Nexus of Corporate Governance on Financial Performance

Abstract

This study examines the relationship between corporate governance and financial performance of randomly selected quoted firms in Nigeria. It investigates corporate governance variables and analyses whether they have effect on firm performance as measured by return on asset (ROA) and profit margin (PM). Based on the review of existing literature, three corporate governance variables were selected namely: composition of board member, board size, and audit committee which served as the independent variables. The ordinary least square regression was used to estimate the relationship between corporate governance and firm performance. Findings from the study show that there is positive and significant relationship between composition of board member and board size as independent variables and firm performance. Audit committee also has positive relationship with firm performance but insignificant at P<0.05. The study recommends among other things that companies’ board should be majorly dominated by independent directors and board size should be in line with corporate size and activities.