Impact of Board Diversity on Profitability of Selected Consumer Goods Manufacturing Firms in Nigeria

Abstract

The declining financial performance, characterized by low profitability and insufficient board diversity, has been observed in Nigerian manufacturing firms over the past decade. The significant contributions of the consumer goods manufacturing sub-sector highlight the need for empirical investigation to enhance its performance. This study assesses the impact of board diversity attributes on the profitability of selected consumer goods manufacturing firms in Nigeria. Using Ex-post-facto and descriptive research designs, the study focuses on consumer goods firms listed on the Nigerian Exchange Group (NGX). Out of 25 firms listed, 10 were selected using homogeneous purposive sampling. Descriptive analysis was applied to study the variables, and panel regression was used to analyze the effects of board diversity on profitability, with tests conducted at a 5% significance level. Results show that educational background (p = 0.0167), ethnic diversity (p = 0.0018), and CEO duality (p = 0.0253) positively influenced profitability. The pooled regression analysis revealed that CEO duality (p = 0.001765), financial expertise (p = 0.000583), and educational diversity (p = 0.010698) significantly affected profitability, measured by Return on Assets (ROA). The study concluded that board diversity attributes, such as gender, educational, ethnic diversity, and financial expertise, positively impact the profitability of Nigerian consumer goods manufacturing firms. It recommends that firms promote initiatives to enhance gender and educational diversity and support financial expertise on their boards.