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Board of Directors’ Heterogeneity and Financial Performance of Listed Deposit Money Banks in Nigeria

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Board of Directors’ Heterogeneity and Financial Performance of Listed Deposit Money Banks in Nigeria.

ABSTRACT

While boards are the main tool of internal governance mechanism, their efficacy may vary depending on their diversities.

This study examined the impact of Board of Directors‟ heterogeneity on the financial performance of listed deposit money banks in Nigeria.

This area of board diversity especially the ethnic diversity is still a novel area of research in Nigeria. The financial performance in this study was the dependent variable while nationality, gender and ethnic composition of Board of Directors were the independent variables.

The population of the study consists of fifteen (15) listed deposit money banks in Nigeria as at 31st December 2012. Eleven of these banks constituted the sample size for the period of eight years (2005-2012). The study employed multiple regressions as a tool for analysis.

Secondary data obtained from the financial statements of the companies were analyzed. The result showed that gender and ethnicity of board directors had positive and significant impact on banks financial performance while, nationality of the board of directors showed a negative but significant relation to banks financial performance.

INTRODUCTION

1.1 Background of the Study

In recent years, matters surrounding Board of Director leadership and oversight roles have taken on increased significance to investors so much so that today‟s economic challenges highlight the importance that board heterogeneity plays in enhancing value and providing companies with a full range of fresh talents and experience.

These challenges have been perceived overtime and have become a matter of concern after the collapse of many big multinational companies around the world arising from various board scandals.

The bleak aftermath of corporate scandals that stormed the United States which led to the collapse of Enron, WorldCom, Dot-Com Bubble, Tyco and Xerox together with the subsequent liquidation of HIH insurance in Australia in the year 2001 and Parmalatin Italy which is known as the biggest bankruptcy in Europe with estimated loss totaling $20 billion and Oceanic Bank in Nigeria in 2009 (Wahid, 2012).

The collapse of these multinational companies has raised concern over the activities of the Boardof Directors and this has brought about looking out for other governance mechanisms one of which is board heterogeneity.

REFERENCES

Alesina, A.,&La Ferrara, E. (2003). Ethnic Diversity and Economic Performance. Harvard Institute of Economic Research Discussion Paper Number 2028.

Anderson, R. C., Reeb, D. M., Upadhyay, A.,& Zhao, W. (2009). “The Economics of Director Heterogeneity” Kogod School of Business, American University, Washington, DC 20016., Fox School of Business, Temple University, Philadelphia, PA  19122.,  University of Alaska, Anchorage, AK 99508., Worcester Polytechnic Institute, Worcester,MA 01609.

Australian Multicultural  Foundation  Managing  Cultural  Diversity  Training  Program Resource Manual Australian Multicultural Foundation and Robert Bean Consulting (2010).

Bear. S., Rahman, N.,& Post, C. (2010). The Impact of Board Diversity and Gender  Composition on Corporate Social Responsibility and Firm Reputation.Journal of Business Ethics (2010) 97:207–221

Brammer, S. & Millington, A. (2005). Corporate reputation and philanthropy: an empirical analysis. Journal of Business Ethics, Vol. 61:29–44.

Brammer, S., Millington, A.,&Pavelin, S. (2007). Gender and Ethnic Diversity among UK Corporate Boards. Corporate Governance Review, Vol. 15 No.2, 393- 403.

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