CHAPTER ONE
INTRODUCTION
BACKGROUND OF THE STUDY
Corporate
governance has become a global concern because of the rising frequency and
widespread pattern of deliberate accounting deceits and frauds, as well as
growing number of consequent corporate failures. Companies break the most basic
rules of accounting, the worst being rebooking income that was earn and had earlier
been taken to profit. The corporate failures that followed the discoveries were
unprecedented magnitude of such unimaginable, unethical and outright
unprofessional conduct that warranted public outcry and disbelief. The essence
of good corporate governance is to bring companies to respect the rule of law,
play by the rules guiding their business and hold ethics and professionalism in
the highest esteem. Emanating from these would be a high sense of social
responsibility. These boil down to the quality and reliability of accounting
and other information that companies make available to their shareholders.
Following good corporate governance closely in the growth and corporate
performance matrix is transparency and accountability. They are at times treated
as components of corporate governance. Accountability arises from the agency
theory that recognizes the management of business organization on one hand and
the shareholders on the other hand. A perfect system of corporate governance
would give the right incentives to make value maximizing investment and
financial decisions and would assure that cash is paid out to investors when
the company runs out of viable projects, that is, investment with positive
NPVs. Statutory control of corporate governance has been with us for a long
time and has increased overtime. While it is impossible to have a crime free
society, the need to spell out the “rules of the game” cannot be
overemphasized. Irrespective of the nature of the entity we are dealing with,
the key issues of governance revolve around:
1. how
things get done (or not done)
2. authority
3. leadership
4. the
decision making process
5. accountability
STATEMENT OF RESEARCH PROBLEM
In Nigeria like most countries, the failures of companies can be
due to internal or external factors or in rare cases, the combination of both.
However in most cases, usually, it has to do with internal cases such as poor
corporate governance. In such cases, such development can be likened to a Giant
Iroko tree felled by termites that did a lot of damages within the trunk of the
tree. The issues of good corporate have attracted a global consensus by which
countries now use in the measurement of their own economic indices. Corporate
governance is therefore taking a gradual but central attraction after highly
rated international companies like Enron, Pamalat, Barynx Bank and WorldCom
failed, an indication that failure of corporate governance can bring down any
institution no matter how long or old it is. What then is the link between
corporate governance and business failure?
OBJECTIVES OF THE STUDY
1. To find out the extent to which governance has contributed to
business failure in Nigeria.
2. To ascertain how effective board membership can translate to
good corporate governance.
3. To proffer solution to corporate collapse through good and
effective corporate governance.
SCOPE OF THE STUDY
This study is not directed at explaining or providing solutions to
all corporate failures in Nigeria because some failures are actually outside
the organizations frontiers. It is narrowed down to these failures that could
be averted if organization would embrace corporate codes and play by the rules.
The companies examined are basically those quoted on the Nigeria Stock Exchange.
RELEVANCE OF THE STUDY
1. This
study will provide empirical evidence that business failure is caused by bad
governance.
2. It will help policy makers to design both legal and
administrative framework for corporate institutions.
3. It will alert the shareholders that all may not be well with
their investments.
4. The study will provide measures for dealing with failures.
5. It will provide ways for dealing with board wrangling.
STATEMENT OF THE RESEARCH HYPOTHESES
Hypothesis 1
Ho: there is no significant relationship between corporate
governance and business failure.
Hi: there is a significant relationship between corporate
governance and business failure.
Hypothesis 2
Ho: the integrity of board members does not have effect on
corporate governance.
Hi: the integrity of board members has effect on corporate
governance.
DEFINITION OF TERMS
BUSINESS: The
various activities of commerce- the winning and using of the product of the
earth, or multiplying the products of the earth and selling them or
manufacturing them and purchase and sales of commodities or the offering of
services for reward. Fry V. Burma Corporation Ltd (1930).
CONTROL: Any
process in which a person or group of persons or organization of persons
determines i.e. intentionally affects, what another person or group or
organization will do. Tenmenbaum (1982)
CORPORATE GOVERNANCE: Corporate
governance is the system by which business corporations are directed and
controlled. The corporate governance structure specifies the distribution of
rights and responsibilities among different stakeholders and spells out the
rules and procedures for making decisions on corporate affairs. By doing this,
it also provide the structure through which the company objectives are set and
the means of attaining those objectives and monitory performance OECD April
1999.
FAILURE: It is
a situation in which a company finds itself unable to generate enough funds
both internally and from outside sources to finance its operations. Osazee and
Anao (1997).
STAKEHOLDERS: Those
groups without whose support the organization will cease to exist. Freeman
(1984).
Department | Education |
Project ID Code | EDU0345 |
Chapters | 5 Chapters |
No of Pages | 53 pages |
Methodology | Chi Square |
Reference | YES |
Format | Microsoft Word |
Price | ₦4000, $15 |
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Contact Us On | +2347043069458 |