Risk Management and the Financial Performance of Listed Real Estate/Construction Companies in Nigeria: The Moderating Role of Board Structure

Abstract

Purpose: The study explored the moderating effect of board structure (board size and gender diversity) on the nexus of operational risk, market risk and financial performance of listed real estate and construction companies in Nigeria. Design/Methodology/Approach: The study implemented ex-post facto research design to analyze the variables on a panel data of audited annual reports of selected companies. The sample size was the population size consisting using the census sampling method. The study used the secondary data retrieved from corporate annual reports and corporate websites of the companies listed on Nigeria exchange group between 2014 and 2023. The data was analyzed using panel least square method. Findings: Market risk exhibited a positive significance with ROA, while the negative relationship with Tobin’s Q was statistically insignificant. Operational risk exerts an insignificant negative and positive effect on ROA and Tobin's Q, respectively. Board structure has a favourable but insignificant moderating effect on the connection between market risk and ROA. However, board structure showed a significantly negative moderating effect on the link between market risk and Tobin's Q. Lastly, board structure showed positive but insignificant moderating effect on the relationship between operational risk and financial performance. Practical Implications: Companies should invest in more reliable risk management systems to effectively detect, evaluate, and reduce operational and market risks. This can lessen the detrimental effects of these risks on financial performance indicators like Tobin's Q and ROA. It is important to improve board governance procedures because board structure has a major moderating effect on the link between market risk and Tobin's Q. Originality/Value: Firstly, the study examined the influence of operational and market risks on financial performance. The study further explored the moderating effect of board structure (board size and gender diversity) on the nexus of operational risk, market risk and financial performance in the context of real estate and construction companies in Nigeria.