IMPACT OF CORPORATE STRATEGY ON FINANCIAL PERFORMANCE OF FINANCIAL INSTITUTIONS LISTED ON THE NIGERIA STOCK EXCHANGE
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IMPACT OF CORPORATE STRATEGY ON FINANCIAL PERFORMANCE OF FINANCIAL INSTITUTIONS LISTED ON THE NIGERIA STOCK EXCHANGE
ABSTRACT
The purpose of this research is to investigate the corporate strategy and financial performance of financial institutions listed on the Nigeria Stock Exchange.
Financial performance is an essential notion that refers to how people, material, and financial resources available to an organisation are used wisely to meet overall company objectives.
The study’s primary goal is to investigate the substantial relationship between corporate strategies. The research survey design was utilised, with a sample size of 72 for an effective outcome.
The study employed the chi-square statistical method, and it was discovered that there is a positive and substantial association between company strategy and financial performance.
There is also a strong and favourable interaction between corporate strategy and financial institutions, as well as between the audit committee and investors.
According to the study, because there is a significant relationship between corporate strategy and financial performance, top management should ensure that strategic planning is made in order to increase the performance of the organisation,
and financial institutions should ensure that proper strategies are put in place in order to increase the productivity of the organisation. Additionally, investors will have confidence in their investment if there is an effective audit committee.
INTRODUCTION
1.1 Background Of The Study
Corporate strategy is a branch of managerial economics that describes the scope and direction of a company through time. Corporate strategy is the process of determining a corporation’s general scope and direction, as well as the manner in which its individual business operations work to achieve their objectives.
This project is concerned with the responsibilities of various players in various organisations, such as the board, managers, shareholders, and other stakeholders, and it specifies down the rules and procedures for making corporate affairs choices.
Financial performance is an essential notion that refers to how people, material, and financial resources available to an organisation are used wisely to meet overall company objectives (Young, 2003).
Since the 1970s, a growing number of studies have been conducted to examine the relationship between company policies and performance and governance. The reason for this is that the allegations were not put to the test using corporate governance factors and performance indexes.
In recent years, corporate scandals around the world have helped to raising awareness among managers, investors, and regulators, and in many countries, quantitative metrics of governance have been developed to quantify their impact on business decision-making processes.
As a result, financial scandals around the world, as well as the recent collapse of major corporate institutions in the United States, South East Asia, Europe, and Nigeria,
such as Adelphia, Enron, the world’s maize, commerce banks, and recently shaken investor confidence in capital markets and existing corporate strategy practises in promoting transparency and accountability. This has highlighted the importance of good corporate strategy and governance.
1.2 Statement of the Problem
Corporate governance is strictly the responsibility of the board, which is supposed to demonstrate ethics, integrity, and probity in ensuring that corporate actions are in keeping with the company objectives.
However, it appears that financial institutions in developing countries are characterised by instability, tenure of office, ineptitude, share incompetence, inter-personal disagreement and hostility within the board, which frequently leads to polarisation of the rank and file of staff (Kyereboad, 2007).
More specifically, board members and top management staff frequently 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 have a negative impact on the organisation.
1.3 Research Questions
The study aims to answer the following questions:
Is there any connection between company strategy and financial performance?
Is there a connection between business strategy and financial institutions?
What is the relationship between the audit committee and the investors?
1.4 Objective of The Study
The study’s goal is to assess the corporate strategy and financial performance of financial institutions listed on the Nigerian stock exchange, with particular goals including:
To investigate the important relationship between business strategy and financial performance.
Determine the importance of the interaction between business strategy and financial institution.
To ascertain the significance of the audit committee’s interaction with investors.
1.5 Hypothesis Statement
The First Hypothesis
HO: There is no discernible link between company strategy and financial performance.
Hello, there is a strong link between company strategy and financial performance.
Hypothesis No. 2
HO: There is no meaningful link between business strategy and financial institutions.
Hello: There is a strong link between business strategy and financial institutions.
Three Hypothesis
HO: There is no meaningful interaction between the audit committee and the investors.
Hello, there is a close contact between the audit committee and the investors.
1.6 Significance of the Research
Companies create financial plans to efficiently direct an economy’s change. As a result, the study is relevant in the following ways:
Firm: This also assists firms in ensuring that corporate strategists seize market opportunities that arise in the short and long term.
Without a sound, focused financial strategy, the financial institution may lack the occupational framework required to motivate employees and improve their productivity importance.
Security Exchange: Securities exchange participants keep track of a company’s financial performance and corporate strategy by taking an in-depth look at how accounting managers create financial statements, ensuring that the report adheres to regulatory criteria in the Nigeria stock exchange.
1.7 Scope of The Study
The purpose of this research is to provide sufficient proof of the relationship between corporate strategy and financial success as a foundation for an effective corporate strategy system in the Nigerian stock exchange. They complement each other, despite the fact that they are distinct concepts.
The corporate strategy influences how senior management raises operating funds and spends corporate cash, decisions that have long-term consequences for the company’s profitability.
The geographical location was Benin City, Edo State, and the time frame was 5 years (2009-2013). A sample size of 72 was needed, however, to produce an effective result.
1.8 Limitations of The Study
Gary (2002) created the term strategy convergence to describe the limitations of rivals’ tactics in widely disparate circumstances. He lamented that successful methods are constrained by corporations that do not comprehend the strategy for the specifics of each situation.
However, in the domain of strategy implementation, the components are interdependent means that are likely to define goal as end is to determine means. These are the factors:
Time line Because of the short time frame, it is difficult to combine activities with going to the field to gather materials for the research activity.
Sample size is too little.
Inability to obtain a completely random sample.
Respondents may not offer accurate information about their organisation.
Finally, there was a scarcity of resources that were up to date (i.e. materials for the research were a huge task).
1.9 Definition of Terms
1. Corporate Strategy: This is a corporation’s overall scope and direction, as well as how its many business processes collaborate to achieve specific goals.
2. Strategy: This is the long-term direction and scope of an organisation that achieves benefit for the organisation through its resource configuration within a demanding environment, to meet market needs, and to fulfil stakeholder expectations.
3. Financial Performance: This is an important concept that refers to the way and manner in which an organization’s financial resources are judiciously used to achieve the overall corporate objective of an organisation, which keeps the organisation in business and creates a greater prospect for future opportunities.
4. Corporate Governance: This is the process influenced by a set of legislative, regulatory, legal, market mechanisms, listing standards, best practises, and the efforts of all corporate participants,
including auditors and financial advisors, to create a system of checks and balances with the goals of creating and enhancing value while protecting the external environment’s interests.
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