Exploring the Impact of Board Diversity on Profitability: Evidence from Nigerian Food and Beverage Firms

Abstract

The collapse of major corporations globally has fueled ongoing debates about corporate governance and its implications for firm performance. This study examines the influence of board diversity attributes on the profitability of listed food and beverage manufacturing firms in Nigeria, providing critical insights into the governance-performance nexus. Utilizing ex-post-facto and descriptive research designs, data were drawn from 10 purposively selected firms out of 22 listed on the Nigerian Exchange Group (NGX). Principal Component Analysis (PCA) was employed to identify significant board diversity attributes, while Pearson Product Moment Correlation Coefficient (PPMCC) was used to analyze their relationship with profitability. The findings reveal that Financial Expertise Diversity (60.78%) is the most dominant factor influencing profitability, while CEO Duality (-58.95%) exhibits a negative impact. Gender Diversity (60.02%) and Ethnicity Diversity (59.1%) emerged as key contributors to demographic diversity, while Educational Background Diversity (73.48%) uniquely enhanced board effectiveness. Correlation analysis demonstrated that increased diversity—particularly in gender (0.683771), ethnicity (0.739114), and educational background (0.833936)—is strongly associated with higher profitability, measured by Return on Assets (ROA). This study underscores the strategic importance of fostering diverse boards to strengthen corporate governance and enhance financial outcomes. By illuminating the significant attributes of board diversity, these findings provide actionable insights for policymakers and stakeholders aiming to drive sustainable growth in the Nigerian food and beverage sector.