Abstract
This study was on corporate governance mechanism and firm value. Three objectives were raised which included: To ascertain the effect of corporate governance in Bua cement, to examine the effect of managerial ownership and value of Bua cement and to ascertain the relationship between corporate governance and the return on investment to the shareholders. The total population for the study is 75 staffs of Bua cement company in Lagos. The researcher used questionnaires as the instrument for the data collection. Descriptive Survey research design was adopted for this study. The data collected were presented in tables and analyzed using simple percentages and frequencies. The study recommended that companies should increase the size of their boards since it’s related to firm performance. However, this increase should be to the extent of fifteen based on the optimal value of partial derivatives. Also, companies may increase outside directors on its board especially independent directors. This may add economic value and enhance transparency.
Chapter one
Introduction
1.1Background of the study
In the past few decades, there has been impressive body of empirical evidence and theory about the ownership of the modern public corporation. Economists have invested significantly into researching the issue of separation of ownership and control. When there is separation of ownership and control problems arise between owners and those managing their wealth (Fama and Jensen 1983). This is what is known as the principal-agency conflict (Aguilera and Crespi-Cladera 2016; Zhang et al. 2016). Circumstances where interests of both parties fail to converge are fertile for principal agency conflicts. This type of conflict normally manifests itself in governance systems with widely dispersed ownership, though they can be mitigated by high levels of investor protection (Shleifer and Vishny 1997). In particular if both principal and agent are utility maximizers, the agent may not always act in the interest of the principal (Jensen and Meckling 1976). As such the agent pursues objectives that are not aligned to the firm value maximization goal of shareholders for instance status, growth, permanence in the company and greater salaries (Lozano et al. 2016). This behavior is detrimental to the shareholder’s wealth, and therefore, to the firms’ wealth. As such, shareholders must install mechanisms to control it.
The desirability of maximizing shareholders wealth and protecting the stakeholder’s interest has been the quest of corporate entities. The going concern concept of a corporate body is a function of the extent to which an entity can create  value substantially  for relevant stakeholders. Hence, for corporate entities to fulfilled corporate objective of maximizing wealth through value creation, relevant corporate governance  mechanisms  are  strategically required for value creation. Fundamentally, there are  different mechanisms of corporate governances upon which firms can utilize to enhance their economic value which implied the extent  to  which  corporate  governance mechanisms constitutes an important determinant of the value of firms (Khan A, Tanveer T, 2017)
From the perceptive of the fundamental analysis, the concept of corporate governance as determinants of corporate value is well grounded. Another study examines the impact of corporate governance practices on firm value. Those studies were able to highlight a management process whereby firms considered the interests of stakeholders and operate based on fairness, accountability, transparency, and responsibility in order to enhance the value of firms. The mechanisms of corporate governance encapsulate stakeholders’ right and responsibility by organizing the relationship  between management, shareholders, creditors, investors and other stakeholders. The study of corporate governance also involves  the  field  of management  study  which  encompasses organizational complexities in areas such as management practices, board composition, board power and other areas of corporate management (Smith WK, 2014)
Statement of the problem
Ideally, corporate governance is at the heart of unravelling how the owners of capital and relevant stakeholders can monitor the activities of management in order to safe guide investment for enhancement of corporate valuation highlight corporate governance as a mechanism of getting a return on investment to the shareholders. The main concern of corporate governance is to provide protection to investors and stakeholders and to ensure corporate efficiency, transparency, and accountability and to mitigate arising conflicts in order to create value for owners, managers and relevant parties . To pursue these objectives many corporate governance mechanisms are designed to monitor the activities of the managers and to alleviate the conflict of interests between relevant stakeholders . Through this study, corporate governance practices as a panacea for determining the value of corporate entity will enrich existing literature on the impact of different characteristics of corporate governance such as concentrated ownership, managerial ownership, and foreign ownership, the board size, and board independence
Objective of the study
The objective of this study is to investigate Corporate Governance Mechanism and Firm Value. Using Bua cement as a case study. The specific objectives are;
- To ascertain the effect of corporate governance in Bua cement
- To examine the effect of managerial ownership and value of Bua cement
- To ascertain the relationship between corporate governance and the return on investment to the shareholders
Research question
The study formulated the following research question;
- What is the effect of corporate governance in Bua cement?
- What is the effect of managerial ownership and value of Bua cement?
- What is the relationship between corporate governance and the return on investment to the shareholders?
Research hypotheses
The following research hypotheses were formulated
H0: there is no effect of corporate governance in Bua cement
H1: there is effect of corporate governance in Bua cement
H0: there is no effect of managerial ownership and value of Bua cement
H2: there is effect of managerial ownership and value of Bua cement
H0: there is no relationship between corporate governance and the return on investment to the shareholders
H3: there is relationship between corporate governance and the return on investment to the shareholders
Significance of the study
The study will be beneficial to students and organizations. the study will give a clear insight on the corporate governance mechanism and firm value. The result of the study will be of benefit to Bua cement company and other companies on the managerial ownership and the value in their companies. The study will also serve as a reference to other researcher that will embark on the related topic
Scope and limitation of the study
The scope of the study covers corporate governance mechanism and firm value. The study will be limited to Bua cement company in Lagos state
Limitations/constraints are inevitable in carrying out a research work of this nature. However, in the course of this research, the following constraints were encountered thus:
- Non-availability of enough resources (finance):Â A work of this nature is very tasking financially, money had to be spent at various stages of the research such resources which may aid proper carrying out of the study were not adequately available.
- Time factor:Â The time used in carrying out the research work is relatively not enough to bring the best information out of it. However, I hope that the little that is contained in this study will go a long way in solving many greater problems.
 Definition of terms
Corporate governance: Corporate governance is a system of rules, policies, and practices that dictate how a company’s board of directors manages and oversees the operations of a company; Corporate governance includes principles of transparency, accountability, and security.
Mechanism: a system of parts working together in a machine; a piece of machinery.
Firm value: A firm’s value, also known as Firm Value (FV), Enterprise Value (EV). It is an economic concept that reflects the value of a business.
This material content is developed to serve as a GUIDE for students to conduct academic research
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