DO BOARD CHARACTERISTICS AFFECT FIRM PERFORMANCE? Empirical Evaluation of Some Corporate Governance Mechanisms in the Nigerian Stock Exchange

Abstract

The board of directors and the features that characterize them have been said to have significant effects on firm performance. In this paper, we examine a number of characteristics of the board of directors of the firms listed in the Nigerian Stock Exchange (NSE) in order to assess their impact on firm performance. To achieve this objective, data were obtained from the firms listed in NSE from 1996 to 2004. Over the nineyear period of the study, a database of 13,267 directorships was developed. It was found that the listed firms were characterized with a fairly small board size (averaging 8.4 persons), and a quarter of the firms that were studied had members of the same family on their boards of directors. Furthermore, regression results show that such a pattern of family control of boardrooms tend to reduce shareholders value and tends to foster long CEO tenures that may not be justified by improved firm performance. Whatever its shortcomings as an estimator, our OLS technique has provided results that seem to offer a reassuring conclusion that membership of boards of directors should be based on performance, and that the current wave of family affiliation in Nigerian boardrooms is not congenial to sound corporate governance and firm performance