Corporate Governance Practices and Financial Performance of Quoted Consumer Good Companies in Nigeria
No Thumbnail Available
Date
2024-12
Authors
Journal Title
Journal ISSN
Volume Title
Publisher
Lead City University, Ibadan
Abstract
This study examines the impact of corporate governance on the financial performance of quoted consumer goods companies in Nigeria, focusing on key governance elements such as board composition, board diversity, audit committee independence, and board size. Using panel data from 2012 to 2022, the study employs both fixed and random effect regression models to analyze how these corporate governance factors affect two key performance metrics: return on assets (ROA) and return on equity (ROE). The Hausman test was conducted to determine the appropriate model for analysis. The findings demonstrate that board composition has a negative and significant effect on ROA of consumer goods companies (P= 0.027<0.05, β1= -0.0229) but have a positive and significant effect on ROE (P= 0.000<0.05, β1= 0.0645) of consumer goods companies in Nigeria. , suggesting that a well-structured and diverse board contributes to improved financial performance in the sector. On the other hand, board size shows a negative but statistically insignificant relationship with ROE and a positive but also insignificant relationship with ROA (P= 0.0496<0.05, β 4= -0.0169 ROA; P= 0.8947>0.05, β 4= -0.0069 ROE). Audit committee independence, another key governance factor, exhibits a negative and insignificant effect on both performance measures (P= 0.282>0.05, β2= -0.0286; P= 0.3167>0.05, β2= 0.1371), indicating that its role may not be as impactful in driving financial success within these companies. The Durbin-Watson diagnostic test reveals no autocorrelation issues in the models, further supporting the robustness of the analysis. Based on the results, the study concludes that certain aspects of corporate governance, especially board composition and diversity, play a crucial role in enhancing the financial performance of consumer goods firms in Nigeria. The study recommends that companies should prioritize board diversity and effective board composition to optimize financial outcomes. Additionally, while audit committees are essential, their role in enhancing financial performance may require further scrutiny and reevaluation to enhance their effectiveness. The study contributes to the growing literature on corporate governance and provides practical insights for firms seeking to improve their governance structures for better financial performance.
Keywords: Corporate Governance, Financial Performance, Audit Committee Independence Board Composition, Audit committee Independence, Board Size.
Word Count: 291
Description
Keywords
Corporate Governance, Financial Performance, Audit Committee Independence Board Composition, Audit committee Independence, Board Size.
Citation
Kate Turabia