Board Characteristics and Financial Performance of DMBs: Evidence from Nigeria
Abstract
The study examines the effect of corporate board characteristics on the performance of listed DMBs in Nigeria. This study used secondary data extracted from the annual reports of 12 listed firms in Nigeria during the period 2011 – 2020. The study employed Tobin’s Q as a proxy of firm performance, while Board size, Independence, diligence, gender diversity, and ethnic diversity are employed as the proxies of board characteristics. The Pooled Ordinary Least Square regression (POLS) and panel fixed effect regression methods were used to analyse the data collected. Findings revealed that board size and board ethnic diversity exerts a statistically significant negative influence on DMBs' financial performance, board independence has a negative and non-significant effect on DMBs financial performance, while board diligence and gender diversity have a positive non-significant effect on DMBs' financial performance. The study recommends among others that board size be carefully analysed by shareholders and balanced according to the expected result, board independence be continuously maintained and periodically reviewed, a maximum of 6 board meetings excluding emergency meetings be held annually; board members should consist of at least half gender diversity, and finally, ethnic heterogeneity be allowed on the boards of Nigerian firms for equity, fair representation, and relative peace
Downloads
References
Adams, R., & Mehran, H. (2003). Is corporate governance different for bank holding companies? Economic Policy Review – Federal Reserve Bank of New York, 9, 123-142.
Adekunle, S. A., & Aghedo, E. M. (2014). Corporate governance and financial performance of selected quoted companies in Nigeria. European Journal of Business and Management, 6(9), 4-16.
Andres, P., & Vallelado, E. (2008). Corporate governance in banking: The role of the board of directors. Journal of Banking and Finance, 32(12), 2570-2580.
Bebeji, A., Mohammed, A., & Tanko, M. (2015). The effect of board size and composition on the financial performance of banks in Nigeria. African Journal of Business Management, 9(16), 590-598.
Bekiaris, M. (2021). Board structure and firm performance: An empirical study of Greek systemic banks. Journal of Accounting and Taxation, 13(2), 110-121.
Belkhir, M. (2009). Board of directors' size and performance in the banking industry. International Journal of Managerial Finance. 5, 201-221.
Belkhir, M. (2006). Board structure, ownership structure, and firm performance: Evidence from banking. European Financial Management Association, EFMA, Conference, Madrid.
Boussaada, R., & Karmani, M. (2015). Did board of directors have an impact on MENA bank performance? International Journal of Economics and Finance, 7(4), 46-56
Eisenhardt, K. (1989). Agency theory: An assessment and review, Academy of Management Review, 14(1), 57–74.
Eluyela, D. F., Akintimehin, O. O., Okere, W., Ozordi, E., Osuma, G. O., Ilogho, S. O., Oladipo, O. A. (2018). Board meeting frequency and firm performance: examining the nexus in Nigerian deposit money banks. Heliyon 4(10), 1-15. http://dx.doi.org/ 10.1016/j.heliyon.2018.e00850.
Ene, E. E., & Bello, A. I. E. (2016). The effect of corporate governance on bank’s financial performance in Nigeria. IOSR Journal of Business and Management (IOSR-JBM), 18(11), 99-107.
Esan, B. A., Anawude, A. C., and Okeke, I. J. (2020). Effect of corporate governance on financial performance of selected deposit money banks quoted on the Nigerian stock exchange (2005-2017). European Journal of Economic and Financial Research, 4(1). 44-69.
Filip, F., Vesna, M., & Kiril, S. (2014). Corporate governance and bank performance: Evidence from Macedonia. Economic Analysis, 47(1-2), 76-99
Gwaison, P.D. & Maimako, L.N. (2021). Effect of Corporate Governance on performance of Commercial Banks in Nigeria. International Journal of Finance Research, 2(1), 13-23.
Isik, O., & Ince, A. R. (2016). Board size, board composition and performance: An investigation on Turkish banks. International Business Research, 9(2), 74-84.
Jensen, M. C. (1993). The modern industrial revolution, exit, and the failure of internal control systems. The Journal of Finance, 48(3), 831-880.
