CORPORATE GOVERNANCE AND BANKRUPTCY RISK: AN EMPIRICAL ANALYSIS OF NIGERIAN BANKS

Abstract

This study determined the effect of corporate governance on bankruptcy risk in commercial banks in Nigeria, using audit committee independence, and remuneration committee. Ex Post Facto research design was adopted for the study. A sample of eight deposit money banks was used for the study. Data were obtained from the annual reports and audited accounts of the banks under assessment. Altman's original model for public companies was used to extract data and the formulated hypotheses were tested with regression analysis with aid of E-View 9.0.  The analysis and hypotheses tested shows that audit committee independence has no significant effect on bankruptcy risk commercial banks in Nigeria. However, the study revealed that remuneration committee has a positive significant effect on bankruptcy risk commercial banks in Nigeria. Based on the results, the study recommended among others that Since the board of director serves as internal control mechanism in the corporate governance, banks policy makers should provide adequate regulations on the specific number of boards to be working with, hence, audit committee independence is likely to reduce the probability of bankruptcy as they bring wider knowledge and better expertise to the bank.