Board Composition, Board Size and Market Value of Listed Industrial Goods Companies in Nigeria
- December 16, 2020
- Posted by: RSIS Team
- Categories: Accounting, IJRISS
International Journal of Research and Innovation in Social Science (IJRISS) | Volume IV, Issue XII, December 2020 | ISSN 2454–6186
Board Composition, Board Size and Market Value of Listed Industrial Goods Companies in Nigeria
Habib Abdulkarim, Abubakar Yusuf, Usman Isah
Department of Accounting, Gombe State University, Gombe – Nigeria
Abstract
This study examines the impact of board composition and board size on the market value of listed industrial goods companies in Nigeria. Ex-post factor research design was used and data was collected from annual reports and account of the sampled companies for the period from 2010 to 2019. The ordinary least square, fixed and random effects regression techniques were applied on the panel data collated to estimate the models. The paper documents significant positive effect of board size on the market value of the companies and insignificant but negative effectof board composition on the market value of the companies. In effect, the result suggests that board size plays important role in determining the market value of the firms. These findings are consistent with the agency theory of corporate governance which suggests higher number of members on board. It is recommended that the size of the board of firms in the sector should not be less than 9 members so as to enhance value.
KEYWORDS: Board Composition, Board Size, Market Value
1.0 Introduction
The agency theory recognizes the role of monitoring mechanism with a view to reduce agency costs and avoid conflict of interests between managers and shareholders. Corporate board is the highest executive body of a company. It is therefore, responsible for the monitoring of the strategic affairs of the corporation on behalf of the shareholders, who elected them and to whom they are accountable. The Board must also be totally committed to administer the policies and procedures with openness, integrity, honesty and accountability.The board is also involve in pursuing the true spirit of Corporate Governance (CG), commensurate with the company’s needs. However, for the board to be effective in discharging its duties and responsibilities, the size as well as its composition must be taken into consideration. Mousa and Al Manaser (2012) stated that the size and composition of the board play a pivotal role towards the achievement of the mandate of the board. Board size of an organisation is all about the number of directors both the executive and the non-executive sitting on the board, while the composition on the hand, is the proportion of non-executive directors (independent) to the total number of directors in an organisation (Adekunle & Aghedo, 2014)
