CORPORATE GOVERNANCE AND ITS IMPACT ON THE MANAGEMENT OF MTN MOBILE COMMUNICATION NIGERIA LTD. KADUNA MAIN BRANCH
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CORPORATE GOVERNANCE AND ITS
IMPACT ON THE MANAGEMENT OF MTN MOBILE COMMUNICATION NIGERIA LTD. KADUNA MAIN
BRANCH
ABSTRACT
This study examined the corporate governance and its
impact on the management of MTN Mobile Communication Nigeria Limited Kaduna
main branch. Research questions guided the study. A survey method was used for
this study. The population consisted of all the entire telecommunication industry
in Nigeria out of which MTN Mobile Communication Plc Kaduna with a total
population of twenty five (25) persons was selected as the sample size of the
study. A questionnaire developed by the researcher based on liker 5 point scale
was used for the study. Mean scores and
frequencies were used to analyze the data based on the research questions.
Research results shows that internal and external mechanism of corporate
governance are used to regulate the performance of MTN. The control mechanism
put in place by MTN include internal and external auditing as well as board of
director monitoring and balance of power. The systemic problems militating
against corporate governance include high cost of monitoring, inadequate supply
of accounting information to shareholders.
TABLE OF CONTENTS
Title page i
Declaration ii
Approval Page iii
Dedication iv
Acknowledgment v
Abstract vi
Table of
Contents vii
CHAPTER ONE: INTRODUCTION
1.1
Background
of the Study 1
1.2
Statement
of the Problem 3
1.3
Objective
of the Study 4
1.4
Significance
of the Study 5
1.5
Research
Questions 6
1.6
Scope
of the Study 6
1.7
Definition
of Terms 6
CHAPTER TWO: LITERATURE REVIEW AND CONCEPTUAL
FRAMEWORK
2.1 Introduction 9
2.2 Concept of Corporate Governance 9
2.2.1 Principles of Corporate Governance 13
2.2.2 Parties to Corporate Governance 16
2.2.3 Ownership Structures and Elements in
Corporate Governance 17
2.3 Theoretical Framework 19
2.3.1 Agency Theory 20
2.3.2 Stewardship Theory 22
2.3.3 Stakeholder Theory 26
2.3.4 Institutional Theory 32
2.4 Empirical Literature Review on the Impact
of Corporate Governance
on
Firm Performance 36
2.4.1 Corporate Governance and Performance 37
2.4.2 Corporate Ownership and Performance 38
2.4.3 Corporate Governance and Ownership
Structure 40
2.5 Summary 42
CHAPTER THREE: RESEARCH METHODOLOGY
3.1 Introduction 44
3.2 Population
and Sample Size 44
3.3 Source of Data Collection 44
3.4 Method of Data Collection 45
3.5 Method of Data Analysis 45
3.6 Justification 46
3.7 Summary 46
CHAPTER
FOUR: DATA PRESENTATION AND ANALYSIS
4.1 Introduction 47
4.2 Respondent Characteristics 47
4.3 Data Analysis 48
4.4 Discussion of Findings 52
4.5 Summary of Findings 54
CHAPTER
FIVE: SUMMARY, CONCLUSION AND RECOMMENDATION
5.0 Introduction 56
5.1 Summary 56
5.2 Conclusion 57
5.3 Recommendations 57
5.4 Limitation
of the study 58
Bibliography 59
Appendix 61
CHAPTER ONE: INTRODUCTION
1.1
Background
to the Study
Corporate
governance is concerned with ways in which all parties interested in the
well-being of the firm (the stakeholders) attempt to ensure that managers and
other insiders take measures or adopt mechanisms that safeguard the interests
of the stakeholders. Such measures are necessitated by the separation of ownership
from management, an increasingly vital feature of the modern firm. A typical
firm is characterized by numerous owners having no management function, and
managers with no equity interest in the firm. Shareholders, or owners of
equity, are generally large in number, and an average shareholder controls a
minute proportion of the shares of the firm. This gives rise to the tendency
for such a shareholder to take no interest in the monitoring of managers, who,
left to themselves, may pursue interests different from those of the owners of
equity. For example, the managers might take steps to increase the size of the
firm and, often, their pay, although that may not necessarily raise the firm’s
profit, the major concern of the shareholder.
