Board Independence and Profitability of Listed Service Firms in Nigeria

Abstract

This study examined the effect of board independence on the profitability of listed service firms in Nigeria, with the specific aim of determining how the proportion of independent directors to total board members influenced net profit after tax. An ex post facto research design was adopted because the work relied on historical financial data that had already been published. The population comprised twenty two listed service firms, from which a purposive sample of sixteen firms was drawn based on the availability of complete annual reports from 2014 to 2024. Data were obtained from audited annual reports, and the hypothesis was tested using panel data regression. The results showed that board independence had a significant positive effect on firm profitability during the study period (β = 2,899,897; p = 0.0000). The study concluded that the composition of the board, particularly the presence of independent directors, played an important role in shaping the financial outcomes of listed service firms in Nigeria. Thus, it was recommended that boards of listed service firms in Nigeria need to strengthen the role and presence of independent directors. The corporate governance committees and shareholders should ensure that a higher proportion of independent directors are appointed and actively involved in oversight and strategic decision-making.