Corporate Governance Mechanisms and Financial Distress of Nigerian Listed Firms

This study examines the influence of corporate governance mechanisms on financial distress among 148 listed firms on the Nigerian Exchange Group (NGX) over the period 2011 to 2025, yielding an unbalanced panel of 2,072 firm-year observations. Financial distress is operationalised using the Altman Z-Score, while ten governance constructs — board size, board independence, CEO duality, audit committee size, audit committee independence, institutional ownership, managerial ownership, ownership concentration, external audit quality, and dividend policy — constitute the primary explanatory variables. A comprehensive set of firm-level, industry-level, and macroeconomic controls is employed, including leverage, liquidity, asset tangibility, sales growth, firm age, earnings volatility, business segment diversification, natural risk management, risk exposure, year dummies, GDP growth, inflation rate, foreign exchange exposure, political connection, and regulatory stringency. The study deploys fixed-effects, random-effects, system-GMM, and panel-corrected standard error (PCSE) estimators to address endogeneity, heteroskedasticity, serial correlation, and cross-sectional dependence. Results consistently reveal that board independence (β = −0.421, p < 0.001), institutional ownership (β = −0.501, p < 0.001), CEO duality (β = +0.247, p < 0.001), and Big Four audit quality (β = −0.196, p < 0.001) are the most economically significant governance predictors of financial distress. Macroeconomic vulnerabilities — specifically naira depreciation and persistent inflation — amplify distress risk, whereas political connections offer a partial buffering effect that raises broader governance concerns. The study enriches agency theory, stewardship theory, and resource dependence theory by contextualising their predictions within Nigeria's institutional voids, weak regulatory enforcement, and macroeconomic fragility. Findings provide actionable guidance for regulators, boards, and investors seeking to strengthen corporate resilience in sub-Saharan Africa's largest economy.