Skip to main content
SpringerLink
Log in

Corporate Governance in the Nigerian Banking Sector: A Bounded Rationality Conundrum

  • Chapter
  • First Online:
Corporate Governance in Banking and Investor Protection

Part of the book series: CSR, Sustainability, Ethics & Governance ((CSEG))

Abstract

The consequences of the global financial crisis of 2007 emphasised the centrality of the banking system to not only economic sustainability, but also the contributions of a robust corporate governance mechanism to the establishment of an efficient banking system. This development provoked a reaction by policy makers across varieties of capitalism including Nigeria. As Africa’s largest economy, Nigeria embarked on a recapitalisation and consolidation exercise in its banking industry following reported widespread structural and operational deficiencies. Despite this intervention, the sector continues to experience a variety of challenges, much of which relates to weaknesses in its poor corporate governance. Whereas the extant literature has examined these problems, this chapter seeks to broaden the literature by exploring corporate governance in the Nigerian banking system from a bounded rationality concept perspective. In doing this, this chapter undertakes a review of corporate governance in the Nigerian banking system, examines the rationality concerns influencing corporate governance practices amongst Nigerian banks, and shows that attempts at addressing corporate governance issues must acknowledge that corporate governance is an information-based mechanism.

This is a preview of subscription content, log in via an institution to check access.

Access this chapter

Log in via an institution

Institutional subscriptions

Similar content being viewed by others

References

  • Acharya, V., Philippon, T., Richardson, M., & Roubini, N. (2009). The financial crisis of 2007–2009: Causes and remedies. Financial Markets, Institutions and Instruments, 18(2), 89–137.

    Article  Google Scholar 

  • Adegbite, E., & Nakajima, C. (2011). Corporate governance and responsibility in Nigeria. International journal of Disclosure and Governance, 8(3) 252–271.

    Article  Google Scholar 

  • Adegbite, E., Amaeshi, K., & Amao, O. (2012). The politics of shareholder activism in Nigeria. Journal of Business Ethics, 105(3), 389–402.

    Article  Google Scholar 

  • Adegbite, E., Amaeshi, K., & Nakajima, C. (2013). Multiple influences on corporate governance practice in Nigeria: Agents, strategies and implications. International Business Review, 22(3), 524–538.

    Article  Google Scholar 

  • Adeusi, S. O., & Oke, M. O. (2013). Impact of bank consolidation on Nigeria economy growth. International Journal of Innovative Research and Development, 2(5), 1196–1212.

    Google Scholar 

  • Adeyemi, B., & Olowu, A. O. (2013). Corporate governance: Has the Nigerian banking sector learnt any lesson? International Journal of Business and Social Research, 3(2), 49–59.

    Google Scholar 

  • Afolabi, A., & Amupitan, M. D. (2015). Corporate governance in the Nigerian banking sector: Issues and challenges. European Journal of Accounting Auditing and Finance Research, 3(5), 64–89.

    Google Scholar 

  • Aidt, T. S. (2003). Economic analysis of corruption: A survey. The Economic Journal, 113(491), F632–F652.

    Article  Google Scholar 

  • Ailemen, I. A. (2012). Issues in banking and finance. Lagos: The Chartered Institute of Bankers of Nigeria.

    Google Scholar 

  • Akindele, S. T. (2005). A critical analysis of corruption and its problems in Nigeria. Anthropologist, 7(1), 7–18.

    Article  Google Scholar 

  • Akpan-Obong, P. I. (2009). Information and communication technologies in Nigeria: Prospects and challenges for development. New York: Peter Lang.

    Google Scholar 

  • Alajekwu, U. B., & Obialor, M. C. (2014). Nigerian bank recapitalisation reforms: Effect on the banks and the economy (2000–2012). International Journal of Managerial Studies and Research (IJMSR), 2(2), 48–56.

    Google Scholar 

  • Allen, F., Carletti, E., & Gu, X. (2015). The roles of banks in financial systems. In A. N. Berger, P. Molyneux, & J. O. Wilson (Eds.), The oxford handbook of banking (2nd ed.). Oxford: Oxford University Press.

    Google Scholar 

  • Arjoon, S. (2006). Striking a balance between rules and principles-based approaches for effective governance: A risks-based approach. Journal of Business Ethics, 68(1), 53–82.

