The effect of corporate governance characteristics and oil-price shocks on bank asset quality in Nigeria

• Main Author: Karaye, Abubakar Ibrahim
• Format: Thesis
• Language: English; English; English
• Published: 2023
• Subjects: HD2709-2930.7 Corporations; HG Finance
• Online Access: https://etd.uum.edu.my/10946/1/permission%20to%20deposit-embargo%2024%20months-s900266.pdf; https://etd.uum.edu.my/10946/2/s900266_01.pdf; https://etd.uum.edu.my/10946/3/s900266_02.pdf; https://etd.uum.edu.my/10946/
• Institution: Universiti Utara Malaysia

Non-performing loan (NPL), one of the common phenomena prevalent in the banking industry, may result in a decline in banks’ assets quality (BAQ). As most literature has centred on external factors (macro-economic and bank-specific effects) affecting BAQ, little attention was given on bank’s corporate governance (CG) mechanism. Therefore, this study investigated CG variables and oil-price shocks that affect BAQ in Nigeria. Agency, resource dependence, and upper echelon theories were applied as underpinning theories. A panel data set of 21 commercial banks spanning 2003-2018 was used for data analysis using the dynamic panel regression technique (Generalized Method of Moment). The results showed a negative association between board of directors (BODs) human/social capital and NPL, inferring that the proportion of highly educated and experienced directors as well as directors with social connections improves BAQ. In addition, a negative association exists between the proportion of female/foreign BODs and NPL, indicating that director’s gender and nationality affect BAQ. Likewise, a negative association exists between the proportion of independent directors on BODs committees (risk, audit, and credit) and NPL. Further results showed that oil price shocks have a negative effect on NPL, implying that an increase in oil price shocks improves BAQ. These findings imply that quality loans for banks are influenced by CG factors and oil price shocks. This study recommends that, banks should pay more attention to the quality of directors appointed to the board. In addition, governments should promote sound economic policies and good governance, to safeguard the adverse effect of oil prices shocks on BAQ. The study advances our understanding of how the underpinning theories can account for BAQ.