Board Diversity and Financial Performance of Listed Manufacturing Firms in Nigeria

Abstract

This study examines the effect of board diversity on the financial performance of manufacturing firms in Nigeria. The motivation for the study lies in the increased quest to establish the most appropriate board with the optimum mix needed to guarantee the absence of corporate failure. The study comprises of 64 listed manufacturing firms as at 31st December 2020, and sample size of 20 listed manufacturing firms were selected using purposive sampling technique. Data were obtained from annual reports of the selected firms from 2011 to 2020. Descriptive statistics and panel regression estimation techniques were used to analyze the data collected. The findings shown that board diversity has an insignificant effect on performance except for financial expertise diversity with a positive effect on financial performance, and there is a presence of long run relationship with firm performance. Based on these findings, the study therefore concludes that diversity on the board in terms of gender, ethnicity and educational background will not really improve or reduce performance of the firms while diversity in terms of financial expertise will do. Thus, it is recommended that greater measures need to be taken by manufacturing firms in Nigeria to have a higher percentage of board members with financial expertise, and directors with certified financial expertise should be allowed to stay longer on the boards to guarantee improved performance in the long run.