    Article  Google Scholar 

  • Armstrong, C. S., Guay, W. R., & Weber, J. P. (2010). The role of information and financial reporting in corporate governance and debt contracting. Journal of Accounting and Economics, 50(2), 179–234.

    Article  Google Scholar 

  • Ashamu, S., & Abiola, J. (2012). The impact of global financial crisis on banking sector in Nigeria. British Journal of Arts and Social Sciences, 4(2), 251–257.

    Google Scholar 

  • Ball, R., Robin, A., & Wu, J. S. (2003). Incentives versus standards: Properties of accounting income in four East Asian countries. Journal of Accounting and Economics, 36(1), 235–270.

    Article  Google Scholar 

  • Bonorchis, R. (2016). Nigerian banking industry seen in ‘full-blown’ credit crisis. Bloomberg. Retrieved February 20, 2017, from https://www.bloombergquint.com/business/2016/10/10/nigerian-banking-industry-seen-in-full-blown-financial-crisis

  • Cai, C. X., Keasey, K., & Short, H. (2006). Corporate governance and information efficiency in security markets. European Financial Management, 12(5), 763–787.

    Article  Google Scholar 

  • Cai, J., Liu, Y., Qian, Y., & Yu, M. (2015). Information asymmetry and corporate governance. The Quarterly Journal of Finance, 5(3), 1550014.

    Article  Google Scholar 

  • Caron, M. I., Ficici, A., & Richter, C. L. (2012). The influence of corruption on corporate governance standards: Shared characteristics of rapidly developing economies. Emerging Markets Journal, 2(1), 21–37.

    Article  Google Scholar 

  • Case, D. O. (2012). Looking for information: A survey of research on information seeking, needs and behavior. Bingley: Emerald Group.

    Google Scholar 

  • Conyon, M., Judge, W. Q., & Useem, M. (2011). Corporate governance and the 2008–09 financial crisis. Corporate Governance: An International Review, 19(5), 399–404.

    Article  Google Scholar 

  • Crotty, J. (2009). Structural causes of the global financial crisis: A critical assessment of the ‘new financial architecture’. Cambridge Journal of Economics, 33(4), 563–580.

    Article  Google Scholar 

  • Crouhy, M. G., Jarrow, R. A., & Turnbull, S. M. (2008). The subprime credit crisis of 2007. The Journal of Derivatives, 16(1), 81–110.

    Article  Google Scholar 

  • Daodu, O., Nakpodia, F., & Adegbite, E. (2017). Institutional perspectives on corporate governance reforms in Nigeria. In F. Ngwu, O. Osuji, & F. Stephen (Eds.), Corporate governance in developing and emerging markets. London: Routledge.

    Google Scholar 

  • Edem, E., Mbaba, U. G., Udosen, A., & Isioma, E. P. (2011). Literacy in primary and secondary education in Nigeria. Journal of Languages and Culture, 2(2), 15–19.

    Google Scholar 

  • Egbulonu, K. G., & Okonkwo, O. N. (2015). A critical review of the effect of the global financial melt-down on the Nigerian banking sector. Research on Humanities and Social Sciences, 5(2), 109–117.

    Google Scholar 

  • Ehimare, O. A., Taiwo, N. J., & Uche, O. (2013). The role of corporate governance in the growth of Nigerian banks. Journal of Business Law and Ethics, 1(1), 44–56.

    Google Scholar 

  • Erkens, D. H., Hung, M., & Matos, P. (2012). Corporate governance in the 2007–2008 financial crisis: Evidence from financial institutions worldwide. Journal of Corporate Finance, 18(2), 389–411.

    Article  Google Scholar 

  • Garuba, A. O., & Otomewo, G. O. (2015). Corporate governance in the Nigerian banking industry: Issues and challenges. African Research Review: An International Multidisciplinary Journal, 9(2), 104–117.

    Article  Google Scholar 

  • Greenwald, B. C., & Stiglitz, J. E. (1986). Externalities in economies with imperfect information and incomplete markets. The Quarterly Journal of Economics, 101(2), 229–264.

    Article  Google Scholar 

  • Hermalin, B. E., & Weisbach, M. S. (2012). Information disclosure and corporate governance. The Journal of Finance, 67(1), 195–233.