Jensen, M. C., & Meckling, W. H. (1976). Theory of the firm: Managerial behaviour, agency costs, and ownership structure. Journal of financial economics, 3(4), 305-360.
John, K., & Senbet, L. W. (1998). Corporate governance and board effectiveness. Journal of Banking & Finance, 22(4), 371-403.
Kyei, S. M., Werner, K., & Appiah, K. O. (2022). Board meetings and bank performance in Africa. Cogent Business & Management, 9, 1-16.
Lehn, K. M., Patro, S., & Zhao, M. (2009). Determinants of the size and composition of US corporate boards: 1935‐2000. Financial management, 38(4), 747-780.
Linck, J. S., Netter, J. M., & Yang, T. (2008). The determinants of board structure. Journal of financial economics, 87(2), 308-328.
Mahdi, G., Behnaz, S., Mansoureh, S. & Neda, S. J. (2014). Assessing the relationship between firm size, age, and financial performance in listed companies of Teheran stock exchange. International Journal of Scientific Management and Development, 2(11), 1-8.
Mallinguh, E., Wasike, C., & Zoltan, Z. (2020). The business sector, firm age, and performance: The mediating role of foreign ownership and financial leverage. International Journal of Financial Studies, 8(79), 1-16.
Ogboi, C., Aderimiki, V. O., & Enilolobo, O. S. (2018). Corporate Board Diversity and Performance of Deposit Money Banks in Nigeria. International Journal of Humanities and Social Science, 8(1), 112-120.
Ogunmakin, A. A., Fajuyagbe, S. B., Alayo, R. A. (2020). Corporate Governance and Financial performance of deposit money banks in Nigeria. EuroEconomica. (1(39), 180-197.
Okoye, L. U., Olokoyo, F. O., Okoh, J. I., Ezeji, F. & Uzohue, R. (2020). Effect of corporate governance on the financial performance of commercial banks in Nigeria. Banks and Bank systems, 15(3), 55-69.
Olokoyo, F. O., Adegboye, F. B., Okoye, L. U., Evbuomwan, G. O., & Adebo, A. E. (2019). Corporate governance and deposit money banks performance in Nigeria. In Proceedings of INTCESS 2019 – 6th International Conference on Education and Social Sciences. Dubai, UAE.
Orozco, L. A., & Vargas, J. (2018). Trends on the relationship between board size and financial and reputational corporate performance: The Colombian case. European Journal of Management and Business Economics, 27(2), 183-197.
Osemwegie, V., O. & Ugbogbo, S. N. (2019). Effect of Board Remuneration and Diversity on Financial performance of Quoted banks in Nigeria. International Journal of Research and Scientific Innovation, 6(4), 45-53.
Raihan, M. Z., & Hoque, K. E. (2013). Impact of corporate governance practices in some selected private banks in Bangladesh. Actual Problems of Economics, 11(149), 484-493.
Sani, A. B., Aliyu, A. A., and Bakare, T. O. (2019). Effect of corporate governance on financial performance of deposit money banks in Nigeria. Asian Journal of Economics, Business, and Accounting. 13(3): 1-11
Sanyaolu, W. A., Adejumo, B. T., & Kadiri, I. (2020). Board diligence and financial performance: evidence from Nigerian Deposit Money Banks. Copernican Journal of Finance and Accounting, 9(3), 145-160. http://dx.doi.org/10.12775/CJFA.2020.017
Shleifer, A., & Vishny, R. W. (1997). A survey of corporate governance. The Journal of Finance, 52(2), 737-783.
Vo, D., & Phan, T. (2013). Corporate governance and firm performance: Empirical evidence from Vietnam. Retrieved from http://digital.lib.ueh. edu.vn/handle/UEH/55153
Weisbach, M. S. (1988). Outside directors and CEO turnover. Journal of Financial Economics, 20, 431-460.
Yahaya, O. A. & Lamidi, Y. (2015). Empirical examination of the financial performance of Islamic banking in Nigeria: A case study approach. International Journal of Accounting Research, 2(7), 1-13.
Copyright (c) 2023 Johnson Emberga Aernan, Steve Emeka Emengini, Bonaventure Sunday Okonkwo
This work is licensed under a Creative Commons Attribution 4.0 International License.
