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International Research Journal of Accounting and Auditing (ISSN: 2251-0028) Vol. 1(1) pp. 1-6, May, 2013
Available online @http://www.interesjournals.org/IRJAA
Copyright ©2013 International Research Journals
Review
The impact of bank employees on the value of business
firms in Nigeria
Eyenubo A. Samuel
Department of Accounting and Finance, Faculty of Social Sciences, Delta State University, Abraka
E-mail: [email protected]
Abstract
The work is anchored on “the impact of bank employees on the value of business firms in Nigeria”. The
study was set out to establish the relationship between employees and the value that they bring to the
business firms. In trying to do so, the study adopted the use of secondary data gotten from the
Nigerian Stock Exchange Fact book during the period 2001 – 2010 and the regression statistical
technique was employed to test our hypothesis. The findings of the study revealed that the role of
employees in an organization has impact on the value of business firms. The study proffered useful
recommendations amongst others that management of business firms should look at matters that
militate against the value of business firms, by improving employees through manpower training and
development which will in turn enhance the value of business firms in Nigeria.
Keywords: The bank employees, value of a firm, financial performance.
INTRODUCTION
According to Anthony and Coleman (2007), banks play
an important role in the implementation of corporate
governance in developing markets. The role involves
transfer of funds from savers to users and in addition,
they have appropriate criteria for lending and do not use
leverage as a tool to implement corporate governance.
The responsibilities of bank are higher in developing
markets compared to developed financial markets. Burki,
and Ahmad (2007) further observed that bank is less
costly compared to public monitoring where all the
shareholders are doing the same job. Banks as creditors
play the role of a monitoring and eliminating the free rider
problem from the market thereby reducing the duality of
effort.
Literature review
The players of the corporate governance mechanism
include managers, employees, customers, shareholders,
executive management, suppliers and the board of
directors. Literature suggests that in developing and
developed markets the roles of a regulatory authority,
board, management, suppliers, customers and creditors
are important in improving the value of a firm (Ping,
2004). Corporate governance is focused on the
protection of the rights of shareholders and plays an
important role in the development of capital markets by
protecting their interests (Kahan and Rock, 2003).
Theoretically, the stakeholder model takes a broader
view of the value of a firm. The traditional stakeholder
model holds that the corporation is responsible to a wider
constituency of stakeholders other than shareholders.
Other stakeholders may include contractual partners
such as employees, suppliers, customers, creditors, and
social constituents such as members of the community in
which the firm is located, environmental interests, local
and national governments, and society at large (Berger et
al., 2005). This view holds that business firms should be
“socially responsible” and “adequately managed” in the
interest of the public. The problem with the traditional
stakeholder model of the firm’s value is that it is difficult, if
not impossible, to ensure that corporations fulfils these
wider objectives.
Blair (1995) states the arguments against this point of
view: “the idea behind the stakeholders model failed to
give clear guidance to help managers and directors set
priorities and decide among competing socially beneficial
uses of corporate resources, and provided no obvious
enforcement mechanisms to ensure that corporations live
up to their social obligations. As a result of these
deficiencies, few academics, policymakers, or other pro-
2 Int. Res. J. Account. Auditing
ponents of corporate governance reforms still espouse
this model.” However, given the potential consequences
of corporate governance for economic performance, the
notion that business firms have responsibilities to parties
other than shareholders merits consideration(Ram et al.,
1995).What matters is the impact that employees can
have on the value of the business firm and on economic
growth in generality. Any assessment of the implications
of corporate governance on economic performance must
consider the incentives and disincentives faced by all
participants who potentially contribute to the value of
business firms. With this in mind, the stakeholder model
has recently been redefined; where the emphasis has
been to more narrowly define what constitutes a
stakeholder. Therefore, the “new” stakeholder model
specifically defines stakeholders to be those actors who
have contributed firm specific assets. This redefinition of
the stakeholder model is also consistent with both the
transaction costs and incomplete contract theories of the
firm in which the firm can be viewed as a “nexus of
contracts” (Gustafsson and Williamson, 1990).
The “best” firms according to the “new” stakeholder
model are ones with committed suppliers, customers, and
employees. This new stakeholder approach is, therefore,
a natural extension of the shareholder model. For
example, whenever firm specific investments need to be
made, the performance of the firm will depend upon
contributions from various resource providers of human
and physical capital. It is often the case that the
competitiveness and ultimate success of the firm will be
the result of teamwork that embodies contributions from a
range of different resource providers including investors,
employees, creditors, and suppliers. Therefore, it is in the
interest of the shareholders to take account of other
stakeholders, and to promote the development of long
term relations, trust, and commitment amongst various
stakeholders (Mayer, 1996). Corporate governance in
this context becomes a problem of finding mechanisms
that elicit firm specific investments on the part of various
stakeholders, and that encourage active co-operation
amongst stakeholders in creating wealth, jobs, and the
sustainability of financially sound enterprises, see the
OECD Principles of Corporate Governance (OECD,
1999).
