Impact of Accounting Information on the Decision Making Process of Management

Impact of Accounting Information on the Decision Making Process

of Management
ORU, Sharon Shokare
Department of Accounting
Bingham University,
Karu Nasarawa State.
E – Mail: sharonbeauty94@yahoo.com, Phone No: +234 8133455360
Abstract
In the field of accounting, economic information is of great interest, meaning that accounting information plays an
important part in the economic book-keeping/registration system in general, but also in the economic information system
especially for decision making necessary for the business. Although accounting information are available for a wide
range of users - stakeholders (managers, employees, suppliers, customers, financial creditors, government and its
institutions, the public, the media, etc.), the investors (shareholders) are recognized as the privileged users of accounting
information. Four principal qualitative characteristics must be met for the accounting information to be useful in the
management system: understandability, relevance, reliability and compatibility of information. Any economic transaction
processing involves collecting, categorizing, summing and analysing the data. From the findings of this research, it shows
that accounting information play a vital role in making investment, financing, dividend and lending decisions. The
sufficient supply and proper use of accounting information had gone a long way in helping management in making
efficient and effective decision and for this, there is a significant of impact of the use of accounting information as an aid
to management decision making in the institutions.

Keywords: Accounting Information, Decision Making, Management, Users

INTRODUCTION
Economic information is of particular interest for accounting. Accounting information belongs to this
category. It is obtained by specific methods, procedures and instruments for processing economic data. It
is the most real, accurate, complete and operative information representing in fact the support on which
the management process is based. Most of the decisions that are made in the process of work rely on
information obtained from accounting. It means the accounting information plays an important part in the
overall economic system but also in the economic information system, especially for decision making
necessary for the business. Resources are relatively scarce and limited and so management in most cases
finds itself confronted with the decision-making problem. In this regard, good accounting information
should be accessible to offer suitable help to the management to aid them in their decision-making
process.
Management is the art of working particularly through people, for the achievement of the broad goals of
an organization (Ejiofor, 1987), in trying to achieve these goals the manager has to map out strategies to
find out the accounting information suitable for the company. Making decisions is part of our everyday
lives. Considering organizational life, it is often one of the main functions and tasks of management, as
underlined also in the statement above. Indeed, management and decision-making are often regarded as
belonging together, as management usually makes the major decisions of the organization. Decision-
making involves the selection of the best course of action. In order to decide on the best option,
management has to judge the effectiveness of various alternatives. Therefore, they need some guidance
that is usually provided in form of data and information. For this reason, they often rely on financial and
economic information gathered by management accounting and financial accounting (Drury 2003).
Financial accounting information is meant for external users, such as investors, employees, creditors,
government or general public and is given by the financial statements, consisting of balance sheet, profit
and loss account, statement of changes in equity, cash flow statement and the accounting policies and
explanatory notes thereto. Managerial accounting information is for internal users or the entity's
management and includes information on the unit cost of products, cost behaviour relative to the volume
of business or profitability per product. As can be derived from this definition, accountants play a crucial

Bingham International Journal of Accounting and Finance (BIJAF) Page 197

Impact of Accounting Information on the Decision Making Process of Management

role in providing information for making economic and financial decisions. These decisions are important
elements for the organization. Implementing the wrong ones can affect the company in a very negative
way and may sometimes also lead to its bankruptcy. Suma (2010) even goes so far to claim that “the road
to bankruptcy is paved with poor decisions.” As the outcome of a decision cannot always be predicted
with certainty, management often faces the risk of choosing the wrong ones. Hence, management always
needs to have some courage as well when facing decisions. Apparently, good decisions are important and
ensure the wellbeing and also the survival of an organization.
LITERATURE REVIEW
Accounting Information System
According to Collier (2003), accounting is a collection of systems and processes used to record, report,
and interpret an economic entity's business transactions, which provides in financial terms an explanation
or report about the transactions of an organization. That can be simply described, as the process of
recognizing, evaluating and communicating information to allow informed judgements and decisions by
users of the information. This is to say that accounting information is valuable to those who need to make
decisions and plans about business and control the businesses. (Atrill, et al., 2014) Thus, the key aspects
of accounting are identifying the key financial component of an organization, measuring the monetary
values of these to represent a true and fair view of the organization, and communicating this financial
information in a way useful to the users of that information (Black, 2005)
Qualitative Characteristics of Accounting Information
Within the managerial system, for the accounting information to be useful, it is necessary for it to fulfil
four principal qualitative characteristics: comprehensibility, relevance, reliability and compatibility of the
information (OMPF, 2014). Comprehensibility is an essential quality which implies that accounting
information must be easily understood by users. To that end, the users are assumed to have a reasonable
knowledge of business and carry out the tasks given by economic activities. Relevance is their ability to
be useful to the beneficiaries in decision making. Accounting information is relevant when it influences
the economic decisions of users by helping them evaluate past, present or future events, confirming or
correcting them. With respect to credibility, accounting information has the quality of being reliable when
it does not contain significant errors and is not biased and users can trust that the information represents
correctly what it aims to represent or what is reasonably expected to represent. Consequently,
compatibility implies that users can compare the information presented in the financial statements of an
enterprise over time to identify trends in its financial position and performance.
Accounting Information Tools
Statements of Financial position
The statement of financial position follows the basic accounting equation assets equal liabilities plus
owners' equity. The difference between what a company has and what it owes equals equity, or net worth.
A high net worth may indicate that a company is relatively debt free, particularly if its owners' equity is
higher, expressed as a percentage of assets, than other companies in its industry.
Statement of comprehensive Income
The statement of comprehensive income shows how much profit a company has earned during a given
period. The format includes a gross profit calculation, followed by an operating income section. This
produces operating income. Non-operating income or losses, including one-time or special sources of
revenue or expense, are then added to derive net income. Gross profit is based on revenue minus the cost
of producing the goods or services that a company sells, called the cost of goods sold. This shows how
efficiently the company generates income from its production. Operating income considers many other
costs along with the cost of goods sold, including overhead and depreciation on equipment. This is

Bingham International Journal of Accounting and Finance (BIJAF) Page 198

Impact of Accounting Information on the Decision Making Process of Management

important in determining the company's basic profitability, especially when compared to prior periods or
to other companies in its field. Growing operating income is a good sign. Special items may positively or
negatively affect a period's net income, but they are less likely to affect long-term concerns.
Cash Flow Statement
The statement of cash flows also reveals useful information when making investment decisions. It shows
the net change in the company's cash position during a given period. In general, stable or growing cash
flow means the company can cover its short-term debt payments and expenses, while also keeping up
with any long-term debt obligations. You can also look over the structure of the cash flow to see how
much cash is generated from operating activities versus financing and investing. It is a good sign when a
company's cash from operating income routinely exceeds its net income. This shows income is turning
into cash. Typically, an effective cash position is favourable in an investment because it shows less risk of
loan defaults or bankruptcy.
Statements of retained earnings
The statement of retained earning presents the changes in a company's or organization’s retained earnings
over a specific period of time. These statements show the beginning and final balance of retained
earnings, as well as any adjustments to the balance that occur during the reporting period. This
information is sometimes included as part of the balance sheet or it may be combined with an income
statement. However, it is frequently provided as a completely separate statement.
Statement of Owners' Equity
The statement of owners' equity isolates the equity section of the balance sheet. Its primary purpose is to
show the trend in retained earnings for the company. Retained earnings are accumulated profits not paid
out in dividends. This is useful in investment decisions because higher retained earnings relative to
dividends means you get less dividend income. However, this often means the company is looking to
grow and is holding onto income for reinvestment versus paying it out in the near term.
Statement of Accounting Policies
The statement of accounting policies comprises specific policies and procedures used by a company to
prepare its financial statements. These include any methods, measurement systems and procedures for
presenting disclosures. Accounting policies differ from accounting principles in that the principles are the
rules and the policies are a company's way of adhering to the rules.
Notes on the accounts
The notes to the accounts are a series of notes that are referred to in the main body of the financial
statements. The notes give further details on the numbers given in the accounts. The importance of these
numbers should not be underestimated. The accounts are not complete without the notes. Investors who
rely on the main body of the accounts and ignore the notes are likely to find themselves misled.
Usefulness of Accounting Information on Management Decision
In particular, Atrill and McLaney (2009) identifies four broad areas, where management accounting
information is necessary to support managers in decision-making especially in terms of developing long-
term plans and strategies, performance evaluation and control, allocating resources and determining costs
and benefits
Developing objectives and plans
Managers are responsible for establishing the mission and objectives of the business and then developing
strategies and plans to achieve these objectives. Management accounting information can help in
gathering information that will be useful in developing appropriate objectives and strategies. It can also

Bingham International Journal of Accounting and Finance (BIJAF) Page 199

Impact of Accounting Information on the Decision Making Process of Management

generate financial plans that set out the likely outcomes from adopting particular strategies. Managers can
then use these financial plans to evaluate each strategy and use this as a basis for deciding between the
various strategies on offer.
Performance evaluation and control
Management accounting information can help in reviewing the performance of the business against
agreed criteria. We shall see below that non-financial indicators are increasingly used to evaluate
performance, along with financial indicators. Controls need to be in place to ensure that actual
performance conforms to planned performance. Actual outcomes will, therefore, be compared with plans
to see whether the performance is better or worse than expected. Where there is a significant difference,
some investigation should be carried out and corrective action taken where necessary.
Allocating resources
Resources available to a business are limited and it is the responsibility of managers to try to ensure that
they are used in an efficient and effective manner. Decisions concerning such matters as the optimum
level of output, the optimum mix of products and the appropriate type of investment in new equipment
will all require management accounting information.
Determining costs and benefits
Many management decisions require knowledge of the costs and benefits of pursuing a particular course
of action such as providing a service, producing a new product or closing down a department. The
decision will involve weighing the costs against the benefits. The management accountant can help
managers by providing details of particular costs and benefits. In some cases, costs and benefits may be
extremely difficult to quantify; however, some approximation is usually better than nothing at all.
METHODOLOGY
Descriptive statistics were used to analyse the data that was collected i.e. (mean and standard deviation)
and regression model. All this played an important role in helping to draw inferences on the relationship
that exists between study variables. Regression and correlation analysis were included to represent
inferential statistics. The researcher used statistical package for social sciences (SPSS) when analysing
the information which helped in determining and testing regression and correlation between dependent
and independent variables. Test of correlation was done to test the strength and association between the
dependent and independent variables. Regression analysis included fit of the model, Analysis of Variance
(ANOVA) and Regression of Coefficients. Fit of the model was construed by assessing R Square to
assess the extent to which the independent variable (Accounting Information Quality) explained the
dependent variable (Decision Making). ANOVA was used to test the significance level of the model
using the 0.05 conventional level where a variable is said to be statistically significant if it falls within the
conventional threshold of 0.05. Tables, figures and frequencies were used to present the data. These
Statistical tools were adopted because it has been used by other accounting information researchers Table
Data Analysis and Presentation

CATEGORY VARIABLES OPERATIONALIZATION MEASUREMENT

Dependent Decision 1. AIS Likert Scale 1-5

Variable Making 2. Success
3. Clear Methodology

Independent Reliability 1. Completeness Likert Scale 1-5

Variable 2. Faithful representation

Bingham International Journal of Accounting and Finance (BIJAF) Page 200

Impact of Accounting Information on the Decision Making Process of Management

3. Verifiable

Independent Comparability 1. Accounting period are Likert Scale 1-5

Variable Comparable
2. Used with ease
3. Accounting Information
Comparability

Source: Reserachers Computation

Model Specification
The model specification used in this study is based on the description of the relationship between the
dependent and independent variables of this research work.
Y = f (Explanatory variables) + error term--------------------------------(I)
Where Y = Dependent Variable “management decision making”
X = Independent Variable which was represented by Reliability and comparability of accounting
information.
The multiple linear regression models for this study is defined as:
Y= β0 + β1X1+β2X2 + e ------------------------------------------------------ (II)
Y= β0 + β1RAI1+β2CAI2 + e ----------------------------------------------- (III)
Where: β0=Constant
e = Error term
Study Variable

Independent Variable (X) Dependent Variable (Y)

Reliability of Accounting Information (RAI1)
Decision Making
Comparability of Accounting Information (CAI2)
Source: Reserachers Computation
RESULT AND DISCUSSION
From the findings, it can be observed that accounting information play a vital role in making investment,
financing, dividend and lending decisions. The sufficient supply and proper use of accounting information
had gone a long way in helping management in making efficient and effective decision and for this, there
is a significant of impact of the use of accounting information as an aid to management decision making
in the institutions. The study also found that accounting information system leads to good financial
reports and also leading to better decision making. This study agrees with a number of empirical
literatures. Okoli, (2012), aimed at studying how effective and efficient the instrument of good accounting
information is in decision making in an organization. Their findings revealed that the use of accounting
information improves and enhances decision making in organizations. Similarly, Amedu (2012),
researched on the Contribution of Financial Statement Investment Decision making in Nigeria and finding
reveal that financial statements are useful for forecasting company’s performance. It equally provided
various facts of a business such as accurate records of its income and expenses as well as the assets and
liabilities that were relied upon in investment decision making.

