Imperative of corporate governance on industry's profitability: An empirical study of privatized cement industry in Nigeria
PDF

Keywords

Corporate governance
Profitability
Privatization
Cement industry

How to Cite

GOMBE, B. M., & ALIERO, I. H. (2021). Imperative of corporate governance on industry’s profitability: An empirical study of privatized cement industry in Nigeria. Turkish Economic Review, 8(2), 45–64. https://doi.org/10.1453/ter.v8i2.2213

Abstract

Abstract. The study investigates the imperative of corporate governance on profitability of privatized cement industry in Nigeria. The variables studied were Rate of Returns as dependent variables and fourteen Corporate Governance proxies as independent variables. Data was collected from secondary sources, and the statistical tools employed in the Methodology were descriptive statistics and Pooled OLS regressions. The study aimed at bridging literature gap on studies that relate corporate governance and privatization policy in Nigeria. The results suggest that, no remarkable improvement of profitability post privatization due to challenges of exogenous factors such as macroeconomic environment instability and weak private sector. The industry witnessed changes in corporate governance such as adopting effective cost management and proactive business strategies, exposure to competition, withdrawal of Government subsidy and special grant post privatisation. Board Size and Workforce have positive and significant impact on Cement industry’s profitability, while, State Ownership, Institutional Ownership, Minority ownership, Percentage of Executive Directors and Privatization with time have negative and significant impact on company’s profitability. Conversely, Foreign Investors, Percentage of Non-Executive Directors and Percentage of Management Staff have positive and insignificant impact on the Cement industry’s profitability. Thus, it will be pertinent to conclude that the result has accepted Alternative Hypothesis that corporate governance has significant impact on the Cement industry’s performance (AROA), despite the challenges of microeconomic environment instability. The study recommends that, Government needs to stabilize macroeconomic environment and strengthen private sector. The Cement Industry needs to ensure right procedure of the selection of Non-Executive Directors, create incentive for foreign investor participation, ensure Payment of dividend, less government interference and accountability. Mechanisms such as efficient and independent audit committee, competent executive directors and professional management team need to be put in place to address the negative and insignificant impact of management staff on the industry.

Keywords. Corporate governance, Profitability, Privatization, Cement industry.

JEL. C01, C50, E10, E60, F02, F30, F41.
https://doi.org/10.1453/ter.v8i2.2213
PDF

References

Agbaeze, E.K., & Ogosi, C.D. (2018). Corporate governance and profitability of Nigerian Banks, European Journal of Scientific Research, 148(3), 358-367.

Allen, F. & Gale, D. (2002). A Comparative Theory of Corporate Governance, Springer.

Aljifri, K. & Moustafa, M. (2007). The impact of corporate hovermance mechanism on the performance of UAE firms; An empirical analysis, Jornal of Economics and Administrative Science, 23(2), 71-93. doi. 10.1108/10264116200700008

Ainworth, P., Danies, D., Plumlee, R.D., & Larson, C.X. (1997). Introduction to Accounting, An Integrated Approach, II.

Arocena, P. (2001). The reform of the utilities sector in Spain. Wider Discussion Paper, No.2001/13. [Retrieved from].

Bappayo, M.G. (2015). Analysis of the impact of corporate governance on the performance of privatized cement companies in Nigeria, Ph.D Thesis, Usmanu Danfodio University Sokoto, Nigeria.

Barja, G., Mckenzie, D., & Urquiola, M. (2002). Capilization and privatistion in Bolivia, Cornel University, Ithaca, New York US.

Boubakri, N., & Cosset, J.C. (1999). Does privatisation meet the expectations? Evidence from African countries, African Economic Research Consortium, Biannual Research Workshop, Nairobi, Kenya, 4-6 December.

Cease, R.H. (1937). The nature of the firm, Economica, 4(16), 386-405. doi. 10.1111/j.1468-0335.1937.tb00002.x

Coleman, A.K. (2007). Corporate governance and firm performance in Africa: A dynamic panel data analysis. Studies in Economis and Econometrics, 32(2), 1-24. doi. 10.1080/10800379.2008.12106447

Delfino, J.A., & Casari, A.A. (2001). The reform of the utilities sector in Agentina, Winder Discussion Paper, No.2001/17.

Dhamija, A.K. (2010). The impact of corporate governance as financial performance: A study of Nigerian companies. Minor Project Report Department of Management Studies. Indian Institute of Technology Delhi.