Bowen et al. (1995) show that firms that have more
on-going implicit claims with stakeholders such as
employees, suppliers, and customers choose relatively
aggressive
accounting
methods
to
influence
stakeholders’ assessments of the firm’s reputation. A
large number of employees were voluntarily resigned
from the banks under the golden shake hand scheme.
Also, number of branches of state owned banks which
were not performing well was also closed down. Finally,
the governance of the banking sector in Nigeria was
influenced by merger and acquisitions of some private
and foreign banks. New policy introduced by
Central Bank of Nigeria has also encouraged merger and
acquisition of small and struggling private and foreign
banks by their financially superior counterparts all in a bid
to improve the value of banks and create better
reputations for them. This study therefore sought to
establish “the impact of bank employee on the value of
business firms in Nigeria.
Hypothesis of the Study
Ho: Bank employees do not affect the value of a firm.
Hi: Bank employees affect the value of a firm.
Model specification
Regression analysis will be used as a tool for hypotheses
testing to reveal the relationship between bank
employees and the value of business firms. The
regression will specify the relationship among the
dependent variable, independent variable. The general
representation of the model is given in the equation
below. The general representation of the model is as
follows:
Yt= C + β1tlogX1t+ Ut
Where:
Yt(regrassand) = Net Profit;
C = Intercept;
βt(β1– β5) = Slope of the independent variable;
Xt(regressor) = Independent variables;
t = Periods;
Ut = Error term;
β1 = Number of Employees
DATA ANALYSIS
NPAT = 3.181NPAT + 2.130NEMPLOYEE
(1.003)
(1.264)
2
R = 0.926
2
R Adjusted = 0.946
F-statistic = 37.276
f-critical = 4.04
t-statistic = 2.130
t-critical = 2.021
Prob (F-statistic) = 0.000000
DW = 2.272
df = 1 – Numerator and 48 Denominator
Level of Sign = 0.05%
_
2
2
R /R Adjusted
2
The R represents the coefficient of determination and
2
goodness of fit test. The R suggests that 93% of the
total variation in the dependent variable (NPAT) has been
explained by NEMPLOYEE and this is a good fit since
Eyenubo 3
2
the unexplained variation is just 7% (1 – 0.93). The R
2
which is the adjusted R for degrees of freedom suggests
that 95% of the changes in the dependent variable
(NPAT) have been explained by MCAP.
F-test
The f-test is used to test the overall significance of the
model and the hypotheses. The decision rule of the f-test
is that if f-calculated > f-critical, we reject the null
hypothesis and accept the alternative hypothesis. The
opposite is the case if the f-calculated < f-critical.
The
result revealed that f-statistic with value 37.276 is> fcritical with value 4.04 and this suggest that we reject the
null hypothesis and accept the alternative hypothesis
which states that the roles of employees affect the value
of a firm.
T-test
The t-test is used to test the statistical significance of
each independent variable in explaining the changes in
the dependent variable. The t-test shows the predictive
power of each independent variable. The decision rule of
the t-test is that if t-calculated > t-critical, it suggests that
the particular independent variable is statistically
significant in explaining the changes in the dependent
variables. The t-test suggests that the t-calculated with
value 2.130 is > t-critical with value 2.021 and this mean
that NEMPLOYEE is statistically significant in explaining
the changes in NPAT.
Dw
The Durbin Watson test is used to test for the presence
or absence of first order serial correlation in the model.
The Durbin Watson test with value 2.272 suggests that
the model show support for the existence of first order
serial correlation.
Signs/Magnitude
The Signs and Magnitude is used to show the linear
relationship that exists between the dependent and
independent variable whether there are positive or
negative relationships. The result shows that
NEMPLOYEE have a positive linear relationship with the
NPAT. That is, an increase in the NEMPLOYEE by
2.130units will increase the NPAT by 3.181units.
CONCLUSION
The purpose of this study is aimed at examining “The
Role of Bank Employees and the Value of a Firm in
Nigeria”. To accomplish this task, a study of this nature
was carried out with 22 banks quoted on the Nigerian
Stock Exchange during the period 2001 - 2010. We have
concluded that the role of bank employees has effect on
the value of a firm. A better and efficient employee is a
reflection of higher value of a firm. Investment in
employees is most likely to yield a good return for firms
compared to firms with lower investment in employees
because the value of the firm having inefficient
employees are more liquid. In contrast, the companies
having efficient employees are sometimes more
profitable because of a higher growth potential.
