The effect of board size and composition on the financial performance of banks in Nigeria

Abstract

This paper analyzed the effects of board size and board composition on the performance of Nigerian banks. The financial statements of five banks were used as a sample for the period of nine years and the data collected were analysed using the multivariate regression analysis. The paper found that board size has significant negative impact on the performance of banks in Nigeria. This signifies that an increase in Board size would lead to a decrease in ROE and ROA. On the other hand, board composition has a significant positive effect on the performance of banks in Nigeria. This signifies that an increase in Board composition would lead to a decrease in ROE and ROA. It is recommended that banks should have adequate board size to the scale and complexity of the organisation's operations and be composed in such a way as to ensure diversity of experience without compromising independence, compatibility, integrity and availability of members to attend meetings. The board size should not be too large and must be made up of qualified professionals who are conversant with oversight function. The Board should comprise of a mix of executive and non-executive directors, headed by a Chairman.

Audit committee attributes, board attributes and market performance of listed deposit money banks in Nigeria

“…Bebeji et al (2015) assessed the extent to which board size and composition influence the performance of listed banks in Nigeria. The researchers adopted a multivariate regression analysis technique on five banks for a span of nine years.…”

Performance: Empirical Evidence From Malaysian Banking Industry

“…In previous study of Bebeji et al (2015), board size and board composition have been proven to be related to the performance of bank in Nigeria. They suggested that board size is inversely related while board composition is positively associated to bank performance.…”

“…Some past studies using Tobin"s Q (Al-Saidi and Al-Shammari, 2013; Belhaj and Mateus, 2016) as their measurement of bank performance. In contrast, other researchers using ROA and ROE (Tomar and Bino, 2012;Fanta et al, 2013;Bebeji et al, 2015;Boussaada and Karmani, 2015;Liang et al, 2013;Pathan, Skully, and Wickramanayake, 2007;Sheikh and Karim, 2015) as the bank performance measures.…”

“…Moreover, Liang et al (2013) documented that board gender has insignificant influence on bank performance. The results of Bebeji et al (2015) and Liang et al (2013) have been argued by Pathan et al (2007). The study investigated the relation between proportion of independent directors and board size with Thai bank performance over the period of 1999 until 2003.…”

Internal audit and financial performance of Yemeni commercial banks: Empirical evidence

“…The study by Ojong and Ekponta (2014), which discusses the role of IA in the efficiency of financial performance in Nigerian higher education institutions, revealed that the role of IA in improving financial performance is not very significant, and the reason is the absence of employees' independence from senior management. The existence of internal entirely independent auditors has a positive impact on the financial performance of banks (Aminu et al, 2015). The contribution of the audit to improving the financial performance of banks is related to several things, including the presence of experienced and competent auditors, the auditors obtaining sufficient rights for them, and the extent of the contribution of the institutions' management to overcom-ing the difficulties (Tapang & Ibiam, 2019).…”