Effect of Board Characteristics on Financial Performance of Listed Healthcare Firms in Nigeria

https://doi.org/10.35912/amor.v3i3.1327
Published: Jan 19, 2023

Abstract:

Purpose: This study was conducted to investigate the relationship between board characteristics and the financial performance of listed healthcare firms in Nigeria.

Research methodology: The study, which covered a seven-year period from 2015-2021, made use of secondary data sourced from published annual reports and accounts of five purposively selected companies on the Nigerian Stock Exchange. Data analysis was done by means of descriptive statistics, a correlation matrix, and some diagnostic tests using STATA 13.

Results: The findings show that board characteristics consisting of board size, board independence, board gender diversity, and board meetings have a negative, non-significant relationship with performance. This study concludes that board size should be increased, the number of non-executive members of the board should be increased with members having vast knowledge and competency in governance, the number of women on the board should be increased, and frequent and necessary board meetings should be encouraged and possibly regulated in order not to create room for waste of resources and time.

Limitations: The study’s main limitations are that it did not use other financial-based measurements for financial performance, used incomplete data, and used a small sample size.

Contribution: The results of the study, based on the findings, will assist firms in the recommendation of the board size number and how its effectiveness should be increased and sustained. The study also contributes to other extant literature, as not many studies have been conducted in this area of the healthcare firms listed on the Nigerian Stock Exchange.

Keywords:
1. Board independence
2. Board meeting frequency
3. Board gender diversity
4. Healthcare firms
5. Financial performance
Authors:
1 . Samuel Enejoh Abu
Prince Abubakar Audu University, Anyigba, Kogi State, Nigeria
2 . Obaya Moses Bamidele
Postgraduate student, Department of Accounting, Prince Abubakar Audu University Anyigba, Kogi State, Nigeria
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Abu, S. E., & Bamidele, O. M. (2023). Effect of Board Characteristics on Financial Performance of Listed Healthcare Firms in Nigeria. Annals of Management and Organization Research, 3(3), 193–206. https://doi.org/10.35912/amor.v3i3.1327
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Issue & Section
Vol. 3 No. 3 (2022): February
Articles
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This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

References

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    Assenga, M. P., Aly, D., & Hussainey, K. (2018). The impact of board characteristics on the financial performance of Tanzanian firms. Corporate Governance: The International Journal of Business in Society.

    Baysinger, B. D., & Butler, H. N. (1985). Corporate Governance and the Board of Directors: Performance Effects of Changes in Board Composition. Journal of Law, Economics, and Organization, 1(1), 101-101.

    Benvolio, J., & Ironkwe, U. (2022). Board Composition and Firm Performance of Quoted Commercial Banks in Nigeria. GPH-International Journal of Business Management (IJBM), 5(01), 19-40.

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    García-Sánchez, I.-M. (2010). The effectiveness of corporate governance: Board structure and business technical efficiency in Spain. Central European Journal of Operations Research, 18(3), 311-339.

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    Nwankwo, J. N., & Uguru, L. C. (2022). Impact of Board Characteristics on the Profitability of Listed Service Firms in Nigeria. Journal of Research in Business and management, 10(7).

    Obonyo, R. O. (2017). He Impact of Capital Structure on Financial Performance of Companies Listed at The Nairobi Securities Exchange in Kenya. International Journal of Economics, Commerce and Management, 5(6).

    Okiro, K. O. (2006). The relationship between board size and board composition on firm performance: A study of quoted companies at the Nairobi Stock Exchange.

    Onyali, C. I., & Okerekeoti, C. U. (2018). Board heterogeneity and corporate performance of firms in Nigeria. International Journal of Academic Research in Accounting, Finance and Management Sciences, 8(3), 103-117.

    Onyekwere, S. C., & Babangida, N. I. (2022). Board Diversity and Firm Performance: Panel Data Evidence from 12 Selected Commercial Banks in Nigeria. Daengku: Journal of Humanities and Social Sciences Innovation, 2(1), 28-53.

    Owolabi, T., Banisaye, T., & Efuntade, A. (2021). Board diversity & Financial performance of quoted firms in Nigeria. International Journal of Economics, Business and Management Research, 5(10), 46-70.

    Priya, K., & Nimalathasan, B. (2013). Board of directors’ characteristics and financial performance: a case study of selected hotels and restaurants in Sri Lanka. Merit Research Journal of Accounting, Auditing, Economics and Finance, 1(2), 018-025.

    Rafinda, A., Rafinda, A., Witiastuti, R. S., Suroso, A., & Trinugroho, I. (2018). BOARD DIVERSITY, RISK AND SUSTAINABILITY OF BANK PERFORMANCE: EVIDENCE FROM INDIA. Journal of Security & Sustainability Issues, 7(4).

    Rosenstein, S., & Wyatt, J. G. (1990). Outside directors, board independence, and shareholder wealth. Journal of Financial Economics, 26(2), 175-191.

