EFFECTS OF BOARD NATIONALITY AND ETHNIC DIVERSITY ON THE FINANCIAL PERFORMANCE OF LISTED FIRMS IN NIGERIA
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This study examined the effect of board nationality and ethnic diversity on firms’ performance in
the Nigeria stock exchange. With the aim of investigating the level of influence ethnic diversity
and board nationality would affect firm performance in terms of profitability and growth in a
developing economy, the study made use of ROA, ROE and Tobin’s Q for financial measures.
The study analysed date from 60 non-financial firms with periodic observations from 2012-2015
using the ordinary least squares regression method. Yemeni formula was used to calculate the
sample size out of the remainder 119 listed non-financial after 57 listed firms from the financial
sector were removed. The total sample size was further streamlined to 60 based on a common
reporting period (January 1st to December 31st) to ensure consistency. The Findings indicate
that ethnic diversity and board nationality has no significant influence on the performance level
of firms in both profitability (ROA and ROE) and growth (Tobin’s Q). Findings also reveal that
the average board size of the listed non financial firms in Nigeria meets the countries corporate
governance requirement of nine (9) members and the average board has a combination of at
least two of the three ethnic groups in Nigeria. The board composition of sampled firms still
reveals the presence of family members in same board which is against the central board
composition code of corporate governance. This study encourages a diverse board since there is
no significant effect on financial based performance; it is still advisable to be diverse except cost
outweighs benefits. Diversity always tends to have effects on the way the board members make a
decision, or strategic moves. It sets a control, brings innovation and could also slow down the
rate of decision making
Keywords
HF5601 Accounting