EFFECT CORPORATE GOVERNANCE ON FINANCIAL PERFORMANCE OF MANUFACTURING FIRMS IN NIGERIA.

Abstract

This study examined the impact of Corporate Governance on Financial Performance of Manufacturing Firms in Nigeria. The predictor variable is corporate governance proxies by board composition, board size and board independence while financial performance is the dependent variable measured by return on asset. The objectives of the study were to examine the impact of corporate governance variables (Board Composition, Board Size and Board Independence) on return on asset, Secondary data sourced from the annual report of the sampled manufacturing firms for a period of ten (10) years 2012- 2022 were used. The data obtained were analysed with the aid of descriptive statistics, Pearson correlation coefficient and ordinary least square regression. The findings among, other things indicated that board composition has positive insignificant impact on return on asset, board size has negative insignificant impact on return on asset of quoted manufacturing firms in Nigeria. Furthermore, the study also revealed that board independence has a positive and significant impact on quoted manufacturing firms in Nigeria. The study concludes that there exist a strong and significant relationship between corporate governance and financial performance of quoted manufacturing firms in Nigeria. Based on the findings, the study recommends that manufacturing firms in Nigeria should ensure that majority of their board members are independent, meaning that the directors are not employees of the companies and do not depend on it for their livelihood so that they can honestly monitor the activities of the CEO and other executive directors. This will help to mitigate and limit the possibility of the CEO and executive directors to exploit the company to their own advantage.