Abstract
The failure of business entities across the globe has continued to draw the attention of stakeholders of those entities. Due to these problems, different countries issued corporate governance regulations to avoid the repeat of the past. Part of the aims of these CG guides is to increase firm value. In Nigeria, similar guidelines issued for firms are referred to as codes of CG. However, arguments exist between stakeholders on whether those corporate governance mechanisms increase the value of shareholders. Some investment analysts suggest the consideration of governance mechanism before investment, while some argue that CG practices are not necessary for Nigeria. To address this problem, this research empirically examines the effects of female directorship, director compensation and managerial shareholding on price-earnings multiple of Nigerian firms. The research uses data from 100 firms listed in the Nigerian Stock Exchange (NSE). The study used the generalized method of moments (GMM) to estimate the regression due to endogeneity problem amongst the variables. The study reveals a significant positive association between female directorship, director compensation, managerial shareholding and price-earnings multiple at 10%, 1% and 10%, respectively. Therefore, it recommends additional females on board, compensation for directors and more managerial share ownership
Highlights
Price-earnings multiple referred to as company market multiple is used to evaluate the market price of equity adjustable to some particular value driver’s earnings and book value, for example
This study empirically examined the effect of female directorship, director compensation and managerial shareholding on the price-earnings multiple using the dynamic model
This study empirically examined the effects of three corporate governance variables, namely, female directorship, director compensation, and managerial shareholding, and the price-earnings multiple of Nigerian firms
Summary
Price-earnings multiple referred to as company market multiple is used to evaluate the market price of equity adjustable to some particular value driver’s earnings and book value, for example. PE multiple is among the equity valuation multiples (EVM) available in the literature which presents market opinion of companies comparative to its competitors (Penman, 2006). Price-earnings multiple is, essentially, used by business investment analysts to appraise stock performance. Shareholders that invest their money in a firm in form of stockholders generally have the interest of evaluating the amount of yield from capital invested. Other equity valuation available in the literature includes price-book value, price-cash flow, and price-sales multiples. As observed in the study of Schreiner (2007), the price-earnings multiple
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