Board Structure and Financial Performance of Listed Consumer Goods Firms in Nigeria

Board Structure and Financial Performance of Listed Consumer Goods Firms in Nigeria

Ilo, Victor Uchenna^1*, Uwaleke, Uche², Achema, Friday³

¹Accounting Department, Veritas University, Abuja, Nigeria

²Banking and Finance Department, Nasarawa State University, Nasarawa State, Nigeria

³Accounting Department, Veritas University, Abuja, Nigeria

DOI: https://dx.doi.org/10.47772/IJRISS.2025.90400417

Received: 12 April 2025; Accepted: 16 April 2025; Published: 19 May 2025

ABSTRACT

This study examines the effect of board structure on the financial performance of listed consumer goods firms in Nigeria, focusing on the influence of board size, board independence, and gender diversity. Panel data covering 16 firms from 2014 to 2023 were analysed using a robust fixed effects regression model, with Return on Assets (ROA) serving as the key performance metric. The findings reveal that board size has a significant negative effect on ROA, suggesting that excessively large boards may hinder strategic decision-making and increase agency costs. Board independence demonstrates a positive and statistically significant impact on ROA, underscoring the importance of non-executive oversight in enhancing firm value. However, board gender diversity exhibits a negative but statistically insignificant effect on ROA, indicating that gender inclusion on boards, though vital for equity, may not directly influence financial outcomes in the Nigerian context. Control variables such as firm size and leverage were also examined, with leverage showing a significant negative effect on ROA. These results highlight the nuanced role that board composition plays in shaping firm performance and underscore the need for optimal board design tailored to firm-specific and contextual realities. The study recommends maintaining a board size that balances diversity with decision-making efficiency and increasing the proportion of independent directors to strengthen governance practices. It also encourages further investigation into the institutional and cultural factors that may mediate the impact of gender diversity on firm performance in emerging markets.

Keywords: Board structure, Board size, Board independence, Board gender diversity, Return on Assets, Corporate governance

INTRODUCTION

The structure of corporate boards has become a focal point in contemporary corporate governance discourse, particularly in the wake of high-profile corporate scandals and failures across both developed and emerging markets. The collapse of global giants such as Enron (2001), WorldCom (2002), and Wirecard (2020), as well as financial distress episodes within Nigeria’s own banking sector, including the recent liquidation of Habib Bank, have exposed deep-rooted governance weaknesses. These events have eroded investor confidence, accentuated agency problems, and amplified calls for more robust and accountable board governance frameworks (Alashe et al., 2021; Benvolio & Ironkwe, 2022). As such, academic inquiry and policy interest have increasingly turned toward the structural configuration of boards, particularly board size, independence, and gender diversity, as a potential determinant of corporate financial performance.

Grounded in agency theory (Jensen & Meckling, 1976), which emphasizes the divergence of interests between shareholders and managers, board structure is theorized to play a pivotal role in monitoring management behaviour, aligning stakeholder interests, and ensuring strategic direction. Effective boards, particularly those that are independent, appropriately sized, and diverse, are believed to mitigate managerial opportunism, enhance decision-making quality, and improve firm outcomes (Fama & Jensen, 1983; Samuel & Obaya, 2022). This theoretical expectation has sparked a growing body of empirical studies examining the relationship between board characteristics and firm performance across various sectors and jurisdictions.

In Nigeria, the consumer goods sector constitutes a vital component of the economy, contributing significantly to employment, industrial output, and national income. However, the sector continues to face persistent challenges related to financial mismanagement, weak internal controls, and ineffective board oversight. These governance shortcomings have been further exacerbated by broader economic volatility and regulatory inconsistencies. Despite a burgeoning literature on corporate governance in Nigeria (e.g., Wede et al., 2023; Alashe et al., 2021; Sanni et al., 2020), empirical findings on the impact of board structure on firm performance remain inconclusive and, at times, contradictory. While some studies suggest a positive link between board independence or size and firm performance (Adegbite et al., 2018; Olayinka et al., 2017), others report weak or statistically insignificant associations (Muller, 2013; Onuoha & Eze, 2019), suggesting that board effectiveness may be contingent upon contextual factors specific to the Nigerian business environment.

A particularly underexplored dimension in the Nigerian context is board gender diversity. Although international studies have associated gender-diverse boards with enhanced governance and financial performance (Carter et al., 2010; Adams & Ferreira, 2009), limited empirical attention has been paid to its applicability and effectiveness within Nigerian consumer goods firms. This gap is especially significant in light of global movements toward gender inclusion and corporate sustainability, which underscore the importance of diverse perspectives in boardroom dynamics.

