performance.

However, studies by Belkhir (2009) and Ene and Bello (2016) discover the significant positive effect of

board size on bank performance. Besides, Ene and Bello (2016) report that the number of non-executive

directors positively correlates with financial performance .

Therefore, in light of the aforementioned statements, this study is conducted to know whether a

different result will be obtained compared to previous researches on corporate governance but using

selected public enterprises as a case study in Nigeria. This indicates that it is deemed necessary to

specifically examine the the impact of corporate governance on the performance of selected public

enterprises in Nigeria.

1.3. Objective Of The Study.

The broad objective of this study is to examine the corporate governance and performance of

selected public enterprises in Nigeria. The specific objectives are to:

Determine the compliance level to corporate governance practice among selectmedia organisations in

Nigeria.

2. Find out the implication of corporate governance practice on the day-to-day running of the select media

organisations in Nigeria.

3. Ascertain the contributions of corporate governance to the growth and sustainability of the select

media organisations in Nigeria.

1.4 Research Question.

1. How does the independence of the board of directors affects the performance of the selected public

enterprises in Nigeria?

2. Does the qualifications and biographical information of board members impact the performance of

the selected public enterprises in Nigeria?

3. What is the influence of check and balances mechanisms on the performance of the selected public

enterprises in Nigeria.

4. Is there any relationship between the internal control system and the performance of the

selected public enterprises in Nigeria?

 1.5 Research Hypotheses

Hypothesis one

Ho: The independence of the board of directors does not affect the performance of the selected public

enterprises in Nigeria.

H1: The independence of the board of directors affects the performance of the selected public

enterprises in Nigeria.

Hypothesis Two:

Ho: Qualifications and biographical information on board members does not impact the performance of

the selected public enterprises in Nigeria.

H1: Qualifications and biographical information on board members impact the performance of the

selected public enterprises in Nigeria.

Hypothesis Three:

Ho: check and balances mechanisms for do not influence the performance of the selected public

enterprises in Nigeria.

H1: check and balances mechanisms influence the performance of the selected public eenterprises in

Nigeria.

Hypothesis Four:

Ho: Internal control systems do not influence the performance of the selected public enterprises in

Nigeria.

H1: Internal control system influences the performance of the selected public enterprises in Nigeria.
1.6 Significance Of The Study.

Several studies have been conducted on corporate governance and the performance of organizations

either collectively or individually on different research topics in different years.

This study appears to be the first, to the best of the researcher’s knowledge, to consider corporate

governance and the performance of public enterprises in Nigeria. Thus, the study will fill an important

void currently existing in the literature in respect of corporate governance practices in the Public

enterprises in Nigeria. Some similar research topics are: Impact of Corporate Governance on the

Performance of Selected Banks in Nigeria (2021), Reforming public Enterprises in Nigeria. Through

Good Governance (2019), THE IMPACT OF CORPORATE GOVERNANCE IN FINANCIAL REPORTING

QUALITY( 2022),CORPORATE GOVERNANCE AND FRAUD MANAGEMENT OF QUOTED COMMERCIAL

BANKS IN NIGERIA(2022),CORPORATE GOVERNANCE ANDPERFORMANCE OF QUOTED DEPOSIT MONEY

BANKS IN NIGERIA USING BALANCED SCORECARD APPROACH(2021),CORPORATE GOVERNANCE

ACCOUNTABILITY AND COSTOF EQUITY CAPITAL: EVIDENCE FROM NIGERIA QUOTED COMPANIES(March

2022),CORPORATE GOVERNANCE AND INTEGRATED REPORTING: EVIDENCE FROM SELECTED LISTED

COMPANIES IN NIGERIA(2021), CORPORATE GOVERNANCE AND CORPORATE SOCIAL RESPONSIBILITY:

MODERATING ROLES OF FIRM SIZE IN NIGERIA(2020),CORPORATE GOVERNANCE AND CASH HOLDING IN

NIGERIAN LISTED COMPANIES(Mar. 2021),Effects of Corporate Governance on Financial Performance of

Commercial Banks in Nigeria (March 2021),Corporate governance and firm’s financial performance

amongst private business enterprises in Uganda, a perspective from Lira City( September,

2021),CORPORATE GOVERNANCE IN NIGERIA: AN EVALUATION OF THE ROLE OF SHAREHOLDERS AND

THE BOARD OF DIRECTORS(2021),CORPORATE GOVERNANCE AND ORGANISATIONAL PERFORMANCE OF

LAPO MICROFINANCE BANK IN NIGERIA( June 2022)Corporate governance reform in Nigeria:upstream

and downstream interventions (2021),Implications of Corporate Governance Practice on the Growth and
Sustainability of Media Organisations in Nigeria (March, 2022),Effects of Corporate Governance on the

Productivity of Quoted Agricultural Firms in Nigeria International Journal of Business & Law Research

(2022),Corporate Governance Mechanisms and the Practice of Sustainability Activities in Nigeria Asian

Research Journal of Arts & Social Sciences(2022),Corporate Governance and Organisational Performance

in Nigerian Banking Industry(Mar-Apr -2022),Impact of Corporate Governance on the Development of

Ethiope West LGA in Delta State,Nigeria.(June, 2022),CORPORATE GOVERNANCE TRAITS AND

CORPORATE RISK REPORTING OF LISTED NIGERIAN FINANCIAL SERVICES FIRMS,Business Excellence and

Management(2021) and many more.

The results of this study, however, are not intended to refute previously published related research

works; rather, they are intended to be of significant importance to Nigerian public enterprises by

bolstering their arguments and corroborated previously published literature on corporate governance

in Nigeria, which will be used as a guide for future research.

The findings of this study will help the management, Board of Directors, shareholders, government and

other stakeholders whether or not corporate governance has impact in determining the performance of

public enterprises in Nigeria. The researcher intend to measure and analyse the trend in the corporate

governance of public enterprises in Nigerian in relation to their performance.

1.7 Scope Of The Study.

The focus of this study is to examine cooperate governance and performance of selected public

enterprises in Nigeria. The selected public corporations include the following:

 Nigeria National petroleum Corporation (NNPC)

 Nigeria Port Authority (NPA)

 Power Holding Company Of Nigeria (PHCN)

 National Bureau of statistics.(NBS)

 National University corporation ( NUC)

The study is limited to selected corporations in Lagos being the case study under examination being

the case study under examination. The organizations are diverse in nature. The extent to which the

study will meet the issue raised in the previous section can be curtailed by the realities of data

available in Nigeria. Corporate governance is a sensitive issue a it focus a on the corporations

observance of rules of ethics and social responsibility etc. Therefore, fthe indings of this report will

be affected by the quality and reliability of data.

1.8 Definition Of Terms.

Corporate governance: This involves a set of relationships between a company’s management, its

board, its shareholders and other stakeholders.

public enterprise : a business organization wholly or partly owned by the state and controlled

through a public authority.

Shareholder:  shareholder is any person, company, or institution that owns shares in a

company's stock. A company shareholder can hold as little as one share. Shareholders are

subject to capital gains (or losses) and/or dividend payments as residual claimants on a firm's

profits.

Government:  government is the system to govern a state or community.

Sarbanes-Oxley: The Sarbanes-Oxley Act of 2002 is a federal law that established sweeping

auditing and financial regulations for public companies. 

 Board of directors:  board of directors (B of D) is the governing body of a company, elected by

shareholders in the case of public companies to set strategy and oversee management. 

Performance: the action or process of performing a task or function.

Conflict of interest: a situation in which the concerns or aims of two different parties are

incompatible.