Moderating Effect of Board Diversity on the Relationship Between Risk Information Disclosure and Value of Listed Commercial Banks in Nigeria

Abstract

This study investigates the moderating effect of board diversity on the relationship between operational and liquidity risk information disclosure and value of listed commercial banks in Nigeria’s financial sector. Utilizing a Generalized Method of Moments (GMM) approach, data was collected from 540 firm-year observations, covering operational risk disclosure, liquidity risk disclosure, and board diversity attributes. The findings indicate that board diversity significantly moderates the relationship between operational risk information disclosure and value, enhancing firm performance. However, board diversity negatively moderates the relationship between liquidity risk disclosure and market value, suggesting complexities in how diverse boards manage liquidity risk communications. The study concludes that board diversity plays a significant role in influencing how risk disclosures affect value. Specifically, while board diversity positively moderates the relationship between operational risk disclosure and value, it has a negative moderating effect on the relationship between liquidity risk disclosure and market value. Therefore, the study recommends that to leverage the benefits of board diversity effectively, firms should invest in training programs that equip board members with the necessary skills to communicate risk disclosures clearly. These programs should emphasize effective decision-making processes and the importance of cohesive communication strategies, particularly in relation to liquidity risk management.