Effect of Board Remuneration and Diversity on Financial Performance of Quoted Banks in Nigeria

International Journal of Research and Scientific Innovation (IJRSI) | Volume VI, Issue IV, April 2019 | ISSN 2321–2705

Effect of Board Remuneration and Diversity on Financial Performance of Quoted Banks in Nigeria

Venisha Osaren Osemwegie¹, Sunday Nosa Ugbogbo(Ph.D)^2,*

^1,2Department of Accounting, Benson Idahosa University, Benin City, Edo State, Nigeria
*Corresponding Author

Abstract:-The study examined the effect of board remuneration and diversity on financial performance of quoted banks in Nigeria. The objectives of the study were to ascertain whether board remuneration and diversity (board gender, board ethnicity, board nationality and board composition) have any effect on financial performance. Financial performance was measured using profit after tax (PAT) and share price (SP). A sample of fifteen (15) quoted banks on the Nigerian Stock Exchange (NSE) from 2009 to 2017 covers the population of the study. The data generated were analyzed using descriptive statistics, Pearson correlation analysis, variable redundancy test and regression analysis. The findings revealed that board remuneration, board gender diversity, board ethnic diversity and board composition have significant positive effect on financial performance while board nationality diversity had a negative effect on financial performance. On the basis of this, the study recommends that board members should be adequately remunerated as this can play a vital role in reducing conflict of interest between board members and shareholders in the banks. The study also recommends that listed banks should focus on the attributes of female directors among board members, and that listed banks should ensure that board members in an organization are not be dominated by a single ethnic group.

Keywords: Financial Performance, Board Remuneration, Board Gender Diversity, Board Ethnic Diversity, Board Nationality Diversity and Board Composition

I. INTRODUCTION

The need for board diversity in organizations stands as a very crucial concern for both management and shareholders. The future of the organization, the returns on investment for investors, the income for employees and the ability of the organization to meet its various obligations depend on its financial performance. There are many definitions of financial performance and these depend on the way it is used (Marimuthu & Kolandaisamy, 2009). Barney, Mackey and Tyson, (2007) defined financial performance as a measure by which an organization employs its assets toward carrying out the company operations in order to achieve turnover. Financial performance determines the total financial prospects of an organisation and can be used to compare the performance of different organizations over a given time period (Bekele, 2013).

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