In light of these theoretical expectations, empirical ambiguities, and contextual gaps, this study seeks to provide a nuanced and updated examination of the relationship between board structure and financial performance in Nigeria’s consumer goods sector. Using data from 2014 to 2023 and Return on Assets (ROA) as the key performance indicator, the study specifically investigates how board size, independence, and gender diversity influence firm-level financial outcomes. By offering evidence-based insights, the study aims to contribute to corporate governance reforms, inform policy debates, and enhance the strategic design of board structures in emerging market contexts.

Objective of the Study

The main objective of this study is to examine the effect of board structure on the financial performance of listed consumer goods firms in Nigeria. Specifically, the study seeks to:

1. Assess the extent to which board size significantly affects the return on assets of listed consumer goods firms in Nigeria.
2. Evaluate the effect of board independence on the return on assets of listed consumer goods firms in Nigeria.

iii. Investigate the impact of board gender diversity on the return on assets of listed consumer goods firms in Nigeria.

Research Hypotheses

The study will test the following null hypotheses:

H₀₁: Board size has no significant effect on the return on assets of listed consumer goods firms in Nigeria.

H₀₂: Board independence has no significant effect on the return on assets of listed consumer goods firms in Nigeria.

H₀₃: Board gender diversity has no significant effect on the return on assets of listed consumer goods firms in Nigeria. 

Conceptual Review

Board Structure

Board structure represents the formal composition and governance framework of a company’s board of directors. It plays a pivotal role in shaping corporate governance by providing oversight, setting strategic direction, and ensuring the alignment of corporate objectives with shareholder interests. Key attributes of board structure include board size, independence, diversity, and leadership configuration—particularly the separation of the roles of the CEO and the board chair. These structural features collectively influence the board’s ability to function objectively, manage risks, and enhance corporate accountability.

According to the Organisation for Economic Co-operation and Development (OECD, 2015), board structure encompasses the mix of executive and non-executive directors, the size of the board, the diversity of its members, and the allocation of responsibilities among board committees. This comprehensive arrangement is intended to strengthen board effectiveness and governance outcomes. Monks and Minow (2011) similarly conceptualize board structure as the foundational framework that determines how the board is constituted and operates, including the number and types of directors, their independence from management, and their capacity to provide effective oversight and strategic direction. The seminal Cadbury Report (1992) underscores the necessity of balancing executive and non-executive directors to prevent any individual or small group from dominating the board’s decision-making processes, thereby promoting transparency and impartiality.

Empirical literature has consistently highlighted the significance of board structure in influencing firm performance. Specific structural elements—such as board size, the proportion of independent directors, and gender diversity—serve as mechanisms through which effective governance is actualized (Fama & Jensen, 1983; Adams & Ferreira, 2009). Thus, a well-structured board is essential not only for regulatory compliance but also for promoting ethical leadership, sound strategic guidance, and long-term organizational sustainability.

Board Size

Board size, a fundamental element of board structure, refers to the total number of directors serving on a company’s board at a given time. It directly influences the board’s ability to perform its oversight, advisory, and strategic roles. The optimal size of a board has been a subject of scholarly debate, with various studies suggesting that both excessively large and very small boards can hinder effective governance. Lipton and Lorsch (1992) posit that an ideal board should consist of approximately eight to nine members, arguing that smaller boards are typically more cohesive, agile, and effective in decision-making. Jensen (1993) supports this view by highlighting that when a board exceeds seven or eight members, coordination becomes problematic, leading to diminished effectiveness in deliberation and oversight.

The OECD (2015) similarly notes that board size should be tailored to a company’s needs, cautioning that very small boards may lack the diversity of expertise required for effective governance, while very large boards may become bureaucratic and inefficient. Empirical research by Yermack (1996) further corroborates these assertions by establishing a negative relationship between board size and firm value, implying that smaller boards often perform better in terms of monitoring and strategic engagement.

Overall, board size is a critical governance variable with direct implications for board efficiency, diversity of input, and accountability. Although the ideal size may vary based on a firm’s size, industry, and complexity, maintaining a balanced board is essential for fostering effective oversight, swift decision-making, and robust corporate performance.

Board Gender Diversity

Board gender diversity, an increasingly prominent dimension of board composition, refers to the representation of both men and women on a company’s board of directors. It has gained traction in corporate governance discourse for its potential to enrich board deliberations, enhance decision-making quality, and improve firm performance. The International Finance Corporation (IFC, 2015) defines board gender diversity as the equitable inclusion of men and women in the boardroom, emphasizing its role in bringing varied perspectives, experiences, and values to corporate leadership. Gender-diverse boards are viewed not only as ethically desirable but also as strategically advantageous.

