Moderating effect of managerial ownership on board characteristics and financial performance of quoted commercial banks in Nigeria

Abstract

This study examined the moderating effect of managerial ownership on the relationship between board characteristics and financial performance of quoted commercial banks in Nigeria and the study was grounded in Resource Dependence Theory. The study adopted an ex post facto research design using secondary data extracted from the annual reports of thirteen quoted commercial banks over a ten-year period. Board characteristics were proxied by board size, board independence, board gender diversity, board financial expertise, board meeting frequency and foreign board membership, while return on assets (ROA) was used as a measure of financial performance. The study employed a dynamic panel estimation technique to account for endogeneity and firm-specific effects. Specifically, the interaction between board independence and managerial ownership shows a negative and statistically significant effect, suggesting that higher levels of insider ownership may weaken the monitoring effectiveness of independent directors. Similarly, the interaction between board financial expertise and managerial ownership reveals a strong negative and statistically significant relationship with performance, implying that an overconcentration of financial expertise, when combined with managerial ownership, may limit strategic flexibility. Conversely, other interaction effects are statistically insignificant. The interaction between board size and managerial ownership is negative but insignificant, indicating no substantial joint influence on performance. The interaction between board gender diversity and managerial ownership is positive but insignificant, suggesting a weak complementary effect. Likewise, board meeting frequency interacting with managerial ownership shows a positive but insignificant effect, while the interaction with foreign board membership is negative and insignificant. The study concludes that managerial ownership significantly influences the effectiveness of board governance mechanisms and recommends optimal ownership levels, stronger board independence, and improved utilization of board expertise.