Dynamic Relationship Between Foreign Directors and Financial Performance: Evidence from Nigerian Listed Companies

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Authors: Abdullahi Sani, Yahaya Muhammad

Abstract

This study assesses the effect of foreign directors on the financial performance of Nigerian listed companies. The research uses a generalised method of moments (GMM) analytical technique that effectively mitigates endogeneity and efficiently captures dynamic effects. The analysis was based on a sample of 73 listed companies from 2014 to 2023. The data were extracted from the annual published accounts and reports of the sampled firms. The main finding suggests that Nigerian listed will boost their financial performance by employing more foreign directors on their boards. This empirical evidence appears consistent with the propositions of the agency and resource dependency theories. The outcome implies that managers and shareholders should emphasise on foreign directorship to attract talents for corporate innovations and gain completive advantage. Regulators and policymakers should promote foreign directorship by developing explicit guidelines that encourage firms to appoint foreign directors for more effective monitoring to boost financial outcomes.

Keywords: Foreign directors; financial performance; dynamic relationship; Nigerian listed firms

2024 - NIJAF - 16 - 208 Abdullahi Sani 120-135.pdf

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