MODERATING EFFECT OF CAPITAL ADEQUACY ON BOARD STRUCTURE AND FIRM VALUE OF LISTED CONGLOMERATE FIRMS IN NIGERIA
Keywords:
Capital Adequacy, Board Structure, Firm ValueAbstract
This study investigated the moderating effect of capital adequacy on the relationship between board
structure and the firm value of listed conglomerate firms in Nigeria from 2014 to 2023. Specifically, it
examined the impact of board size, board independence, board expertise, and managerial ownership on
firm value, with capital adequacy as a moderating variable. The study adopts an ex-post facto research
design, utilizing secondary data obtained from the annual reports of the selected firms over the specified
period. Using panel regression analysis, the findings revealed that board independence and board
expertise have a positive but varying influence on firm value, while managerial ownership exhibits a
significant effect. Furthermore, the interaction between capital adequacy and board expertise, managerial
ownership positively moderates firm value, indicating that firms with adequate capital and specialized
board expertise experience enhanced firm value. Conversely, capital adequacy's moderation of board size
and independence shows a negatively impact on firm value. The study concludes that while board expertise
and capital adequacy play a critical role in improving firm value, other elements of board structure
require further exploration. Based on the findings, the study recommended strengthening board expertise
and maintaining sufficient capital adequacy to optimize firm value. Also, it is recommended that
conglomerate firms in Nigeria reconsider the balance between board independence and capital adequacy.
While board independence is crucial for transparency and accountability, too much independence may
not serve the firm's interests when it dilutes strategic alignment with firm goals. Companies should strive
to maintain a board structure that includes a well-balanced mix of independent directors and insiders
who are more attuned to the firm's operational needs, particularly about capital adequacy decisions.
