Risk management in Nigerian listed commercial banks: The significance of board composition (2013–2023)

https://doi.org/10.35912/ijfam.v6i4.2629
Published: Apr 10, 2025

Abstract:

Purpose: The study examined the effect of board composition on the risk management of listed commercial banks in Nigeria. The specific objective was to determine the effect of board size, board independence, and board gender diversity on the non-performing loan ratio (NPLR).

Method: Ex-post facto research design was chosen for the study. The population of the study comprised all the 13 listed commercial banks in Nigeria. A census sampling approach was used to include all the population elements into the sample. Secondary data was collected from the annual audited reports of the banks covering 2013 to 2023. Aside from descriptive analysis, Pearson correlation, Pesaran Cross-sectional Dependence test, and Panel Heteroskedasticity tests were used to assess the validity of the regression model. Panel Estimated Generalized Least Squares was used to test the hypotheses.

Results: Board size has a significant positive effect on NPLR (? = 0.003935; p-value = 0.0000); board independence has a significant positive effect on NPLR (? = 0.121012; p-value = 0.0000); board gender diversity has a significant negative effect on NPLR (? = -0.102780; p-value = 0.0000).

Conclusions: In conclusion, a well-composed board ensures that banks are resilient to financial shocks while safeguarding the interests of shareholders, customers, and the broader economy.

Limitations: The aspects of board composition covered were limited to board size, board independence, and board gender diversity, but did not cover board final literacy and board risk committee.

Contribution: Thus, the study recommends that listed commercial banks in Nigeria should have a board size that balances adequate expertise and diversity with the ability to make effective decisions in order to ensure that boards reduce bureaucratic delays in risk management.

Keywords:
1. Board Composition
2. Risk Management
3. Board Size
4. Board Independence
5. Board Gender Diversity
Authors:
1 . Veronica Ogbenyeanu Nwafor
Ebonyi State University, Abakaliki, Ebonyi State, Nigeria
2 . Gilbert Ogechukwu Nworie
Ebonyi State University, Abakaliki, Ebonyi State, Nigeria
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Nwafor, V. O., & Nworie, G. O. (2025). Risk management in Nigerian listed commercial banks: The significance of board composition (2013–2023). International Journal of Financial, Accounting, and Management, 6(4), 539–557. https://doi.org/10.35912/ijfam.v6i4.2629
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Vol. 6 No. 4 (2025): March
Articles
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References

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    Abubakar, A. H., Ibrahim, B. Y., Zakaria, N. N. B., & Kassim, S. F. B. M. (2023). Board attributes, risk management and financial performance: Insights from Iraq. Annals of Management and Organization Research, 5(2), 115-126. https://doi.org/10.35912/amor.v5i2.1810.

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    El Idrissi, I., & Alami, Y. (2021). The financial impacts of board mechanisms on performance: The case of listed Moroccan banks. International Journal of Financial, Accounting, and Management, 3(2), 93-113. https://doi.org/10.35912/ijfam.v3i2.536

    El Mokrani, Y., & Alami, Y. (2021). The effects of corporate governance mechanisms on earnings management: Empirical evidence from Moroccan listed firms. International Journal of Financial, Accounting, and Management, 3(3), 205-225. https://doi.org/10.35912/ijfam.v3i3.538

    Essien, M. D., & Akpan, D. C. (2024). Board Diversity and Earnings Quality of Listed Deposit Money Banks in Nigeria. FUDMA Journal of Accounting and Finance Research [FUJAFR], 2(2), 17-31. 10.12691/jfa-9-1-2

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    Jenter, D., Schmid, T., & Urban, D. (2023). Does board size matter? European Corporate Governance Institute–Finance Working Paper(916). http://dx.doi.org/10.2139/ssrn.4371743

    Kanene, K. C., & Francis, O. (2023). Empirical Relationship between Board Size, Board Tenure on Corporate Risk Management: Evidence from Nigerian Quoted Companies. IIARD International Journal of Economics and Business Management, 9(7), 28-38. 10.56201/ijebm.v9.no7.2023.pg28.38

