CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND TO THE STUDY
The experience of business failure and financial scandals around the world brought about the need for good governance practices. The United States of American, Brazil, Canada, Germany, France, England, Nigeria all witnessed financial failures in the 90s and in the recent periods. This view was supported by Bell et al (2000), that the last 20 years witnessed several bank failures throughout the world. Financial distresses in most of these countries were attributed to a high incidence of non – performing loans, weak management and poor credit policy. In the view of Omankhanlen (2011), the development was said to have reflected the deterioration in the quality of credit facilities, coupled with the ongoing reclassification of bank assets. The banking institution occupies a vital position in the stability of the nation’s economy. It plays essential roles on fund mobilization, credit allocation, payment and settlement system as well as monetary policy implementation. Management is expected to exhibit good governance practices to ensure achievement of it objectives and avoid the consequences of failure leading to loss of confidence. This view was supported by Wilson (2006) that poor corporate governance can lead market to lose confidence in the inability of a bank to properly manage it assets and liability, including deposits which could in turn trigger a bank liquidity crisis. Oluyemi (2005) considered corporate governance to be of special importance in ensuring stability of the economy and successful realization of bank strategies. In achieving this, strict compliance to standards of lending high risky loan should be adequately secured.
Weak corporate governance has also been a hydra- headed problem in most listed companies in Nigeria. Many recipes have also failed to strengthen the integrity and enthrone