Corporate Governance and Credit Ratings in Nigeria

This study investigates the relation between corporate governance features and corporate credit ratings for a sample of 134 publicly traded firms from Nigeria for the period 2013 to 2022. Corporate governance features considered are foreign ownership, ownership concentration, family ownership, CEO ownership, board size, board independence, board gender, board meetings, board ownership, board remuneration, audit committee size, nomination committee size, remuneration committee size, risk committee size, and audit quality. In contrast to prior literature, credit ratings score is defined as the index of credit ratings factors. Further, the analysis examines the association between corporate governance characteristics and credit ratings. Comparable to general findings from studies using foreign data, the empirical analysis as a whole shows consistent significant link between the corporate governance mechanisms and corporate credit ratings. However, individual corporate governance mechanisms are found to influence corporate credit ratings in some cases. For example, family ownership, board gender, nomination committee size, and audit quality (big4) show positive significant effects on credit ratings. However, remuneration committee size, leverage and firm size show negative significant effects on credit ratings. Foreign ownership, ownership concentration, board independence, board size, board meetings, board ownership, board remuneration, audit committee size and risk committee size show no significance in relation with credit ratings. Overall, results provide evidence that even under different conditions, corporate governance role vary across credit ratings. Consequently, these findings do not support that uniform board features should be mandated. This study suffers from some limitations. First, the study sample is limited to only 1,340 observations. However, this is due to number of listed firms on main board of the NGX. Second, the study period ended in 2022. Third, although this study examines the effect of corporate governance, not all the governance aspects have been examined in the study models. Nevertheless, this paper is significant to regulators, market players (credit rating agencies), banks, shareholders, and boards of directors, management, lenders (creditors), and a number of other stakeholders. It offers empirical evidence for both policy improvement, performance improvement, future research and it provides additional body of knowledge.