Adams and Ferreira (2009) underscore that gender-diverse boards tend to be more diligent and independent in monitoring management, thereby contributing to improved governance outcomes. Their findings suggest that women’s presence on boards correlates with better attendance, enhanced participation, and more rigorous oversight. Similarly, Carter, Simkins, and Simpson (2003) identify a positive association between gender diversity and firm value, attributing this relationship to the broader range of viewpoints and improved board dynamics that female directors contribute. This broader social responsiveness enhances the board’s capacity to engage with diverse stakeholders.

In sum, board gender diversity is not merely a matter of representation but a strategic asset that can enhance innovation, organizational reputation, and financial performance. As such, corporate governance codes increasingly advocate for greater gender inclusion at the board level, recognizing its value in advancing equitable, accountable, and performance-driven leadership (Terjesen, Sealy & Singh, 2009).

Board Independence

Board independence is a cornerstone of effective corporate governance, referring to the degree to which directors are free from relationships with management that could impair their objectivity. Independent directors are expected to act in the best interests of shareholders and stakeholders by providing unbiased oversight, monitoring executive conduct, and upholding accountability mechanisms. According to the OECD (2015), an independent director is one who is not a member of the company’s management and lacks material relationships that might compromise impartial judgment. This structural autonomy enhances the board’s ability to challenge managerial decisions, mitigate agency conflicts, and safeguard shareholder interests.

Fama and Jensen (1983) argue that independent or outside directors are more effective in their monitoring roles because they are less susceptible to internal political pressures and more inclined to protect shareholder value. The UK Corporate Governance Code (2018) reinforces this perspective by emphasizing both structural and behavioral independence, noting that directors must be free from any business or personal relationship that could interfere with objective decision-making.

A robust body of empirical research supports the positive impact of board independence on firm performance, highlighting its association with reduced fraud, improved transparency, and more effective CEO monitoring (Bhagat & Black, 2002; Rosenstein & Wyatt, 1990). Consequently, board independence is widely regarded as a key attribute of sound governance, one that enhances investor confidence and strengthens institutional legitimacy.

Return on Assets

Return on Assets (ROA) is a fundamental financial metric used to evaluate a company’s efficiency in generating profit from its total asset base. It is calculated by dividing net income by total assets, resulting in a percentage that indicates how well a company utilizes its resources to create earnings. ROA is particularly valuable in assessing management’s effectiveness in deploying capital investments and managing operational efficiency.

According to the Corporate Finance Institute (2025), ROA reflects the rate of return generated on a firm’s total assets, providing insights into the profitability of resource utilization. Harvard Business School Online (2025) similarly emphasizes that ROA measures the extent to which asset usage contributes to income generation, underscoring the relationship between capital structure and operational output. Hayes (2025) further explains that a higher ROA suggests superior performance in converting assets into net income, which is especially useful when comparing firms within the same industry.

However, the interpretive value of ROA depends on industry context, as asset intensity varies significantly across sectors. Capital-intensive industries like manufacturing typically report lower ROA figures due to large fixed asset investments, whereas service-oriented firms, which rely more on human capital, tend to have higher ROA values. Therefore, while ROA is an essential performance indicator, it should be evaluated within the firm’s specific industrial and economic environment.

In conclusion, Return on Assets is a critical tool for stakeholders seeking to assess operational efficiency, strategic effectiveness, and financial health. By integrating insights from multiple authoritative sources, it becomes evident that ROA plays a vital role in strategic decision-making and corporate performance evaluation.

Theoretical Framework

This study draws upon multiple theoretical perspectives to explain the relationship between board structure and firm performance, particularly in the context of listed consumer goods firms in Nigeria. The primary theoretical lens is Agency Theory, which is complemented by Resource Dependence Theory and Institutional Theory to provide a more nuanced understanding of board composition and governance practices in emerging economies.

Agency Theory, originally developed by Jensen and Meckling (1976), serves as the foundational framework. It conceptualizes the firm as a nexus of contracts between principals (shareholders) and agents (managers), with agency problems arising when managers prioritize personal objectives over shareholder value. Such divergences may manifest in managerial opportunism, inefficient resource allocation, and weakened firm performance unless proper monitoring mechanisms are instituted. According to Fama and Jensen (1983), the board of directors plays a critical role in mitigating agency costs by overseeing managerial decisions and aligning executive actions with shareholder interests. In this study, board attributes such as size, independence, and gender diversity are examined as governance tools that can strengthen managerial oversight, improve decision-making, and curb self-serving behaviors, thereby enhancing firm performance (Bhagat & Black, 2002; Adams & Ferreira, 2009).