Corporate
governance issues in both the private and public sectors have become a popular
discussion in recent time. There have been some legislative changes and
provisions imposed by governments on public and private organizations around
the world to improve on their governance arrangements. Telecommunication sector
in Nigeria have been one of the ‘interests caught up in the national surge in
governance of organizations’
Particularly in Nigeria, governance issues
such as size and composition of board of directors and their roles,
responsibilities and relationships have been discussed in several Government
business policy reports for more than a decade.
Corporate
governance can simply be defined as the system by which companies are directed
and controlled which focuses on the “hygiene” and “housekeeping” aspects of
running a business. As such, corporate governance can be seen as a set of
relationships between a company’s management, its board, its shareholders and
other stakeholders that provides a structure through which the objectives of
the company are set and the means of attaining those objectives and monitoring
performance are determined.
Corporate
governance issues are as old as companies themselves. At its broadest, it
concerns the question of who should own and control the company and at the
narrowest; it concerns the relationship between the shareholders and directors.
Many
a research has been carried out world over to unearth the impact of the
corporate governance on listed firms as well as correct and good practice of
corporate governance in developing countries.
However
Nigeria have been faced with a myriad of issues, ranging from “underdeveloped
and illiquid stock markets, economic uncertainties, weak legal controls and investor
protection, and frequent government intervention and coupled with poor economic
performance, a predominance of concentrated shareholding and controlling
ownership Therefore, Nigeria demand higher levels of effective corporate
governance practices.
However,
until quite recently the issue of corporate governance has received minimal
attention in Nigeria. This is the reason why, many corporate organizations have
been caught of getting involved in unethical practices. For example, seven top
Bank executives in Nigeria that were discovered to be involved in one of the
highest financial scam in the nation’s banking industry, after the CBN
consolidation exercise ; which has put the credibility of their corporate image
under suspicion, and threatening investors’ confidence.
Therefore
an important theme of corporate governance in this regard is the nature and
extent of accountability of people in the business and mechanisms that try to
decrease the principal agent problem. Consequently, corporate governance
mechanism has been a crucial issue under discussion with vested interest. It is
against this background that the researchers see the subject matter; corporate
governance and its impact on the management of Mobile Telecommunication Nig.
Ltd Main Branch as an issue worthy of being investigated.
1.2
Statement
of Problem
There
has been considerable discussion in the academic literature of corporate
governance especially managerial agency problems that arise from the separation
of ownership and control. For example, Jensen and Meckling (2006) opined that a
number of corporate governance mechanisms have been proposed to ameliorate this
agency problem between managers and their shareholders. The proposed governance
mechanisms include, for example, CEO incentive compensation, managerial
ownership, monitoring by large shareholders, board size and independence, and
stronger shareholder rights. Many studies have found a positive contemporaneous
correlation between firm performance and good governance, which has led to numerous
attempts to reform governance by institutional investors, stock exchanges and Congress
in so many countries in order to increase accountability in corporate
organizations.
But
in spite of this, there is, however, little evidence on whether changing a
firm’s governance structure leads to subsequent firm performance, as such doubt
is expressed by previous studies whether
firms can improve their longer term performance by implementing changes to their
governance structure. It is against this gap that the researcher intend to take
a survey into the subject matter:corporate governance and its impact on the
management of MTN mobile communication
By attempting to address an important limitation of past studies which has failed to address this
gap. As such, this study aims to provide additional insights into the
relationship between governance mechanisms and firm financial performance in
Nigeria. The need for a study of this kind is even more important in an
environment like Nigeria’s, which is characterized by growing calls for
effective corporate governance, particularly for public limited liability
companies. This call is understandable in view of the importance of effective
governance at both microeconomic and economy-wide levels
1.3
Objective
of the Study
The
main objective of the study is to examine the corporate governance and its
impact on the management of MTN. other specific objectives are to:
i)
assess the effect of corporate
governance on the performance of
Telecommunication companies.
ii)
examine the internal and external corporate
governance control mechanism in Telecommunication companies.
iii)
identify the systemic problems of corporate
governance in Telecommunication companies.
