Board Size and Composition and Corporate Performance: the Case of Non- Financial Companies on the Nigerian stock Exchange

Abstract

The rampant corporate failures in recent times both within and outside Nigeria make corporate governance issue an interesting and important area of research in Accounting.  The cases of Enron, Xerox, Adelphia et cetera internationally and Cadbury, NITEL, NEPA, NRC and many banks in Nigeria are very well known. Interestingly the Board of Directors as the top management of these corporate entities is where the bulk stops. The quality of the board, its efficiency and by extension the corporate performance of the entity could be affected by the size and composition of the Board as a critical element of corporate governance. Precisely the question is asked, if at all, to what extent do Board size, Board composition/structure, and frequency of board meetings and regularity of attendance at meetings by board members impact the corporate performance of companies? This paper uses opinions of company administrators and managers to assess their perception on the impact of Board size and composition and the related variables on the financial performance of Non-Financial Companies quoted on the Nigerian stock exchange. A total of 72 companies selected through the Taro Yameni formula were selected and three copies of a structured questionnaire administered to three top ranking managers/accountants in each company to get their perception of the impact of these board characteristics on the corporate governance and performance of these companies. The Micro soft Special Package for Social Sciences (SPSS) was used to analyze the responses presented in a 5-point likert scale. The regression showed that there is a significant positive relationship between the Board size, composition, frequency of meetings, regularity of members’ attendance   and performance of quoted non financial companies. R, the correlation coefficient which has a value of 0.977, indicates that there is a significant positive relationship between the Board size, composition, frequency of meetings, regularity of members’ attendance   and performance of quoted companies.  R square, the coefficient of determination, shows that (B = -02.0%; C= 80.4%; F= -22.2%; R= 40.7%) of the variation in the performance of quoted companies is explained by the model. More specifically, a higher percentage outside board membership leads to a higher corporate performance and the fewer the overall size of the Board, the higher the corporate performance. It is therefore recommended among others that the Board should not be unnecessarily weighty in size but more importantly, the Board should be composed more of outsiders with proven integrity, acumen, experience and skill in corporate management. This is expected to reduce drastically the spate of corporate failures as good corporate governance is engendered

Key words: Board of Directors, Corporate performance, corporate governance,