BOARD COMPOSITION AND CRITICAL DECISIONS IN NIGERIAN QUOTED FIRMS

BOARD COMPOSITION AND CRITICAL DECISIONS IN NIGERIAN QUOTED FIRMS

ABSTRACT

This study examines the effect of board composition on critical decisions of Nigerian quoted firms.  The six critical decisions studied were Chief Executive Officer’s (CEO) total compensation, CEO’s incentive pay out of total compensation, the level of firm unrelated diversification, intensity of firm research and development expenditures, firm’s debt intensity and CEO turnover. The six hypotheses formulated for the study were estimated using the Z-test, analysis of variance (ANOVA) and generalized least square (GLS) multiple regression. The findings of the study showed that board composition had negative effect on CEO’S total compensation; while board composition had positive effect on critical decisions such as; CEO incentive pay out of total compensation, firm unrelated diversification, firm’s research and development expenditure, firm debt intensity and CEO turnover. The findings of the study provide partial evidence on the effective of the agency theory. One of the greatest contributions of the studies is the discovery of entirely agency conflict which is between the non-executive board members and shareholders. The theoretical framework and findings of this study are expected to stimulate scholars for further research on mechanism for resolving this entirely new version of agency conflict in the Nigerian corporate environment.