Board Characteristics and Firm Performance of Quoted Insurance Companies in Nigeria

Abstract

The Nigeria Insurance Association (NIA) has attributed the continued poor performance of the Nigerian Insurance firms to, among other factors, weak corporate governance practices and lack of effective monitoring by the board of directors. This has increased the research attention towards the impact of different attributes and compositions of the board of directors on the performance of Nigerian Insurance companies. In that regards, this study therefore examines the effect of selected board characteristics on the performance of the insurance firms quoted on the Nigerian Exchange Group (NGX) for the period of 2012-2020.The study adopts correlational research design. It uses secondarydata extracted from audited annual reports of the twenty-two (22) quoted insurance firms in Nigeria, which constitutes the sample size of the study. The study adopts a dual model approach by the use of two firm performance proxies, return on assets (ROA) and Tobin’s Q, while introducing firm size and leverage as control variables. It analyses data collected using descriptive statistics, correlation matrix and random effect panel regression technique. The result of the first model shows that board size, independence, gender and nationality diversity have no significant on ROA. The outcome of the second model shows that board size has a significant negative impact on Tobin’s q measure of performance, while board independence and gender diversity exert significant positive effects on the Tobin’s q. In line with the findings, the study recommends, among others, that the insurance companies should reduce the number on their boards for effective performance. It also recommends the need for more female presence in the board together with more independent non-executive directors in order to engender effective monitoring of the management for sustainable performance and attainment of set organisational goals.