Abstract:
No consensus has been reached among researchers in the extant literature on the effects of the composition of corporate boards and size on the financial performance of manufacturing firms. In spite of expansive literature on this subject matter the debate is inconclusive. This research is therefore designed to empirically address these variables as they apply to the Nigerian manufacturing firms in the post enactment of the Code of Corporate Governance Act. The objective of this study is therefore to examine the effects of the board composition on the financial performance of Nigerian manufacturing firms. The research used the descriptive cross sectional survey design. Data was collected by secondary method. Ten firms were sampled for analysis using audited annual reports and accounts for eleven years covering 2005 to 2015. The fixed effect model of the regression analysis was found most suitable and employed in estimating the variables of the study. Our findings revealed that non-executive directors have significant effect on the financial performance of manufacturing firms in Nigeria. Also the board size has positive and significant influence on the financial performance of manufacturing firms in Nigeria. The findings from this study has been able to show that the implementation of the Code of Corporate Governance in Nigeria has positive and significant effect on the financial performance of the manufacturing sector of the economy. The policy implications of this new knowledge is that the improvement of firm performance is heavily dependent on board independence as depicted by the ratio of non-executive to executive directors and the appropriate board size. Any policy aimed at improving the financial performance of Nigerian manufacturing firms must focus on the composition of the boards. It was therefore recommended to increase the minimum board members from five to eight, the expansion of the coverage of the governance code and the establishment of Corporate Governance Board to oversee compliances and implement sanctions.