While Agency Theory provides robust insights into the monitoring function of the board, it does not fully capture the strategic and symbolic roles of board members, especially in contexts where institutional environments and resource constraints are significant. Resource Dependence Theory (Pfeffer & Salancik, 1978) offers a complementary perspective by viewing the board as a conduit for securing critical external resources and legitimacy. Board members, particularly those with diverse backgrounds, networks, and expertise, can facilitate access to capital, regulatory support, and strategic alliances. In this regard, gender-diverse boards are not only more reflective of stakeholder plurality but also better positioned to attract varied perspectives and external endorsements, thereby enhancing firm adaptability and resilience in dynamic markets (Hillman, Cannella & Paetzold, 2000; Terjesen, Sealy & Singh, 2009).

Moreover, Institutional Theory (DiMaggio & Powell, 1983) provides an important contextual lens for understanding governance practices in Nigeria, where regulatory environments, cultural norms, and stakeholder expectations often shape board configurations beyond mere economic rationality. Institutional Theory posits that firms conform to prevailing norms and expectations to gain legitimacy, access resources, and ensure survival. In the Nigerian corporate landscape, institutional pressures—from regulators, investor communities, international governance standards, and gender inclusion campaigns—exert influence on how boards are structured and function. Thus, the presence of independent and gender-diverse directors may also reflect isomorphic tendencies, where firms adopt globally recognized governance practices to enhance legitimacy, even in the absence of strong enforcement mechanisms.

By integrating these three theoretical perspectives, this study offers a holistic understanding of board structure and its implications for firm performance. Agency Theory emphasizes the monitoring and control functions of the board; Resource Dependence Theory highlights the board’s strategic role in securing external legitimacy and resources; while Institutional Theory captures the socio-political and cultural influences that shape governance configurations in the Nigerian context. Together, these theories support the study’s empirical investigation into how board size, board independence, and board gender diversity affect financial performance, as measured by Return on Assets (ROA), in Nigeria’s consumer goods sector.

Empirical Review

Ado et al. (2024) investigated the relationship between board characteristics—specifically board size and composition—and the financial performance of publicly listed deposit money banks in Nigeria. Using panel data from ten deposit banks listed on the Nigerian Stock Exchange (NSE) for the period 2011 to 2020, the study analysed 60 firm-year observations. Data were sourced from banks’ annual reports and the NSE’s official websites. The findings revealed a positive and significant relationship between board size and financial performance, suggesting that larger boards enhance financial outcomes. In contrast, a negative and significant relationship was identified between board composition and financial performance, indicating that increased board composition might adversely affect financial outcomes.

Asare et al. (2023) examined the impact of board structures on the financial performance and stability of banks in Africa. Their study utilized data from 366 banks across 26 African countries between 2007 and 2015. Key performance measures included net interest margin, risk-adjusted return on assets, and z-scores for bank stability. Variables of board structure, such as board size, independence, and gender diversity, were also assessed. The study found that board independence negatively influenced financial stability and demonstrated varied effects on financial performance. Meanwhile, board size and gender diversity showed no significant relationships with financial performance.

Nguyen and Huynh (2023) explored the influence of Board of Directors’ characteristics on the financial performance of 52 construction and real estate companies listed on the Vietnam Stock Exchange from 2006 to 2020. Using advanced econometric techniques, including pooled OLS, FEM, REM, and IV-GMM, the study addressed issues like endogeneity and cross-sectional dependence. Results indicated that board size, female board membership, meeting frequency, and board members’ education positively influenced financial performance. Conversely, increased board independence was associated with a decline in business efficiency.

Sarpong-Danquah et al. (2023) assessed the impact of board size on the financial performance of 408 microfinance institutions (MFIs) from 2010 to 2018. Their findings highlighted the inconclusive nature of board size effects in the literature. However, their analysis showed a strong negative relationship between board size and financial performance in both the short and long term. The study also noted that in environments with efficient judicial systems, MFIs experienced a positive impact of board size on performance. This suggests that while larger boards may not directly enhance performance in some cases, institutional factors such as a well-functioning legal system can mediate the effectiveness of board structures. The study’s results add to the ongoing debate in corporate governance literature about the optimal size of boards for performance enhancement, especially in microfinance institutions.

