Empirical Analysis of Corporate Governance, Financial Performance, and Microfinance Banks' Sustainability in Nigeria

Abstract

This paper empirically analyzed the relationship among corporate governance, financial performance, and microfinance banks' sustainability in Nigeria. The data for the study were collected from 133 respondents, who were selected from ten (10) licensed microfinance banks in Lagos state. Descriptive statistics and regression analysis were employed to analyze the relationship that exists among corporate governance, financial performance, and microfinance sustainability. The study found that board size (BS) and Bank size (MFBS) have a statistically significant positive impact on Return on Asset (ROA). It shows that a 1 percent point increase in Board size and Microfinance Bank size (MFBS) will increase Return on Asset (ROA) by 0.081 and 0.28 percent, respectively. The study also established that corporate governance is a major determinant of the financial performance of MFBs. This result further reflects that a coefficient value of 0.94 that exists between board size (BS) and equity (EQ) implies that corporate governance (BS) influences the financial performance (EQ) of MFBs. The study concludes that corporate governance and financial performance are effective tools for ensuring the survival and sustainability of MFBs. Therefore, the study recommends that microfinance banks (MFBs) should be more concerned about:

• The composition of the board of directors and
• Raising more equity for the stability and sustainability of microfinance institutions