Board Composition and Corporate Performance: X-raying the Nexus in Nigerian Banks

Abstract

We investigate the nexus between board composition and corporate performance of Nigerian banks listed on the Nigerian Stock Exchange (NSE) from 2010 to 2019. The contextual board characteristics of empirical interest include board size, financial knowledge of board members, frequency of board meetings, gender diversity and board independence. Corporate performance is measured by return on equity (ROE) and earnings per share (EPS). Our findings lead to the predictions that board size, financial nous of board members, gender diversity and board independence are important board characteristics that catalyse corporate performance, although the evidence of gender diversity and board independence is limited. We find no robust relation between the frequency of board meetings and corporate performance. Our findings affirm the plurality of governance theories. Although board characteristics are in aggregate perceived to be a strong determinant of firm performance, however, their disaggregation depicts differential effects on the performance of Nigerian banks. The study contributes to (a) empirical validation of theoretical pluralism to gain more insights into the dimensions of corporate governance, and (b) greater understanding of the nexus between board composition and corporate performance through the lens of both financial and nonfinancial factors. The fact that some board characteristics exhibit no or partial relations with firm performance suggests further research in and regulatory attention to the relations between board structure and optimal size for efficient corporate performance.