Wede et al. (2023) examined the impact of board characteristics on the financial performance of quoted consumer goods firms in Nigeria between 2010 and 2020. Using secondary data from ten firms’ annual reports, the study employed multiple regression analysis to assess the relationship between board attributes and key performance indicators. The study revealed that board size and independence had a negative influence on profitability measures, including earnings per share and profit after tax. However, these characteristics had a positive effect on return on equity (ROE), indicating that while larger and more independent boards may not directly improve profitability, they might contribute to long-term shareholder value. Board diversity was found to have a positive and significant effect on earnings per share, suggesting that diversity may lead to better financial outcomes by bringing diverse perspectives and better decision-making. This finding aligns with the growing literature on the importance of diversity in enhancing the overall effectiveness of corporate boards. The study concluded by emphasizing the need for firms to focus on improving board composition and audit quality to ensure transparent financial reporting.

Alashe et al. (2021) examined the influence of board structure on the financial performance of consumer goods firms in Nigeria following the adoption of International Financial Reporting Standards (IFRS). Using data from 14 firms over the period from 2012 to 2019, the study utilized ordinary least squares (OLS) regression to explore the effects of board gender diversity, executive director strength, and other board characteristics on profit margins. The findings revealed that neither board gender diversity nor the numerical strength of executive directors had a significant impact on profit after tax margin. This suggests that these specific aspects of board structure may not directly influence financial performance in the post-IFRS adoption era. The study highlights that while some countries and industries have seen improvements in governance through diversity, the influence of board structure on financial performance remains context-dependent. Moreover, the study calls for the implementation of policies to address the underrepresentation of women on boards, suggesting that gender diversity may still play an indirect role in fostering better governance practices.

Cao et al. (2021) investigated the relationship between corporate board size and performance using data from 372 U.S. companies in the S&P 500 from 2013 to 2017. Their study found a negative correlation between board size and corporate performance, particularly in high-tech industries. The results suggest that large boards may be less effective in industries where rapid decision-making and agility are essential. Additionally, the study found that boards with an odd number of directors were more effective than those with an even number, potentially because odd-numbered boards reduce the likelihood of ties during decision-making processes. This finding adds to the debate on board structure, as it highlights that board size and composition must be optimized for specific industries and organizational needs. The study concludes that while larger boards may be seen as more resourceful, they may struggle with coordination and decision-making, especially in fast-paced environments like high-tech sectors.

This empirical review reveals diverse findings on the relationship between board characteristics and financial performance. While some studies suggest positive correlations, others highlight negative or inconclusive effects. These differences reflect the varied organizational contexts, industries, and governance practices examined across the studies. The literature underscores the complexity of corporate governance and emphasizes the need for further research to explore the optimal combination of board attributes for enhancing financial performance.

METHODOLOGY

This study adopted ex-post facto research design, which is justified on the ground that it is suitable for quantitative analyses of data gleaned from historical event, phenomena and occurrence. Secondary data that are quantitative in nature were collected for the study population; they are extracted from the annual reports of listed consumers’ goods firms. The use of secondary data is justified based on the fact that the study is based on quantitative research methodology, and thus, required quantitative data. The population of the study consist of twenty-one (21) consumers’ goods firms listed on the floor of the Nigeria Exchange Group from the year 2014 to 2023, while sample size gotten through judgmental techniques are sixteen (16) of these firms.

Panel regression model is use with the aid of Stata 13 to determine and analyse the effect of board structure on the financial performance of listed consumers’ goods firms in Nigeria. The independent variable is proxies by board size measured by natural logarithm, board independent measured by the ratio of independent board members to total board number, and board diversity measured by the ratio of female board members to total number of board members.  While the dependent variable is proxy by Return on Assets (ROA) measure as the ratio of profit before interest and tax to total assets. The study involves multiple independent variables across sections, so the Hausman test was used to select the most suitable model between fixed and random effects to determine this relationship (Samuel & Obaya, 2022). The study adapted the model of Samuel and Obaya (2022) as specified thus:

DPS = f (BOS, BME, BIN, BOD, LTOA)

Where: DPS= Dividend per Share, BOS= Board Size, BME= Board Meeting, BIN= Board Independent, BOD= Board Diversity and LTOA= log Total Asset as control variable.

