Board Governance as a Moderator in the Relationship Between Firm Dynamics and Profitability of Listed Insurance Firms in Nigeria

Basiru Usman Shehu; Okoh,  U

doi:10.70742/asoc.v2i2.523

Authors

Basiru Usman Shehu Department of Economics Federal University Kashere
Okoh, U Department of Accounting, Federal University of Kashere, Gombe State

DOI:

https://doi.org/10.70742/asoc.v2i2.523

Keywords:

Firm Dynamics, Board Control, Profitability, Insurance Companies, Nigeria.

Abstract

In this study, the moderating influence of board control is examined in the cause-effect relationship that exists between firm dynamics (firm size, growth, and leverage) and the profitability of listed insurance firms in Nigeria. In previous studies, the interaction between internal firm attributes and governance systems, especially in developing economies, has been widely overlooked, hence making the study a very important addition. Applying the positivist philosophy and a deductive method of research, the secondary data consisted of collected annual reports of the 14 listed insurance companies in the Nigerian Exchange Group in the previous year, 2015 to 2024. The proposed hypotheses were tested by applying multiple regression analysis with interaction terms that were applied in the framework of moderation by Baron and Kenny (1986). The findings show that the size of the firm has a negative implication on profitability, but firm growth and leverage have positive implications. Although the board control (measured in terms of the number of independent directors) was linked to a direct negative impact on the profitability, it strengthened the correlation between the firm size and profitability to a great extent. On the other hand, its moderating roles on firm growth and leverage were statistically non-significant. These results indicate that the role of governance structure, especially independent directors, can conditionally influence the influence of firm dynamics on financial performance. To this end, this study proposes that insurance companies should enhance their board independence and that the regulating bodies enhance governance changes in accordance with the firm-specific risks. The study contributes to the theory by broadening the body of literature on governance with the moderation-based framework and providing useful information on how to enhance the profitability of firms through strategic oversight of boards.

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