BOARD COMPOSITION AND FINANCIAL PERFORMANCE OF LISTED CONSUMER GOODS COMPANIES IN NIGERIA

ABSTRACT

This study examines board composition and financial performance of listed consumer goods companies in Nigeria over the period from 2012 to 2021. The study employed two measures of financial performance (return on equity-ROE and return on asset-ROA). These measures were individually regressed on board size, proportion of non-executive directors, audit committee size, corporate governance disclosure index and directors’ equity holding (proxy for consumer goods companies’ board composition). Twenty-one (21) listed consumer goods companies were examined, utilizing descriptive statistic, correlation analysis, pooled OLS and panel data estimation techniques. The empirical results show that board composition attributes (characteristics) significantly influence firm financial performance of consumer goods companies in Nigeria. Specifically, board size, proportion of non-executive directors and audit committee size are negatively related to financial performance of listed consumer goods companies in Nigeria, while directors’ equity holding and corporate governance disclosure are significantly positive in relation with financial performance of listed consumer goods companies in Nigeria. Against the backdrop of these findings, it is recommended that it is necessary to consider board size when taking financial decisions. The implication of this is that the quality of board members should have significant impact on financial performance and not the quantity of members in the board. To improve board composition, the value of the stock ownership of board members must be put in mind, since it relates positively to both the probability of disciplinary management turnover and future operating performance in poorly performing listed consumer goods companies in Nigeria.