Effect Of Corporate Governance on Financial Performance of Manufacturing Firms in Nigeria

Abstract

This study investigated the influence of corporate governance (CG) on the performance of companies. The objectives of this study were to respectively analyze and determine individually and jointly, the influence of board size, board composition, audit committee size and board independence on corporate performance (CP). The study employed exploratory research design. Eight (8) listed firms on Nigerian Stock Exchange were chosen through a purposive sampling technique and data extracted from the annual reports of these firms from 2006 to 2017. A panel data regression was used to analyse the data. Data were also sought from published annual reports and accounts of the sampled. Data generated were analyzed using multiple regressions. Results showed that the corporate governance variables have effect on financial performance: specifically, there is a positive significant effect of board size on return on asset (ROA) of manufacturing firms in Nigeria. On the other hand, board composition has a negative and non-significant effect on return on asset (ROA), Again, Audit committee independence has positive and significant effect on return on asset of the manufacturing firms in Nigeria. Lastly, BOIND revealed the existence of strong negative correlation with ROA and the financial performance of firms in Nigeria. The implication of the finding is that companies that keep to the dictate of the corporate governance code has chances of improving their corporate financial performance particularly the return on assets while it will appear almost difficult for those companies that do not keep to the corporate governance code. Based on the findings, the study recommends that there should be concerted efforts towards improving the performance by focusing on the corporate governance code in Nigeria. Moreover, relevant authorities must intensify their monitoring potentials to ensure that firms comply with the relevant provisions of Nigeria Corporate Governance codes.