Corporate Governance as a Strategic Management Tool

The objective of the study is to determine the effectiveness of corporate governance as a strategic tool in improving performance of listed manufacturing company in Nigeria. The specific objective is to examine the relationship between corporate governance mechanisms and performance of manufacturing firms in Nigeria. This study adopted quantitative research; the population for the study is seventy four, which is the total number of listed manufacturing companies in Nigeria. Twenty manufacturing companies were purposively selected from the seventy four manufacturing companies listed on the Nigeria stock exchange that formed the population of the study. The study is based on content analysis of the selected firms’ annual reports for ten years, from year 20082017. Time series data were collected to determine corporate governance and profitability performance of the selected companies. Five (5) aspects of corporate governance were investigated; these include board size, gender, independence, meeting and audit committee size. The data collected were analyzed using panel data analysis. Findings revealed that heterogeneity effect across firms and over time are incorporated into the model via the error term, Board Size (BOS) and Board Gender Disparity (BGD) had negative impact on the financial performance of manufacturing firms in Nigeria. It is recommended that organizations should use corporate governance as a strategic tool to achieve corporate objectives especially by ensuring the board meets regularly to monitor and control.

and objectives of organizations are set and accomplished. Strategic failure can be avoided if management and board observe and correct their mistakes quickly. Corporate governance should provide checks, balances, incentives to spot, correct bad decisions and if corporate governance are strengthened organizations can strengthen their strategies and their ability to compete ( Zeyad, Atif & Hazem, 2015).

Code of Corporate Governance in Nigeria
The crisis of Lever Brothers in the 1990's made Security and Exchange Commission (SEC) to draw up its own code of corporate governance for 2003. It was later reviewed and made compulsory for every quoted company to follow and implement in 2014.Financial Reporting Council of Nigeria Act, (2011) empowered Financial Reporting Council to supervise and monitor all relevant issues that affect corporate governance in Nigeria. The council also developed principles and practices of good corporate governance in Nigeria and has issued a National code of corporate governance in 2016 which is mandatory for public sector, private sector and not for profit making organization.
SEC code of corporate governance state that the board is accountable and responsible for the performance and the affairs of the company and also to ensure sound corporate governance in the company. The duties of the board include formulation of policies and overseeing the effectiveness and adequacy of internal control system.
Company and Allied Matters Act, 2004 said the director is any person occupying the position of directors by whatever name called. Two types of directors include executive and non-executive directors.

Board size
The board size means the number of directors sitting on the board. SEC code specify that the member of the board should not be less than five, there must be a mixture of both the executive and non-executive director majority should be non-executive and at least there must be an independent director. The role of non-executive director include monitoring executive activities and to contribute to strategic development. In Odiwo, Chukwuma and Kifordu (2016), Brown and Caylor (2014) opined that ideal board size should be between 6-15 members to enhance the effective performance of the board.

Board Meeting
This is the number of times which the member of the board must meet according to SEC code of corporate governance; the board members are to meet at least once every quarter. For the board to have full control and monitor the executive they must meet regularly (Odiwo, Chukwuma & Kifordu, 2016).

Board Independence
The SEC code state that the board should be independent of management to enable it carries out its oversight function in an objective and effective manner. CAMA (2004) provide that auditors should make a report to an audit committee. The audit committee shall consist of an equal number of directors to a maximum of six members they are to examine the auditor's report and also make recommendation thereon to the annual general meeting.

Board Gender Disparity
When diverse groups are well represented on the board it will prevent an individual from dominating the decision process on the board (Nielsen & Huse, 2010). More women on the board might likely lead to increase in firm performance.

