Corporate Governance and Firm Financial Performance in Nigeria

ABSTRACT

In ensuring that organisations are run in a way that guarantees its owners are receiving a fair return on their investment, this study aimed at investigating the relationship between corporate governance and firm financial performance in Nigeria. Specifically, the study investigated the relationship between board size, board independence and board gender diversity on firm financial performance of listed firms in Nigeria. The study was anchored on the agency theory. The study adopted the ex-post facto research design. The data was collected from annual reports of the sampled companies and analysed using E-views 8.0 statistical software. The study period spanned from 2014-2018. The study arrived at a sample of eighty-eight companies derived from the non-financial sector of the Nigerian Stock Exchange. The study measured financial performance using the return on assets (ROA). Board size was measured using the total number of directors on the board. Board independence was measured using the total number of outside directors expressed as a proportion of total board membership and board gender diversity was measured as the ratio of female to ale represented on the board of director. The technique of data analysis was the panel regression. The findings revealed the effect of board size on firm financial performance was found to be insignificant. Board independence showed a negative significant effect on firm financial performance. Furthermore, the results showed a positive effect of board gender diversity on firm financial performance. The study recommends that the quality of directors should be emphasised rather than the size of the board. Also, the study recommends that the independence of the board should be re-examined to ensure they monitor management diligently. The study also recommends that the presence of female directors should be encouraged as they bring in due diligence.