Effect of Managerial Ability and Board Diversity on Profitability: Evidence from Domestically Systemic Important Banks in Nigeria

This study examined the joint effects of managerial ability and board diversity on the profitability of Domestically Systemic Important Banks in Nigeria (DSIBN) over the period 2014–2024. A census approach was employed, covering all six (DSIB) in Nigeria, Access Bank, Zenith Bank, First Bank of Nigeria, Guaranty Trust Bank (GTBank), United Bank for Africa (UBA), and Ecobank Transnational Incorporated (ETI). Secondary data were extracted from audited annual reports and corporate governance disclosures. Managerial ability was proxied using the Operating Efficiency Ratio (OER) and Asset Turnover Ratio (ATR), while board diversity was captured through gender diversity, age diversity, educational diversity, and professional diversity). Profitability was measured using Return on Assets (ROA), Return on Equity (ROE), and Net Interest Margin (NIM). Data were analysed using descriptive statistics, correlation analysis. The Hausman test was employed to determine the appropriate model. The findings revealed that managerial ability, proxied by OER and ATR, had a strong, positive, and statistically significant effect on profitability across all three measures (ROA: β = 6.892, p < 0.01; ROE: β = 35.123, p < 0.01; NIM: β = 9.892, p < 0.01). Board diversity, captured through the composite Governance Quality Index, also had a positive and statistically significant effect on profitability (ROA: β = 8.923, p < 0.01; ROE: β = 35.678, p < 0.01; NIM: β = 10.456, p < 0.01). However, the joint effect of managerial ability and board diversity was statistically insignificant (p > 0.10), indicating an additive rather than synergistic relationship. The study concludes that managerial ability is adominant driver of profitability in (DSIB) in Nigeria, and board diversity contributes to governance quality, which in turn enhances profitability. It is recommended that banks prioritize the recruitment, development, and retention of highly capable managers; adopt a holistic approach to board diversity encompassing gender, age, educational, and professional diversity; maintain compliance with the CBN's 30% gender diversity target; and that regulators strengthen fit-and proper criteria and promote holistic governance quality in the banking sector.