The model is modified by specifying Return on Assets as function of board size, board independent, and board diversity. Mathematically, the models are given below:

ROA = f (BOS, BIN, BOG)

The model is then transformed to econometric form:

ROA_it = β₀ + β₁ BOS_it + β₂ BIN_it + β₃ BOD_it β₄ FSZ + β₅ LEV_it + e_it

Where: ROA = return on assets, BOS = board size, BIN = board independent, BOG = board gender diversity. FSZ= firm size, LEV= Leverage (control variables), i = represents the firm, t = represent the time/year, and e = the error term.

ANALYSIS

Table 1: Descriptive statistics

Source: Descriptive Statistics Result using STATA 17: Researcher (2025)

Table 1 reveals the sample descriptive statistics for the variables of the study for the period 2014 to 2023.  The average return on assets (ROA) for the firms is 8.7%, with a significant variation (standard deviation of 10.3%). This means that on average, the firms were efficient in making profit from a given asset to 8.7%.  However, the standard deviation indicates that it is widely disperse from the mean.  The minimum ROA is -16.7%, indicating some firms experience losses, while the maximum is 42.6%, showing profitable firms. This suggests a diverse financial performance across the firms, with some achieving high profitability and others struggling.

Further, Table 2 also reveals that the average board size is 10 members, standard deviation is 3.00. This indicates that the on average the size of the board of the selected consumer goods firms is 10.  The standard deviation is 3.00 shows that the size is common among the firms as it indicates a low fluctuation from the mean.  The smallest board consists of 4 members, and the largest has 18 respectively.

With regard to board independence, the average proportion of independent board members is only 15.6%, with standard deviation of 0.142.  The mean value reveals that the proportion of the independent directors on the board is low. The standard deviation value signifies low variation of BIN across the quoted consumer goods firms in Nigeria. The maximum BIN and minimum BIN is 0 and 0.539 respectively.

The average gender diversity on boards is 19.2%, which is also low. The maximum BOG and minimum BOG is 0 and 0.572 respectively. The range from 0% to 57.1% shows that some firms have no female board members, while others are more diverse. This low mean indicates that gender diversity remains underdeveloped in most of the firms.

On the control variables, table 1 shows that firm size has an average 24.6, with a standard deviation of 1.87, indicating that most firms are of a similar size, but some variation exists. The smallest firm has a size of 19.75, while the largest has 28.03 respectively.  Table 1 shows the average leverage ratio is 61.4%, indicating that, on average, firms are financing a significant portion of their operations with debt. The leverage ratio ranges from 19.4% to 113.4%, reflecting varying debt levels across firms

Table 2: Correlation Analysis

Source: Correlation Analysis Result using STATA 17: Researcher (2025)

The table shows board size has a weak and negative correlation with ROA of the listed consumers’ goods firms in Nigeria with a coefficient of -0.020. Also, board independence has positive and weak correlation with ROA of the listed consumers’ goods firms in Nigeria with a coefficient of 0.133. Finally, board diversity has negative and weak correlation with ROA of the listed consumers’ goods firms in Nigeria with a coefficient of -0.062. Among the independent variables themselves, table 2 showed that weak correlation exists as all values fell below +- 0.80.

Table 3:Diagnostics Tests

Source: Diagnostics Tests Result using STATA 17: Researcher (2025)

The Jacque Bera test reveals a p-value of 0.000 which is less than 5% indicating that the residual is not normally distributed. The residual’s homoskedasticity is a further premise of conventional ordinary least squares.  According to the null hypothesis, the error term variance is comparable for all independent variable values. The heteroskedasticity test for this investigation was conducted using the Breusch-Pagan/Cook-Weisberg test. At a 5% level of significance, the null hypothesis is that the data are homoscedastic. According to Table 6’s Breusch-Pagan/Cook-Weisberg test results, the chi2 value is 48.02 and the p-value for chi2 is 0.000, both of which are significant and suggest that there may be a problem with heteroskedasticity. The Wooldridge test for autocorrelation in panel data examines whether first-order serial correlation is present. The result (p = 0.0877) suggests no significant autocorrelation, as p > 0.05. The Hausman Specification Test was used in the study to establish if the panel effect was random or fixed because the data were panel-based. The outcome indicates that the chi2 is 13.93 and the prob>chi2 is 0.016, both of which are significant at the 5% level of significance. The p-value demonstrates that the Hausman test favours the fixed effect model. Thus, the study interpreted the fixed effect model. In order to deal with the problem of abnormal distribution and the problem of heteroskedasticity encountered in the data, the study used robust fixed effect model for making inference.

