Impact of Board Structure on Firm Performance in the Nigerian Manufacturing Sector

In this study, the impact of board structure on firm performance is empirically examined using a large cross section of 50 manufacturing firms in Nigeria and the panel data estimation technique. Both the random and fixed effects methods are adopted to provide robust estimates from the pooled data for the firms over a ten-year period (2005-2014) and the estimations are performed using two measures of firm performance and three measures of board structure. The empirical results from the analysis show that board structure has a significant impact on performance of manufacturing firms in Nigeria. The main source of the impact is through board independence and faintly through board size. However, board composition seems to exert very little effect on firm performance for the sample in the study. Also, firm size is shown to be an essential factor in explaining the general behaviour of firm performance and the pattern of effect that board structure has on firm performance. The effect of size is observed by controlling for it in the performance estimations. The study shows that firm size tends to improve the effect of board structure on performance, apart from EPS. The optimization of board size and composition is desirable for performance especially in a setting like Nigeria with diverse firm characteristics.

JEL classification: G32, L6, L25.