Abstract
The paper examines the implications of Corporate Governance and leverage on firm profitability (ROA), value (MPS) and cash flows (FCF). The study utilized the agency, stewardship and free cash flow theories. The correlation research design was employed and data collected from ten (10) listed manufacturing firms in Nigeria between the period 2009-2018. The data was analysed for descriptive and correlation properties, with the research hypotheses tested through regression analysis. The results of the study indicates that independent boards have significant negative influence on debt usage, board size does not have a significant effect on debt capital, CEO duality positively impacts the usage of debt financing. The results also indicate that independent boards (BIND) have significant impact on ROA, FCF and MPS, BSIZE is found to exert no statistically significant impact on the financial performance variables, CEO duality negatively impacts both FCF and MPS of the sampled manufacturing firms in Nigeria. Furthermore, the impact of DEBT on ROA and FCF are found to be negative, with the negative effect on ROA being statistically insignificant at the 0.05 level (-0.015, (0.6846)), and the negative effect on FCF being statistically significant at the 0.05 alpha level. The research concludes that the research therefore upholds that capital structure, corporate governance board characteristics and financial performance of manufacturing firms listed on the NSE are significantly related at the 0.05 level. The study recommended that the role of the CEO and board chairman be separated and current debt levels in the manufacturing industry be maintained. Keywords: Corporate Governance, Leverage, Firm Profitability, Firm Cash Flows, Firm Value DOI : 10.7176/RJFA/10-24-04 Publication date: December 31 st 2019
Highlights
Sound corporate governance principles are the foundation upon which the trust of investors and lenders is built
To alleviate the effects of spurious outliers, extreme values are limited in the statistical data, with ROA, Debt capital (DEBT), Equity Capital (EQTY), Free Cash Flow (FCF) winsorized at 1% and 99%
The descriptive results of firm value, measured using the market price of shares indicate that the average market price of manufacturing firm shares in the period studied are about 2.49 naira, with maximum price for the www.iiste.org period under study amounting to about 11.75 naira, with the minimum price plummeting as low as 0.39 naira
Summary
Sound corporate governance principles are the foundation upon which the trust of investors and lenders is built. The fundamental perception and understanding of the field of corporate governance originated from the fact that there are potential problems associated with separation of ownership and control. This is inherent in the modern corporate form of organization with a set of institutional and market mechanisms that induce selfinterested managers (controllers) to maximize the value of the residual cash-flow of the firm on behalf of its shareholders (the owners). This conflict within the firms leads to distortion in corporate policy choices and lower corporate performance. If they spend the free cash on more risky action, the probability that the repayment schedule will be met decreases
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