The increasing number of high profile corporate failures around the world has sparked off a lot of enquiry as to the reasons why well-established and respected companies failed. Corporate failure today is a global issue. On the international scence we saw the overlaps of large companies like Enron, Worldcom, Rank, Xerox, Rarmalat, Bank of Credit and Commerce International (BCCI) and large-scale crisis that rocked the Asian financial institutions. In Nigeria, corporate failure is very rampant in the financial services sector some years back and even at present. Cases of corporate debacle abound in the death of Abacus Merchant Bank Nigeria Limited, Royal Merchant Bank Limited, Rims Merchant Bank Limited, Financial Merchant Bank Nigeria Limited, Progress Bank Plc to mention but a few (Al-Faki;2006). Soludo: 2005 hinted that by 1998 a total of 26 banks have been liquidated and at the time of consolidation in 2005, eleven banks were already dead literally. Outside the banking institution, creative accounts of African petroleum where its concealed debts in excess of N20 billion, over valuation of shares of involving Bonkolans securities and others are signals of impending doom for these companies. What then is the cause of corporate failure in local and international, listed and unlisted, quoted and unquoted, public and private companies?

John Clutterback in Al-Faki (2006) highlighted that companies that failed shares some common characteristics and they are: –

  • Leadership of the company is vested in an individual who combines the office of chairman and chief executive with domineering tendency.
  • Persistent violation and non-compliance with internal control of the company by the chief executive.
  • Optimistic or even distorted rather than prudential financing reporting.
  • Irregular board meetings, often without adequate information given in advance.
  • Minimal disclosure in the accounts of the company.


It is the combination of these factors that undermine the ability of companies to withstand economic downturns turns leading to a collapse.

In the Nigerian Banking Industry, issues such as lack of probity, transparency, integrity and accountability, inflation of balance sheet with unearned income, weak capital base, unskilled and inefficient management also contributed to death of many banks. Uche, 2001 identified the reasons of early indigenous banks failures as mismanagement and accounting incompetence. These are the issues today’s legislation need to combat with since yester years’ provision seemed to be adequate.

What then is adequacy of bank legislation and controlling and regulating the banking practices in the industry? The question is pertinent, because in spite of the existing legislations, a number of failures and distresses have been recorded in the industry. In an attempt to design codes, that will be appropriate to quell these irregularities, a global phenomenon termed “Corporate Governance” came into existence. Today, it has become a contemporary issue, which has dominated the interest of all business, legal and government circles worldwide. In the Nigerian scene, the provisions in the code of Corporate Governance was designed to augment the provisions of Company and Allied Matters Act 1990 (CAMA), Bank and other Financial Institution Act (BOFID) 2004, Failed banks (Recovery of Debts) and financial malpractices in Bank Act 2004, Nigeria Deposit Insurance Corporation Act, 2006, Money Laundering (prohibition) Act 2004, Economic and Financial Crimes Commission (Establishment) Act 2004, Prudential Guidelines and other relevant banking codes and prudential guidelines for Deposit Money Banks in Nigeria.(2010)