1.4
Significance
of the Study
This
study adds a significant practical importance, because its results support the
application of appropriate regulatory agencies such as central, stock exchange
as well as Nigeria security and Exchange commission and financial organization
in their various policy formulations as
regard corporate governance . As such the study will be significant to these
organinisations and regulatory Agencies especially as they utilize the findings
of this research in enhancing policy formulation as regard corporate governance
in their organization. This study is important as it provides new insights into
governance and performance of organization
in private sector.
The
study will also add to the existing knowledge as well as making an original
contribution to the study of corporate governance, since it is a comprehensive
investigation into the comparative roles of governance in affecting performance of organizations in Nigeria and
elsewhere in the world.
The
study will also be a reference material for further research on corporate governance.
As such, it will be a springboard to students intending to carryout similar
research.
1.5
Research
Questions
The
central research question is: What is the impact of corporate governance on the
management of MTN Mobile Communication? The specific questions are:
i)
how does corporate governance affect the
performance of MTN?
ii)
what are the internal and external
corporate governance control mechanism in place in MTN?
iii)
what are the systemic problems
militating against corporate governance in MTN?
iv)
what are the solutions to such problems?
1.6
Scope
of the Study
The
study covers the examination of the impact of corporate governance in the
telecommunication industry with reference to MTN Mobile Communication. The
collection of empirical data is limited to MTN Kaduna main office. The study
covers a time from 2001 – 2011.
1.7
Definition
of Terms
In this section
we define the various proxy variables we use to capture changes in corporate
governance.
Corporate
Governance: This is a set of the structure through which
the objective of the firm and set and the means of obtaining these objectives
and monitoring performance are determined.
Corporation: This refers to
corporate entity or a body by means of which capital is acquired and used for
investing in assets producing goods and services.
Shareholder rights: Our first measure of
shareholder rights is the G-Index used by Gompers, Ishii, and Metrick (2003).
As in Gompers et al., we use the incidence of governance rules to construct the
G-Index. Firms with low G-Index values have the strongest shareholder rights
and firms with high values of the G-Index have the weakest shareholder rights.
Insider Ownership: Consistent with Himmelberg,
Hubbard, and Palia (1999) we calculate the ratio of insiders’ holdings of
common shares over total shares outstanding. Morck, Shleifer, and Vishny (1988)
find a non-monotonic relationship between insider ownership and firm value and
show two inflection points at 5% and 25% respectively.
Shareholders: People who have
invested in a company through subscribing to the company’s stock.
Board Structure: Management at
the top comprising of board of directors.
Ownership
Structure:
Shareholders and directors.
CEO: Acronym for
Chief Executive Officer.
MTN: Mobile
Telecommunication Nigeria
AGM: Annual General Meeting
BOFID: Banks and Other Financial Institution
Decree
CAC :Corporate Affairs Commission
CAMD: Company and Allied Matters Decree
CBN: Central Bank of Nigeria
DPC :Development Policy Centre
FOS: Federal Office of Statistics
IAS:International accounting standard
ISD:Investments and Securities Decree
MENA: Middle East and North Africa
NAICOM: national insurance commission of nigeria
NICON: National Insurance Corporation of Nigeria
plc
NEPA: National Electric Power Authority
NDIC: Nigerian Deposit Insurance Corporation
NNPC: Nigerian National Petroleum Corporation
NITEL: Nigerian Telecommunications Plc
NSE: Nigerian Stock Exchange
OECD: Organisation For Economic Cooperation
And Development.
PLC: Public Limited Company
SEC: Securities And Exchange Commission
SOE: State Owned Enterprises
TCPC: Technical
Committee On 
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