Corporate Performance
Corporate performance is the way in which the financial resources are used to achieve the objectives of the organization (Nworji,2011). Performance can be measured from different angle such as financial performance, product market performance and shareholder's return. Financial performance can be measured using return on assets, return on investment (Owolabi, 2018). Researchers like Nwaiwu & Joseph (2018), Sathyamoorthi, Pritika, Mashoko & Lilian (2017) have used return on assets (ROA) index in measuring performance.
2.1.9 Benefit of good corporate governance Karanja (2015) reported that good corporate governance is a strategic tool that can be used to achieve set goals and objectives and it can positively affect production, operations, marketing strategy, financial planning and budgeting, product development, human resource management, expansion strategy, and procurement procedures.
Moreover, it improves efficiency in the operations of the company, reduce costs, and hence increase profits and general performance and profitability if complied with, institutionalized and well integrated into their corporate plans. It can also result in retention and attraction of competent human resource, better marketing strategies, efficient operations and production, improved financial planning and budgeting, superior product development, successful expansion strategies and effective and efficient procurement procedures. Owolabi (2018), noted that the essence of good corporate governance is to assess whether the performance are in line with plans and to motivate participants to align with their various activities, actions and inactions with the overall objectives of the organizations. It also induces the accountability of those who are in management positions which also serve as increase in wealth creation. Corporate governance enhances credibility and attracts global investors to show interest and confidence in the organization. Corporate governance places an organization on a very high competitive status, encourage transparency, and stimulate effective communication required by the stakeholders. It also helps to develop business sustainability, macro-economic stability, and attract development assistance to achieve sound reputation

Problems of Corporate Governance in Nigeria
Failure of corporate governance can be as a result of some problems. Weak and inadequate enforcement capacity of Company and Allied Matters Act (CAMA). Some board members who have no finance and business operating ability are been selected from highly placed retired military officers and civil servants. Some of the executive members collaborate with the senior executives of the companies to satisfy their personal interest as the business and shareholders interest is secondary to their interest. At times annual general meetings are located at places that are not easily accessible by most shareholders thereby preventing them from getting involved in the governance issues. Some executives are not been checked regularly and this gives them room to engage in gross misconduct because some investors are not included in governing structure. Inadequate executive member training and capacity development to manage business has resulted high agency cost and loss of profit (Owolabi, 2018). Weak corporate governance system in Nigeria has led to collapse of textile industry in Nigeria thereby leading to huge loss to economy of Nigeria as a whole. It has led to banking crisis, many banks have collapsed in the past, and other industries have been affected in the past such as Erisco Food Ltd. in Oregun-Lagos, Dunlop and Michelin companies, Cadbury. If the corporate governance system is effective many of the crises in the manufacturing industry would have been prevented and the industry would have enlarged (Owolabi, 2018).  Vol.10, No.14, 2019 115 Expectations gaps exist around boards of director. Expectation gap is the difference in opinion that exists between two or more people. Expectation gap can be reasonableness gap or performance gap. There exist expectation gap between what stakeholders expect and what the boards can actually contribute and this can be a problem.
Performance expectation gap include ability to fire the CEO, monitoring could be difficult in practice, board may not be able to control daily, the board may not be independent and information asymmetry among managers may conceal accurate and timely information from the board members. Reasonableness expectation gap include, lack of agreement on the role and duties that the board are to play. Their role may be conflicting at times by over trusting the management when they are performing and managers may take liberties and do what they like. Other reasonableness gap include negative impact that some role of board on company performance. The role that the board may play can be restricted and the directors have limited ability to monitor and control the managers (Niamh, 2006

Agency Theory
Agency theory was originally developed by Jensen & Meckling (1976). Agency problems arise when investors have difficulties in monitoring the funds provided to managers. The agents maximize their own interest at the expense of investors. The origin of agency problem emerged from separation of ownership and control, where the principal contracts the agent to act on his behalf. The agents are the management and board of directors of the companies entrusted with maximizing shareholder wealth. Hasan and Halbouni, (2013) Stated that corporate governance is a mechanism used in solving agency problem. The principals can adopt corporate governance to monitor the agent. Effective corporate governance can improve performance and financial results of companies.
Corporate governance can be put in an organization to disclose, monitor, align the objectives of principals and the agent and also minimize agency cost.

Resource Dependency Theory
This was propounded by Jeffrey and Gerald (1970). Board of directors can use their oversight function to manage the resources of the organization. Resources are the keys to organizational success and access to control over resources is a basis of power. External resources of the organization can affect the behavior of the organization.
The external resource is an important tenet of both the strategic and tactical management (Amy, Micheal & Brian, 2009). Board size has the ability to provide resources that organization need. Board size is rational organization and can respond to the situation of external environment. It was further stated in Pearce and Zahra (1992), that board size and board composition are contingent on the firm's current strategy and prior financial performances.
Advantages of having directors in an organization's can make the organization to have access to channels of information between the organization and the environmental contingencies. They can give advice and counsel; they can get access to resources and legitimacy. According to this theory the board is a strategic tool which can connect the various external resources in an organization (Ingley & Vander, 2001). Pfeffer and Salancik (1978) noted that Board of Directors can be a mechanism that interacts with the environment and accessing the resources in the environment. The environment where the organization and board of directors are located matters and it has effect. The environment may affect how the board of directors affect the performance of the organization and only way to overcome that is to have an appropriate board composition on board of directors.

