Corporate Governance Mechanism and Financial Risk Management of Health Care Firms in Nigeria

Abstract

The study was carried out to examine the relationship which exists between the corporate governance mechanisms and financial risk management. The study is crucial as it shows the extent to which the corporate governance mechanism ensures effective financial risk management practices. To determine the relation which exists between the corporate governance mechanisms (CGM) and financial risk management, the main proxy variables of the CGMs were used in the study, namely; Board Independence (BI), Board Diligence (BD) and Female Directorship Presence (FDP), while financial risk management was proxy by liquidity risk (LIQR). Three hypotheses were formulated to guide the investigation and OLS model was applied in the data analysis. The study anchored on the Stewardship Theory adopted an Ex Post Facto Approach and data were collected from the annual reports and financial statements of listed health care firms in Nigeria for the period 2016-2020. The empirical analysis of the research shows that there is a significant and positive association between board independence, board diligence, female directorship and financial risk management of listed health care firms in Nigeria at 5% significant level. Thus, the study concludes that corporate governance mechanisms ensure effective risk management practices among the publicly traded healthcare companies in Nigeria. Thus, the study recommended that companies should review the frequency of board meetings. Attention to be paid to the efficiency and not the frequency of board meetings. Also in composition of corporate board, there shall be independent directors and female directorship presence as thus ensures effective financial risk management practices.

The Role Corporate Governance in Managing Financial Risk: A Qualitative Study on Listed Companies

“…Research has shown that board independence, board diligence, and female directorship presence have a significant and positive association with financial risk management in listed healthcare firms in Nigeria [3].…”

“…Furthermore, good corporate governance can lead to improved investment efficiency and reduced financial information disclosure risk. A study conducted on companies listed on the Tehran Stock Exchange found that investment efficiency increased with better corporate governance quality, while the risk of financial information disclosure decreased [3]. This implies that good corporate governance can help companies avoid agency conflicts, minimize earnings manipulation by managers, and obtain reliable company performance valuations [1].…”