CONCLUSION AND RECOMMENDATIONS

Bingham International Journal of Accounting and Finance (BIJAF) Page 201

Impact of Accounting Information on the Decision Making Process of Management

From the foregoing, accounting information holds the crucial role in substantiating the economic
decisions, offering the possibility of an accurate representation of economic phenomena and processes.
Users of accounting information act, operate and make decisions constantly, by using and understanding
the accounting information provided by financial statements. The financial statements published by
companies are aimed at providing data able to ensure markets' efficiency and the optimal allocation of
economic resources. Through this study the researcher recommended the following specific task as a way
of insuring that accounting information is important in management to make decisions.
i. All systems have to be computerized and modern speed system network should be
established so that the information could reach the accounting department on time. The
management should also train its workers on the accounting package for quick and efficient
accounting records.
ii. Qualified and capable personnel should be employed for accounting information preparation
and presentation.
iii. Monitoring and control actions should be enhanced in the decision- making process on
specific decisions according to the stipulated processes associated so that desired goals are
achieved in improving the functionality and performance of the organization.
References

Amedu, A. (2012). The Contribution of Financial Statement Investment Decision making. Nigeria:
Publication Inc.

Atrill, P. and McLaney, E. (2009). Management Accounting for Decision Makers: 6th Edition. Harlow:
Pearson Education.

Collier, P. (2003). Accounting for Managers: Interpreting Accounting Information for Decision-Making.
Chichester: John Wiley & Sons.

Drury, C., (2008). Describes the decision-making process. USA: Manson Inc

Kananiagripina, R. (2016). Impact of Accounting Information on Management Decision Making

Process. Kwimba: Sumve Mwanza Inc.

Okoli, M. N, (2012). How effective and efficient the instrument of good accounting information is in
decision making in an organization. Lagos: Oracle Publishing

Suma.D.(2010). Managerial Economics: Second Edition. UK: Oxford University Press.

Bingham International Journal of Accounting and Finance (BIJAF) Page 202

Corporate Board Structure and Profitability of Insurance Companies in Nigeria: Empirical
Evidence from Selected Listed Insurance Companies

Corporate Board Structure and Profitability of Insurance

Companies in Nigeria: Empirical Evidence from Selected Listed
Insurance Companies
GODO, Bitrus
Department of Accounting
The Federal Polytechnic
Mubi, Adamawa State
E-Mail: bitrusgodo@yahoo.com, Phone No: +234 8069190720; +234 8076305542
EYIBIO, Okon Ekpe
Department of Business Administration and Management
Cross River Institute of Technology and Management
Ugep, Cross River State
E-Mail: ikpeokon@gmail.com; Eyibio_okon@yahoo.com
HYACINTH, Nnabuenyi Obiekwe
Hyacinth & Associates
Moshalasi Street, Obalende, Ikoyi, Lagos State
Email: Hyacng2001@gmail.com
AJITA, Suleiman Ishaku
Department of Actuarial Science
University of Jos
Jos, Plateau State
Email: ajitas@unijos.edu.ng
ANGYAK, Jonathan Ahan
Department of Actuarial Science
University of Jos
Jos, Plateau State
Email: angyakjonathan@gmail.com, Phone No: +234 8166052623
Abstract
The study investigated the effect of corporate board structure on the profitability of listed insurance companies in Nigeria.
Specifically, the study examined the effect of board size and board composition on the profitability of the four (4) listed
insurance Companies in Nigeria. The firms’ profitability was defined as Return on Assets (ROA). This study adopted a
descriptive research design. The study population comprised all the twenty three insurance companies which were quoted
on the floor of the Nigerian Stock Exchange as at March 9, 2020. Both probability and non-probability methods in the
form of purposive and simple random sampling techniques were employed to select a sample from the population.
Secondary data were generated from only secondary source using documentary records from the companies’financial
statements and annual reports for the period 2015 to 2019 using content analysis method of data collection. Descriptive
and inferential statistical tools based on multivariate regression analysis using E-view Processorwere used to analyze the
data collected. The study revealed thatcorporate board structure does not significantly affect the profitability of insurance
companies in Nigeria. Board size and board composition were found to have no effect on the profitability as a measure of
financial performance of insurance companies listed on the NSE. The study recommends among other things
thatinsurance companies should have an optimal board size and board composition so as to enhance investor’s
confidence in the companies which is attracted by increased independency of the board; capable of enhancing financial
performance. It further suggests that board of directors should practice due care and diligence in discharging their duties
and that the majority of board members should be non-executive directors composed mostly of independent directors.

Keywords: Corporate Board Structure, Corporate Governance, Profitability, Insurance Companies, Board
Size, Board Composition, Return on Assets

Bingham International Journal of Accounting and Finance (BIJAF) Page 203

Corporate Board Structure and Profitability of Insurance Companies in Nigeria: Empirical
Evidence from Selected Listed Insurance Companies
INTRODUCTION
Corporate governance issues have been variously discussed in relation to performance of corporate
organisations. Recently corporate governance became a hot topic among a wide spectrum of people,
government, industry operations, directors, investors, shareholders, academics and international
organisations to mention a few. The background of corporate governance dates back to the 19th Century
when state corporation laws enhanced the rights of corporate boards without unanimous consent of
shareholders (Wheeler, Colbert and Freeman, 2002; Ghosh, 2015). The concept propounds that
corporations should have a good board structure in order to enhance performance (Securities and
Exchange Commission ([SEC], 2003; 2011). It is firmly rooted on the assumption that good corporate
governance practices enhance corporate performance. They did it in exchange for statutory benefits such
as appraisal rights in order to make corporate governance more efficient. Corporate governance is
considered as one of the most debated issues in the finance and accounting literature in the recent years.
This debate is expected to have been occasioned by the recent corporate failures experienced around the
world such as Enron Corporation and WorldCom among others (Mang’unyi, 2011). The early debates
came up after the increase in agency problem, which emanated from separation of ownership and control
created in the case of Salomon v Salomon, (1897). Today’s world has seen that organisations’
transparency, financial disclosure, independency, board size, board composition, board committees, board
diversity, board meetings, duality of positions of Board Chairman and Managing Director/Chief
Executive Officer, to mention a few is the cornerstone of good governance practices. These variables are
in the main agenda of most meetings and conferences worldwide including the World Bank, International
Monetary Fund (IMF) and Organisation of Economic Co-operation and Development (OECD) (Inyanga,
2009).
Corporate governance can be defined as the system of principles, policies, procedures, and clearly defined
responsibilities and accountabilities used by stakeholders to overcome conflicts of interest inherent in the
corporate form. Maimako (2010) defines corporate governance as an internal system or mechanism
encompassing policies, processes and people, which serve the needs of shareholders and other
stakeholders by directing and controlling management activities with good business savvy, objectivity,
accountability and integrity.According to Nworji, Olagunju and Adeyanju (2015), corporate governance
is a diligent manner by which providers of corporate capital are legally and ethically rewarded. Corporate
governance is described as the system by which companies are controlled and directed in the best interest
of the owners(Cadbury, 2010).It is viewed as the set of processes, customs, policies, laws and institutions
affecting the manner a corporation (company) is directed, administered and controlled. It is concerned
with a system, principle, practice and policy that require the management to admit that shareholders are
the true and legalized owners of business entities.It is about the acceptance by management of the
inalienable rights of shareholders as the true owners of the corporation and of their own role as trustees on
behalf of the shareholders; it is about commitment to values, about ethical business conduct, and about
making a distinction between personal and corporate funds in the management of a company. It involves
a structure that prescribes set of relationships among a company’s management, its board, its shareholders
and other stakeholders. Corporate board is central to corporate governance practice as it is regarded anan
important element in the enhancement and sustenance of private sector growth and development. This is
because corporate governance pursues not only to strengthen the ability of companies to attract
investment and ensure growth, but also to guarantee strength, effectiveness, efficiency, and more
accountability ofthe companies to their stakeholders (Coleman, 2008; International Finance Corporation
[IFC], 2010, 2014). The Cadbury Report was issued in reaction to corporate collapses such as Maxwell
Communications Plc and Polly Peck International Plc in the United Kingdom (UK). Ten years later, the
enactment in the United States of America (USA) of the Sarbanes-Oxley Act in 2002 was in reaction to
the collapse of Enron Corporation and WorldCom (Souster, 2012). The collapse of these corporate giants
was linked to lack of sound corporate governance principles.

