BOARD STRUCTURE, REMUNERATION AND CORPORATE FINANCIAL PERFORMANCE: EVIDENCE FROM NIGERIAN FIRMS

Authors: Alimi, A. A; Adegun, E. A & Agboola, O. S

ABSTRACT

Corporate governance, encompassing the complex arrangement of board structure, is crucial in guaranteeing the long-term prosperity of a company, protecting the privileges of shareholders, and reconciling the concerns of various stakeholders, such as employees, customers, suppliers, and the wider community. The increasing importance of corporate governance in developing economies such as Nigeria necessitates a comprehensive knowledge of the interplay between these components. This understanding is of utmost importance for policymakers, investors, and business executives. The present study aims to investigate the complex interplay between board structure, executive compensation, and corporate financial performance in the specific context of Nigerian consumer firms.

The research design adopted for this study is longitudinal research design. Secondary data were utilized for the study and sourced from the annual financial reports of the sampled thirteen consumer for the period of twelve years between 2011 to 2022. Data were analyzed using both descriptive and inferential statistics to achieve the study objectives. Panel regression was used to analyze the effect of board structure and board remuneration on corporate financial performance of selected consumer firms in Nigeria. Finally, Box plots were also used to remove the effects of outlier that may distort the results of the study.

Results of fixed panel regression showed that board size (BDZ) (P=0.0028), board independence (BNDE) (P=0.025), board gender diversity (BD) (P=0.005) and CEO pay slice (CPS) (P=0.006) have positive and significant impact on return on assets for consumer goods firms. The box plots also show information about the data set’s outliers. This could be owing to anomalous values in the predictor variables. Hence, this study uncovers a problem that has never been adequately addressed by any Nigerian scholar working on board structure, remuneration and corporate financial performance of firms in Nigeria while taking into account assumption of outliers

The study concluded that board structure and remuneration had positive and significant effect on corporate financial performance. It is therefore recommended that the firms should enhance executive performance through clear metrics, shareholder engagement, regular board evaluations, compliance with corporate governance codes, and penalties for non-compliance.

Keywords: Corporate governance, board structure, remuneration, corporate financial performance, panel regression

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