Board Independence and Bankruptcy Risk of Nigerian Listed Firms

This study examines the relationship between board independence and bankruptcy risk among Nigerian listed firms for the period spanning 2011 to 2025. Employing an unbalanced panel dataset of 148 non-financial and financial firms drawn from the Nigerian Exchange Group (NGX), the study adopts the Altman Z-score and the Ohlson O-score as dual proxies of financial distress and bankruptcy risk. Using fixed-effects and random-effects panel regression models, augmented by system-generalised method of moments (GMM) to address endogeneity concerns, the findings reveal that board independence exerts a statistically significant and positive influence on the Altman Z-score (coefficient = 0.847, p < 0.01), indicating that firms with more independent boards demonstrate enhanced financial health and reduced bankruptcy vulnerability. Conversely, board independence exerts a statistically significant negative effect on the Ohlson O-score (coefficient = -0.312, p < 0.01), confirming that independent boards are associated with lower predicted probabilities of insolvency. These findings are robust after controlling for firm size, leverage, liquidity, profitability, asset tangibility, firm age, sales growth, asset turnover, board size, audit committee characteristics, ownership concentration, managerial ownership, market-to-book ratio, stock return volatility, macroeconomic variables (GDP growth, inflation, interest rates, oil prices, and foreign exchange exposure), and political connections. The study contributes novel empirical evidence from a frontier emerging market context where weak institutional environments, concentrated ownership, and political rent-seeking fundamentally condition the corporate governance–financial distress nexus. The results carry significant policy implications for the Securities and Exchange Commission of Nigeria, the Central Bank of Nigeria, and listed firms seeking to enhance board governance architecture as a tool for financial resilience.