IMPACT OF CORPORATE GOVERNANCE MECHANISMS ON FINANCIAL PERFORMANCE OF OIL AND GAS COMPANIES IN NIGERIA

Abstract

The objective of this study is to examine the impact of corporate governance mechanisms on financial performance of listed oil and gas companies in Nigeria. The study adopted ex-post facto research design and gathered secondary data from published annual reports of the selected companies for the period of 10 years (2013-2022). The population of the study is 10 listed oil and gas companies in Nigeria where the entire population was considered as the sample using census-sampling technique. The data gathered were analyzed using descriptive and inferential statistics such as correlation and panel regression analysis with the help of STATA 14.0. The study found that board size and board independence have significant positive influence on financial performance, while foreign ownership was negatively significant. On the hand, ownership concentration was found to have insignificant relationship with financial performance. In view of the findings, the study concludes that corporate governance is an effective mechanism to ensure a sustainable and better financial performance as it shaped the decision-making process and the strategic focus of the companies. Therefore, it is recommended that, the petroleum companies should optimize the composition of the board by ensuring a diverse mix of expertise, experience relevant to oil and gas industry to promote the effective oversight and guidance. Also, the independence criteria for the directors in Nigerian oil and gas companies should be strengthened by reviewing the criteria to ensure that they meet a recognized standard of been non-associated with any stakeholder group. Finally, companies should foster stakeholder engagement of relevant parties such as employees, local communities and investors to build positive relationship that can contribute to long-term sustainability and reputation management.