    Lincoln, A., Adedoyin, O., & Laugharne, J. (2017). Board composition and corporate governance mechanisms in the Nigerian banking sector. Dimensional corporate governance: An inclusive approach, 79-102. https://doi.org/10.1007/978-3-319-56182-0_6

    Liu, X. (2023). A Literature Review of Upper Echelons Theory. Paper presented at the SHS Web of Conferences. https://doi.org/10.1051/shsconf/202316901067

    Mehmood, R., Ahmad, I., Rahman, S. U., & Sattar, S. (2025). The Role of Corporate Governance in Bank Risk-Taking Corporate Risk Mitigation Through Socially Responsible Governance (pp. 215-226): IGI Global.

    Muhammad, M. I., Tukur, Y., Dabari, I. J., & Hanga, B. Y. (2023). Board Attributes and Credit Risk Exposure of Listed Deposit Money Banks in Nigeria: The Moderating Effect of Risk Committee Size. Journal of Economics, Management and Trade, 29(8), 99-112. 10.9734/jemt/2023/v29i81118

    Musa, S. J., Moses, I. K., & Success, B. E. (2022). Effect of corporate governance on risk management of selected deposit money banks in Nigeria. International Journal of Health Sciences, 6, 6193-6203.

    Nainggolan, Y. A., Prahmila, D. I., & Syaputri, A. R. (2023). Do board characteristics affect bank risk-taking and performance? Evidence from Indonesian and Malaysian Islamic banks. Journal of Management and Governance, 27(4), 1115-1145. https://doi.org/10.1007/s10997-022-09625-w

    Nworie, G. O., & Agwaramgbo, J. C. (2023). Determining the Financial Performance of Tier-1 Deposit Money Banks in Nigeria Using Bank Liquidity. International Journal of Academic Management Science Research, 7(2), 166-181.

    Nworie, G. O., Okafor, T. G., & John-Akamelu, C. R. (2022). Firm-level traits and the adoption of computerised accounting information system among listed manufacturing firms in Nigeria. Journal of Global Accounting, 8(3), 128-148.

    Nworie, G. O., & Onochie, C. C. (2024). FUELLING ENTREPRENEURIAL PRODUCTIVITY IN NIGERIA: THE CONTRIBUTION OF BANK LOANS. 10.52589/IJEBI-XQGMW7DI

    Olufemi, A. (2021). Board gender diversity and performance of listed deposit banks in Nigeria. Eur Bus Manag, 7(1), 14. 10.11648/j.ebm.20210701.13

    Onuorah, A., Osuji, C., & Ozurumba, B. (2019). Board composition, diversity index and performance: Evidence from four major nigerian banks. Journal of Management Information and Decision Sciences, 22(4), 342-359.

    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. https://doi.org/10.35877/454RI.daengku587

    Roy, S. K. (2022). The impact of age, gender, and ethnic diversity on organizational performance: an empirical study of Bangladesh's banking sector. International Journal of Financial, Accounting, and Management, 4(2), 145-161. https://doi.org/10.35912/ijfam.v4i2.905

    Tukur, Y. (2023). Internal Governance Mechanisms and Risk Management Strategy of Listed Deposits Money Banks in Nigeria. Journal of Human Resources and Management Science.

    Ugwuanyi, W., Wade, J. W., & Okoh, J. (2024). BANKING REFORMS IN NIGERIA: IMPLICATIONS FOR EMPLOYEE JOB SATISFACTION AND PERFORMANCE EVALUATION MANAGEMENT. African Banking and Finance Review Journal, 8(8), 84-102.

