EFFECT OF BOARD COMPOSITION ON FINANCIAL PERFORMANCE OF LISTED DEPOSIT MONEY BANKS IN NIGERIA

Abstract

Performance of banks plays a crucial role in the economic development of any country, with the boards of these banks being key to their success. These boards are responsible for ensuring the long-term sustainability and growth of the banks. One of the key questions that arises is what kind of board composition leads to the most effective performance of corporate organizations, including banks. This study explored the impact of board composition on the financial performance of listed deposit money banks in Nigeria. A total of four banks were randomly selected and analyzed over a ten-year period (2014-2024). Data from annual reports and financial statements were analyzed using Ordinary Least Squares (OLS) Regression analysis. The results revealed that the size of the board has a significant positive effect on the financial performance of listed deposit money banks in Nigeria. Additionally, the presence of chief executive officer duality was also found to positively influence the financial performance of these banks. Based on these findings, the study recommends that banks should maintain a board size between ten and fifteen members, depending on the scale and complexity of the bank. It also highlights the importance of ensuring the board includes skilled, competent, independent members who are available for meetings. In line with corporate governance best practices, the study further recommends a focus on non-executive directors, carefully selecting them based on their skills, competence, experience, independence, and availability for meetings.