Corporate Governance and Firm Financial Performance: The Nigerian Evidence

The study examines the board’s independence, gender and ethnic minority diversity and firm’s ownership structure in relation to performance. Its overall aim is to investigate the causal relationship between the internal governance mechanisms and firm’s financial performance, and based on empirical findings make recommendations for improvement. The study uses the GMM methodology which permits simultaneous control of both endogeneity of independent variables and fixed effects. The data comprise hand-collected panel dataset of firms that are listed on the Nigerian Stock Exchange over the 12-year period (2004-2015). The study provides evidence that, board independence enhances firm performance and that, performance impact of board independence is stronger in closely-held than the widely-held firms. Its findings suggest that the positive impact of board independence on firm performance is moderated by ownership structure. Findings also reveal an insignificantly negative association between the board independence and ownership concentration. The study finds a negative and significant association between the executive directors’ ownership, non-executive directors’ ownership, institutional and non-institutional blockholders’ ownership respectively and Tobin’s Q. It provides evidence that, except for non-executive directors’ ownership none of other forms of ownership improves firm performance. Finally, regarding the investigation of both the agency and resource dependence role of the females and ethnic minorities on the Nigerian corporate boards, finding reveals a significantly positive association between the ethnic minority directors’ representation, female directors’ presence on the board and firm performance. Findings of the study further suggest that, the female and ethnic minority directors are valued members of the corporate boards equally as the men and other ethnic director counterparts.