ABSTRACT
This research project investigated the effect of board composition on the financial performance of quoted manufacturing companies in Nigeria. In order to achieve the objectives of the study, data was collected from the annual financial report of five quoted companies through content analyses. Multipple regression analyses was utilized as the method of data analyses. The results of the data analyses showed that there is a positive and significant relationship between board independence and earnings per share of quoted manufacturing companies. There is a positive and significant relationship between board independence and return on equity. There is a positive significant relationship between board size and earnings per share. There is a positive and significant relationship between board size and return on equity of quoted manufacturing companies in Nigeria. Based on findings, it was therefore concluded that board independence significantly influences financial performance of quoted manufacturing firms in Nigeria. Board size significantly influences financial performance of quoted manufacturing firms in Nigeria. It is therefore recommended that firms listed at the NSE should embrace technological advancement and seek innovative ways of increasing their performance with smaller board structures for efficiency, expediency in decision making and competitiveness. The board should make steps in ensuring stakeholders are involved in the managerial activities as executives, so as to work towards the protection of the firm. This can lead to better financial performance of the firm since board independence had an influence on the financial performance of the firm. The study recommends the executive directors should have regular, frequent meetings without the CEO or other non-executive members of management present. The study recommends smaller boardsizes accompanied by skill, experience and expedience of the board results in increased firm performance.
BACKGROUND TO THE STUDY
.......... Board of directors refers to individuals that are elected to act as representatives of stakeholders who shall be jointly responsible for overseeing the activities of a corporation or an organization; they also establish corporate management related policies and take decisions on company’s issues. The board of directors comprises of the executive directors and the non-executive directors.
On the other hand Board composition refers to the number of independent non- executive directors on the board relative to the total number of executive directors. An independent non-executive director is defined as an independent director who has no affiliation with the firm except for their directorship (Clifford and Evans, 1997). There is an apparent presumption that boards with significant outside directors will make different and perhaps better decisions than boards dominated by insiders. Fama and Jensen (1983) suggest that non-executive directors can play an important role in the effective resolution of agency problems and their presence on the board can lead to more effective decision-making.
Firm performance which shows if the resources of a firm are used effectively, efficiently and economically to fulfill the goals of the firm (Daft, 1997) is crucial in evaluating the overall success of the firm (Parker, 2000). For performance evaluation, firms employ financial and non -financial performance criteria. Measures such as Return on Assets (ROA), Return on Equity (ROE) and Earnings Per Share (EPS) are financial performance measures that are most frequently used. Stern, Shiely and Ross (2004) opined that Return on Assets and Return on Equity are better indicators of firms financial performance because they include the statement of financial position and statement of comprehensive income.
Also the financial performance of entities is of utmost importance to stakeholders in general and shareholders in particular as, on one hand it is a key source for financing the current economic activities, thus helping to maintain a going concern and to increase the value of the business, and on the other hand it is the basis for distributing dividends, which in turn may attract investors (and their funds). Thus, it should appear as straightforward that identifying and analyze ..........
TABLE OF CONTENTS
CHAPTER ONE:INTRODUCTION
1.1 Background to the Study
1.2 Statement of the Problem
1.3 Conceptual Framework
1.4 Aim and Objectives of the Study
1.5 Research Questions
1.6 Research Hypotheses
1.7 Significance of the Study
1.8 Scope of Study
1.8.1 Theoretical (Content) scope:
1.8.2 Geographical scope
1.8.3 Unit of Analysis
1.9 Organization of the Study
1.10 Limitations of the Study
1.11 Operational Definition of Terms
REFERENCES
CHAPTER TWO:
LITERATURE REVIEW
2.1 Theoretical Review
2.1.1 Agency Theory
2.1.2 Upper Echelon Theory
2.1.3 Resource Dependency Theory
2.2 Concept of Board Composition
2.4 Dimensions of Board Composition
2.3.1 Independent Board Members
2.3.2 Board size
2.4 Concept of Financial Performance
2.6 Measures of Financial Performance
2.5.1 Earnings per Share (EPS)
2.5.2 Return on Equity (ROE)
2.6 Relationship between Board Composition and Financial Performance
2.6.1 Relationship between board independence and firm’sfinancial performance
2.6.2 Relationship between Board Size and firm’s financial performance.
2.7 Empirical Review
2.7 Summary
CHAPTER THREE
RESEARCH METHODOLOGY
3.0 INTRODUCTION
3.1 RESEARCH DESIGN
3.2 SAMPLE PROCEDURE AND DATA COLLECTION METHOD
3.3 OPERATIONAL MEASURES OF VARIABLES
3.5 DATA ANALYSES TECHNIQUES
3.5.1 MODEL SPECIFICATION
REFERENCES
CHAPTER FOUR
DATA PRESENTATION AND ANALYSIS
4.1 INTRODUCTION
4.2 DATA PRESENTATION
4.3 Test of Hypotheses
4.5 DISCUSSION OF FINDINGS
CHAPTER FIVE
SUMMARY OF FINDINGS, CONCLUSION AND RECOMMENDATIONS
5.1 Summary
5.2 Conclusion
5.3 Recommendations
REFERENCES
Reference code: C089
Reference code: C089
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