The Effects of Board Size on Financial Performance of Banks: A Study of Listed Banks in Nigeria
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A critical review of the Nigerian banking system over the years shows that one of the problems confronting the
sector has been that of poor corporate governance. In an attempt to investigate the linkage between corporate
governance and financial performance of banks, this study contributed to the existing literature by assessing the
effect of size of boards on the performance of banking sector in a developing economy like Nigeria. This study
made use of a range of data drawn from the Nigerian Stock Exchange fact book (2008), which contains information
on board size and the performance proxies. Regressing performance on board size, it was observed that banks with
board size below 13 are more viable than those with board size above 13. The study further observed that banks with
larger boards recorded profits lower than those with smaller boards. Therefore, this study concludes that there is a
significant negative relationship between board size and bank financial performance with a t- value of -1.977 and a
p- value of 0.053. This is because, increase in board size occurs with increase in agency problems (such as director
free-riding) within the board and the board becomes less effective. However, the paper recommends a smaller board
size for better financial performance and to reduce the problem of free-rider of banks in Nigeria.
Keywords
H Social Sciences (General), HG Finance