Board Composition and Firm Performance of Quoted Commercial Banks in Nigeria
Abstract
Banks world over are expected to operate within acceptable standards of governance for consistent operational performance. They depend on customer deposits, which are confidence–driven. Since the quality of governance is critical to winning and retaining customer confidence and patronage, the imperative for good governance practices in banks cannot be overemphasized. The aim of this study is to empirically explore the relationship between board composition and firms’ performance of quoted commercial banks in Nigeria. Data on different variables of board composition and firm market value from 2011-2021 were collected from the annual financial reports of all the fourteen quoted commercial banks in Nigeria. Ordinary least square regression analysis, descriptive statistics, Hausman specification test, likelihood ratio test, panel stationarity test, Lagrange multiplier test, lag length selection criterion, and panel auto-regressive distribution lag brand test was used in analyzing the data. The empirical results indicate that board composition significantly relates to firm performance, explaining about 85.1% of the total variation of firm market value. The study concludes that board composition contributes significantly to firm performance and recommends that a strong and mandatory corporate governance structure should be put in place to ensure that the board of directors consists mostly of members that are independent of the firm, both directly and indirectly.
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