The Effects of Board Size on Financial Performance of Banks: A Study of Listed Banks in Nigeria

Olubukunola Ranti UWUIGBE, Adeniran Samuel FAKILE

Abstract


A critical review of the Nigerian banking system over the years shows that one of the problems confronting the sector has been that of poor corporate governance. In an attempt to investigate the linkage between corporate governance and financial performance of banks, this study contributed to the existing literature by assessing the effect of size of boards on the performance of banking sector in a developing economy like Nigeria. This study made use of a range of data drawn from the Nigerian Stock Exchange fact book (2008), which contains information on board size and the performance proxies. Regressing performance on board size, it was observed that banks with board size below 13 are more viable than those with board size above 13. The study further observed that banks with larger boards recorded profits lower than those with smaller boards. Therefore, this study concludes that there is a significant negative relationship between board size and bank financial performance with a t- value of -1.977 and a p- value of 0.053. This is because, increase in board size occurs with increase in agency problems (such as director free-riding) within the board and the board becomes less effective. However, the paper recommends a smaller board size for better financial performance and to reduce the problem of free-rider of banks in Nigeria.


Full Text: PDF DOI: 10.5539/ijef.v4n2p260

Creative Commons License
This work is licensed under a Creative Commons Attribution 3.0 License.

International Journal of Economics and Finance  ISSN  1916-971X (Print) ISSN  1916-9728 (Online)

Copyright © Canadian Center of Science and Education

To make sure that you can receive messages from us, please add the 'ccsenet.org' domain to your e-mail 'safe list'. If you do not receive e-mail in your 'inbox', check your 'bulk mail' or 'junk mail' folders.