Bingham International Journal of Accounting and Finance (BIJAF) Page 204

Corporate Board Structure and Profitability of Insurance Companies in Nigeria: Empirical
Evidence from Selected Listed Insurance Companies
Board structure is a framework that encompasses the entire elements and components that qualify the
board. Global practice reveals that there are basically two types of board structure; a single-tier or unitary
board and a two-tier board. Board structure is an arrangement that basically and narrowly deals with the
board size and the board composition. From a wider dimension, board structure covers board size, board
composition, board diversity, internal board committees, board meetings and duality of the positions of
the Board Chairman and the Chief Executive Officer (CEO).The definition of board structure as given by
Tricker (1994) is adopted in this study since board structure is a corporate governance mechanism.
Tricker (1994) noted that board structure distinguishes between those directors who hold management
positions in a company and those who do not engage in the management affairs of the company.In other
words, board structure classifies directors into executive directors and non-executive directors. It further
classifies directors into independent directors and dependent directors. Profitability as a parameter of
financial performance is measured by the firm’s optimum attainment of targeted financial returns through
effective and efficient utilization of human, material and financial resources at its disposal (Oparanma,
2010). Profitability is the ability of a company to use its resources to generate revenues in excess of its
expenses. In other words, this is a company’s capability of generating profits from its
operations.Profitability is one of four building blocks for analyzing financial statements and company
performance as a whole. The profitability of a firm measures its gains over its operative years. As
contained in Bauer (2004), from the agency cost theory view point, firms with more profit should have
higher leverage for income they shield from taxes. It holds the view that more profit firms should make
use of more debts purposely to serve as a disciplinary measure for the managers. For this reason, the need
for flexible and appropriate board structure for quick and informed decision making is necessary to
respond quickly to the current dynamic business environment. Profitability measure of financial
performance is a complex issue that has no single approach for its measurement. Firms face diverse
stakeholder demands to choose from various alternatives to address financial performance challenges
from internal and external environments. At this juncture, Berle and Means (1932), opine that in contract
of agency, the agent’s interest often comes into conflict with that of the principal which results to
suboptimal performance of the organization as a result of moral hazards and adverse selection. Therefore,
there is an increasing demand for corroborating good governance to protect the firm’s shareholders’
wealth, enhance firm’s profitability and financial performance for sustainable growth and development
(Dembo & Rasaratnam, 2014).
Many of the modern day corporations are not controlled by those who own them. This is what sparked
Berle and Means (1932) ground-breaking study, when they warned that the growing dispersion of
ownership was giving rise to a potential value-reducing separation of ownership and control. Berle and
Means (1932) expected an inverse relationship between the diffuseness of shareholdings and financial
performance. Berle and Means (1932) argued that shareholder diffusion makes it difficult for the firm’s
equity owners to act collectively and hence influence management to a great extent. The board of
directors was therefore assigned with the fiduciary duty to act in the diffused owners' best
interest.However, in some cases, these directors suffered from the same principal-agent problems faced
by those diffused shareholders. Studies conducted on the effect of corporate governance on financial
performance of firms by Brown and Caylor (2004); Gompers, Ishii and Metrick (2003) found that
companies with effective corporate governance systems tend to have higher measures of profitability and
generate higher returns for shareholders. In essence, it can be deduced from above that ineffective
corporate governance systems and practices increase the risk to an investor, thus affecting the financial
performance of the company. Ineffective corporate governance systems could even cause a company to
go bankrupt, as seen from recent examples such as the failure of the Enron Corporation, WorldCom,
Tyco, Adelphia and Global Crossings. The occurrence of major corporate scandals, such as Enron and
WorldCom in America and Regal Bank and Leisurenet in South Africa, has brought increased attention to
corporate governance issues and regulations aimed at improving the corporate governance environment.
Poor governance, lack of oversight functions, relinquished control and lack of accountability by the board
of directors are some of the reasons for those corporate failures. As a result, various corporate governance

Bingham International Journal of Accounting and Finance (BIJAF) Page 205

Corporate Board Structure and Profitability of Insurance Companies in Nigeria: Empirical
Evidence from Selected Listed Insurance Companies
reforms such as the Sarbanes-Oxley Act (2002) in America, the Cadbury Report (1992) in the United
Kingdom, the King Report (1994) in South Africa and the Securities and Exchange Commission (SEC)
Code (2011)as amended in Nigeria were issued. These corporate governance reforms among other things
specifically emphasized changes to listed companies’ board structures in an attempt to reduce the
likelihood of similar corporate failures occurring in the future (Abidin, Kamal & Jusoff, 2009).

The diversity of corporate practices around the world challenges a common definition for
corporategovernance (Aguilera & Jackson, 2003). However, the major role of an operational
corporategovernance system, as reflected in most accounting and finance literature, is to abridge the
underlying principal-agent problems in a firm (Desender, 2009). An agency relationship occurs when an
agent acts on behalf of a principal. Such a relationship may create a latent for a principal-agent problem
where the agent may act for his own well-being rather than for that of the principal. Effective corporate
governance systems are primarily concerned with minimizing the potential principal-agent problems
between managers and shareholders and between directors and shareholders. Monitoring these principal-
agent problems can result to agency costs to shareholders. To reduce these costs, shareholders nominate
corporate directors to monitor and prevent principal-agent problems that may arise in the firm (Shleifer
&Vishny, 1997). Hence, the board of directors is at the core of ensuring that good corporate governance
is practised by a firm (Desender, 2009). Studies by Hermalin and Weisbach (1998) found that one
important criterion to ensure the success of the board of directors as managers of the company is to have
an effective board structure in place. Brennan, (2006) opined that the monitoring duty of a board is
influenced by factors such as board composition, board ownership, board diversity, board size, board
committees, board meetings, CEO duality and information asymmetries. A number of studies were
conducted on board structure and firm performance in recent years (Golmohammadi, Ranjdoost&Cherati,
2012; Jackling &Johl, 2009; Uadiale, 2010; Tornyeva&Wereko, 2012). However, a few researches were
known to be conducted in Nigeria like that of Garba& Abubakar (2014), Adeyele&Maiturare (2012), who
studied corporate governance and financial performance of listed Nigerian companies. To the best of the
researchers’ knowledge, there is little or no study that was conducted on board structure and profitability
as a measure of financial performance of listed insurance companies in Nigeria. Therefore, this research
aims to fill this gap by examining the effect of board structure on the profitability as a measure of
financial performance of listed insurance companies in Nigeria.

LITERATURE REVIEW

Conceptual Review

Corporate boards have become synonymous with the control and management of listed firms,
characterised by management teams that are different from the owners. The separation of management
from ownership of firms brings about agency conflicts, which according to agency theory proponents as
captured in Jensen andMeckling, (1976); Fama and Jensen (1983) arise from the human tendency to
misappropriate the resources of others unless one is motivated against or deterred from such actions. The
corporate board is simply a committee of selected representatives of the shareholders, investors and other
stakeholders of an economic entity whose main responsibility is to provide superior supervision over the
actions of employees and hired professional managers in order to ensure that actions are taken in the best
interests of the stakeholders of the entity. There are several criteria for judging the effectiveness of
corporate boards such as board size, diversity, and duality of Chairman/CEO positions, shareholding by
board members, attendance at board meetings, gender diversity, and age of directors, board committees
and nationality of members. Only literature on board size, board composition, board diversity,internal
board committee, the duality of positions the Chairman/CEO, and board meetings is reviewed under this
section. However, other characteristics, as they relate to the Nigerian insurance companies, are not
discussed in this paper.

Bingham International Journal of Accounting and Finance (BIJAF) Page 206

Corporate Board Structure and Profitability of Insurance Companies in Nigeria: Empirical
Evidence from Selected Listed Insurance Companies
Importance and Key Characteristics of Corporate Governance
Corporate governance has taken a stronger foothold in developed countries when compared to emerging
economies. Kolk and Pinkse (2010) assert that good corporate governance has many benefits to the
organization. The importance of corporate governance tends to be different with the level of
organizational governance (IFC, 2014). Calabrese et al. (2013) argued that company level, well-governed
companies tend to have better and cheaper access to capital, and tend to outperform their poorly governed
peers over the long-term. Companies that insist upon the highest standards of governance reduce many of
the risks inherent to an investment in a company (IFC, 2004). In a similar view, Caprio, Laeven and
Levine (2007) pointed out that good corporate governance can reduce the risk of financial crisis, which
can have devastating social and economic costs. Finally, good corporate governance can lead to better
relationship with all stakeholders and thus improve labour relations as well as the climate for improving
social aspects such as environmental protection (Enobakhane, 2010). The directors are the key
characteristic of good corporate governance mechanism (Blair, 1995) and are regarded as the officers of
the company by the company law (Coleman, 2008). Based on the literature board structure (board size,
board composition, board committees, and board diversity) could be used as a proxy for measuring
corporate governance practices in firms (Enobakhane, 2010) since directors are the once who control the
company. Board structure refers to how the organisation is structured in terms of the board of directors
(Vaithilingam, Mahendhiran & Muthi, 2006). Ogbechie and Koufopoulos (2007) argued that a board
structure is an integral part of the corporation as it plays a key role in the wellbeing of the firm.
Corporate Board Structure
To be effective, corporate boards must take steps, both in their structures and in their nominating
procedures, to ensure that insiders and executive owners are unable to exercise undue control over the
boards’ activities and decisions.To ensure that shareowners’ interests are served, boards must be
appropriately independent so as to provide a variety of views, including those of investors, on strategy,
governance, and financial performance (Othman, Ponirin & Ghani, 2009). In doing so, boards should seek
competent professionals while refraining from nominating individuals with a large number of existing
board memberships (Ogbechie & Koufopoulos, 2010).The primary responsibility of a corporate board of
directors is to protect the assets of shareholders and ensure they receive a positive return on their
investment. The board of directors has a fiduciary responsibility under United States (US) law to the
company’s shareholders (HillmanShropshire & Cannella, 2007). The board of directors is the highest
governing authority within the management structure of a corporation or publicly traded business
(Sundaram&Inkpen, 2004). It is the board's job to select, evaluate, and approve compensation for the
company's Chief Executive Officer (CEO), evaluate the attractiveness of and pay dividend, recommend
stock splits, oversee share repurchase, approve the company's financial statements, and recommend or
reject merger and acquisition opportunities, and the like (SEC, 2011).
A board of directors is essentially a panel of people who are elected to represent shareholders and other
stakeholders. A board of directors is an elected group of individuals that represent shareholders. The
board is a governing body that typically meets at regular intervals to set policies for corporate
management and oversight. Everypublic company must have a board of directors. Some private and
nonprofit organizations must also have a board of directors (Attiye&Robina, 2007). A board of directors
is a group of people who jointly supervise the activities of an organization, which can be either a for-
profit business, nonprofit organization, or a government agency. Such a board's structure, powers, duties,
and responsibilities are determined by government regulations (including the jurisdiction of
thecorporation’s law) and the organization's own constitution and bylaws. These authorities or bylaws
may specify the number of members of the board, the manner in which members of the board are elected
(example, byshareholders vote at an annual general meeting), and how often the board meets. While there
is no set number of members for a board, most range from 3 to 31 members. Some analysts believe the
ideal size is seven. The board of directors should be a representation of both management and
shareholder interests and include both internal and external members. The directors of an organization are