  1. Abiola, A. (2023). Relationship between Corporate Governance Practices and Credit Risk in Banking. International Journal of Modern Risk Management, 1(1). 10.47604/ijmrm.2098.
  2. Abubakar, A. A., Yahaya, O. A., & Joshua, S. G. (2023). Board characteristics and financial performance. Asian-Pacific Journal of Financial Studies, 52, 7-19.
  3. Abubakar, A. H., Ibrahim, B. Y., Zakaria, N. N. B., & Kassim, S. F. B. M. (2023). Board attributes, risk management and financial performance: Insights from Iraq. Annals of Management and Organization Research, 5(2), 115-126. https://doi.org/10.35912/amor.v5i2.1810.
  4. Adu, D. A. (2024). How do board and ownership characteristics affect bank risk-taking? New evidence from sub-Saharan Africa. Journal of Banking Regulation, 25(3), 209-233. https://doi.org/10.1057/s41261-023-00226-7.
  5. Agubata, N., Igbru, O., & Udezo, N. O. (2021). Effect of corporate governance on financial risk disclosure of banks in Nigeria. International Journal of Innovative Social Sciences & Humanities Research, 9(4), 136-145.
  6. Alie, M. S., Fitri, E. R., Desmon, D., Nasir, M., & Meidasari, E. (2024). The Influence of good corporate governance on the financial performance of state-owned enterprises listed on the Indonesia Stock Exchange. Journal of Multidisciplinary Academic Business Studies, 2(1), 97-110. https://doi.org/10.35912/jomabs.v2i1.2507.
  7. Bob-Manuel, J. (2024). Effects of Non-Performing Loans on The Performance of Listed Deposit Money Banks in Nigeria. AFIT Journal of Marketing Research, 3(1).
  8. Cannella Jr, A. A. (2001). Upper echelons: Donald Hambrick on executives and strategy. Academy of management perspectives, 15(3), 36-42. https://doi.org/10.5465/ame.2001.5229499.
  9. Carpenter, M. A., Geletkanycz, M. A., & Sanders, W. G. (2004). Upper echelons research revisited: Antecedents, elements, and consequences of top management team composition. Journal of management, 30(6), 749-778. https://doi.org/10.1016/j.jm.2004.06.001.
  10. Chukwu, G. N., Muritala, T. A., Akande, J. O., & Adekunle, A. O. (2024). Impact of Non-Performing Loan on Bank Performance in Nigeria. Journal of Law and Sustainable Development, 12(6), e3796-e3796. https://doi.org/10.55908/sdgs.v12i6.3796.
  11. Duruechi, A. H., Chigbu, S. U., & Ukpong, U. M. (2022). Central Bank of Nigeria Regulatory Policies and Non-Performing Loans in the Nigerian Banking Industry. IIARD International Journal of Banking And Finance Research, 8(4). https://doi.org/10.56201/ijbfr.v8.no4.2022.pg1.19
  12. Edeh, M. B., & Iwedi, M. (2024). CORPORATE GOVERNANCE AND SOUNDNESS OF BANKING FIRMS IN NIGERIA. African Banking and Finance Review Journal, 10(10), 1-13.
  13. El Idrissi, I., & Alami, Y. (2021). The financial impacts of board mechanisms on performance: The case of listed Moroccan banks. International Journal of Financial, Accounting, and Management, 3(2), 93-113. https://doi.org/10.35912/ijfam.v3i2.536
  14. El Mokrani, Y., & Alami, Y. (2021). The effects of corporate governance mechanisms on earnings management: Empirical evidence from Moroccan listed firms. International Journal of Financial, Accounting, and Management, 3(3), 205-225. https://doi.org/10.35912/ijfam.v3i3.538
  15. Essien, M. D., & Akpan, D. C. (2024). Board Diversity and Earnings Quality of Listed Deposit Money Banks in Nigeria. FUDMA Journal of Accounting and Finance Research [FUJAFR], 2(2), 17-31. 10.12691/jfa-9-1-2
  16. Gasu, G. (2023). Reinvigorating the ethics of corporate governance in the Nigerian banking sector. Journal of Contemporary African Legal Studies, 1(2).
  17. Hoppmann, J., Naegele, F., & Girod, B. (2019). Boards as a source of inertia: Examining the internal challenges and dynamics of boards of directors in times of environmental discontinuities. Academy of Management journal, 62(2), 437-468. https://doi.org/10.5465/amj.2016.1091
