International Journal of Social Sciences and Management Review

CORPORATE GOVERNANCE AND FINANCIAL PERFORMANCE OF LISTED INSURANCE FIRMS IN NIGERIA

Authors: Yusuf, Mohammed Aliyua, PhD, Dzugwahi, Haruna (MSc, FCA) & Adigizey John Dollay, PhD

ABSTRACT

The effect of corporate governance (CG) on the financial performance of publicly traded Nigerian insurance companies was researched to learn more about that financial performance. An expo-facto research design was employed. The study’s population and sample were the twenty-four (24) publicly traded Nigerian insurance companies as of 31st December 2021. Panel data from the financial statements of insurance companies for the years 2012 to 2021 was gathered, and panel corrected standard error regression was used to analyze the data.  The findings revealed that corporate Governance elements have a significant impact on financial performance. This study also found that board size, board meetings, board independence, and audit committee size have a significant effect on return on assets. The study recommended that the defined minimum number of audit committee members at the listed insurance companies in Nigeria should be maintained. In addition, the study recommends that board size should match the code and that more meetings involving shareholders and their representatives should be held to improve company policies and strategies that can help increase financial performance.

Keywords: Corporate Governance, Financial Performance, insurance companies, Return on Asset, Panel corrected standard errors.

REFERENCES

• Adejare, R., & Aliu, I. (2020). Effect of board members’ dynamics on financial performance of insurance company in Nigeria using caramels financial performance indicators. Fountain University Osogbo Journal of Management 5(1), 135-158.
• Ajisafe, A. O. (2019). Effect of Corporate Governance on Financial Performance of Listed           Insurance Companies in Nigeria (Doctoral dissertation, Kwara State University                      (Nigeria)).
• Akbar, S., Poletti-Hughes, J., El-Faitouri, R., & Shah, S. Z. A. (2016). More on the relationship between corporate governance and firm performance in the UK: Evidence from the application of Generalized Method of Moments Estimation. Research in International Business and Finance, 38, 417-429.
• Akinkoye, E. Y., & Olasanmi, O. O. (2014). Corporate governance practice and level of compliance among firms in Nigeria: Industry analysis. Journal of Business and Retail     Management Research, 9(1).
• Al-Matari, E. M., Al-Swidi, A. K., & Fadzil, F. H. B. (2014). The measurements of firm performance’s dimensions. Asian Journal of Finance & Accounting, 6(1), 24.
• Araoye, F.E & Ajayi, E.O (2015). Corporate Governance and Banks Performance in Nigeria, Asian Academic Research Journal of Social Science and Humanities, 1 (31), 72-84.
• Araoye, F., & Olatunji, E, (2019). Effect of board attributes on financial performance of quoted insurance companies in Nigeria. International Journal of Accounting and Finance, 8(1), 78-96.
• Aribaba, F. O., & Ahmodu, L. O. (2017). Corporate Governance Mechanisms and Financial Performance of Quoted Insurance Companies in Nigeria. Corporate Governance, 2(4), 30-47.
• Berle, A. A., & Means, G. C. (1932). The Modern Corporation and Private Property. New York: Macmillan.
• Chechet, I. L., Yancy, F. S., & Akanet, S. (2013). Impact of internal governance mechanisms on corporate performance in deposit money banks in Nigeria. International Journal of Arts and Commerce, 2(8), 35-46.
• Datta, N. (2018). Impact of corporate governance on financial performance: A study on DSE listed insurance companies in Bangladesh. Global Journal of Management and Business Research. 18 (2), 45-59.
• Donaldson, T. and Preston, L.E. (1995): The Stakeholder Theory of the Corporation: Concepts, Evidence, and Implications. Academy of Management Review, 20(1), 65-91
• Etzioni (1998). A Communitarian Note on Stakeholder Theory, Business Ethics Quaterly, 8,(4), 62-67
• Freeman, S.M. (1984). Corporate governance and directors’ remuneration in selected ASEAN countries. The Journal of applied business research, 25(2).
• Freeman, R.E. (1999): Response. Divergent Stakeholder Theory. Academy of Management Review, 24(2), 233-236
• Garuba, A. O., & Otomewo, G. O. T. (2015). Corporate governance in the Nigerian banking industry: Issues and challenges. African Research Review, 9(2), 104-117.
• Ibe, H. C. A., Ugwuanyi, G. O. & Okanya, O. C. (2017). Effect of Corporate Governance Mechanisms on Financial Performance of Insurance Companies in Nigeria. Journal of Finance and Accounting, 5(3), 93-103.
• Jensen, M., & Meckling, W. (1976). Theory of the firm: Managerial behavior, agency costs, and ownership structure. Journal of Financial Economics, 3, 305-360.
• Khatab, H., Masood, M., Zaman, K., Saleem, S., & Saeed, B. (2011). Corporate governance and firm performance: A case study of Karachi stock market. International Journal of Trade, Economics, and Finance, 2(1), 39.
• Laksmana, I. (2007) Corporate Board Governance and Voluntary Disclosure of Executive Compensation Practices  Available http://dx.doi.org/10.2139/ssrn.1103717
• Mazviona, B. W., Dube, M., & Sakahuhwa, T. (2017). An analysis of factors affecting the performanceof insurance companies in Zimbabwe. Journal of Finance and Investment Analysis, 6(1), 1-21.
• Muth, M. and Donaldson, L. (1998) Stewardship Theory and Board Structure: A Contingency Approach. Corporate Governance An International Review, 6, 2-28.
• Mwamburi, M. M. (2017). The effect of corporate governance practices on the financial performance of the Insurance Companies in Kenya. Dissertation (Ph.D.), University of Nairobi.
• NAICOM – National Insurance Commission (2021). Code of corporate governance.
• Olayinka O. M. (2019). Audit committee and firms’ performance in Nigeria: Case study of selected Nigerian banks. International Journal of Scientific and Research Publications 9 (9):315-323.
• Petra, S.T. (2007) The effects of Corporate Governance on the Informativeness of Earnings. Economics of Governance, 8, 129-152.
• Robert G. E., Ioannis I., & Serafeim, G (2011) the Impact of Corporate Sustainability on Organizational Processes and Performance Management Science, 60 (11), 2835-2857
• Security and Exchange Commission (SEC) (2011) Code of corporate governance for public companies in Nigeria
• Shawar, K., & Siddiqui, D. A. (2019). Factors affecting financial performance of insurance industry in Pakistan. Shawar, K. and Siddiqui, DA (2019). Factors Affecting Financial Performance of Insurance Industry in Pakistan. Research Journal of Finance and Accounting, 10(5), 29-41.
• Srivastava, V., Das, N., & Pattanayak, J. K. (2019). Impact of corporate governance attributes on cost of equity: evidence from an emerging economy. Managerial Auditing Journal.
• Yusuf, M.A. Fodio, M.,  Nwala, M (2018) Effect of ownership structure on voluntary disclosure of listed financial firms in Nigeria International Journal of Economics, Commerce And Management 6 (10), 493-516