CORPORATE GOVERNANCE MECHANISMS, INVESTMENT POLICY AND FINANCIAL SUSTAINABILITY OF PENSION FUND ADMINISTRATORS IN NIGERIA
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Date
2024-06
Journal Title
Journal ISSN
Volume Title
Publisher
MALETE JOURNAL OF ACCOUNTING AND FINANCE, Department of Accounting and Finance, Faculty of Management and Social Sciences, Kwara State University, Malete
Abstract
The pension sector plays a crucial role in ensuring the well-being and financial stability of retirees.
Simultaneously, the capacity of pension fund administrators to uphold their financial stability has
emerged as a significant global issue. Consequently, this research scrutinized the factors
(specifically, corporate governance mechanisms and investment policy) influencing the financial
sustainability of Nigerian pension fund administrators. Primary data was gathered through a self administered questionnaire following a cross-sectional research design. The study encompassed the
19 pension fund administrators in Nigeria, with a purposively selected sample size of 228. Data
analysis was conducted using the PLS-SEM technique. The results revealed that corporate
governance mechanisms (β = 0.187, t = 1.046, p = 0.154) and investment policy (β=0.367; t=2.598;
and p=0.240) exhibit negligible impacts on the financial sustainability of pension fund managers in
Nigeria at 5% level of significance. Consequently, it can be inferred that corporate governance
mechanisms and investment policy do not exert a significant influence on the financial sustainability
of authorized pension fund administrators in Nigeria. The study recommended that pension fund
administrators in Nigeria should regularly assess and update corporate governance procedures to
align with industry best practices, implement robust oversight mechanisms to ensure transparency
and accountability in decision-making processes, and enhance board training and development to
improve the effectiveness of governance structures; and periodically review the investment policy to
adapt to changing market conditions and emerging risks, diversify investment portfolios to spread
risk and enhance potential returns, and utilize advanced risk management tools to identify and
mitigate potential investment risks.
Description
Corporate governance mechanisms in Pension Fund Administrators (PFAs) in Nigeria ensure accountability, transparency, and efficient management. Investment policies are crucial for optimizing returns while managing risks, supporting long-term financial sustainability. Effective governance, including board oversight and regulatory compliance, fosters prudent investment strategies. This alignment enhances the PFAs' capacity to meet future pension obligations, ensuring financial stability and confidence in the pension system. Integrating sound corporate governance with robust investment policies is vital for maintaining the financial sustainability of PFAs in Nigeria.
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Citation
Afolabi, A. A., Sanni, M., Oladele, M. O., Olumoh, Y. A. and Muhammed, K. U. (2024). Corporate governance mechanisms, investment policy and financial sustainability of pension fund administrators in Nigeria. Malete Journal of Accounting and Finance, 4 (2), 107-122. https://majaf.com.ng/index.php/majaf/article/download/143/96