CORPORATE GOVERNANCE MECHANISMS AND INVESTORS’ CONFIDENCE OF LISTED CONSUMER GOODS COMPANIES IN NIGERIA

Abstract

In recent years, corporate governance has received increased attention because of high-profile scandals involving abuse of corporate power and, in some cases, alleged criminal activity by corporate officers. Several multinational companies have been exposed to the worst corporate scandals as a result and it is believed that these mechanisms make investors to view organizations in diverse ways. On this note, this study investigated the effect of corporate governance mechanisms on investors’ confidence of listed consumer goods companies in Nigeria. Corporate governance mechanisms used in the study were; board size, board gender diversity and board independence while investors’ confidence was measured using earnings multiple. The population of this study was 21 consumer goods companies listed on the Nigerian Exchange Group (NGX) while 18 consumer goods companies were the final sample size after employing purposive sampling technique. Secondary data were extracted from the annual reports of these companies and analysed using panel least square regression techniques. The results of the analysis revealed that board size and board gender diversity have significant negative effect on earnings multiple of the companies under study, while board independence has no significant effect on earnings multiple of these companies. Thus, it was concluded that corporate governance mechanisms have varying levels of effect on investors’ confidence, and it was recommended that companies should advocate for smaller board size and a less gender-diverse board in order to improve their investors’ confidence.

 Keywords: Corporate governance, investors’ confidence, earnings yield, board size.