    Sanni, O., Enebi, D., & Kanwai, P. (2020). Impact of Board Characteristics and Risk Management on Financial Performance of Listed Insurance Firms in Nigeria. RESEARCH REVIEW International Journal of Multidisciplinary, 5.

    Simionescu, L. N., Gherghina, ?. C., Tawil, H., & Sheikha, Z. (2021). Does board gender diversity affect firm performance? Empirical evidence from Standard & Poor’s 500 Information Technology Sector. Financial Innovation, 7(1), 1-45.

    Smith, N., Smith, V., & Verner, M. (2006). Do women in top management affect firm performance? A panel study of 2,500 Danish firms. International Journal of productivity and Performance management.

    Thomsen, S., & Pedersen, T. (2000). Ownership structure and economic performance in the largest European companies. Strategic management journal, 21(6), 689-705.

    Vafeas, N. (1999). Board meeting frequency and firm performance. Journal of Financial Economics, 53(1), 113-142.

    Westphal, J. D., & Milton, L. P. (2000). How experience and network ties affect the influence of demographic minorities on corporate boards. Administrative science quarterly, 45(2), 366-398.

    Yermack, D. (1996). Higher market valuation of companies with a small board of directors. Journal of Financial Economics, 40(2), 185-211.

  1. Abakah, P. V. (2020). Effect of capital adequacy on performance of listed banks in Ghana.
  2. Abdullah, S. N., Mohamad, N. R., & Mokhtar, M. Z. (2011). Board independence, ownership and CSR of Malaysian large firms. Corporate Ownership & Control, 8(3), 417-431.
  3. Aifuwa, H. O., & Saidu, M. (2020). Board cognitive diversity and firm performance nexus: Evidence from Nigeria. Aifuwa, HO, Musa, S., Gold, NO & Usman, KM (2020). Board cognitive diversity and firm performance nexus: Evidence from Nigeria. International Journal of Management, Innovation & Entrepreneurial Research, 6(2), 88-99.
  4. Assenga, M. P., Aly, D., & Hussainey, K. (2018). The impact of board characteristics on the financial performance of Tanzanian firms. Corporate Governance: The International Journal of Business in Society.
  5. Baysinger, B. D., & Butler, H. N. (1985). Corporate Governance and the Board of Directors: Performance Effects of Changes in Board Composition. Journal of Law, Economics, and Organization, 1(1), 101-101.
  6. Benvolio, J., & Ironkwe, U. (2022). Board Composition and Firm Performance of Quoted Commercial Banks in Nigeria. GPH-International Journal of Business Management (IJBM), 5(01), 19-40.
  7. Bhagat, S., & Black, B. (1999). The uncertain relationship between board composition and firm performance. The Business Lawyer, 921-963.
  8. Carter, D. A., Simkins, B. J., & Simpson, W. G. (2003). Corporate governance, board diversity, and firm value. Financial review, 38(1), 33-53.
  9. Causholli, M., De Martinis, M., Hay, D., & Knechel, W. R. (2010). Audit markets, fees and production: Towards an integrated view of empirical audit research. Journal of accounting literature, 29, 167-215.
  10. Danoshana, S., & Ravivathani, T. (2019). The impact of the corporate governance on firm performance: A study on financial institutions in Sri Lanka. SAARJ Journal on Banking & Insurance Research, 8(1), 62-67.
  11. Fakile, O. G., & Adigbole, E. A. (2019). Effect of board characteristics on financial performance of quoted information communication and technology companies in Nigeria. Entrepreneurial Journal of Management Sciences, 6(1).
  12. Fama, E. F., & Jensen, M. C. (1983). Separation of ownership and control. The journal of law and Economics, 26(2), 301-325.
  13. Gambo, E.-M. J., Bello, B. A., & Rimamshung, S. A. (2018). Effect of board size, board composition and board meetings on financial performance of listed consumer goods in Nigeria. International Business Research, 11(6), 1-10.
  14. García-Sánchez, I.-M. (2010). The effectiveness of corporate governance: Board structure and business technical efficiency in Spain. Central European Journal of Operations Research, 18(3), 311-339.
  15. Hafez, H. M. (2017). Corporate governance practices and firm’s capital structure decisions: An empirical evidence of an emerging economy. Accounting and Financial Research, 6(4), 115-129.
  16. Hair, J., Anderson, R., Tatham, R., & Black, W. (1998). Multivariate data analysis, 5th edPrentice-Hall. Englewood Cliffs, NJ.
  17. Hakim, S. R., & Shimko, D. (1995). The impact of firm’s characteristics on junk bond default. Journal of Financial and Strategic Decisions, 8(2), 47-55.
  18. Hermalin, B. E., & Weisbach, M. S. (1991). The effects of board composition and direct incentives on firm performance. Financial Management, 101-112.
  19. Huang, C.-J. (2010). Corporate governance, corporate social responsibility and corporate performance. Journal of Management & Organization, 16(5), 641-655.