Bingham International Journal of Accounting and Finance (BIJAF) Page 207

Corporate Board Structure and Profitability of Insurance Companies in Nigeria: Empirical
Evidence from Selected Listed Insurance Companies
the persons who are members of its board. Several specific terms categorize directors by the presence or
absence of their other relationships to the organization.A board is composed of individual men and
women who are elected by the company’s shareholders for multiple-year terms (SEC, 2003).
Board structure is a framework that encompasses the entire elements and components that qualify the
board. Board structure is an arrangement that basically and narrowly deals with the board size and the
board composition. From a wider dimension, board structure covers board size, board composition, board
diversity, internal board committee, board meetings and duality of the positions of the Board Chairman
and the Chief Executive Officer (CEO).Board structure in this study is based on the definition of board
structure given by Tricker (1994). He noted that board structure distinguishes between those directors
who hold management positions in the company and those who do not. In other words, board structure
classifies directors into executive directors and non-executive directors. An executive director is an inside
director who is also an executive with the organization. The term is also used, in a completely different
sense, to refer to a CEO. A non-executive director is a member of a company's board of directors who is
not part of the executive team. A non-executive director alternatively is an inside director who is not an
executive of an organisation or typically does not engage in the day-to-day management of the
organization but is involved in policymaking and planning exercises. In addition, non-executive directors'
responsibilities include the monitoring of the executive directors and acting in the interest of the company
stakeholders. Both the executive director and thenon-executive director constitute dependent (insider)
director, who, in addition to serving on the board, has a meaningful connection to the organization
(Johnson, Daily &Ellstrand, 1996). Independent director alias outside director is a director who, other
than serving on the board, has no meaningful connections to the organization (Organisation for Economic
Co-operation and Development [OECD], 2004; Securities and Exchange Commission [SEC],
2003).Global practice reveals that there are basically two types of board structure, a single-tier or unitary
board and a two-tier board. The two-tier board is further split into an upper-tier board and a lower-tier
board. In a two-tier board, the upper-tier maintains a neighbouring watch on the executives at the lower-
tier. Examples of countries that operate the two-tier board system are Germany, Austria and Netherlands.
Many countries practice the single-tier or unitary board system. Nigeria, Britain, United States are
examplesMaimako (2010).
Board Size
This is considered to be a crucial characteristic of board structure. It refers to the total number of
members sitting on the board. Historically, nonprofit boards have often had large boards with up to
twenty-four members, but a modern trend is to have smaller boards as small as six or seven people.
Studies suggest that after seven people, each additional person reduces the effectiveness of group
decision-making (Wikipedia, 2020). According to the Corporate Library's study, the average size of
publicly traded company's board is 9.2 members, and most boards range from 3 to 31 members. Some
analysts’ think the ideal size is seven (Clifford & Evans, 1997; Wen, Rwegasira & Bilderbeek, 2002;
Wikipedia, 2020). State law may specify a minimum number of directors, maximum number of directors,
and qualifications for directors (Blair, 1995; Bhagat&Blach, 1999; Wikipedia, 2020). For example,
whether board members must be individuals or may be business entities.Thus, as an extra member is
included in the board, a potential trade-off exists between diversity and coordination. According to
Yermack (1996), coordination, communication and decision-making problems increasingly impede
company performance when the number of directors increases. However, board size recommendations
tend to be industry-specific, since Adams and Mehran (2003) indicated that bank holding companies have
board size significantly larger than those of manufacturing firms.
Board Composition
Board composition dwells on the position that the board should strive for a diversity of backgrounds,
expertise, and perspectives, including an increased investor focus. The rationale is board composition
with these attributes will improve the likelihood that the board will act independently of management and

Bingham International Journal of Accounting and Finance (BIJAF) Page 208

Corporate Board Structure and Profitability of Insurance Companies in Nigeria: Empirical
Evidence from Selected Listed Insurance Companies
in the best interests of shareowners; reduce the influence of board members who are executive or
financial officers of other companies who might have a natural inclination to support management’s
perspectives; ensure that board members are able to understand the many complicated financial
transactions and activities; ensure that company activities are presented properly in the financial
statements; and ensure that shareowner and investor views are considered along with the perspectives of
CPAs (Wikipedia, 2020). The Companies and Allied Matters Act ([CAMA], 2004) in section 246 (1)
prescribes the minimum number of directors for a registered company as two. The Act does not prescribe
the maximum number of directors for a registered company. The Act allows each company to decide on
the number of directors. However, The Code of Best Practices on Corporate Governance in Nigeria
(2011) requires that the minimum number of directors should be five while the maximum number should
be fifteen. The CBN code recommends a maximum number of twenty directors for a Nigerian bank. It
further states that the number of non-executive directors on the board should exceed that of the executive
directors. The CBN code provides that at least two non-executive board members should be independent
directors. The actual number of director on a board varies from company to company (Maimako, 2010).
A single-tier board is usually headed by a chairman. The board membership consists of executive
directors, non-executive directors and independent directors. Non-executive directors do not exercise
executive powers and are not employees of the companies on whose boards they sit. Executive directors
who usually exercise executive powers are employees. The appointment of independent directors is a
recent phenomenon in some companies. An independent director does not represent any particular
shareholder’s interest in the company (Maimako, 2010).
In single-tier boards, most governance codes recommend the separation of the position of a chairman
from the position of a Managing Director (MD)/Chief Executive Officer (CEO) to prevent one individual
from having unfettered powers of decision making. Although the Code of Best Practices for Governance
in Nigeria recommends the separation of the position of the chairman from the position of MD/CEO, it
states that in exceptional cases, the two may be combined (Okolo, 2016). The code suggests that there
should be a strong Non-executive Independent Director as vice chairman of the board. However, the CBN
code forbids the combination of the positions of chairman and MD/CEO and stipulates that no executive
chairman is recognised in the structure. To promote balance of power within the leadership structure, a
separation of the two positions is not just desirable but considered to be best practice (Maimako, 2010).
Board Diversity
Board diversity relates to the composition of the gender, age, skills, ethnicity, and other demographic
factors of the individual members of the board. Although several attempts have been made to establish the
relationship between the individual aspects of board diversity on the performance of the firm (Ujunwu,
Okoyeuzu & Nwakoby, 2012; Laible, 2013; Adams, Gray &Nowland, 2011; Marimuthu&Kolandaisamy,
2009), there appears to be no consensus on whether one aspect of board diversity impacts more on the
performance of the firm than another. However, literature is unanimous that board diversity in general
does affect the performance of the firm and results in diverse opinions that impacts on the quality of
corporate decisions (Bernardi&Threadgill, 2010; Adams & Ferreira, 2008; Dobbin & Jung, 2011;
Salehnezhad&Abbasi, 2013). The resource dependence theory supports diverse boards because of the
inherent human and social capital and associated resources that diverse persons would bring into the
organisation (Pfeffer&Salancik, 1978). Thus, broadening the ethnic and gender diversity of boards not
only helps increase the size of the candidate pool and therefore the quality of potential board members,
but also helps broaden the perspectives and experience of the whole team. The literature indicates that the
number of women in corporate boards is very low ranging from 9% to 16% in the Americas and Europe
except in Norway where regulation specifies an enhanced quota for female board members (Sweigart,
2012; European Commission, 2014).
The empirical evidence in literature is that inclusion of females in corporate boards provides some level
of corporate legitimacy to investors, increases social and environmental responsibility, improvements in
intra-board communication and overall management style leading to improved financial performance and

Bingham International Journal of Accounting and Finance (BIJAF) Page 209

Corporate Board Structure and Profitability of Insurance Companies in Nigeria: Empirical
Evidence from Selected Listed Insurance Companies
shareholder value, increased customer and employee satisfaction, rising investor confidence, and greater
market knowledge and reputation (Adams & Ferreira; 2008; Adams, Gray &Nowland, 2011; Sweigart,
2012; IFC, 2014). There are not any regulatory provisions in any governance code in Nigeria which
require the inclusion of women in the boards of listed companies including banks. However, some passive
provisions on the quality of board members are contained in both the CBN (2006) and the SEC (2011)
Codes. The CBN (2006) Code indicates that only people of proven integrity and who are knowledgeable
in business and financial matters should be on the board of listed banks while the SEC (2011) code states
that board members of listed companies (including listed banks) should be individuals of upright personal
characteristics, relevant core competence and entrepreneurial spirit with records of tangible achievements
and knowledgeable in board matters. There are no requirements on age, minimum educational
qualifications, and number of years of experience, foreign representatives, or other demographic factors
pertaining to board membership in Nigeria.
Internal Board Committees
While a board may have several committees, two committees comprising the compensation committee
and audit committee are critical and must be made up of at least three independent directors and no inside
directors. Other common committees in boards are nominating and governance (Wikipedia, 2020). The
functions of board of directors are performed through its various standing committees. The number of
board committees varies from company to company depending on the type and size of a company.
Committee charters usually define the purpose of the committees, their structures and composition, duties
and responsibilities, frequency of meetings and reporting lines to the board. When committees of the
board are established, their mandate, composition and working procedures should be well defined and
disclosed by the board (OECD, 2004). Although functions are assigned to the committee, the full board
takes final responsibility. In line with best practice, the chairman of the board should not chair any board
committee (Maimako, 2010).
Duality of Positions
There appears to be a universal concern as to whether to separate the positions of the chairman of the
board and the CEO or toallow one person to occupy both positions. From the agency theory perspective,
independent board leadership is necessary to prevent managerial entrenchment. Whereas agency theory
supports the split of the two positions to avoid over-concentration of power in a single individual which
may impede effective control of the firm, stakeholder theory supports the concentration of the two
positions in one individual for effective command and quick decision making (Dalton &Kesner, 1987;
Abdullah, 2004). In the case of the banking sector, shareholders and other corporate governance activists
appear to favour the splitting of the two positions between two independent persons (Bank for
International Settlements, 2010; Tribbett, 2012). Literature is divided as to whether firms with chairman/
CEO duality perform better than those that split the holding of the two positions. Empirical findings have
also not been conclusive in that research findings have supported both opinions (Peng, Zhang & Li, 2007;
Krause &Semadeni, 2013).
Rechner and Dalton (1991) found that firms with independent governance consistently outperformed the
CEO duality firms (one person holds both positions as CEO and Chairman). On the contrary, Wong and
Yek (1991) found that CEO duality did not lower the firm value. They argue that the internal incentives
(bonus and stock options) and external market system (market for corporate control) have effectively
motivated and adequately disciplined management of firms. Balinga, Moyer and Roa (1996);Brickley,
Coles and Terry (1994) support the claim as their studies found companies with independent board
leadership did not show enhanced performance. In Singapore, Wong and Yek (1991) found a significant
and positive relationship between CEO duality and modified Tobin’s Q. Tan, Chang and Tan (2001) also
found CEO duality had positive and significant relationship with Tobin’s Q during financial crisis (1997).
In Malaysia, Haniffa and Hudaib (2006) found that independent leadership had insignificant relationship
to Tobin’s Q but had a significant and positive relationship to Return on Assets (ROA). Due to mixed

Bingham International Journal of Accounting and Finance (BIJAF) Page 210

Corporate Board Structure and Profitability of Insurance Companies in Nigeria: Empirical
Evidence from Selected Listed Insurance Companies
results, the present study adopts agency theory because independent board leadership is highly
recommended by the Malaysian Code on Corporate Governance (MCCG)by Securities Commission
Malaysia ([SCM], 2017).The guiding criteria for corporate boards’ structure have been identified to
include shareholders’ demands and structure, regulatory requirements, state of the firm and cost-benefits
trade-offs (Gabrielsson, Huse&Minichilli, 2007; Sridharan&Marsinko, 1997; Kakabadse, Kakabadse&
Barratt, 2006; Thuy-Nga, 2010). The Nigerian experience is similar. Both the CBN Code (2006)for
deposit collecting banks and the SECCode (2011)for all listed companies in Nigeria indicate that the
positions of the chairman of the board and the CEO should be held by different individuals. In the case of
banks in Nigeria, the CBN Code rejects the creation of the position of executive vice-chairman which
would allow the holder to sit as alternate chairman of the board and also as the CEO of the bank. The
Nigerian experience, according to CBN (2006), indicates that banks that had chairmen or CEOs with
overbearing influence recorded serious corporate governance infractions. The occupation of position of
the chairman of the board by a non-executive director not connected to the CEO is considered necessary
as a check on the occupants of both offices and to improve corporate governance performance, reduce the
powers of both occupants and ensure that the corporate board performs effectively and with significant
independence(OECD, 2004; CBN, 2006).
Board Meetings
For corporate boards to carry out their responsibilities and duties effectively, members must of necessity
hold meetings. A board of directors conducts its meetings according to the rules and procedures contained
in its governing documents. These procedures may allow the board to conduct its business by conference
call or other electronic means. They may also specify how a quorum is to be determined (Wikipedia,
2020). Many organizations in the English-speaking world have adopted Robert's Rules of Order as a
guide to supplement their own rules(Wikipedia, 2020). In this book, the rules for conducting board
meetings may be less formal if there are no more than about a dozen board members present(Wikipedia,
2020). An example of the informality is that motions are not required if it's clear what is being discussed
(Wikipedia, 2020).In their study of 169 listed corporations from 2002 to 2007 in South Africa, Ntim and
Osei (2011) observed that there is a statistically significant and positive association between the
frequency of corporate board meetings and corporate performance, which implies that firms whose boards
meet frequently are likely to perform better than those firms whose boards do not meet regularly. This
indication provides empirical evidence to the agency theory suggestion that for effective control of firms
for high performance, boards should meet more regularly. Chou, Chung and Yin (2012) also found in a
study of Taiwanese firms a positive relationship between board attendance by directors and the
profitability of firms. Both the SEC (2011) and the CBN (2006) Codes indicate that regular board
meetings and the attendance by board members would ensure that the board performs its oversight
function and monitors management’s performance effectively. All listed firms in Nigeria are expected to
hold board meeting at least once every quarter in the year. The SEC (2011) Code indicates that every
board member should attend at least two-thirds of all board meetings to qualify for re-nomination.
Profitability as a Measure of Financial Performance
The capacity and ability of a firm to use its assets to generate revenue from its primary mode of business
depict its overall financial health. When this is measured periodically, it forms the basis for both
horizontal and vertical analyses and comparison. According to Demsetz and Lehn (2004), financial
performance involves measuring a firm’s policies and operations in monetary terms which are depicted in
the firm’s return on investment, return on assets, and value added, among others.Profitability is the ability
of a company to use its resources to generate revenues in excess of its expenses. In other words, this is a
company’s capability of generating profits from its operations.Profitability is one of four building blocks
for analyzing financial statements and company performance as a whole. The other three are efficiency,
solvency, and market prospects. Investors, creditors, and managers use these key concepts to analyze how
well a company is doing and the future potential it could have if operations were managed
properly.Studying profitability allows policymakers to determine financial performance.That is,

