Effect of Corporate Governance Mechanisms on Cost of Debt of Listed Consumer Goods Companies in Nigeria

Abstract

This study examined effect of corporate governance mechanisms on cost of debt of listed consumer goods companies in Nigeria. Specifically, the study examined the effect of board size, board gender diversity, board independence, board meeting and audit committee size on cost of debt. Ex-post facto design was employed as data were extracted from published audited annual financial reports of 16 sampled listed consumer goods companies on the Nigerian Exchange Group for a period of ten (10) years covering 2012-2021. The data collected were processed and subjected to series of tests to ascertain the data validity and reliability for analysis; these include; correlational test, variance inflation factor and normality test. Regression post estimation was conducted using heteroskedasticity test. Panel data analysis was employed and multiple regression analysis was conducted and the Ordinary Least Square (OLS) model was found most appropriate to test the formulated hypotheses. The study found that Board side (BS) has significantly reduces cost of debt; board gender diversity (BD) insignificantly increase cost of debt; board meeting (BI) significantly reduces cost of debt; board meeting (BM) significantly reduces cost of debt and audit committee size (ACS) significantly reduces cost of debt of consumer goods companies listed on the NGX Group. Therefore, the study recommends amongst others that the board should comprise more experienced directors with widely varied experience in all aspects of the business. Specifically, the board should be made up more directors with sufficient level of financial literacy and professionalism which they will come to bear in ensuring that finances derived from either debt or equity sources are rightly managed.