    Article  Google Scholar 

  • Hodgson, G. M. (2006). What are Institutions?. Journal of Economic Issues, 40(1), 1–25.

    Article  Google Scholar 

  • Isukul, A. C., & Chizea, J. J. (2016). A comparative analysis of corporate governance disclosure in Nigerian and South African Banks. Asian Journal of Economics, Business and Accounting, 1(3), 1–15.

    Article  Google Scholar 

  • Jain, A. K. (2001). Corruption: A review. Journal of Economic Surveys, 15(1), 71–121.

    Article  Google Scholar 

  • Keatinge, T. (2016). Banking sector collaboration is needed to tackle Nigerian corruption. RUSI Newsbrief, 36(6), 26–28.

    Google Scholar 

  • Kirkpatrick, G. (2009). Corporate governance lessons from the financial crisis financial market trends (Vol. 1). Paris: OECD.

    Google Scholar 

  • La Porta, R., Lopez-de-Silanes, F., & Shleifer, A. (2002). Government ownership of banks. The Journal of Finance, 57(1), 265–301.

    Article  Google Scholar 

  • Lawal, G. (2007). Corruption and development in Africa: Challenges for political and economic change. Humanity and Social Sciences Journal, 2(1), 1–7.

    Google Scholar 

  • Levine, R. (1997). Financial development and economic growth: Views and agenda. Journal of Economic Literature, 35, 688–726.

    Google Scholar 

  • Levine, R. (2004). The corporate governance of banks: A concise discussion of concepts and evidence (Vol. 3404). Washington, DC: World Bank Publications.

    Book  Google Scholar 

  • Mayer, C. (1990). Financial systems, corporate finance, and economic development. In R. G. Hubbard (Ed.), Asymmetric information, corporate finance, and investment (pp. 307–332). Chicago: University of Chicago Press.

    Google Scholar 

  • Nakpodia, F., Adegbite, E., Amaeshi, K., & Owolabi, A. (2016). Neither principles nor rules: Making corporate governance work in Sub-Saharan Africa. Journal of Business Ethics. doi: https://doi.org/10.1007/s10551-016-3208-5

  • Ngwube, A., & Ogbuagu, M. (2014). Global financial crisis and Nigeria economy. Global Journal of Management and Business Research, 14(4), 24–30.

    Google Scholar 

  • Nmehielle, V., & Nwauche, E. (2004). External-internal standards in corporate governance in Nigeria. Paper presented at the Corporate Governance and Accountability in Sub-Saharan Africa, George Washington University Law School.

    Google Scholar 

  • Nwankwo, O. (2013). Impact of pre and post bank consolidation on the growth of Nigeria economy. International Journal of Business and Management, 8(13), 73–82.

    Google Scholar 

  • Odeleye, A. T. (2014). Pre-consolidation and post-consolidation of Nigerian banking sector: A dynamic comparison. International Journal of Economics and Financial Issues, 4(1), 27–34.

    Google Scholar 

  • Ogun, O., & Ofonyelu, C. (2012). Determinant of asymmetric risks in Nigerian loan market: Any dichotomy between the banks and borrowers’ perspectives? African Journal of Economic Policy, 19(2), 27–40.

    Google Scholar 

  • Okafor, E. E. (2009). Post-consolidation challenges and strategies for managing employees’ resistance to change in the banking sector in Nigeria. Journal of Social Sciences, 19(2), 129–139.

    Article  Google Scholar 

  • Okafor, E. E. (2013). Reforms in the Nigerian banking sector and strategies for managing human resource challenges. European Journal of Business and Management, 5(18), 127–137.

    Google Scholar 

  • Okaro, S. C., & Tauringana, V. (2012). From SAS to IFRS: An investigation of Nigeria transition road map implementation problems. In V. Tauringana & M. Mangena (Eds.), Accounting in Africa (research in accounting in emerging economies) (Vol. 12, pp. 155–176). Bingley: Emerald Publishing.

    Google Scholar 

  • Okike, E. (2007). Corporate governance in Nigeria: The status quo. Corporate Governance: An International Review, 15(2), 173–193.

