BOARD DIVERSITY AND CORPORATE FINANCIAL PERFORMANCE: THE MODERATING EFFECT OF FIRM LIFE CYCLE

The main objective of this study is to examine the relationship between board diversity and corporate financial performance, given the stages of a firm’s lifecycle for non-financial companies in Nigeria. The study covered a period of five (5) years (2011-2015). Six (6) models were specified and analyzed using descriptive statistics, histogram normality test, correlation analysis, hauseman specification test, and panel regression analysis using the random effect estimator with the aid of E-views 9.0. The data used in the study was obtained from the annual reports and accounts of ninety (90) non-financial firms quoted Nigerian Stock Exchange. From the empirical analysis, the study revealed that foreign diversity has a significant positive relationship with corporate financial performance while gender diversity and educational diversity have no significant relationship with corporate financial performance of non-financial companies in Nigeria. In addition, when the variables of board diversity interacted with the five stages (introduction, growth, mature, shakeout and decline) of the firm’s lifecycle, gender diversity and foreign diversity have significant negative relationship with corporate financial performance at the introduction stage of the firm and a significant positive relationship with corporate financial performance at the mature stage of the firm. However, when educational diversity was interacted with the stages of the firm’s lifecycle, there was no significant relationship with all five stages of the firm’s lifecycle. The study therefore recommends that when companies are diversifying their corporate boards, with the sole aim of improving on their performance, they ensure that the number of women on the board be increased at the mature stage of a firm’s lifecycle because they will assure shareholders of an imminent significant change even in a state of recession. Also, the board should increase the number of foreign directors at the mature stage of the firm because they will help the firm reduce its cost of capital by encouraging greater financial flexibility.