Board Independence, Expertise, Foreign Board Member and Financial Performance of Listed Insurance Firms in Nigeria

Document Type: Original Research


Department of Accounting and Management, Nigerian Defence Academy, Kaduna, Nigeria


Most studies on board independence, board expertise, foreign board members and financial performance in Nigeria and other parts of the world showed different results with some showing positive, negative and mixed results. This study examined the effect of board independence, expertise and foreign board member on the financial performance of listed insurance firms in Nigeria. The population of the study comprises 26 listed insurance firms in Nigerian Stock Exchange and 17were selected as sample the size using random sampling technique. The regression analysis revealed that board expertise and foreign members have statistical significant effect on the financial performance measured by return on asset (ROA). Board independence has a significant effect on ROA but do not have significant effect on return on equity ROE. The study  therefore, recommend that regulators must ensure that competent independent board members are well represented in the board of directors, and insurance companies should adhere strictly to the corporate governance code of conduct as it affects  board expertise  and foreign  board members so  to improve the quality of financial performance.


Adenikinju, O. & Ayonrinde. F. (2001). “Ownership Structure, Corporate Governance and Corporate Performance: The Case of Nigerian Quoted Companies”. Unpublished Final Report Presented at the AERC Bi-Annual Workshop, Nairobi.
 Adesanmia, A.D., Sanyaolua, O.A.,   Isiakaa, M.M. & Fadipea, O.A. (2019) Empirical analysis of board diversity and the financial performance deposit money banks in Nigeria. Growing science, Canada.  An open access article distributed under the terms and conditions of the Creative Commons Attribution (CC-BY) license (http://creativecomm
Ahmadu, U. S., Tuku G. & Aminu, S.M (2011). Board independence and Firm Financial Performance Evidence from Nigeria: African Economic Research Consortium
Anderson, R.D., Reeb, A., Upadhyay, A. and Zhao, W. (2011), The economics of director heterogeneity, Financial Management, 40(1): 5-38.
Charitou, A., Louca, C. & Vafeas, N. (2007). Boards, ownership structure, and involuntary delisting from the New York Stock Exchange. Journal of Accounting and Public Policy, 26(2): 249-262.
Christine, K. (2017).  Effects of corporate governance on organizational financial performance in Kenya: A case of Insurance Companies. A Thesis submitted in partial fulfillment of the requirements for the award of the degree of master of Business Administration, Catholic University of Eastern Africa
Coles, J.L., Daniel, N.D. & Naveen, L. (2008). Boards: Does one size fit all? Journal of Financial Economics, 87(2): 329-356.
Dandago, K.I. (2012). Application of research methodology in managerial science. Paper presented at Department of Accounting, Ahmadu Bello University, Zaria.
Davidson III, W.N. & Rowe, W. (2004). Intertemporal endogeneity in board composition and financial performance. Corporate Ownership and Control, 1(4): 49-60.
Defond, M. L., Hann, R.N. and Hu, X. (2005), Does the market value financial expertise on audit committees of boards of directors? Journal of Accounting Research, 43(2): 153-193.
Dimitropoulos, P.E. & Asteriou, D. (2010). The effect of board composition on the in formativeness and quality of annual earnings: Empirical evidence from Greece. Research in International Business and Finance, 24(4): 190-205.
Duchin, R., Matsusaka, J.G. & Ozbas, O. (2010). When are outside directors effective?, Journal of Financial Economics, 96(2): 195-214.
Edwards, J.R., Anderson, M. and Chandler, R.A. (2007), Claiming a jurisdiction for the Public Accountant in England prior to organisational fusion, Accounting, Organizations and Society, 32(1-2):61-100.
Effiok, S.O., Effiong, C. & Usoro, A.A. (2012). Corporate governance, corporate strategy and corporate performance: Evidence from the financial institutions listed on the Nigerian Stock Exchange. European Journal of Business and Management, 4(13): 95-112.