Bingham International Journal of Accounting and Finance (BIJAF) Page 211

Corporate Board Structure and Profitability of Insurance Companies in Nigeria: Empirical
Evidence from Selected Listed Insurance Companies
accounting profit ratios proxy financial performance. The profitability of a firm measures its gains over
its operative years. According to a recent literature review, most researchers calculate profitability
through return on assets (ROA) or return on equities (ROE) or both, such as Beck et al. (2013). Some
studies include net interest margin (NIM) such as Ghosh (2015) and Houston et al. (2010). However,
insurance companies’ profits are attained through charging fees on their services and through interest. As
a result, the most profitable insurance companies are more efficient, competitive and stable (Apergis,
2014).Determinants of profitability can be internal (company-specific variables) and external
(macroeconomic variables). However, focusing on determinants of profitability simplifies understanding
of the reasons behind any loss or profits which lets senior company management look for alternative
plans if there is any drop in returns. In case of a rise in profits, insurance companies are able to create
higher earnings by focusing on variables that increase profits.
Corporate governance has been found to correlate positively with firms’profitability and overall financial
performancewhich are both seen from the accounting ratios of the firms and the movement of price in the
stock market. While the accounting profit ratios are measured by the accountants, constrained only by the
standards set by their profession, the performance as reflected by the movement in the prices of securities
in the stock market ismeasured by the investors, constrained by their acumen, information, optimism or
pessimism and general psychology. In either case however, Young (2000) suggests that best governance
practices exert a positive influence on firm financial performance since it prevents management and
controlling investors from taking initiatives to expropriate minority investors.Thus, it is argued it impacts
positively on the firm’s goodwill and ability to attract equity capital from prospective marginal investors.
Hence in considering approaches to measurement of firms’ level of financial performance, Sanda,
Minkailu and Garba (2005) insist that this is found in social science research based on market prices,
accounting ratios and total factor profitability where market prices are readily obtained from national
stock exchanges for all listed firms.
While profit is a flow concept, profit margin measures the flow of profits over some period compared
with revenue and costs and thus there could be gross profit margin, operating profit margin, return on
equity and return on assets among others. The relationship between corporate governance and a firm’s
financial performance stems from the understanding that economic value is driven by governance
mechanisms such as the legal protection of capital, the firm’s competitive environment, its board
composition and board size, board diversity, CEO duality, board meetings, board committees(existence of
Supervisory Committee and Audit Committee) and financial policy (Uadiale, 2010). In this light,
Gompers,Ishii and Metrick(2003)revealed that stock returns are higher for firms with strong shareholder
rights as compared to firms with weak shareholder rights. This suggests that firms with stronger or better
corporate governance provisions outperform those with poor governance provisions in terms of profits,
capital acquisition and sales growth. They also add that there is substantial evidence showing that weakly
governed firms experience lower performance based on operating performance measures, lower sales
growth and profit. This has been corroborated by Khatab, Masood, Zamam, Saleem, and Saeed (2011)
from a study of twenty listed firms in the Karachi Stock Exchange in Pakistan.
Corporate Board Structure and Profitability
Board Size and Profitability
A review of the empirical evidence on the effect of board size on profitability shows mixed results.
According to Adams and Mehran (2003), firms with a large board of directors ensure a better
performance. Shukeri, Shin, and Shaari (2012) opine that board size had positive influence on
firms’Return on Assets (ROA). However, the results of Haniffa and Hudaib (2006) are inconclusive.
Using a market return as a measure of performance, their results suggest that a large board isseen as less
effective in monitoring performance, but when accounting returns are used, large boards seem toprovide
the firms with the diversity in contacts, experience and expertise needed to enhance profitability as a

Bingham International Journal of Accounting and Finance (BIJAF) Page 212

Corporate Board Structure and Profitability of Insurance Companies in Nigeria: Empirical
Evidence from Selected Listed Insurance Companies
measure of financial performance.Finally, Connelly and Limpaphayom (2004) found that board size does
not have any relation with firm’s financial performance.
Board Composition and Profitability
When analysing the relationship between board composition viz-a-vizboard diversity and profitability, the
results of empirical studies are mixed. A number of studies, from around the world, indicate that non-
executive directors have been considered effective in monitoring managers and protecting the interests of
shareholders, resulting in a positive effect on profitability as a measure of financial performance.
Dehaene, De-Vuyist, and Ooghe (2001) found that the percentage of outside directors is positively related
to the financial performance of Belgian firms. Connelly and Limpaphayom (2004) found that board
composition has a positive relation with profitability of life insurance firms in Thailand. However, there is
also a fair amount of studies that tend not to support this positive perspective. Some of them find no
significant relationship between accounting performance measures and the proportion of non-executive
directors (Weir, Laing & McKnight, 2002; Haniffa&Hudaib, 2006). Haniffaand Hudaib(2006)
summarized a number of views expressed in the literature which may justify this non-positive
relationship, such that high proportion of non-executive directors may engulf the companies in excessive
monitoring, which may be harmful to companies as they may stifle strategic actions, lack real
independence, and lack the business knowledge to be truly effective.
Theoretical Framework
Corporate Governance is defined as the process and structure used to direct and manage business affairs
of companies towards enhancing prosperity and corporate accounting with the ultimate objective of
realizing shareholder long term value while taking into account the interest of other stakeholders. Various
theories have been put forward to help understand the concept of Corporate Governance. However, the
agency theory as endorsed in the literature by Mulili and Wong (2010) has been adopted for this study.
Agency Theory
Agency theory was developed by Jensen and Meckling in 1976 to address the conflict between
shareholders and managers. Agency theory is defined as the relationship between the principals, such as
shareholders and agents such as the company executives and managers. In this theory, shareholders who
are the owners or principals of the company, hires the agents to perform work. Principals delegate the
running of business to the directors or managers, who are the shareholder’s agents (Clarke, 2004).
Agency theory suggests that employees or managers in organizations can be self-interested. The
shareholders expect the agents to act and make decisions in the principals’ interest. On the contrary, the
agents may not necessarily make decisions in the best interests of the principals (Padilla, 2000). The
agents may be succumbed to self-interest, opportunistic behavior and falling short of congruence between
the aspirations of the principals and the agents pursuits. Even the understanding of risk defers in its
approach. Although with such setbacks, agency theory was introduced basically as a separation of
ownership and control (Bhimani, 2008). The agents are controlled by principal-made rules, with the aim
of maximizing shareholders value. Hence, a more individualistic view is applied in this theory (Clarke,
2004). The theory concluded that shareholders, who are the principals, can assure themselves that the
agents (management) will only act in the best interest of shareholders if appropriate incentives are given
and only if they are monitored.
Shareholders therefore, elect board of directors to monitor managers (Muth& Donaldson, 1998). The
board of directors which serves as the link between shareholders and management performs an important
oversight function on the company. The board of directors ensures that management acts in the best
interest of the shareholders (Jensen &Meckling, 1976).Indeed, agency theory can be employed to explore
the relationship between the ownership and management structure. However, where there is a separation,
the agency model can be applied to align the goals of the management with that of the owners. The model

Bingham International Journal of Accounting and Finance (BIJAF) Page 213

Corporate Board Structure and Profitability of Insurance Companies in Nigeria: Empirical
Evidence from Selected Listed Insurance Companies
of an employee portrayed in the agency theory is more of a self-interested, individualistic and are
bounded rationality where rewards and punishments seem to take priority (Jensen &Meckling, 1976).
Empirical Review
Various empirical studies have been carried out to determine whether any relationship exists between
corporate board structureand financial performance and whether this corporate board structure has effect
on corporate performance of listed companies in Nigeria. Kamardin, Abdul-Latif, Mohd and Adam
(2014) examined the effect of some of board of directors’ attributes namely board diversity, multiple
directorships and ownership structure on firm performance in the Malaysian setting prior to the revised
Malaysian Code of Corporate Governance 2012. Samples of the study are Malaysian listed companies on
Bursa Malaysia from 2006 to 2010. Firm performance is measured by market to book value (MTBV) and
return on assets (ROA). Findings of the study showed that higher fraction of either Malay or Chinese
directors affect both measures of performance negatively. They suggested that board diversity in terms of
ethnicity lead to better performance as diverse board could exploit the strength of ethnically diverse
members. Multiple directorships are shown to have positive relationships with both measures of firm
performance which support the assumption in quality hypothesis. Shungu, Ngirandeand Ndlovu (2014)
examined the impact of corporate governance on the performance of commercial banks in Zimbabwe.
Using data gathered from 2009-2012 for a sample of five commercial banks, it applied multi-regression
model, to assess the causal relationship between corporate governance measures (board size, board
composition, internal board committees and board diversity) and bank performance. The results indicated
unidirectional causal relationship between corporate governance and bank performance. In addition, there
a positive relationship between board composition, board diversity and commercial bank performance,
although a negative relationship appears between board size, board committees and bank performance.
The study recommended that in order to improve performance in commercial banks; good corporate
governance practices which include; improving board structures, disclosure, and fiduciary duties of
directors must be implemented. The study further suggested that Reserve Bank of Zimbabwe should
ensure or put in place robust supervisory and regulatory policies; as the development and implementation
of a national corporate governance code is long overdue.
Noushabadi and Kamyabi (2014) investigated the relationship between corporate governance and firm
value of Iranian listed companies on Tehran stock exchange. The study Used 81 listed companies on
Tehran Stock Exchange during 2008 to 2012 and utilised percentage of active non-executive managers in
the board, managerial ownership, institutional ownership, state ownership, ownership concentration,
duality of CEO and chairman the board as independent variables and firm value as dependent variable.
Ordinary Least Squares (OLS) regression was applied to examine each our hypothesis. The research
results found that there is no any significant relationship between percentage of active nonexecutive
managers in the board, managerial ownership, state ownership and firm value, but institutional
ownership, the duality of duty of CEO are positively associated with a firm value. Kamyabiand
Noushabadi (2014) conducted a study on the relationship between corporate governance and dividend
payment policy in listed companies of Tehran Stock Exchange. The study utilized board size, duality of
duality of CEO and ownership of institutional shareholders as independent variables and dividend
payment policy as dependent variable by controlling firm size, firm growth, financial leverage and return
on assets. Using EVIEWS software 7, the study applied Ordinary Least Squares (OLS) method to test
hypotheses. Based on a sample of 83 listed companies in Tehran Stock Exchange during 2008 to 2012
years, the empirical results indicated that boards size and institutional shareholders are in positive and
significant relation to dividend payment policy of the listed companies in Tehran stock, but duality of
CEO is not related to dividend payment policy of the listed companies in Tehran stock exchange.
Aina (2013) discussed and analyzed with the aid of comparative law, the Code of Corporate Governance
in Nigeria and its effect on the board structure, the role, effectiveness and duties of the non-executive
directors (NEDs) and how their independence can be assured, guaranteed and monitored to enhance the
board’s effectiveness, ensure full compliance with the codes of corporate governance. The study revealed

