Board Composition and Corporate Performance: An Analysis of Evidence from Nigeria

Abstract

This study examines the impact of board composition on the economic performance of firms in Nigeria. This study is significant because it attempts to analyze the relationship between corporate governance practices and financial performance in Nigeria thus providing a basis for a framework for institutional regulations. Board composition in this study is in terms of the proportion of the board of directors in Nigeria that is represented by outside non-executive directors. The hypothesis for the study is that there is no significant positive relationship between board composition and firm performance in Nigeria. The study uses a cross-sectional design, using a survey of a sample of 38 firms during the 2009 financial year. Results show that outside non-executive directors do not create any economic value added though may have some benefits. The results of the study are consistent with those of earlier studies for both developed and developing economies that there is no explicitly clear relationship between board composition and firm performance.

Key words: Board composition, Corporate performance, Corporate governance, Non-executive directors.