Directors’ Observable Characteristics and Market-Level Financial Performance: Evidence from Nigeria and South Africa

Abstract

Purpose: The primary aim of this study was to examine the effects of directors’ observable characteristics on market-level financial performance in Nigeria and South Africa via ex-post-facto research design. Method: Cross-sectional data of one hundred and eleven (111) and one hundred and sixty-four (164) financial and non-financial firms were sampled in Nigeria and South Africa respectively from 2012-2021. Directors' observable characteristics used were board independence and gender diversity, and market-level performance indicators (Tobin’s Q and market-to-book-value ratios) Data were obtained from the annual reports and accounts of publicly quoted firms on Nigerian and Johannesburg Stock Exchanges. Data obtained were analyzed using descriptive, post-estimation and inferential statistical tools. Results and Conclusion: The results of fixed and random effects regression revealed that while directors’ observable characteristics had significant effects on Tobin’s Q (Wald=39.87; Prob.=0.0000<0.05), an insignificant effects was found for market-to-book value (Wald = 6.27; Prob.=0.3933> 0.05) of firms in Nigeria and South. On the basis of the findings, it is recommended that management should engage in economic or business activities by way of investing more in capital assets or bonds to generate a high Tobin’s Q value for firms in Nigeria and South Africa Implication of the Research: The implication is that directors’ observable characteristics can serve as a means of enhancing Tobin’s Q except market-to-book value Originality/Value: There is the need for future researches to validate the model employed by using the identified directors’ observable characteristics which were not used in this current study.