Table 4: Multicollinearity Test

Source: Multicollinearity Test Result using STATA 17: Researcher (2025)

The absence of multicollinearity is a requirement for the traditional assumption of the OLS regression model, which states that the explanatory variables must not be fully linked. Gujarati (2004) asserts that estimates with a tolerance value (TV) of less than 0.1 and a VIF value of 10 or higher are likely to be multicollinear. Table 4s findings, however, showed that there isn’t an excessive amount of correlation between the independent variables, with the lowest tolerance value (TV) being 0.644 and the maximum variance inflation factor (VIF) being 1.55.

Regression Results       

In this section, the regression results of the board structure and financial performance are presented and analysed in table

Table 5: Fixed Effect  Model

Source: Regression Results Result using STATA 17: Researcher (2025)

The Dicrol-kraay fixed effect regression model’s findings, which were based on the Hausman specification test, are shown in Table 5. The board structure variables are able to explain change in financial performance of listed consumers’ goods firms in Nigeria to the tune of 13.4%, with the remaining percentage being explained by other factors not captured in the model, according to the F statistic, which shows a value of 0.134. The model is fitted at less than 5% significant level, and the variables have a combined effect on financial performance of listed consumers’ goods firms in Nigeria. According to the F-statistics chi square, which is 34.38 and has a P-value of 0.000.

DISCUSSION OF FINDINGS 

The discussion of the findings on the individual variables is as follows:

Board Size and Financial Performance

The analysis presented in Table 5 indicates a statistically significant negative relationship between board size and financial performance, as measured by return on assets (ROA), with a coefficient of -0.013 and a p-value of 0.044. Consequently, the null hypothesis asserting no significant relationship between board size and firm performance is rejected. This empirical evidence suggests that an increase in the number of board members is associated with a decline in financial performance among listed consumer goods firms in Nigeria.

From a theoretical perspective, this finding aligns with agency theory, particularly regarding the inefficiencies and coordination problems that may arise from larger boards. In practice, expansive boards may lead to slower decision-making processes, communication breakdowns, and difficulties in reaching consensus, which can hamper strategic responsiveness and oversight effectiveness. Moreover, the potential for “free rider” behavior increases with board size, as individual accountability may be diffused, thereby weakening the board’s monitoring capacity. These inefficiencies can manifest in elevated agency costs and suboptimal utilization of corporate resources.

Empirically, this outcome is consistent with the findings of Cao et al. (2021), Sarpong-Danquah et al. (2023), and Wede et al. (2023), who documented that larger board sizes exert a deleterious impact on firm performance. For instance, Sarpong-Danquah et al. (2023) emphasized that this negative influence persists over both the short and long term within microfinance institutions. However, this result contradicts the findings of Boubacar (2020), Nguyen and Huynh (2023), and Ado et al. (2024), who reported a positive association between board size and firm performance, citing benefits such as diverse expertise, broader networks, and enhanced advisory capabilities. The divergence in findings may reflect differences in institutional contexts, governance practices, or industry-specific dynamics.

Board Independence and Financial Performance

Table 4 reports a positive and statistically significant relationship between board independence and ROA, with a coefficient of 0.048 and a p-value of 0.012. Accordingly, the study rejects the null hypothesis, confirming that greater board independence is associated with improved financial performance in Nigerian consumer goods firms.

This result substantiates the theoretical assertions of agency theory, which advocates for the inclusion of independent directors as a mechanism for mitigating managerial opportunism and aligning the interests of management with those of shareholders. Independent directors, by virtue of their objectivity and lack of material ties to the firm, are presumed to enhance the board’s capacity to monitor executive decisions, reduce conflicts of interest, and facilitate transparent governance. Practically, this implies that Nigerian firms with higher proportions of independent board members may benefit from more rigorous oversight, better risk management, and more strategically sound decision-making processes.

This finding is congruent with empirical studies such as Upadhyay and Öztekin (2021) and Hu et al. (2023), both of which identified a positive association between board independence and firm performance. However, it stands in contrast to studies by Asare et al. (2023), Nguyen and Huynh (2023), and Ado et al. (2024), who observed a negative relationship, possibly due to excessive independence leading to reduced internal cohesion or a lack of firm-specific knowledge among independent members. In the Nigerian context, this study suggests that the benefits of independent oversight outweigh potential drawbacks, particularly in enhancing governance effectiveness and financial outcomes.

Board Gender Diversity and Financial Performance

The analysis in Table 5 reveals an insignificant relationship between board gender diversity and ROA, with a coefficient of -0.022 and a p-value of 0.282. This indicates that the presence of female directors on corporate boards does not have a statistically significant impact on financial performance within the sampled firms. Consequently, the null hypothesis that board gender diversity has no significant influence on financial performance is not rejected.

