Effect of board characteristics and risk management practices on the financial performance of listed non-financial firms in Nigeria

  • 604 Views
  • 291 Downloads

Creative Commons License
This work is licensed under a Creative Commons Attribution 4.0 International License

Faulty board configurations associated with risk management practices are alleged to be the primary sources of most corporate failures. Therefore, experts have suggested that firms should adopt holistic risk management practices. This study investigates the interactive effect of board characteristics with risk management activities on the performance of listed Nigerian non-financial firms. The study is anchored on the agency theory perspective. It is designed as ex post facto inquiry with a population of 113 companies, from which a sample of 96 firms was drawn from firms with a complete set of data. Secondary data were extracted from the NSE Factbook and Thomson Reuter’s DataStream for 2010–2019. The static panel regression technique was utilized to analyze and estimate the interaction between the variables. The findings show that all the independent variables positively impacted ROA of the listed firms. Nevertheless, concerning market evaluation (Tobin-Q), except for board financial experts and audit committee meetings, risk management committee meetings and the presence of chief risk officer showed an insignificant impact. The combined implication is that although firms have complied with the provision of the CG codes on risk governance structure, the improvements associated with risk management aimed at enhancing market evaluation are nonetheless not deeply embedded in these firms. Firms are suggested to implement effective risk management practices to achieve competitive advantages and substantiality. More studies are advocated to extend the literature by expanding the scope.

view full abstract hide full abstract
    • Table 1. Sample characteristics
    • Table 2. Descriptive statistics
    • Table 3. Panel regression result: board characteristics, risk management practices, and ROA
    • Table 4. Regression estimates for model 1: fixed effects
    • Table 5. Regression estimates for model 2: fixed effects
    • Table 6. Breusch-Pagan/Cook-Weisberg test
    • Table 7. Wooldridge test (auto correlation test)
    • Table 8. Multicollinearity result for the variables (test for multicollinearity)
    • Conceptualization
      Martins Mustapha Abu, Umar Abbas Ibrahim, Taiwo Adewale Muritala
    • Formal Analysis
      Martins Mustapha Abu
    • Investigation
      Martins Mustapha Abu, Umar Abbas Ibrahim, Taiwo Adewale Muritala
    • Methodology
      Martins Mustapha Abu, Umar Abbas Ibrahim
    • Project administration
      Martins Mustapha Abu, Umar Abbas Ibrahim, Taiwo Adewale Muritala
    • Visualization
      Martins Mustapha Abu, Umar Abbas Ibrahim, Taiwo Adewale Muritala
    • Writing – original draft
      Martins Mustapha Abu
    • Writing – review & editing
      Martins Mustapha Abu, Umar Abbas Ibrahim, Taiwo Adewale Muritala
    • Supervision
      Umar Abbas Ibrahim, Taiwo Adewale Muritala
    • Validation
      Umar Abbas Ibrahim, Taiwo Adewale Muritala
    • Data curation
      Taiwo Adewale Muritala