D’Souza, J., Megginson, W.L., & Nash, R. (2006). The effects of changes in corporate governance and restructuring on operating performance: Evidence from privatisations. Prince College of Business, University of Oklahoma.

Donaldson, T., & Lorsh, P.E. (1995). The stakeholders theory of the corporate: Concept, evidence and implication, Academy of Management Review, 20(1), 65-91. doi. 10.2307/258887

Dyck, A. (2001). Privatisation and corporate governance: Principle, Evidence and Future Challenges, The World Bank Challenge.

Elham M.H.Y. (2016). The impact of corporate governance on the profitability of the listed companies in Jordan over the period from 2010 to 2014. European Journal of Business and Management, 8(23), 143-163.

Eissa, A. Al-Homaidi, F., Almaqtari, A., Ahmad, A., & Mosab, I.T. (2019). Impact of corporate governance on financial performance of hotels companies: Empirical evidence from india. African Journal of Hospitality, Tourism and Leisure, 8(2), 1-21.

Fodio, I.M. (2006). The impact of corporate governance on the performance and value of banks in Nigeria. Journal of Research and Development in Africa, 4(1), 145-162.

Greanias, C.G., Windsor, D., & Jones, J.H. (1982). The Changing Boardroom: Making Policy and Profits in an Age of Corporate Citizenship. Gulf Publishing Company Houston London.

Hachette, D., & Luder, R. (1993). Privatization in Chile: An Economic Appraisal. California; ISC Press.

Harward, A., & Upto, B. (1961). Introduction to Business Finance, Mc Graw Hill, New York.

Ibrahim, J.B., Mahmud, H.Q., & Khalif, S.T. (2007). The effect of privatization on the efficiency of financial performance of state owned enterprises: A case study of the Jordanian cement factories company, Centre for Management Buyout Research Nottigham University.

Iqbal, Z., & Mirakhor, A. (2004). Stakeholders model of governance in Islamic economic system. Islamic Economic Studies, 11(2), 43-63.

McKinnon, R.I., & Shaw, R. (1973). Money and Capital in Economic Development, Washington DC: Brooking Institute.

Megginson, W.L., Nash, R.C., Netter, J.M., & Annette B.P. (2002). The choice of private versus public capital markets: Evidence from privatisations, The Journal of Finance, 59(6), 2835-2870.

Ndama, A. (2010). Corporate governance and firm performance in Nigeria. Abuja Journal of Banking and Finance, 1(1), 53-75.

Nellis, J. (2003). Privatisation in Africa: What has happened? What is to be done?, Centre for Global Development, Working Paper, No.25.

Ogabo, A.M., Agba, M.S., Ushie, E.M., & Festus, N. (2010). Privatisation, job security and performance efficiency of privatized enterprises in Nigeria critical reassessment. Journal of Art Science and Commerce, 1(1), 95-102.

Okeahalam, C.C., & Akinbode, O.A. (2003). A review of corporate governance in Africa: Literature issues and challenges. Global Corporate Governance Forum, 15th June.

La Porta, R., Lopez-de-Silanes, F., Shleifer, A., & Vishny, R.W. (2002). Incentives or reward, Advances a – financial, 2(4), 119-149.

Paredes, R. (2001). Redistributive impact of privatisation and the regulation of utilities in Chile. Wider Discussion Paper, No.2001/19.

Salacuse, J., & Braker, H.J. (2002). Corporate governance in the Unece Region, UN Discussion Paper, No.2002.2. [Retrieved from].

Sternbeg, E. (1996). Stakeholders theory exposed: Corporate governance, Quarterly Honkong Institute of Company Secretaries, 2(1), 4-18. doi. 10.1111/j.1468-0270.1996.tb00539.x

Turball, S. (1997). Corporate governance: Its scope, concern, and theories. Journal of Economic Literature, 5(4), 180-205.

Yameen, M.F., & Tobash, M.J. (2019). Impact of corporate governance on firm performance: Empirical evidence from Indian towerism sector, Journal of Internal Studies, 12(1), 208-228. doi. 101254/2071-8330-2019

Will K. (2019). Profitability Ratios Definition, Investopedia

Creative Commons License
This article licensed under Creative Commons Attribution-NonCommercial license (4.0)

Downloads

Download data is not yet available.