Theoretically, this result challenges expectations grounded in resource dependence theory and social identity theory, which posit that gender-diverse boards are likely to enrich the decision-making process through a wider array of perspectives, cognitive approaches, and stakeholder representation. The lack of a significant relationship in this context may be attributed to structural and cultural constraints that inhibit the effective participation of women on corporate boards in Nigeria. Specifically, the phenomenon of tokenism, where female directors are appointed primarily to fulfil regulatory or symbolic requirements without being accorded meaningful influence, may limit their ability to contribute substantively to governance and strategy.

Moreover, if female board members are underrepresented in executive or committee leadership roles, their impact on firm performance may be further diminished. These constraints highlight the importance of not merely increasing the number of women on boards but ensuring their integration into key decision-making processes.

This finding corroborates those of Alashe et al. (2021) and Asare et al. (2023), who also found no significant linkage between board gender diversity and firm performance. In contrast, studies by Nguyen and Huynh (2023) and Wede et al. (2023) reported a positive and significant relationship, emphasizing that the benefits of board diversity may be more fully realized in environments where institutional, cultural, and policy frameworks actively support inclusivity and gender equity in corporate governance. In the Nigerian setting, the insignificant impact observed may reflect the early stages of diversity integration and a need for more robust mechanisms to empower female directors.

CONCLUSION AND RECOMMENDATIONS

This study set out to examine the impact of board structure on the financial performance of listed consumer goods firms in Nigeria over the period 2014 to 2023. Return on Assets (ROA) was employed as a proxy for financial performance, while board structure was disaggregated into three key governance variables: board size, board independence, and board gender diversity.

The empirical findings indicate that board size has a negative and statistically significant effect on ROA, suggesting that excessively large boards may hinder performance due to coordination inefficiencies and increased agency costs. Conversely, board independence exhibits a positive and statistically significant relationship with ROA, affirming the role of independent directors in enhancing corporate oversight and aligning managerial actions with shareholder interests. However, board gender diversity was found to have a negative and statistically insignificant effect on ROA, suggesting that the presence of female directors does not independently drive financial outcomes in the sampled firms, potentially reflecting systemic tokenism or limited participation in strategic decision-making processes.

In light of these findings, the study concludes that board structure remains a critical determinant of firm performance, with board size and board independence exhibiting measurable influence. However, the impact of gender diversity remains inconclusive in the Nigerian context, warranting further exploration.

Policy and Managerial Recommendations:

1. Optimizing Board Size: Firms should seek to balance board composition by maintaining a size that promotes both diversity of expertise and efficient decision-making. Oversized boards may impede effective communication and reduce accountability, thereby undermining performance.
2. Strengthening Board Independence: Corporate boards should include a substantial proportion of independent, non-executive directors to enhance oversight, mitigate conflicts of interest, and ensure objective governance. Regulatory frameworks may also be strengthened to enforce minimum thresholds for board independence.
3. Enhancing the Role of Female Directors: While the study found no significant performance impact from board gender diversity, this may stem from limited executive authority or symbolic inclusion. Companies should therefore move beyond tokenistic representation and actively integrate women into key board committees and strategic roles to harness the full benefits of gender-diverse leadership.

Methodological Limitations and Suggestions for Future Research:

While this study provides empirical insights into the relationship between board structure and firm performance, it is not without limitations. Notably, issues related to endogeneity and omitted variable bias may affect the reliability of the estimated relationships. Variables such as firm culture, CEO duality, or ownership concentration, unaccounted for in this model, could influence both board structure and performance. Future research should consider addressing these concerns using instrumental variable (IV) techniques or dynamic panel estimators such as the Generalized Method of Moments (GMM) to improve causal inference.

Additionally, future research could benefit from:

1. Longitudinal case studies that trace board dynamics over time to provide deeper insights into governance practices and their evolution.
2. Qualitative approaches, including interviews with board members or executives, to uncover nuanced perspectives on how board processes, power dynamics, and interpersonal relationships influence strategic outcomes.
3. Comparative sectoral analysis, for instance comparing board-performance dynamics in consumer goods firms with those in highly regulated sectors such as banking or telecommunications, to assess whether institutional and industry-specific factors moderate the relationship.

In conclusion, effective board structure remains pivotal to firm success. However, a comprehensive understanding of its impact requires methodological rigor, contextual sensitivity, and a multidimensional approach that integrates both quantitative and qualitative insights.

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