RECOMMENDATIONS
Based on the findings of the study, banks are enjoined to
place a remarkable degree of emphasis on the area of
their financial performance and to some extent embark
on improving employees (human capital development). It
could be advantageous if banks try as much as possible
to improve human capital as it instills growth in the
company and that is relevant to the need of changing
economic circumstances. Above all, it will be advisable
for management of banks to look at the matters of
prevailing economic situation that militates against the
value of their financial performances. Policy recommenddations should attempt to account for the interactions
between the role of bank employees and the institutional
framework in the country. The search for good practice
should be based on an identification of what works in
Nigeria, to discern what broad principles can be derived
from these experiences, and to examine the conditions
for transferability of these practices to other countries. As
this research has demonstrated, not only will different
improvements be called for in different systems but these
improvements will also depend upon the factors
determining the effectiveness of different systems.
REFERENCES
Anthony K, Coleman (2007). Corporate Governance and Shareholder
Value Maximization: An African Perspective, Afr. Dev. Rev.; 19 (2).
Berger AN, Clarke RC, Klapper L, Udell GF (2005). Corporate
governance and bank performance: A joint analysis of statics,
selection, and dynamic effects of domestic, foreign and state
ownership, J. Baking and Finance; 29.
Blair M (1995). Ownership and control: rethinking corporate governance
for the twenty-first century, Brookings Institution, Washington DC.
Bowen R, Noreen E, Lacey J (1995). Determinants of the corporate
decision to capitalize interest. J. Account. Econom. 3(3).
Burki A, Ahmad S (2007). “Corporate Governance Changes in
Pakistan’s Banking Sector: Is there a Performance Effect?”Center for
Management and Economic Research, working paper.
Gustaffson B, Williamson O (1990). The Firm as a Nexus of Treaties,
London: Sage Publications.
Kahan M, Rock E (2003). ‘Corporate constitutionalism: anti-takeover
charter provisions as pre-commitment’ working paper, New York
University Law School, available at
4 Int. Res. J. Account. Auditing
http://Isr.nellco.org/upenn/wps/papers/19, accessed 1 June
Mayer C (1996). “Corporate governance, competition and performance”,
OECD Economic Studies, 27.
OECD (1999), OECD Principles of Corporate Governance, Paris.
Ping J (2004). The Relationship Between Ownership Structure and Firm
Performance: an Empirical Analysis over Heilongjiang Listed
Companies, Nature and Science, 2(4).
Ram B, Charles M, Ramesh S (1995). CEO duality and firm
performance:
WHAT'S THE FUSS?, Research Article, Received:
28 September
Eyenubo 5
APPENDIX
Regression Result on NEMPLOYEE
Descriptive Statistics
Mean
Std. Deviation
N
NPAT
4.31E5
231499.200
50
NEMPLOYEE
1716.10
274.583
50
Correlations
NPAT NEMPLOYEE
Pearson Correlation
NPAT
1.000
-.161
NEMPLOYEE -.161
1.000
Sig. (1-tailed)
NPAT
.
.132
NEMPLOYEE
.132
.
NPAT
22
22
NEMPLOYEE
22
22
N
Variables Entered/Removedb
Model Variables Entered Variables Removed Method
1
a
NEMPLOYEE
.
Enter
a. All requested variables entered.
b. Dependent Variable: NPAT
Model Summaryb
Change Statistics
Model
1
Adjusted Std. Error of R Square
F
Sig. F DurbinR Square R Square the Estimate Change Change df1 df2 Change Watson
R
a
.961
.926
.946
230849.348
.926
37.276
1
48
a. Predictors: (Constant), NEMPLOYEE
b. Dependent Variable: NPAT
ANOVAb
Model
1
Sum of Squares Df
Mean Square
Regression
6.801E10
1
6.801E10
Residual
2.558E12
20
5.329E10
Total
2.626E12
21
a. Predictors: (Constant), NEMPLOYEE
b. Dependent Variable: NPAT
F
Sig.
a
37.276 13.264
13.264
2.272
6 Int. Res. J. Account. Auditing
APPENDIX CONTINUE
Model Summaryb
Change Statistics
Model
1
Adjusted Std. Error of R Square
F
Sig. F DurbinR Square R Square the Estimate Change Change df1 df2 Change Watson
R
a
.961
.926
.946
230849.348
.926
37.276
1
48
13.264
2.272
a. Predictors: (Constant), NEMPLOYEE
b. Dependent Variable: NPAT
Coefficientsa
Unstandardized Coefficients
Model
1
B
Std. Error
(Constant)
663914.703
208679.820
NEMPLOYEE
-135.684
120.104
Standardized Coefficients
Beta
t
3.181 1.003
-.161
2.130 1.264
a. Dependent Variable: NPAT
Residuals Statisticsa
Minimum
Maximum
Mean
Std. Deviation
N
3.94E5
4.89E5
4.31E5
37256.386
50
-3.338E5
4.090E5
.000
228481.600
50
Std. Predicted Value
-.987
1.563
.000
1.000
50
Std. Residual
-1.446
1.772
.000
.990
50
Predicted Value
Residual
a. Dependent Variable: NPAT
Sig.
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