The Relationship Between Board Diversity and Corporate Financial Performance: &amp;lt;i&amp;gt;Empirical Evidence from Five Selected Commercial Banks in Nigeria&amp;lt;/i&amp;gt;

Sixtus Cyprian Onyekwere,Shukriyya Nuuman Danbatta,Samuel Wesiah

doi:10.11648/j.ijfbr.20190504.13

The Relationship Between Board Diversity and Corporate Financial Performance: &lt;i&gt;Empirical Evidence from Five Selected Commercial Banks in Nigeria&lt;/i&gt;

Sixtus Cyprian Onyekwere, Shukriyya Nuuman Danbatta + Show 1 more

Open Access

https://doi.org/10.11648/j.ijfbr.20190504.13

Copy DOI

Abstract

The purpose of this research was to investigate the nature of the relationship between board diversity and financial performance of deposit money Banks quoted on the Nigerian stock exchange. Based on extensive review of the literature, three board diversity variables were identified namely gender (measured by the proportion of women in the boardroom), non-executive directors (measured by the proportion of non-executive directors that make up the boardroom) and board size. Financial performance was measured using Return on Assets (ROA) and Return on Equity (ROE). The Fixed effects Panel data regression model was used to test the nature of relationship between the board diversity variables and the financial performance variables, using secondary data from the Banks annual financial statements covering the period from 2006-2017. The result of the analysis showed that gender diversity has a statistically significant positive impact on banks financial performance. On the other hand, the study also indicated that non-executive directors and board size do not have a significant impact on banks performance. Based on the findings from this study, it was therefore recommended that quoted deposit money banks in Nigeria should raise female proportions in their boardroom so as to improve financial performance.

Highlights

The banking sector is central to the economic growth of any country's economy, since it influences the level of money stocks through the ability to create deposits and extend credit
The important role played by the financial systems in accelerating economic development is widely recognised and this can be traced back to the era of Goldsmith which shows that the financial sector of the economy would be a catalyst of economic growth if developed
Understanding the relationship between Board characteristics and corporate performance has become extremely necessary given the wave of corporate frauds which has resulted to the failure of many corporate entities across the globe

Summary

Introduction

The banking sector is central to the economic growth of any country's economy, since it influences the level of money stocks through the ability to create deposits and extend credit. Understanding the relationship between Board characteristics and corporate performance has become extremely necessary given the wave of corporate frauds which has resulted to the failure of many corporate entities across the globe Examples of such failed entities include Enron, WorldCom, Lehman Brothers, etc. In Nigeria, there were recorded cases of corporate failures; examples of failed corporate entities in Nigeria that were attributed to poor corporate governance include, Oceanic bank plc, Wema bank plc, Fin bank, Spring bank, Afribank and the recent case of Skye Bank [2] (Abubakar, 2018) These are all linked to poor or ineffective board in the discharge of the oversight function over the firms they manage. Devising an effective way of monitoring managerial decisions becomes essential for the board of directors in order to protect shareholders' interests [21]

Objectives

Methods

Results

Conclusion