  18. Jenter, D., Schmid, T., & Urban, D. (2023). Does board size matter? European Corporate Governance Institute–Finance Working Paper(916). http://dx.doi.org/10.2139/ssrn.4371743
  19. Kanene, K. C., & Francis, O. (2023). Empirical Relationship between Board Size, Board Tenure on Corporate Risk Management: Evidence from Nigerian Quoted Companies. IIARD International Journal of Economics and Business Management, 9(7), 28-38. 10.56201/ijebm.v9.no7.2023.pg28.38
  20. Lincoln, A., Adedoyin, O., & Laugharne, J. (2017). Board composition and corporate governance mechanisms in the Nigerian banking sector. Dimensional corporate governance: An inclusive approach, 79-102. https://doi.org/10.1007/978-3-319-56182-0_6
  21. Liu, X. (2023). A Literature Review of Upper Echelons Theory. Paper presented at the SHS Web of Conferences. https://doi.org/10.1051/shsconf/202316901067
  22. Mehmood, R., Ahmad, I., Rahman, S. U., & Sattar, S. (2025). The Role of Corporate Governance in Bank Risk-Taking Corporate Risk Mitigation Through Socially Responsible Governance (pp. 215-226): IGI Global.
  23. Muhammad, M. I., Tukur, Y., Dabari, I. J., & Hanga, B. Y. (2023). Board Attributes and Credit Risk Exposure of Listed Deposit Money Banks in Nigeria: The Moderating Effect of Risk Committee Size. Journal of Economics, Management and Trade, 29(8), 99-112. 10.9734/jemt/2023/v29i81118
  24. Musa, S. J., Moses, I. K., & Success, B. E. (2022). Effect of corporate governance on risk management of selected deposit money banks in Nigeria. International Journal of Health Sciences, 6, 6193-6203.
  25. Nainggolan, Y. A., Prahmila, D. I., & Syaputri, A. R. (2023). Do board characteristics affect bank risk-taking and performance? Evidence from Indonesian and Malaysian Islamic banks. Journal of Management and Governance, 27(4), 1115-1145. https://doi.org/10.1007/s10997-022-09625-w
  26. Nworie, G. O., & Agwaramgbo, J. C. (2023). Determining the Financial Performance of Tier-1 Deposit Money Banks in Nigeria Using Bank Liquidity. International Journal of Academic Management Science Research, 7(2), 166-181.
  27. Nworie, G. O., Okafor, T. G., & John-Akamelu, C. R. (2022). Firm-level traits and the adoption of computerised accounting information system among listed manufacturing firms in Nigeria. Journal of Global Accounting, 8(3), 128-148.
  28. Nworie, G. O., & Onochie, C. C. (2024). FUELLING ENTREPRENEURIAL PRODUCTIVITY IN NIGERIA: THE CONTRIBUTION OF BANK LOANS. 10.52589/IJEBI-XQGMW7DI
  29. Olufemi, A. (2021). Board gender diversity and performance of listed deposit banks in Nigeria. Eur Bus Manag, 7(1), 14. 10.11648/j.ebm.20210701.13
  30. Onuorah, A., Osuji, C., & Ozurumba, B. (2019). Board composition, diversity index and performance: Evidence from four major nigerian banks. Journal of Management Information and Decision Sciences, 22(4), 342-359.
  31. 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. https://doi.org/10.35877/454RI.daengku587
  32. Roy, S. K. (2022). The impact of age, gender, and ethnic diversity on organizational performance: an empirical study of Bangladesh's banking sector. International Journal of Financial, Accounting, and Management, 4(2), 145-161. https://doi.org/10.35912/ijfam.v4i2.905
  33. Tukur, Y. (2023). Internal Governance Mechanisms and Risk Management Strategy of Listed Deposits Money Banks in Nigeria. Journal of Human Resources and Management Science.
  34. Ugwuanyi, W., Wade, J. W., & Okoh, J. (2024). BANKING REFORMS IN NIGERIA: IMPLICATIONS FOR EMPLOYEE JOB SATISFACTION AND PERFORMANCE EVALUATION MANAGEMENT. African Banking and Finance Review Journal, 8(8), 84-102.