The Impact of Board Structure on Corporate Financial Performance in Nigeria

This study examines the impact of board structure on corporate financial performance in Nigeria. It investigatesthe composition of boards of directors in Nigerian firms and analyses whether board structure has an impact onfinancial performance, as measured by return on equity (ROE) and return on capital employed (ROCE). Basedon the extensive literature, four board characteristics (board composition, board size, board ownership and CEOduality) have been identified as possibly having an impact on corporate financial performance and thesecharacteristics are set as the independent variables. The Ordinary Least Squares (OLS) regression was used toestimate the relationship between corporate performance measures and the independent variables. Findings fromthe study show that there is strong positive association between board size and corporate financial performance.Evidence also exists that there is a positive association between outside directors sitting on the board andcorporate financial performance. However, a negative association was observed between directors’ stockholdingand firm financial performance measures. In addition, the study reveals a negative association between ROE andCEO duality, while a strong positive association was observed between ROCE and CEO duality. The studysuggests that large board size should be encouraged and the composition of outside directors as members of theboard should be sustained and improved upon to enhance corporate financial performance.