Empirical Review
In Kenya, Karanja (2015) carried out a study on the effect of corporate governance as a tool to improve performance of listed companies in Kenya. Both questionnaire and data extracted from the audited financial statement were used. The findings showed that most of the companies listed at the Nairobi Securities Exchange were implementing corporate governance guidelines issued by the Capital Markets Authority and had incorporated corporate governance practices into their corporate strategies resulting to improved performance and had discovered that corporate governance was an effective strategic tool to improve performance of listed companies in Kenya.
In Botswana, Sathyamoorthi, Pritika, Mashoko and Lilian (2017)  It is therefore suggested that reform efforts should be directed towards improving the corporate governance of listed Nigeria manufacturing companies especially emphasis should be devoted to the variables of ownership structure and audit committee. Odiwo, Chukwuma and Kifordu (2016), examined the impact of corporate governance on performance of manufacturing firms in Nigeria. They used the audited annual financial statement of 30 manufacturing company in Nigeria from the period of 2010 to 2014, which was analyzed with correlation and, heteroskedasticity test was carried out with regression analysis. The findings revealed that CEO shareholding has a positive and significant impact on organization performance but Director's shareholding has a negative and significant impact on the organization performance.
The main gap in these empirical tests conducted in Nigeria has to do with the limited number of years covered by the data used for regression analysis. The findings would have been more robust and revealing if the panel data were employed for the analysis. This was considered in this study.

Methodology
This study adopted quantitative research design because it enables the researcher to generalize the findings of a study to a larger population. The population of the study is seventy four, which is the total number of listed manufacturing companies in Nigeria. Twenty manufacturing companies were purposively selected from the seventy four manufacturing companies listed on the Nigeria Stock Exchange that formed the population of the study. The study is based on content analysis of the selected firm's annual reports, whereby data were extracted from ten years audited financial statement of the selected companies from 2006 t0 2017. Time series data were collected to determine the corporate governance and the profitability performance of the selected companies, the five aspect of the corporate governance were examined in line with the provision of corporate governance for companies; these include board size, gender, independence, meeting and audit committee size. The data collected is analyzed using panel data analysis.

Model specification
The fixed effect model is given thus:  Vol.10, No.14, 2019 119 Where £ measures the random deviation from the global intercept a, subscript "it" represents the combination of time and individuality. Uit means error term. In substituting the variables under consideration into the fixed effect model, it will appear thus: The selection of the best suited model from the two is done following the Hausman test

Source: Authors Computation
Panel Data

Fixed Effect Model
Result of fixed effect estimation presented in Table 3 showed that when heterogeneity effect over time is incorporated into the model as intercept term, Board Size (BOS) and Board Gender (BGD) exert a negative impact on the financial performance of manufacturing firms in Nigeria measured in terms of ROA. The impact is only significant for BOS (r = -0.5301, p< 0.05), while for BGD(r=-0.2975, p>0.05) and thus is not significant.
Consequently, Board Meetings (BOM), Audit Committee Size (ACS) and Board Independence (BID) exert positive impact on the performance of manufacturing firms in Nigeria measured in terms of ROA for the period covered by this study. The impact is only significant for BOM (r = 0.5786, p<0.05), while ACS and BID had r =0.5018, p>0.05; and, r = 0.6263, p>0.05) respectively. R-square value reported for the whole is 0.5901, which implies that about 59% of the systematic variation in ROA can be jointly explained by the explanatory variables (BOS, BOM, ACS, BID and BGD). Prob(F-statistics) = 0.000

Random Effect Model
Random Effect estimation result presented above revealed that when heterogeneity effect across firms and over time is incorporated into the model via the error term, Board Size (BOS) and Board Gender ( Table 5 reported a chi-square statistic of 3.36 and the probability value of 0.0644. The result revealed that there was not enough evidence to reject the null hypothesis that differences in coefficients of fixed effect estimation and random effect estimation were not significant. Therefore, the most consistent and efficient estimation was given by the random effect estimation as presented in Table 4. It thus becomes evident that the estimation that best