Bingham International Journal of Accounting and Finance (BIJAF) Page 214

Corporate Board Structure and Profitability of Insurance Companies in Nigeria: Empirical
Evidence from Selected Listed Insurance Companies
that regime of compliance and regulation with the codes of corporate governance is extremely.The study
recommended a specialized regulatory agency to monitor compliance with the codes, upgrade standard
and harmonize the different codes. Miring’u and Muoria (2011) analyzed the effects of Corporate
Governance on performance of commercial state corporations in Kenya. Using a descriptive study design,
the study sampled 30 State Corporations out of 41 state corporations in Kenya and studied the
relationship between financial performance, board composition and size. The study found a positive
relationship between Financial Performance and board compositions of all State Corporations.
Furthermore and in the same vain, Ongore and K’Obonyo (2011) examined the interrelations among
ownership, board and manager characteristics and firm performance in a sample of 54 firms listed at the
Nairobi Kenya’s Securities Exchange. The findings from this study show a positive relationship between
managerial discretion and performance.
Uadiale (2010) studied the impact of board structure on corporate financial performance in Nigeria. The
results of the study indicate that there is a positive association between board composition and financial
performance and a strong positive association between board size and financial performance.Ogbechie
and Koufopoulos (2007) evaluated corporate governance issues in Banks operating in Nigeria that deal
with board characteristics, composition, operations and processes, and as well as their degree of
compliance with Central bank of Nigeria Code of Corporate Governance. The empirical findings of the
study revealed useful insights with respect to Corporate Governance Practices in Banks operating in
Nigeria. The results showed that Nigerian Banks have embraced the principles of good Corporate
Governance and have achieved high degree of compliance with the Central Bank of Nigeria Code of
Corporate Governance. Based on the findings, the study suggested that for the majority of banks, board
leadership should be independent, CEO and Chairperson Seats are held by different persons, and Nigerian
banks should have large boards. Using data on companies in many African countries, including Ghana,
South Africa, Nigeria and Kenya, Kyereboah-Coleman (2007) revealed that better governance practices
are associated with higher valuations and better financial performance.
METHODOLOGY
The purpose of this study is to empirically investigate the effect of corporate board structure on
profitability of listed insurance companies in Nigeria. The study is descriptive in nature; hence, the
research design adopted for the study is the descriptive type. The population of the study comprised the
twenty-three insurance companies listed on the floor of the Nigerian Stock Exchange (NSE) as obtained
from the internet as at March 9, 2020. This population is considered appropriate for this study as data for
the study are supposed to be generated from the financial information of insurance companies. From this
population, a sample was selected to represent the entire insurance companies that were listed on the
NSE. To be specific, selection of the sample was based on the following criteria as specified Bebeji,
Mohammed and Tanko (2015). Insurance companies with missing values for the variable used were
excluded. Secondly, the insurance companies were not involved in any merger during the study period.
Lastly, for the empirical analysis of this study, the data are limited to insurance companies that were in
existence throughout the period of the study (2015-2019).The justification of this study period was
informed from the fact that NAICOM issued a specific Code of Corporate Governance which was
industry-specific for all insurance companies listed on the Nigerian stock Exchange, effective February,
2009.On the basis of the above criteria, four insurance companies were selected. They include Aiico
Insurance Plc., Cornerstone Insurance Plc., N.E.M Insurance Plc. and Niger Insurance Plc. Both
probability and non-probability methods in the form of purposive and simple random sampling techniques
were employed in selecting the insurance companies into the sample.
The study utilized only the secondary source of data. This is appropriate because the estimation of the
mode l (Ordinary Least Square) in the study requires the use of cross sectional/time series (panel data) in
the form of financial information which were generated from the financial statements of the sampled
insurance companies. The data were sourced from the annual reports and accounts of the sampled
insurance companies for all the relevant years covered by the study. In generating the data for the content

Bingham International Journal of Accounting and Finance (BIJAF) Page 215

Corporate Board Structure and Profitability of Insurance Companies in Nigeria: Empirical
Evidence from Selected Listed Insurance Companies
analysis method of data collection was employed. Data generated were analyzed using the multivariate
regression analysis using E-view Processor. The insurance companies’financial performance linked to
two explanatory variables (board size, and board composition) was considered. Correlation matrix was
used to examine the nature and the degree of relationship among variables of consideration.
Model Specification

The model employed is an Ordinary Least Squares (OLS) regression to examine the separate and
combined effect of board size, and board composition onprofitability as a measure of financial
performance of insurance companies in Nigeria. The model was adopted from the works of Djordjevic
(2002); Klapper and Love (2002); Sanda et al. (2005); Musa (2006); and Hassan (2012). The model is
specified below.
ROA = βo + β1BS + β2BC+ ε………….… (1)
Where: ROA = Return on Assets;
BS = Board Size;
BC = Board Composition;
βo = Regression Intercept;
β1 = Coefficient ofBoard Size;
β2 = Coefficient ofBoard Composition;
ε = Error term.
RESULT AND DISCUSSIONS

Data Presentation, Analysis and Interpretation

Table 1: Descriptive Statistics of Variables
VARIABLES MEAN STD-DIV MINIMUM MAXIMUM
ROA 0.133351 0.317414 -0.030400 1.596600
BS 8.666667 1.785611 6.000000 11.00000
BC 0.570708 0.121601 0.428600 0.727300
Source: Data Analysis (E-View 8 Output)
Table 1 summarizes the descriptive details for 2 variables that are considered capable of influencing
return on assets of the four (4) selected quoted insurance companies in Nigeria and the result shows that
average ROA is 0.133351 with a standard deviation of 0.317414 with regard to all four insurance
companies observed and has a range from -0.030400 to 1.596600. The mean value for Board size is
8.666667 with a standard deviation of 1.785611 and has a range from 6.000000 to 11.00000. Board
composition has a range from 0.428600 to 0.727300 and its average is 0.570708 with a standard deviation
of 0121601.
Table 2: Correlation Analysis of the Study Variables
ROA BS BC
ROA 1.00000
BS 0.243226 1.000000
BC 0.270964 0.659441 1.000000
Source: Data Analysis (E-View 8 Output)
Table 2 shows that there is a positive correlation between return on assets (the dependent variable) and
each of Board Size (BS) and Board Composition (BC) with coefficients of (0.243226) and (0.270964)
respectively.
Table 3: Test of Hypothesis – Regression Analysis
VARIABLE COEFFICIENT STD. ERROR T-STATISTIC PROB.
C -0.307834 0.361530 -0.851474 0.4071
BS 0.021968 0.050188 0.437716 0.6674
BC 0.439445 0.745516 0.589451 0.5638

Bingham International Journal of Accounting and Finance (BIJAF) Page 216

Corporate Board Structure and Profitability of Insurance Companies in Nigeria: Empirical
Evidence from Selected Listed Insurance Companies
R-squared 0.281482
Adjusted R -squared -0.032870
F-statistic 0.895436
Source: Data Analysis (E-View 8 Output)
The resultsin Table 3 revealed that 28% of variations experienced in ROA of the various insurance
companies are caused by changes in the independent variables; while the probability of the F-statistic
shows that the independent variables aresignificant in exerting pressure on the dependent variable.
However, considering the individual coefficient in the relative statistics, the overall constant is not
significant and negatively related to Return on Assets (ROA); Board Size (BS) is not significant but
positively related to return on assets. Therefore, null hypothesis HO 1 is failed to be rejected. Hence, this
indicates apparent evidence that board size has no significant effect on the profitability of insurance
companies in Nigeria. This is not in conformity with the view of Shukeri, Shin andShaari (2012) who
opines that board size had positive influence on firms ROA. However, the results of Haniffaand
Hudaib(2006) are inconclusive. Using a market return measure of performance, their results suggested
that a large board isseen as less effective in monitoring performance, but when accounting returns are
used, large boards seem toprovide the firms with the diversity in contacts, experience and expertise
needed to enhance financial performance. Nevertheless, Connelly and Limpaphayom (2004) found that
board size does not have any relation with firm’s financial performance which is in conformity with this
study.On the other hand, Board Composition (BC) is not significant and also has positive relationship
with return on assets. Therefore, null hypotheses HO2 is failed to be rejected. This indicates that board
composition has no significant effect on the profitability of insurance companies in Nigeria. Miring’u and
Muoria (2011) analyzed the effects of corporate governance on performance of commercial state
corporations in Kenya. Using a descriptive study design, the study sampled 30 state corporations out of
41 state corporations in Kenya and studied the relationship between financial performance, board
composition and board size. The study found a positive relationship between financial performance and
board composition of all the state corporations. This does not conformto this study. The result of this
study is also not consistent with the study conducted byUadiale (2010) who studied the impact of board
structure on corporate financial performance in Nigeria. The results of the study indicated that there is a
positive association between board composition and financial performance.
CONCLUSION AND RECOMMENDATIONS
Corporate board structure has attracted increasing studies in legal, business and social sciences. This is
because corporate boards are the fulcrum of corporate governance and the pillars that support the
effective formulation of corporate strategies and performance required to ensure the optimal performance
of the firm (IFC, 2014; Kyereboah-Coleman, 2008). The regression results have shown insignificant
effects of board size and board composition on insurance companies’ performance in Nigeria.Board size
has no significant effect on the profitability of insurance companies in Nigeria. This signifies that an
increase or decrease in board size would not affect ROA. Similarly, board composition has no significant
effect on the profitability of insurance companies in Nigeria. This signifies that an increase or decrease in
board composition would not affect ROA. The overall conclusion of the study is that corporate board
structure has no significant effect on the profitability of insurance companies in Nigeria. The
recommendations of this study are directed at different parties that are involved in monitoring the
institutionalization of an effective system of corporate governance in Nigeria. These parties include,
share-holders, board of directors, board committees, and government/regulatory bodies. On the basis of
this and the findings of this study, the following recommendations are made:
i. Insurance companies should have an optimal board size and board composition so as to draw
investor’s confidence in the companies which is attracted by increased independency of the
board; capable of enhancing financial performance. This can be done by ensuring that
insurance companies have adequate board size to the scale and complexity of the company’s
operations and be composed in such a way as to ensure diversity of experience without