Egwakhe, A. J., Akpa, V. O., & Ajayi, A. A (2019). Board diversity and profitability of insurance firms in Nigeria: Evidence from listed insurance firms. International Journal of Advanced Studies in Business Strategies and Management | IJASBSM p-ISSN: 2354-4236 | e-ISSN: 2354-4244 Volume 7(1), pp 41-59
Fama, E.F. (1980). “Agency Problems and the Theory of the Firm”. Journal of Political Economy, 88(2): 288307.
Foluso, O. A. & Lateef, O. A. (2017). Corporate Governance Mechanisms and Financial Performance of Quoted Insurance Companies in Nigeria International Journal of Management Studies, Business & Entrepreneurship Research
Gardachew, W. F. (2015).Corporate governance on financial performance of insurance industry. Corporate Ownership & Control, Volume 13, Issue 1, pp. 1201-1209.
Guner, A.B. Malmendier, U. and Tate, G. (2008). Financial expertise of directors, Journal of Financial Economics, 88(2): 323-354.
Hailab, G.M. (2014). The impact of corporate governance on firm performance: A study on selected companies in Ethiopia. A Thesis submitted in partial fulfillment of the requirements for the award of the degree of master of Business Administration, Jimma University, College of Administration, Ethiopia.
Hardwick, P., Adams, M. and Zou, H. (2011), Board characteristics and profit efficiency in the United Kingdom life insurance industry, Journal of Business Finance and Accounting, 38(7-8): 987-1015.
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, 2017, Vol. 5, No. 3, 93-103
Jhunjhunwala, S., and Mishra, R. K. (2012). “Board diversity and corporate performance: The Indian evidence”. IUP Journal of Corporate Governance, Vol. 11 No. 3, pp. 71-79.
Kim, H. & Lim, C. (2010). Diversity, outside directors and firm valuation: Korean evidence. Journal of Business Research, 63(3): 284-291.
Liu, C., Sheu, H., Chung, H. & Liao, P. (2010). Board independence and family control. Working Paper, National Chiao Tung University Taiwan, Retrieved February 10 Available from www, finman/Xiamen/BIFC 11001.PDF.
Najjar, N. (2013). The impact of corporate governance on the insurance firm’s performance in Bahrain. International Journal of Learning & Development, 3(2): 56 - 65.
Nwonyuku, K. N. (2016). Corporate governance and profitability of listed food and beverages firms in Nigeria. Industrial Engineering Letters, 6 (3), 47 – 105.
Olayinka, M.U. (2010). The impact of board structure on corporate financial performance in Nigeria. International Journal of Business and Management, 5(10): 155-166.
Oxelheim, L., and Randøy, T. (2003). “The impact of foreign board membership on firm value”. Journal of Banking and Finance, Vol. 27 No. 12, pp. 2369-2392.
Sanda, A.U., Mikailu, A.S. & Garba. T. (2005). Corporate Governance Mechanisms and Firm Financial Performance in Nigeria. AERC Research Paper 149. African Economic Research Consortium, Nairobi, Kenya.
Sanda, A.U., T. Garba and A.S. Mikailu, 2008. Board independence and firm financial performance, evidence from Nigeria.  Paper submitted to the centre for the Study of African Economics (CSAE), for Presentation at the CSAE Conference 2008, titled Economic Development in Africa at St Catteries College, University of Oxford. March, 2008
Schwizer, P., Soana, M. & Cucinelli, D. (2012). The relationship between board diversity and firm performance: The Italian evidence. Working Paper. Department of Banking and Insurance, Faculty of Economics, University of Parma.
Tomislava, P. K., Ana, A & Mirjana, P. (2018) Measuring the impact of board characteristics on the performance of Croatian insurance companies. International Journal of Engineering Business Management, Volume 10: 1–13
Tornyeva, K. & Wereko, T.  (2012a). Soft Governance and Firm Performance: A Study of Ghanaian Insurance Firms. European Journal of Business and Management, 4(13): 86-94.
Tornyeva, K. & Wereko, T. (2012b). Corporate governance and firm performance: Evidence from the insurance sector of Ghana. European Journal of Business and Management, 4(13): 95-112.
Tukur, G & Abubakar, B.A. (2014) Corporate board diversity and financial performance of insurance companies in Nigeria: An Application of Panel data approach: Asian Economic and Financial Review, 2014, 4(2):257-27.
Ujunwa, A. (2012). “Board characteristics and the financial performance of Nigerian quoted firms”. Corporate Governance: The International Journal of Business in Society, Vol. 12 No. 5, pp. 656-674.