Null hypothesis
Chi-square stat Probability The difference in coefficient not systematic 3.36 0.0644

Discussion of Findings
An attempt has been made to show the effect of corporate governance on the performance of manufacturing firms in Nigeria. Mechanisms of corporate governance used were board size, board meetings, audit committee size, board independence and gender sensitivity of the board members. Data gathered from 20 quoted manufacturing firms were analyzed using descriptive statistics of mean, standard deviation, minimum and maximum, followed correlation matrix that shows the direction of the relationship between the explained and explanatory variables after which the study used a random effect model and fixed effect model of panel data regression. Through, Hausman test, it was gathered that the estimation that best explains the impact of corporate governance on the performance of manufacturing firms is the random effect estimation presented in Table 4.
The first discovery was that board size has a negative and significant effect on the profitability of manufacturing firms in Nigeria measured using return on assets. This implies that roles of the members of the board in improving the monitoring functions, improve governance and increase returns have been negatively affecting the performance of firms in terms of return on assets. This outcome gave credence to the findings of Ajala, Amuda, and Arulogun (2012), that there was a negative but significant relationship between board size and the performance of banks in Nigeria. It was equally gathered that board meeting had positive effect on return on assets of the sampled manufacturing firms in Nigeria, showing that increased number of meetings might lead to enhanced performance of manufacturing firms in Nigeria. Intermittent meetings of members of the board could engender good governance.
In the same vein, it was gathered that the impact of audit committee size and board independence on the return on assets of the manufacturing firms was positive but insignificant. This implies that the size of the audit committee and the independence of the board members have not contributed to the performance of the manufacturing firms in Nigeria meaningfully. The positive relationship between the board composition and the performance could be explained by the objective view of the non-executive directors regarding the company. Therefore, they are more suitable to accomplish the supervisory function. While the non-significant relationship is consistent with the regulatory requirement in manufacturing sector that director do not emphasize value maximization over the soundness and the safety of the firm. This outcome gave credence to the findings Osundina, Olayinka, and Chukwuma(2016), that the performance indicator ROA related with each component of the corporate governance such as audit committee size.
Another discovery made was that gender of the members of the board had negative but non-significant impact on return on assets of the manufacturing firms in Nigeria. This implies that the performance of these firms is not gender-sensitive. This appears to negate the general belief that the presence of the female on the board of directors has a crucial role in increasing board's independence since women tend to ask different questions than male directors. Moreover, female directors are considered as hard-working person and have better communication skills which enable them to add value in the firm by improving the decision-making ability and the problem solving of the board. This outcome failed to corroborate the discovery of Sathyamoorthi, Pritika, Mashoko and Lilian (2017), that gender of the board member positively influences the performance of firms.

Conclusion
From the results of the analysis the board size had a negative and significant effect on the profitability of manufacturing firms in Nigeria. This implies that roles of the members of the board in improving the monitoring functions, improve governance and increase returns had negative effect on the performance of firms. It was also noted that board meeting had positive effect on ROA of the sampled manufacturing firms in Nigeria, it was concluded that increase in the number of meetings might lead to enhanced performance. The size of the audit committee and the independence of the board members have not contributed to the performance of the manufacturing firms in Nigeria meaningfully. The positive relationship between the board composition and the performance could be explained by the objective view of the non-executive directors regarding the company. Therefore, they are more suitable to accomplish the supervisory function.
Another discovery made was that gender of the members of the board had negative but non-significant effect on performance of the manufacturing firms in Nigeria. This negated the general belief that the presence of the female on the board of directors has a crucial role in increasing board's independence since women tend to ask different questions than male directors. Moreover, female directors are considered as hard-working and possessing better communication skills which enable them to add value in the firm by improving the decision-making ability and the problem solving of the board.
It is recommended that organizations should employ corporate governance as a strategic tool to achieve corporate objectives. The board must meet regularly to be able to monitor and control. Strategic failure can be avoided if managers and the board meet regularly to observe and correct the mistakes quickly enough. Corporate governance should be strengthening so that organizations' can strengthen their strategies and their ability to survive in a competing environment.