Bingham International Journal of Accounting and Finance (BIJAF) Page 217

Corporate Board Structure and Profitability of Insurance Companies in Nigeria: Empirical
Evidence from Selected Listed Insurance Companies
compromising independence, compatibility and integrity. The board size should not be too
large and must be made up of qualified professionals who are conversant with oversight
functions. The majority of board members should be non-executive directors whom should be
independent directors.There is also a need for insurance companies to comply with corporate
governance regulatory requirements and codes of best practices so as to avoid bankruptcy and
placement under judicial management.
ii. The directors should practice due care and diligence in discharging their duties. The directors
should disclose up all their activities to the public through audited financial statements. This
would help the insurance companies attract return for its customers and investors where the
directors discharge their duties in an ethical way. There is also a need for directors to address
issues of board structure in order to avoid a large chunk of directors in the companies’ board.
The directors are also mandated by the Companies Act to ensure responsibility and
accountability. The board structure as shown by the regression should have more independent
non-executive directors. This would tend to attract more potential investors since investors
favour companies with more independent non-executive directors than executive directors.
iii. Investors with a profit motive should target insurance companies with good corporate
governance practices. It is believed that formulation and implementation of complimentary
good corporate governance practices and performance growth policies would lead to
achievement of the oral objective of the companies, shareholder wealth maximization which
is needed by investors. Shareholders of insurance companies should seek to positively
influence the standard of corporate governance in the insurance companies in which they
invest by making sure there is strict compliance with the codes of corporate governance.
Further, it is the responsibility of the shareholders to ensure that the committee is constituted
in the manner stipulated and is able to effectively discharge its statutory duties and
responsibilities.
iv. Government should come up with the national corporate governance policy, which will make
governance equality among companies in the country. Since without such a policy
framework, monitoring and assessment companies’ corporate governance will be limited to
only in-house organisational appraisals. In addition, this would help regulators to enforce
companies’ regulation and supervision on an equal platform to all insurance companies.

Reference
Abdullah, S. N. (2004).Board composition, CEO duality and performance among Malaysian listed
companies.Journal of Corporate Governance, 4 (4), 47-61.
Abidin, Z. Z., Kamal, N .M.,& Jusoff, K. (2009). Board structure and corporate performance in
Malaysia.International Journal of Economics and Finance, 1, (1), 150-164.
Adams, R. B., & Ferreira, D. (2008).Women in the boardroom and their impact on governance and
performance.Japan Center forEconomic Institutions Working Paper Series, Institute of Economic
Research, Hitotsubashi University.
Adams, R. B., Gray, S., &Nowland, J. (2011).Does gender matter in the boardroom? Evidence from the
market reaction to mandatory new director announcements. http://ssrn.com/abstract=1953152
Adams, R., B., & Mehran, H. (2003). Is corporate governance different for bank holding companies?
Economic Policy Review, 9, 123-142.
Adeyele, J.S., &Maiturare, M.N. (2012).Repositioning the Nigerian insurance industry for sustainable
development: Risk management perspective.European Journal of Business and Management, 4
(5), 22-30.

Bingham International Journal of Accounting and Finance (BIJAF) Page 218

Corporate Board Structure and Profitability of Insurance Companies in Nigeria: Empirical
Evidence from Selected Listed Insurance Companies
Aguilera, R.V., & Jackson, G. (2003).The cross-national diversity of corporate governance: Dimension
and determinants. Academy of Management Review.
Aina, k. (2013).Board of directors and corporate governance in Nigeria.International Journal of
Business and Finance Management Research, 1 (2013),21-34.
Apergis, N. (2014). The long-term role of non-traditional banking in profitability and risk profiles:
Evidence from a panel of U.S. banking institutions. Journal of International Money and
Finance, 45, 61-73.
Attiye, J. J., & Robina, J. (2007).Relationship between corporate governance and firm
performance.African Journal of Business Management, 9 (16), 590-598.
Balinga, B. R., Moyer, R.C., & Rao, R.S. (1996). CEO duality and firm performance: What's the fuss?
Strategic Management Journal, 17(1),41-43.
Bank for International Settlements.(2010). Principles for enhancing corporate
governance.http://www.bis.org/publ /bcbs176.pdf
Bauer, P. (2004). Determinants of capital structure: Empirical evidence from the Czech Republic. Czech
Journal of Economics and Finance.
Bebeji, A.,Mohammed,A.,&Tanko, M. (2015).The effects of board size and board composition on the
performance of banks in Nigeria.African Journal of Business Management, 28 (3), 447-465.
Beck, T., Demirguc-Kunt, A., &Merrouche, O. (2013). Islamic vs. conventional banking: Business
model, efficiency and stability. Journal of Banking and Finance, 37, 433-447.
Berle, A., & Means, G. (1932), The modern corporation and private property.The Macmillan Company.

Bernardi, R.A., &Threadgill, V. H. (2010).Women directors and corporate social

responsibility.Electronic Journal of Business Ethics and Organization Studies, 15(2) 15-21.
Bhagat, S., & Black, B. (1999), Board independence and long-term firm performances.Working Paper of
the University of Colorado.
Bhimani, A. (2008). Making corporate governance count: The fusion of ethics and economic
rationality.Journal of Management and Governance, 12(2), 135-147.
Blair, M. (1995).Ownership and Control: Rethinking corporate governance for the twenty first century.
Brookings.
Brennan, N. (2006), Boards of directors and firm performance: Is there an expectations gap?Corporate
Governance International Review, 14 (6), 577-593.
Brickley, J.A., Coles, J. L., & Terry, R. L. (1994).Outside directors and the adoption of poison
pills.Journal of Financial Economics, 35(3), 371-390.
Brown, L.D., &Caylor, M. (2004).Corporate governance study: The correlation between corporate
governance and company performance. Institutional Shareholder Services.
Cadbury. (2010). The Code of Best Practice: Report of the committee on the financial aspects of
corporate governance. https://www.ecgi.org/codes

CBN.(2006). Code of Corporate Governance for Banks in Nigeria Post Consolidation.Corporate Author.
Calabrese, A., Costa, R., Menichini, T., Rosati, F., &Sanfelice, G. (2013). Turning corporate social
responsibility driven opportunities into competitive advantages: A two dimensional model.
Knowledge and Process Management, 20 (1), 50-58.
Caprio, G., Laeven, L., & Levine, R. (2007).Governance and bank valuation.Journal of Financial
Intermediation, 16 (4), 584-617.

Bingham International Journal of Accounting and Finance (BIJAF) Page 219

Corporate Board Structure and Profitability of Insurance Companies in Nigeria: Empirical
Evidence from Selected Listed Insurance Companies
Chou, H-I., Chung, H., & Yin, X. (2012).Attendance of board meetings and company performance:
Evidence from Taiwan. http://ssrn.com/abstract=2188721
Clarke, T.(2004).The stakeholder corporation: A business philosophy for the information age. In Clarke
T. (ed), Theories of Corporate Governance the Philosophical Foundations of Corporate
Governance. Rout Ledge, 189-202.
Clifford, P., & Evans, R. (1997).Non-executive directors: A question of independence.Corporate
Governance International Review,5(4), 224-231.
Coleman, K. (2008). Corporate governance and firm performance in Africa: A dynamic panel data
analysis. Studies in Economics and Econometrics, 19(2), 350-367.
Companies and Allied Matters Act, 2004.

Connelly, J. T., &Limpaphayom, P. (2004). Environmental reporting and firm performance: Evidence
from Thailand. The Journal of Corporate Citizenship, 13 (1) 37-149.
Dalton, D.F., &Kesner, I. F. (1987). Composition and CEO duality in boards of directors: An
international perspective. Journal of International Business Studies,18(3), 33-42.
Dehaene, A., De Vuyst, V., &Ooghe, H. (2001).Corporate performance and board structure in Belgiun
companies.Long Range Planning, 34(3), 383-398.
Dembo A. M., &Rasaratnam, S.(2014). Corporate governance and disclosure in Nigeria.Procedia- Social
and BehaviouralSciences,164, 161 - 171.
Demsetz, H., & Lehn, K. (2004).The structure of corporate ownership.Journal of Political
Economy, 93,1155-1177.
Desender, K. A. (2009).The relationship between the ownership structure and the role of the
board.Working Paper of the University of Illinois, Urbana Champaign, Illinois.

Djordjevic, V. (2002). Testing multiple regression analysis. Economics and Organization,10(1), 25-29.
Dobbin, F., & Jung, J. (2011). Corporate board gender diversity and stock performance: The competence
gap or institutional investor bias? North Carolina Law Review, 89, 809-838.
Enobakhare, A. (2010). Corporate governance and bank performance in Nigeria. Dissertation
Stellenbosch: University of Stellenbosch.
European Commission. (2014). Gender balance on corporate boards: Europe is cracking the glass
ceiling.http://ec.europa.eu/justice/gender-equality/index_en.htm
Fama, E., & Jensen, M. (1983).Separation of ownership and control.Journal of Law and Economics,26,
301–325.
Gabrielsson, J., Huse, M., &Minichilli, A. (2007).Understanding the leadership role of the board
chairperson through a team production approach.International Journal of Leadership Studies, 3
(1), 21-39.
Garba, T., &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, 4 (2), 257-277.
Ghosh, S. (2015). Political transition and bank performance: How important was the Arab
Spring?.Journal of Comparative Economics, Article in Press.
Golmohammadi, H., Ranjdoost, B.,&Cherati, H. (2012). The impact of ownership structure and board
structure on financial performance: Evidence from Tehran stock exchange spectrum.A Journal of
Multidisciplinary Research, 1 (9), 32-39.

Bingham International Journal of Accounting and Finance (BIJAF) Page 220

Corporate Board Structure and Profitability of Insurance Companies in Nigeria: Empirical
Evidence from Selected Listed Insurance Companies
Gompers, P.A, Ishii, J.L., &Metrick, A. (2003).Corporate governance and equity prices.The Quarterly
Journal of Economics, 18 (11), 107-156.
Haniffa, R. M., &Hudaib, M. (2006). Corporate governance structure and performance of Malaysian
listed companies.Journal of Business, Finance & Accounting, 33(7/8), 1034- 1062.
Hassan S. U. (2012). Corporate governance, earnings management and financial performance: A case of
Nigerian manufacturing firms. An International Journal of Contemporary Research 2(7).
Hermalin, B.E., &Weisbach, M. S. (1998).Endogeneously chosen board of directors and their monitoring
of the CEO.American Economic Review, 88 (1), 96-118.
Hillman, A. J., Shropshire, C., &Cannella Jr., A. A. (2007).Organizational predictors of women on
corporate boards.Academy of Management Journal, 50 (4), 941–952.
Houston, J.F., Lin, C., Lin, P., & Ma, Y. (2010). Creditor rights, information sharing, and bank risk
taking. Journal of Financial Economics, 96, 485-512.
International Finance Corporation. (2010).Corporate governance knowledge tool: Developing
corporate governance codes of best practice:Corporate Author.
International Finance Corporation. (2014). Corporategovernance scorecards: Assessing and
promoting the implementation of codes of corporate governance. Corporate Author.
Inyang, B. (2009). Nurturing corporate governance system: The emerging trends in Nigeria. Journal
of Business Systems, Governance and Ethics, 4 (1), 2.
Jackling, B., &Johl, S. (2009).Board structure and firm performance: Evidence from India’s top
companies. Corporate Governance International Review, 17 (4), 492–509.
Jensen, M.C.,&Meckling, W. H. (1976). Theory of the firm: Managerial behaviour, agency costs and
ownership structure. Journal of Financial Economics, 3 (4), 305-360.
Johnson, J.L., Daily, C.M., &Ellstrand, A.E. (1996). Board of directors: A review and research agenda.
Journal of Management, 22, 409-438.
Kakabadse, A., Kakabadse, N. K., & Barratt, R. (2006). Chairman and chief executive officer (CEO):
That sacred and secret relationship. Journal of Management Development, 2, 134-150.
Kamardin, H., Abdul-Latif, R., Mohd, K. N. T., & Adam, C. (2014).The effect of board diversity,
multiple directorships and ownership structure on firm performance. Paper
Presented at Malaysia Indonesia International Conference on Economics,
Management and Accounting (MIICEMA 2014), 10-11 November, 2014.
Kamyabi, Y., &Noushabadi, S. Z. (2014).The impact of corporate governance on dividend
payment policy: Empirical evidence from Iranian listed Companies.Paper Presented at
Malaysia Indonesia International Conference on Economics, Management and Accounting
(MIICEMA 2014), 10-11 November, 2014.
Khatab, H., Masood, M., Zaman, K., Saleem, S., & Saeed, B. (2011). Corporate governance and firm
performance: A case study of Karachi Stock Market.International Journal of Trade,
Economics and Finance, 2(1).
Klapper L. F., &Love, I. (2002).Corporate governance, investor protection and performance in emerging
markets. World Bank Policy Research working Paper No. 2818.
http://dx.doi.org/10.2139/ssrn.303979
Kolk, A., &Pinkse, J. (2010).The integration of corporate governance in corporate social responsibility
disclosures.Corporate Social Responsibility and Environmental Management, 17(1), 15-26.
Krause, R.,&Semadeni, M. (2013).Director notes: CEO-board chair separation: If it isn’t broke, don’t fix
it.http://www.conferenceBoard