    Article  Google Scholar 

  • Okike, E., Adegbite, E. A., Nakpodia, F. A., & Adegbite, S. (2015). A review of internal and external influences on corporate governance and financial accountability in Nigeria. International Journal of Business Governance and Ethics, 10(2), 165–185.

    Article  Google Scholar 

  • Okpara, G. C. (2010). Asymmetric information and dividend policy in emerging markets: Empirical evidence from Nigeria. International Journal of Economics and Finance, 2(4), 212–220.

    Article  Google Scholar 

  • Oluduro, O. F. (2015). History and evolution of banking in Nigeria. Academia Arena, 7(1), 9–14.

    Google Scholar 

  • Osemeke, L., & Adegbite, E. (2016). Regulatory multiplicity and conflict: Towards a combined code on corporate governance in Nigeria. Journal of Business Ethics, 133(3), 431–451.

    Article  Google Scholar 

  • Pandey, I. M. (2015). Financial management (11th ed.). Ahmedabad: Vikas.

    Google Scholar 

  • Sanchez-Pages, S. (2009). Bargaining and conflict with incomplete information. In M. R. Garfinkel & S. Skaperdas (Eds.), The Oxford handbook of the economics of peace and conflict. Oxford: Oxford University Press.

    Google Scholar 

  • Sanusi, L. (2010). The Nigerian banking industry – what went wrong and the way forward. Paper presented at the lecture delivered to mark the Annual convocation ceremony of Bayero University, Kano, Nigeria.

    Google Scholar 

  • Sharfman, B. S. (2014). Shareholder wealth maximization and its implementation under corporate law. Florida Law Review, 66(1), 389–431.

    Google Scholar 

  • Simon, H. A. (1972). Theories of bounded rationality. Decision and Organization, 1(1), 161–176.

    Google Scholar 

  • Soludo, C. C. (2004). Consolidating the Nigerian banking industry to meet the development challenges of the 21st century. Paper presented at the Special Meeting of Bankers’ Committee, Central Bank of Nigeria, Abuja, Nigeria.

    Google Scholar 

  • Soludo, C. C. (2009). Banking in Nigeria at a time of global financial crisis. Paper presented at the Special interactive session on the banking system, Lagos, Nigeria.

    Google Scholar 

  • Soyibo, A., & Adekanye, F. (1992). The Nigerian banking system in the context of policies of financial regulation and deregulation (Vol. Research Paper Seventeen). Nairobi: African Economic Research Consortium.

    Google Scholar 

  • Uche, C. U. (1999). Foreign banks, Africans, and credit in colonial Nigeria, c. 1890–1912. The Economic History Review, 52(4), 669–691.

    Article  Google Scholar 

  • Ugoani, J. N. (2013). Power of bank credit on economic growth: A Nigerian perspective. International Journal of Financial Economics, 1(3), 93–102.

    Google Scholar 

  • Umanhonlen, O. F., & Lawani, I. R. (2015). Effect of global financial meltdown on the Nigerian banking industry and economy. Management, 5(3), 63–89.

    Google Scholar 

Download references

Author information

Authors and Affiliations

  1. Newcastle Business School, Northumbria University, Newcastle, UK

    Franklin Nakpodia

Authors
  1. Franklin Nakpodia
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Franklin Nakpodia .

Editor information

Editors and Affiliations

  1. Department of Business Administration, University of Cantabria, Santander, Spain

    Belén Díaz Díaz

  2. Guildhall Faculty of Business and Law, London Metropolitan University, London, United Kingdom

    Samuel O. Idowu

  3. College of Business Administration, University of Sharjah, Sharjah, United Arab Emirates

    Philip Molyneux

Rights and permissions

Reprints and permissions

Copyright information

© 2018 Springer International Publishing AG

About this chapter

Check for updates. Verify currency and authenticity via CrossMark

Cite this chapter

Nakpodia, F. (2018). Corporate Governance in the Nigerian Banking Sector: A Bounded Rationality Conundrum. In: Díaz Díaz, B., Idowu, S., Molyneux, P. (eds) Corporate Governance in Banking and Investor Protection. CSR, Sustainability, Ethics & Governance. Springer, Cham. https://doi.org/10.1007/978-3-319-70007-6_13

Download citation

Publish with us

Policies and ethics

Search

Navigation