Examining Nigerian Banking Governance, Leadership Style, and Performance During the Financial Crisis

The 2008–2009 global financial crisis of financial systems negatively affected about 30% of Nigerian banks, leading to profitability issues. The profitability issues led to operational challenges, downsizing, and liquidation of some banks. The purpose of this correlational study was to examine the relationship between corporate governance structure, perception of leadership style, and bank performance. This study was grounded in agency theory and used survey and archival data. Survey data were collected from 11 participants employed by commercial banks located in Nigeria, using the Multifaceted Leadership Questionnaire. Corporate governance and bank performance data were collected from annual bank reports. The model as a whole was not able to significantly predict bank performance, F(2,11,) = . 361, p = . 708, R = . 083. There was no relationship between corporate governance structure, employees’ perception of leadership style of bank leaders, and performance of banks. The social impact for this study is that a lack of corporate governance structures can lead to bank failures. The findings from this study may be valuable to bank executives and employees. However, the findings do not suggest that corporate governance should not be practiced in organizations. When corporate governance is practiced in organizations it strengthens the structure of the banks. The results of this study are designed to be of interest to bank leaders who need to understand the relationship between corporate governance structure, employees’ perception of leadership styles, and bank performance. Background of the Study Between December 2007 and June 2009 (National Bureau of Economic Research), the world business community was faced with a financial crisis. This financial crisis, which started from the United States of America because of the sub-prime mortgage-lending crisis, soon reverberated across the world. In Nigeria, the impact of the financial crisis was immediately felt in the stock market (Ikokua & Okany, 2014). This was because of the high dependence of the stock market on foreign funds. Following the crisis, foreign investors in the Nigerian stock market immediately recalled their funds. This development had a huge negative impact on the Nigerian stock market. In addition to the foreign investors that pulled out of the market, several local investors pulled out of the market as well. Prices of stocks in the market fell below record lows and the banking sector was severely hit as well (Peni & Vähämaa, 2012). Following this development, some banks became dependent on the Central Bank of Nigeria (CBN) for funds to finance their operations. After observing this trend for a period, the CBN conducted a detailed examination of the books of all the banks. During this examination, it was revealed that some banks had a large portfolio of non-performing loans, particularly insider related credits. The management of these banks gave loans to friends, relations, and acquaintances without following sound banking principles (Ikokua & Okany, 2014). Consequently, these loans were not performing: the banks became unprofitable, there were largescale job losses, and shareholders were not paid dividends (Uwuigbe, Peter & Oyeniyi, 2014). The CBN in a bid to prevent systemic distress and public distrust of the entire banking sector took over the management of 8 banks out of 24 operating at that time and injected new funds into these banks (Oyerinde, 2014).