Investigating Corporate Governance and Firms Performance Nexus in Nigeria: Evidence from Panel ARDL and GMM

Abstract

This study investigates corporate governance and firm performance nexus of 30 selected firms Listed on the Nigerian stock exchange (NSE) – 15 blue-chip firms and 15 penny firms using panel dynamic autoregressive distributed lag (ARDL) model and differenced and system generalized method of moment (GMM). Data ranging from 1990 to 2020 extracted from annual financial fact sheets of the sampled firms. In this study, corporate governance measures include board size (BSZ), board governance and remuneration committee (BGRC), number of meetings held (NMH), number of shareholders committee (NSHC), number of remuneration committee (NRMC), and number of audit committee (NAC); while firms performance measures include return on assets (ROA) and return on equity (ROE). The study also controlled for the influence of shareholders fund (SHF) and gross earning (GRE). Findings from the Pedroni cointegration test shows that there are cointegration between corporate governance and firms’ performance which was confirmed by Kao cointegration test as robustness check. Evidence from the results of panel dynamic ARDL models of MG, DFE and PMG shows that there is existence of long-run relationships between corporate governance and firms’ performance in Nigeria. Also, the results of the error correction model shows that speeds of adjustments from the short-run to the long-run exist in various degrees for MG, DFE and PMG for models 1 and 2. Findings from GMM models confirmed the existence of long-run relationships between corporate governance and firms’ performance in Nigeria. However, policies such as enhancement of the corporate governance and institutional qualities in Nigeria were recommended.