Corporate Governance, Board Attributes, and Financial Performance: A Study of Listed Insurance Companies in Nigeria
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Abstract
Purpose: This study aimed to examine the effect of corporate governance and board attributes on the financial performance of listed insurance companies in Nigeria.
Theoretical Framework: This research is based on the Stakeholder Theory, which was originally introduced by Professor Edward Freeman in 1984. According to this theory, companies are ethically responsible for acknowledging and fulfilling the concerns of diverse stakeholders, such as employees, suppliers, customers, government entities, investors, and the community.
Design/ Methodology/Approach: The research employed both ex-post facto and panel research designs to gather data from the audited annual reports of the selected insurance companies quoted on the Nigerian Exchange Group, covering a span of eleven (11) years from 2012 to 2022. The study's sample size was ten (10) insurance companies which were determined by purposive sampling techniques. Data analysis utilized both descriptive and inferential statistical methods.
Findings: The study's findings showed that board size and board independence had a statistically significant positive influence on Tobin Q but had a positive but not statistically significant effect on return on equity. Board diversity exhibited a significant positive effect on both returns on equity and Tobin Q. The research results indicate that board diversity and board independence are crucial factors influencing the financial performance and market value efficiency of insurance companies in Nigeria.
Practical Implications: For insurance companies and policymakers, these findings highlight the importance of promoting board diversity and independence as they are positively associated with financial performance and market value efficiency. While a larger board size might enhance market value efficiency, its impact on ROE is less reliable. It is essential for insurance firms to consider these governance factors in their decision-making processes.