Corporate Governance and Financial Performance of Quoted Companies in Nigeria

Abstract

This study investigates the impact of corporate governance on the financial performance of selected companies quoted on the Nigerian stock exchange over the period 2014 – 2018. The study uses a survey research design. The sample of the study covers fifteen companies from different sectors of the Nigerian stock exchange. Financial performance was captured by using return on investment, while the independent variable corporate governance was denominated by the percentage of attendance of board meeting and board size. All data were collected from the companies’ annual reports. The companies’ ages, firm and debt to equity ratio were used as control measures. The model was estimated using the Pooled Ordinary Least Squares estimation technique (POLS). Results from this study generally indicate that Board Activity and Board size have a significant positive impact on financial performance.  The correlation matrix also shows that there is a positive significant linear relationship between the proxies of corporate governance and ROI. The study recommends that corporate governance should be given more priority in companies given its capacity to contribute to financial performance, as such all four null hypotheses are therefore rejected. Based on these results, shareholders are encouraged to request for access to adequate director’s report at Annual General Meetings. Likewise, since Board activity and size have been shown to be strong predictors of firm performance, shareholders can make informed investment decisions by comparing attendance at board meetings and size of the boards. Further studies should consider other measures of the strength of the board such as board diversity and Number or frequency of meetings.  Similarly, future research works can utilize larger sample.

Keywords: Corporate governance, Board Activity, Board Size, ROI

DOI: 10.7176/EJBM/12-6-04

Publication date: February 29^th 2020