Board Characteristics and Bankruptcy Risks of Banks in Nigeria

Abstract

Research Purpose: This study investigates the influence of board characteristics on the bankruptcy risks of deposit money banks in Nigeria, amidst growing concerns about financial stability and governance.

Methodology: Utilising an ex-post-facto research design, the study spans 2012 to 2021. Secondary data were sourced from annual reports of selected Nigerian banks, and hypotheses were tested using a multiple regression technique.

Findings: The analysis reveals that board size and audit committee size have non-significant positive effects on banks' current ratios, while board independence has a non-significant negative effect. Thus, these board characteristics do not majorly determine bankruptcy risks.

Conclusion: The study concludes that the examined board characteristics are not primary determinants of bankruptcy risks in Nigerian banks. Effective governance requires a nuanced understanding beyond mere structural attributes.

Recommendations: Banks should ensure board sizes of at least 10 members to foster diverse and sound decision-making. Balance, rather than excessive independence, should guide board composition. Audit committees should include sufficient experts to meet legal and ethical standards in accounting practices.