Corporate Governance Mechanisms, Managerial Ability and Financial Performance in the Nigerian Banking Industry

Kuagbogho Fejiro Theresa

doi:10.56201/jafm.vol.12.no9.2026.p59.69

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Corporate Governance Mechanisms, Managerial Ability and Financial Performance in the Nigerian Banking Industry

Kuagbogho Fejiro Theresa

Abstract

Good corporate governance has become a vital ingredient for financial stability in the banking industry, especially in developing economies where weak institutional structures often undermine performance. This study examined how corporate governance mechanisms shape the financial performance of Nigerian deposit money banks, with particular attention to the mediating role of managerial ability. The specific objectives were to analyse the effect of corporate governance mechanisms on financial performance; to investigate how corporate governance influences managerial ability, and to assess the effect of managerial ability on financial performance. The study adopted a quantitative, explanatory design, using panel data from twelve purposively sampled Nigerian deposit money banks listed on the Nigerian Exchange, covering 2012–2023 (144 bank-year observations). Corporate governance was proxied by board size, expertise, gender diversity, independence and audit committee size; managerial ability was estimated via stochastic frontier analysis (Demerjian et al., 2012); and financial performance was measured with return on equity . Panel regression (pooled OLS, fixed and random effects, selected via Breusch–Pagan LM and Hausman tests) was employed, controlling for bank size and leverage. Findings show that, individually, governance mechanisms had no statistically significant direct effect on financial performance or managerial ability. Managerial ability, however, had a positive and highly significant effect on financial performance, confirming its mediating role. The study concludes that governance structures alone cannot guarantee profitability unless backed by competent managers and recommends that banks and regulators move beyond compliance-based governance toward board engagement quality and leadership development.

Keywords

corporate governancemanagerial abilityfinancial performancedeposit money bankspanel dataNigeria

References

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Corporate Governance Mechanisms, Managerial Ability and Financial Performance in the Nigerian Banking Industry

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