EFFECT OF BOARD INDEPENDENCE AND RISK MANAGEMENT ON FINANCIAL PERFORMANCE OF LISTED DEPOSIT MONEY BANKS IN NIGERIA

Olawale Nurudeen Sanni, Adamu Shalli, Patience Kanwai

Abstract


This study examined the effect of board independence and risk management on financial performance of listed deposit money banks in Nigeria for the period of 2009-2018.  The study used correlational research design. Data were collected from the published annual financial reports of studies listed deposit money banks in Nigeria. The population of the study comprised of the 14 listed deposit money banks. The adjusted population of twelve (12) listed deposit money banks in Nigeria was arrived at using three points filter. Extreme value theory, credit risk theory and agency theory were used to underpin the study. The data were analyzed with the aid of random effect multiple regression technique, the result of the random effect regression showed that board independent has a positive and significant effect on the financial performance of listed deposit money banks in Nigeria. However, negative significant relationship was found between market risk, credit risk and financial performance of listed deposit money banks in Nigeria. Based on the findings, the study recommended that banks should possess considerable proportion of independence non-executive directors that will contribute actively to the strategic decision-making process, and securing access to critical resources which in turn will improve performance.  In addition, the study suggests that bank should hire qualified personnel to analyze credit risk. They can gather information of clients in the entire bank, of changes in financial environment, of consumption trends and of consumer loans. The personnel can periodically analyze and adjust the weight of every risk factor and control the rate of overdue payment loan in the right moment. Finally, the study recommends that banks should mitigate the market risk by using appropriate risk management strategies through forwards, futures, swaps, and insurance as well as securitization techniques.

 

Keywords: board independence, risk management and financial performance


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