Corporate Governance and Profitability of Listed Food and Beverages Firms in Nigeria

Abstract

At its core, the goal of a firm is to create sustainable profitability. And corporate governance should work to ensure this steady increase in corporate performance. Understanding the impact of corporate governance on firm profitability has warranted a special attention over time by different fields of scientific knowledge. This study was aimed to explore the relationship between corporate governance and profitability of firms, employing eight food and beverages firms listed in the Nigerian Stock Exchange from 2004 to 2014.  The data were analysed using basic descriptive and inferential statistics with Ordinary Least Square multiple regression in a panel data setting. The results revealed that at 5 per cent level of significance, board size has positive relationship with return on equity and net assets per share. However, board composition has negative relationship with return on equity but with positive association with net assets per share. Board skills and competence has negative relationship with return on equity and net assets per share, while board gender diversity results indicated positive relationship with return on equity and net assets per share. Despite the mixed results, it can be argued that the empirical results support the contention that corporate governance has a positive relationship with profitability of firms. The study recommends among other things, that Nigerian food and beverages firms should adopt effective corporate governance practice as a panacea to firm growth and survival. Further research using corporate governance processes and profitability will not only add value in explaining performance of firms, but also add value to the academic literature.

Keywords: corporate governance; board; profitability; food and beverages; listed firms; Nigeria.