IMPACT OF CORPORATE STRATEGY ON FINANCIAL PERFORMANCE OF FINANCIAL INSTITUTIONS LISTED ON THE NIGERIA STOCK EXCHANGE – Complete Project Material


CHAPTER
ONE

INTRODUCTION

1.1     
Background
of the study

Corporate strategy is part
of managerial economics that described the scope and direction of an
organization over a long period of time. Corporate strategy is the process of
the overall scope and direction of a corporation and the way in which its
various business operations work to achieve their goals. This project is
concerned about the responsibility among different participants in different
organization such as the board, managers, shareholders, and other stakeholder
and spells out the rules and procedures for making decisions on corporate
affairs. Financial performance is an important concept that relates to the way
and manner in which human, material and financial resources available to an
organization and is judiciously applied to achieve the overall corporate
objectives (Young, 2003).Since the 1970, a growing number of studies have been
going on linking corporate polices and performance with governance. The reason
being that, allegations were not tested using the corporate governance
variables and performance indices. Corporate scandals around the world in
recent years contributed to raising awareness among managers, investors and
regulators and in many countries to produce quantitative measures on
governance, and estimate their impact on the decision-making process of
firms.Hence, financial scandals around the world and the recent collapse of
major corporate institutions in the USA, South East Asia, European and Nigeria
such as Adelphia, Enron, world’s corn, commerce banks and recently shaken
investor’s confidence in the capital markets and the efficiency or existing
corporate strategy practices in promoting transparency and accountability. This
has revealed the need for practice of good corporate strategy and governance.

1.2
STATEMENT OF THE PROBLEM

Strictly
speaking, corporate governance rest with the board which is expected to exhibit
ethics, integrity and probity in ensuring that corporate affairs are in line
with the corporate objectives. But what appears to be the thing is that
financial institutions in developing countries are characterized by
instability, tenure of office, ineptitude, share incompetence; inter personal
disagreement and hostilities within the board which often lead to polarization
of rank and file of staff (Kyereboad, 2007). More so, board members and top
management staff often take advantage of this scenario and engage in arbitrage
opportunities and rent seeking activities rather than planning for high
corporate performance and survival strategies all of which are systematically involved
in negative effect on the organization.

1.3 OBJECTIVE OF THE STUDY

The objective of the study is to
examine corporate strategy and financial performance of financial institutions
listed on the Nigerian stock exchange and the specific objective includes:

  • To examine the significant
    relationship between corporate strategy and the financial performance.
  • To ascertain the significant
    relationship between corporate strategy and financial institution.
  • To determine the significant
    relationship between audit committee and investors.

1.4
STATEMENT OF HYPOTHESES

Hypothesis
One

HO:   There
is no significant relationship between corporate strategy and the financial
performance.

HI:    There
is significant relationship between corporate strategy and financial performance.

Hypothesis
Two

HO:  
There is no significant relationship exists between corporate strategy and
financial institution.

HI:  There
is significant relationship corporate strategy and financial institution.

Hypothesis
Three

HO:   There
is no significant relationship between audit committee and investors.

HI:   There
is significant relationship between audit committee and investors.

1.5
SIGNIFICANCE OF THE STUDY

Companies draw up financial
plan to efficiently direct the change of an economy. The study is thus
significant in the following ways;

Firm: This
also help firms set themselves up for making sure corporate strategists seize
market opportunities that emerge in the short and long terms without a sound,
focused financial strategy, the financial institution may lack the occupational
framework needed to motivate employees and improve their productivity
importance.

Security
Exchange: 
Securities exchange players keep across on
company’s financial performance and corporate strategy takes an in-depth look
at how accounting manager prepares financial statement, making sure the report
adhere to regulatory guidelines in the Nigeria stock exchange

1.6
SCOPE AND LIMITATION OF THE STUDY

This scope
of this study is to cover the sufficient evidence of relationship between
corporate strategy and financial performance as a corner stone of an effective
corporate strategy system in the Nigerian stock exchange. They go hand in hand
although both concepts are distinct. The corporate strategy affect how senior
leadership raise operating funds and spends corporate cash, decision that have
ultimate impacts of the company’s profitability. Benin City, Edo State was used
as the geographical location, using a time frame of 5 years (2009 – 2013).
However, a sample size of 72 was used to yield effective result.Gary
(2002) coined the term strategy convergence to explain the limitation of the
strategic being used by rivals in greatly differing circumstances, he lamented
that successful strategies are limited by firms that do not understand the
strategy for the specific of each situation. But in the world where strategies
must be implemented, the factors are interdependent means that are likely to
determine end as end are to determine means. These factors are:

  • Time frame as a result of the
    very short period, it has a difficult task in combining activities with
    going to the field to collect materials for the research work.
  • Smallness in sample size.
  • Inability to get a complete
    random sampling.
  • Respondents might not disclose
    true fact about their organization.
  • Finally was dearth of materials
    getting up to date, (i.e. materials for the research were a very big task.

1.7 DEFINITION OF TERMS   

1.    
Corporate Strategy: 
this is the overall scope
and direction of a corporation and the way in which its various business
operations work together to achieves particular goals.

2.    
Strategy: 
This is the direction and scope of an
organization over the long term which achieves advantage for the organization
through its configuration of resource within a challenging environment, to meet
the needs of markets and to fulfill stakeholder expectations.

3.    
Financial Performance: 
This is an important
concept that relates to the way and manner in which financial resources
available to an organization are judiciously used to achieve the overall
corporate objective of an organization, in keeps the organization in business
and creates a greater prospect for future opportunities.

4.    
Corporate Governance: 
This is the process
affected by a set of legislative, regulatory, legal, market mechanisms, listing
standard, best practices and effort of all corporate participants including
auditors and financial advisors which create a system of checks and balance with
the goals of creating and enhancing and sustainable value while protecting the
interest of external environment.

1.8 ORGANIZATION OF THE STUDY

This
research work is organized in five chapters, for easy understanding, as follows

Chapter one is concern with the introduction, which
consist of the (overview, of the study), historical background, statement of
problem, objectives of the study, research hypotheses, significance of the
study, scope and limitation of the study, definition of terms and historical
background of the study. Chapter two highlights the theoretical framework on
which the study is based, thus the review of related literature. Chapter three
deals on the research design and methodology adopted in the study. Chapter four
concentrate on the data collection and analysis and presentation of
finding.  Chapter five gives summary,
conclusion, and recommendations made of the study


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