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Journal of Finance and Accounting. 2017, 5(3), 93-103
DOI: 10.12691/jfa-5-3-4
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Effect of Corporate Governance Mechanisms on Financial Performance of Insurance Companies in Nigeria

Ibe Happy Chukwudike Azutoru1, , Ugwuanyi Georgina Obinne1 and Okanya Ogochukwu Chinelo2

1Department of Banking and Finance, Michael Okpara University of Agriculture, Umudike

2Institute of Management & Technology, Enugu

Pub. Date: November 14, 2017

Cite this paper:
Ibe Happy Chukwudike Azutoru, Ugwuanyi Georgina Obinne and Okanya Ogochukwu Chinelo. Effect of Corporate Governance Mechanisms on Financial Performance of Insurance Companies in Nigeria. Journal of Finance and Accounting. 2017; 5(3):93-103. doi: 10.12691/jfa-5-3-4


This study investigated the effect of corporate governance on financial performance of Insurance companies in Nigeria. The study adopted ex-post facto research design and panel data covering five year period from 2011-2015 for twenty insurance companies. The study examined a range of corporate governance mechanisms such as board size, board independence, executive directors’ remuneration, non-executive directors’ remuneration, directors’ ownership, institutional ownership, foreign ownership and the study controlled the effect of the firm size using log of total assets. The Fixed effects model was used to evaluate the effect of these corporate governance mechanisms on financial performance of Nigerian insurance companies. The fixed effect econometric estimates showed that, board size and non-executive directors’ remuneration have negative and significant effect on financial performance proxy by return on assets (ROA). While board independence, and institutional ownership indicated positive and significant impact on the financial performance as predicted by agency theory. However, contrary to theoretical predictions executive directors’ remuneration, directors’ ownership, and foreign ownership did not make significant impact on the financial performance of Nigerian insurance companies. However, the fixed effect econometric estimator employed in this study indicated that corporate governance mechanisms affects the financial performance of Insurance companies in Nigeria. Therefore, the study recommends among other things that the board be restructured to a manageable size, and suggested that a performance-based remuneration be design for the directors. In addition, more non-executive directors should be appointed to the corporate board to enhance the effectiveness of the board in aligning the interest of the stakeholders.

corporate governance board size board independence directors’ remuneration directors’ ownership institutional ownership foreign ownership financial performance

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