Female directorship, director compensation, managerial shareholding, and price-earnings multiple of Nigerian firms

Abstract

The failure of business entities across the globe has continued to draw the attention of stakeholders of those entities. Due to these problems, different countries issued corporate governance regulations to avoid the repeat of the past. Part of the aims of these CG guides is to increase firm value. In Nigeria, similar guidelines issued for firms are referred to as codes of CG. However, arguments exist between stakeholders on whether those corporate governance mechanisms increase the value of shareholders. Some investment analysts suggest the consideration of governance mechanism before investment, while some argue that CG practices are not necessary for Nigeria. To address this problem, this research empirically examines the effects of female directorship, director compensation and managerial shareholding on price-earnings multiple of Nigerian firms. The research uses data from 100 firms listed in the Nigerian Stock Exchange (NSE). The study used the generalized method of moments (GMM) to estimate the regression due to endogeneity problem amongst the variables. The study reveals a significant positive association between female directorship, director compensation, managerial shareholding and price-earnings multiple at 10%, 1% and 10%, respectively. Therefore, it recommends additional females on board, compensation for directors and more managerial share ownership.

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