Ownership Structure, Board of Directors and Financial Performance: Evidence in Nigeria

Abstract

Purpose: This paper examines two relationships: ownership structure and financial performance on one hand; board of directors and financial performance on the other hand. The sample consists of 75 companies from non-financial services companies  listed on the floor of the Nigerian Exchange Group for the period 2012-2021.

Design/Methodology/Approach: Financial performance is measured by return on assets, return on equity, return on invested capital, and Tobin’s Q. Ownership structure is measured by the shares of institutional investors and those of CEO. Board of directors is measured by (board independence, size, committees, gender diversity, CEO tenure, age, duality, base salary, bonuses, packages with shares). The estimation model used generalized least squares, the correction of standard errors for heteroskedasticity using the method of White, and the fixed-effects.

Findings: The results highlighted a mixed influence of the independent variables on financial performance (board size, share of women on the boards, the independence of the board). 

Conclusion: We concluded a positive relationship between ROE and the remuneration of CEO in bonuses, as well as a negative relationship between Tobin’s Q ratio and the remuneration of CEO through shares at the company they manage.

Originality/Value: The paper highlighted two major components of corporate governance: ownership structure and board of directors, as they relate to financial performance seen from both accounting and market performance measures. However, it should be noted the findings are only useful to listed non-financial services companies on the Nigerian Exchange Group. Future studies may consider expanding the proxies of ownership structure, board of directors and financial performance.