Corporate Governance, Institutional Quality, and Firm Performance: A Comprehensive Analysis of the Oil & Gas Sector

Akinbola Olawale¹ and Ezeala Obinna^2,

¹Department of Finance, University of Lagos, Lagos, Nigeria

²Department of Economics, University of Lagos, Nigeria

Cite this paper:
Akinbola Olawale and Ezeala Obinna. Corporate Governance, Institutional Quality, and Firm Performance: A Comprehensive Analysis of the Oil & Gas Sector. Journal of Finance and Economics. 2023; 11(3):160-170. doi: 10.12691/jfe-11-3-4

Abstract

The analysis explores the relationship between corporate governance, institutional quality, and firm performance in the Nigerian oil & gas sector from 2013 to 2022. The study utilizes secondary data obtained from annual financial statements of selected companies in the sector and the Nigerian Stock Exchange. Descriptive and econometric methods are employed for data analysis. The study utilized multiple theoretical frameworks, including Agency Theory, Stakeholder Theory, Institutional Theory, Resource Dependence Theory, and Transaction Cost Economics, to gain a comprehensive understanding of the topic. The data was analyzed using the Panel Least Square (PLS) method, allowing for a robust examination of the variables' relationships over time. The findings of the study shed light on the unique context of the Nigerian oil & gas sector. One key result was that board independence did not significantly impact firm performance, suggesting that other factors may have a more influential role in determining performance outcomes in the sector. The study's findings indicate that increasing board diversity alone may not lead to significant improvements in revenue and overall performance for oil firms in Nigeria. Another significant finding was a negative relationship between board ownership structure and firm performance. Higher levels of board ownership concentration were associated with decreased revenue for oil firms operating in Nigeria. This highlights the challenges and risks associated with concentrated ownership in the sector. Additionally, the study revealed a negative impact of trade ratings on firm performance. Lower trade ratings were linked to a substantial decrease in revenue for oil firms, emphasizing the importance of considering external market conditions and economic factors when evaluating firm performance in the oil & gas sector. Based on the findings of the study strengthening corporate governance frameworks to ensure independence and effectiveness of boards is recommended. Attention should be given to the ownership structure of oil firms to prevent excessive concentration and promote diversity. Improving trade policies and creating an enabling environment for international trade is crucial for the oil & gas sector's performance.

Keywords:
Corporate Governance Institutional Quality and Firm Performance Oil and Gas Sector

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