The International Institute for Science, Technology and Education (IISTE)
Abstract
This study examined the effect of board size on financial performance (proxied by both economic value added (EVA) and return on assets (ROA) of the manufacturing sector in Nigeria using publicly listed firms. The study investigated the extent and nature of the relationship between board size and profitability of publicly listed manufacturing firms; and nature and extent of the relationship between board size and firm size of same firms. The study adopts quantitative panel methodology in analyzing secondary (panel) data collected and collated from the audited financial statements of 46 quoted manufacturing firms drawn from 95 subsectors of (NSE) for the twelve year period (2003-2014). It revealed that manufacturing firms with smaller board size are more viable than those with larger board size. It also reported that firms within the sector with larger boards recorded lesser profits in contrast. The implication of the findings can be deduced from the problem associated with free rider syndrome characteristic of chief executive officer dualizing as managing director for firms in Nigeria. Further, stricter regulating of corporate institutions is imperative because of the significant role that these institutions play in the stock markets and negative repercussions that are experienced when their risk-taking is not properly regulated. The study, recommends, among others, that firms seeking some improvement in their performance should constitute smaller sized boards of directors composed of few independent directors. Moreover, there may be a need to revisit regulation with respect to constituting board size which would balance the interest of executives and shareholders. Key words: Board size, Financial Performance, Quoted Manufacturing Firm
