EFFECT OF BOARD DIVERSITY ON FINANCIAL PERFORMANCE OF LISTED FIRMS IN NIGERIA

Nwaorgu, Innocent Augustine & Iormbagah, Jacob Aondohemba
Department of Accounting, College of Management sciences,
Michael Okpara University of Agriculture Umudike Umuahia, Abia State. 1 Corresponding
author’s E-mail: jiormbagah1@gmail.com

The study examined the effect of board diversity on the financial performance of listed firms in
Nigeria. Using Ex-post facto research design with a content analysis approach to specific
variables, the study employed a multiple regression model; in analyzing data gotten from the
financial statement of 7 firms randomly selected from 7 sectors on the Nigerian stock exchange
market who engage in manufacturing activities from 2014 to 2018. Findings revealed that
gender diversity has no significant effect on the leverage ratio of the listed firms while
educational diversity and nationality diversity both have no significant effect on the leverage
ratio of the listed firms in Nigeria. Thus, it is recommended that listed firms in Nigeria consider
highly the need to admit more female board members to balance up the ratio of gender
diversity. This will not only give credence to the contemporary propagation of gender equality
but having more female members who are resourceful in risk evaluation will serve as a check
to the possibility of bankruptcy when firms expose themselves to a high leverage ratio. Also,
the listed firms should admit board members that are resourceful as a result of educational
diversity. This will help the board have the required human resources to evaluate the best
possible financing option vis a vis cost of capital and any agency issues that may arise from
such investment decisions. Lastly, the need for board diversity in terms of the nationality of
board members is important. The board members with diverse nationalities are resourceful
and vast in international business culture and economic experiences. This will help the board
members navigate the contemporary economic dynamism as a result of business globalization,
which poses a threat to businesses’ survival daily.
Keywords: Gender diversity, educational diversity, nationality diversity and leverage ratio

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