Board Characteristics, Ownership Structure and Firm Value of Listed Petroleum Companies in Nigeria

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Corporate governance is increasingly becoming a topical issue in Nigeria especially given the number of events that led to reforms meant to strengthen sound firm practices in the country. The events which include growth and decline in the equity market, expansion in the number of shareholders and a variety of corporate scandals have continued to raise the concern of policy makers, investors, analysts and academics on corporate governance practices of corporations and how these practices affect firm value. This paper examined the effect of board characteristics and ownership structure on firm value of listed petroleum companies in Nigeria. The study used six (6) listed petroleum firms that had consistently published their annual audited financial reports from 2008 to 2015, and analyzed the data based on robust pooled-OLS multiple regression result due to absence of panel effect in the dataset as confirmed by the result of Breusch Pagan Lagrangian Multiplier test. The results revealed that board size, board independence as well as managerial shareholding had significant negative effect on firm value. In the case of board gender diversity, it was discovered that the inclusion of females on the board of petroleum firms in Nigeria had a significant positive effect on firm value. The study concluded that overall, board characteristics and ownership structure components of board size, board independence, board gender diversity, ownership concentration and managerial shareholding affect the value of listed petroleum firms in Nigeria, though the direction and extent of the association vary from one component to the other. In view of the findings, the study recommended an optimal board size of between five (5) and sixteen (16) directors, beyond which an additional board member will create added costs greater than the benefit derivable from the added board member. Also, females should be elected to boards based on their skills, education, expertise and experience. In addition, concentrated shareholding should be encouraged at lower levels, while a large managerial ownership structure should be moderated to create a strong incentive to reduce the abuse of shareholders resources.