  20. Ibrahim, M., Che-Ahmad, A., Johl, S., & Rahman, H. (2016). The impact of corporate governance regulations on board independence and quality of financial information reporting: A proposed study. The European proceedings of social and behavioral sciences EpSBS, 761-768.
  21. Ilaboya, J., & Ashafoke, T. (2017). Board diversity and firm performance in Nigeria. International journal of management, accounting and economics, 4(10), 1002-1019.
  22. Jensen, M. C. (1993). The modern industrial revolution, exit, and the failure of internal control systems. The Journal of Finance, 48(3), 831-880.
  23. Jensen, M. C., & Meckling, W. H. (1976). Theory of the Firm: Managerial Behavior, Agency Costs and Ownership Structure. Journal of Financial Economics, 3(4), 305-360.
  24. Kalyanaraman, L., & Altuwaijri, B. (2016). The linkage between excess board independence and capital structure: An exploration in the context of listed companies in Saudi Arabia. Journal of Applied Finance and Banking, 6(3), 129.
  25. Kutum, I. (2015). Board characteristics and firm performance: Evidence from Palestine. European Journal of Accounting Auditing and Finance Research, 3(3), 32-47.
  26. Letting, N. K. (2011). Board of directors' attributes, strategic decision-making and corporate performance of firms listed on the Nairobi Stock Exchange. University of Nairobi, Kenya.
  27. McIntyre, M. L., Murphy, S. A., & Mitchell, P. (2007). The top team: examining board composition and firm performance. Corporate Governance: The International Journal of Business in Society.
  28. Nwankwo, J. N., & Uguru, L. C. (2022). Impact of Board Characteristics on the Profitability of Listed Service Firms in Nigeria. Journal of Research in Business and management, 10(7).
  29. Obonyo, R. O. (2017). He Impact of Capital Structure on Financial Performance of Companies Listed at The Nairobi Securities Exchange in Kenya. International Journal of Economics, Commerce and Management, 5(6).
  30. Okiro, K. O. (2006). The relationship between board size and board composition on firm performance: A study of quoted companies at the Nairobi Stock Exchange.
  31. Onyali, C. I., & Okerekeoti, C. U. (2018). Board heterogeneity and corporate performance of firms in Nigeria. International Journal of Academic Research in Accounting, Finance and Management Sciences, 8(3), 103-117.
  32. Onyekwere, S. C., & Babangida, N. I. (2022). Board Diversity and Firm Performance: Panel Data Evidence from 12 Selected Commercial Banks in Nigeria. Daengku: Journal of Humanities and Social Sciences Innovation, 2(1), 28-53.
  33. Owolabi, T., Banisaye, T., & Efuntade, A. (2021). Board diversity & Financial performance of quoted firms in Nigeria. International Journal of Economics, Business and Management Research, 5(10), 46-70.
  34. Priya, K., & Nimalathasan, B. (2013). Board of directors’ characteristics and financial performance: a case study of selected hotels and restaurants in Sri Lanka. Merit Research Journal of Accounting, Auditing, Economics and Finance, 1(2), 018-025.
  35. Rafinda, A., Rafinda, A., Witiastuti, R. S., Suroso, A., & Trinugroho, I. (2018). BOARD DIVERSITY, RISK AND SUSTAINABILITY OF BANK PERFORMANCE: EVIDENCE FROM INDIA. Journal of Security & Sustainability Issues, 7(4).
  36. Rosenstein, S., & Wyatt, J. G. (1990). Outside directors, board independence, and shareholder wealth. Journal of Financial Economics, 26(2), 175-191.
  37. Sanni, O., Enebi, D., & Kanwai, P. (2020). Impact of Board Characteristics and Risk Management on Financial Performance of Listed Insurance Firms in Nigeria. RESEARCH REVIEW International Journal of Multidisciplinary, 5.
  38. Simionescu, L. N., Gherghina, ?. C., Tawil, H., & Sheikha, Z. (2021). Does board gender diversity affect firm performance? Empirical evidence from Standard & Poor’s 500 Information Technology Sector. Financial Innovation, 7(1), 1-45.
  39. Smith, N., Smith, V., & Verner, M. (2006). Do women in top management affect firm performance? A panel study of 2,500 Danish firms. International Journal of productivity and Performance management.
  40. Thomsen, S., & Pedersen, T. (2000). Ownership structure and economic performance in the largest European companies. Strategic management journal, 21(6), 689-705.
  41. Vafeas, N. (1999). Board meeting frequency and firm performance. Journal of Financial Economics, 53(1), 113-142.
  42. Westphal, J. D., & Milton, L. P. (2000). How experience and network ties affect the influence of demographic minorities on corporate boards. Administrative science quarterly, 45(2), 366-398.
  43. Yermack, D. (1996). Higher market valuation of companies with a small board of directors. Journal of Financial Economics, 40(2), 185-211.