Bingham International Journal of Accounting and Finance (BIJAF) Page 221

Corporate Board Structure and Profitability of Insurance Companies in Nigeria: Empirical
Evidence from Selected Listed Insurance Companies
Kyereboah-Coleman, A. (2007). Corporate governance and firm performance in Africa: A dynamic panel
data analysis. A paper presented at the International Conference on Corporate Governance in
Emerging Markets of theSabanci University, Istanbul, Turkey, November, 2007.
Laible, M-C. (2013). Gender diversity in top management and firm performance: An analysis with the
IAB-Establishment panel. CAED Conference Paper, Atlanta: Institute for Employment Research.

Maimako, S. S. (2010). Principles of corporate governance.Garki, Abuja: Eriba Publishing

Company.
Mang’unyi, E. (2011). Ownership structure and corporate governance and its effects on performance: A
case of selected banks in Kenya. International Journal of Business Administratio,2(3).
Marimuthu, M., &Kolandaisamy, I. (2009).Ethnic and gender diversity in boards of directors and their
relevance to financial performance of Malaysian companies.Journal of Sustainable Development,
2 (3), 139-148.

Miring’u, A., &Muoria, E. (2011).An analysis of the effect of corporate governance on performance of
commercial state corporations in Kenya.International Journal of Business and Public
Management, 1(1).
Mulili, M.B., & Wong, P. (2010).Corporate governance in developing countries.The case for
Kenya.International Journal of Business Administration, 2(1).
Musa, F. J. (2006). The impact of corporate governance on the performance and value of banks in
Nigeria: An agency approach. Nigerian Journal of Accounting Research, 1(4).
Muth, M.M., & Donaldson, L. (1998).Stewardship theory and board structure: A contingency
approach.Corporate Governance International Review, 6 (1), 5-28.
Noushabadi, S. Z., &Kamyabi, Y. (2014).Corporate governance and firm Value: Evidence from Iranian
listed companies.Paper Presented at Malaysia Indonesia International Conference on
Economics, Management and Accounting (MIICEMA 2014), 10-11 November, 2014.
Ntim, C. G., &Osei, K. A. (2011).The impact of corporate board meetings on corporate performance in
South Africa.African Review of Economics and Finance, 2(2), 83-103.
Nworji, I. D.,Olagunju.A.,&Adeyanju, D. (2015). Corporate governance and banks failure in Nigeria:
Issues, challenges and opportunities. Journal of Finance and Accounting, 2 (2), 1 - 19.
OECD.(2004). Principles of Corporate Governance.Corporate Author.
OECD. (2015). Principles of Corporate Governance:OECD report to G20 Finance Ministers and
Central Bank Governors. Corporate Author.
Ogbechie, C., &Koufopoulos, D, N. (2007). Corporate governance practices in publicly quoted
companies in Nigeria. A paper presented at the 4th World Congress on Corporate Governance
jointly sponsored by the Management of Innovation and New Technology (MINT)
Research Centre, The Directors College and the DeGroote School of Business, McMaster
University, Hamilton, Ontario, Canada, January 24-26.
Ogbechie, C., &Koufopoulos, D. N. (2010).Corporate governance and board practices in the
Nigerian banking industry. A Paper contained in the British Academy of Management and
Strategic Management Society proceedings.
Okolo, E. A. (2016). The Nigerian Securities and Exchange Commission scorecard experience: Efforts
in encouraging transparency and disclosure. A Paper Presented at the Global Stakeholder
Consultation and Practice Group Meeting of the IFC on Corporate Governance Codes and
Standards: Integrating Sustainability and Governance-The Role of Codes, Standards and
Disclosure at Hilton Vienna Plaza Hotel Vienna, Austria on Tuesday, April 19, 2016.

Bingham International Journal of Accounting and Finance (BIJAF) Page 222

Corporate Board Structure and Profitability of Insurance Companies in Nigeria: Empirical
Evidence from Selected Listed Insurance Companies

Ongore, V., & K’Obonyo, P. (2011). Effects of selected corporate governance characteristics on firms’
performance; Empirical evidence from Kenya.International Journal of Economics and Financial
Issues, 1(3), 99-122.
Oparanma, A. O. (2010). The organizational culture and corporate performance in Nigeria.International
Journal of African Studies, 3, 34-40.
Othman, R., Ponirin, H., &Ghani, E. K. (2009).The effect of board structure on whareholders’ Wealth in
small listed companies in Malaysia.Management Science and Engineering, 3 (4), 1-15.
Padilla, A. (2000). Can agency theory justify the regulation of insider trading?The Quarterly Journal of
Austrian Economics, 5(1), 3-38.
Peng, M. W., Zhang, S., & Li, X. (2007). CEO duality and firm performance during China’s institutional
transitions.Management and Organization Review, 3(2), 205–225.
Pfeffer, J., &Salancik, G. R. (1978). The external control of organizations: A resource dependence
perspective. Stanford Business Books.
Rechner, P., & Dalton, R. (1991). CEO duality and organizational performance: A longitudinal analysis.
Strategic Management Journal, 12 (2), 155–160.
Salehnezhad, S. H., &Abbasi, M. (2013). The relationship between board diversity and firm performance:
Empirical evidence from Iran. International Journal of Management and Humanity Sciences, 2
(3), 198-204.
Sanda, A., Minkailu, A. S., &Garba, T. (2005).Corporate governance mechanisms and firm financial
performance in Nigeria.AERC Research Paper.http://www.aercafrica.org/documents/Rp.149
Securities Commission Malaysia.(2017). Malaysian Code on Corporate Governance.Corporate Author.
SEC. (2003).Code of Best Practice on Corporate Governance.Corporate Author.
Securities and Exchange Commission.(2011). Code of Best Practice on Corporate Governance for
Public Companies in Nigeria. Corporate Author.
Shleifer, A., &Vishny, R. W. (1997).A survey of corporate governance.Journal of Finance, 52 (2), 737-
783.
Shukeri, S. N., Shin, O., &Shaari, M. S. (2012). Docharacteristics of board of directors affect firms’
performance? Evidence from Malaysian public listed companies.International Business Research,
5(9), 120-127.
Shungu, P., Ngirande, H., &Ndlovu, G. (2014).Impact of corporate governance on the performance of
commercial banks in Zimbabwe. Mediterranean Journal of Social Sciences, 5 (15), 93-105.
Souster, R. (2012).Corporate governance: The board of directors and standing
committees.http://www.accaglobal.com/content/dam/acca/global/PDF-students/2012s/sa_oct12-
f1fab_governance.pdf
Sridharan, U. V.,&Marsinko, A. (1997).CEO duality in the paper and forest products industry.Journal of
Financial and Strategic Decisions, 10 (1), 59 – 65.
Sundaram, A.K., &Inkpen, A. C. (2004).The corporate objective revisited. Organization Science, 15 (3),
350-363.
Sweigart, A. (2012). Women on board for change: The Norway model of boardroom quotas as a tool for
progress in the United States and Canada. North-Western Journal of International Law &
Business, 32(4), 81A – 105A.
Tan, R. S. K., Chang, P. L., & Tan, T. W. (2001). CEO share ownership and firm value. Asia Pacific
Journal of Management, 18, 355–371.

Bingham International Journal of Accounting and Finance (BIJAF) Page 223

Corporate Board Structure and Profitability of Insurance Companies in Nigeria: Empirical
Evidence from Selected Listed Insurance Companies
Thuy-Nga, V. T. (2010). To be or not to be both CEO and board
chair.http://open.wmitchell.edu/facsch/184
Tornyeva, K., &Wereko, T. (2012a). Soft governance and firms’ 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 firms’ performance: Evidence from the
insurance sector of Ghana. European Journal of Business and Management, 4 (13), 95–112.
Tribbett, C. (2012). Splitting the CEO and chairman roles: Yes or no.
http://www.russellreynolds.com/sites/default/files/corporate_Board_splitting_the_ceo_and_chairm
an_roles.pdf
Tricker, R.I.(1994).International corporate governance: Text readings and cases.Prentice-hall.
Uadiale, O. M. (2010). The impact of board structure on corporate financial performance in
Nigeria.International Journal of Business Management, 5 (10), 155–166.
Ujunwa, A., Okoyeuzu, C., &Nwakoby, I. (2012). Corporate board diversity and firm performance:
Evidence from Nigeria. Review of International Comparative Management, 13 (4), 605-620.
Vaithilingam, S. Mahendhiran, N., &Muthi, S. (2006). Key drivers for soundness of the banking sector:
lessons for developing countries. Journal of Global Business and Technology, 2(1), 114-144, 163.
Weir, C., Laing, D., & McKnight, P. J. (2002). Internal and external governance mechanisms: Their
impact on the performance of large UK public companies. Journal of Business Finance and
Accounting,29, 579-611.
Wen, Y., Rwegasira, E., &Bilderbeek, J. (2002). Corporate governance and capital structure decisions of
the Chinese listed firms. Corporate Governance International Review, 10 (2), 75-83.
Wheeler, D., Colbert, B., & Freeman, R.E. (2002).Focusing on value: Reconciling corporate social
responsibility, sustainability and a stakeholder approach in a Network World.Journal of General
Management, 28, 1-28.
Wikipedia.(2020). Board of directors. https://www.en.wikipedia.org › wiki › Board_of_directors on
August 24 2020

Wong, K. A., &Yek, T. C. (1991). Shareholdings of board of directors and corporate performance:
Evidence from Singapore. Pacific Basin Capital Market Research, 2, 211-225.
Yermack, D. (1996). Higher market valuation of companies with a small board of directors. Journal of
Financial Economics, 40(2), 185–211.
Young, S. (2000). The increasing use of non-executive directors: Its impact on UK board structure and
governance arrangements.Journal of Business Finance and Accounting,27(9&10), 1311-1342.

Bingham International Journal of Accounting and Finance (BIJAF) Page 224