Corporate Governance Practices and Return on Assets of Listed Consumer Goods Firms in the Midst of A Double-Digits Inflationary Economy in Nigeria

Abstract

This study investigated the impact of corporate governance practices on the return on assets of listed consumer goods firms in the midst of the double-digit inflationary economy in Nigeria. The specific objectives of the study looked at the impact of board size, board independence, board diligence, and women board membership on return on assets. The inflation rate was used to moderate corporate governance in relation to return on assets. The study was anchored on the agency theory, and the secondary data were obtained from the audited financial statements and annual reports of randomly selected listed consumer goods firms, which cover a ten-year period from 2014 to 2023. The statistical package for social sciences (SPSS) version 23 was utilized to perform regression analysis on the gathered data in order to investigate the influence of the moderating variable and corporate governance proxies on return on assets. According to the study's findings, return on assets is positively and significantly correlated with all corporate governance factors, including board size, independence, diligence, and the proportion of women on the board. In contrast, return on assets is negatively and significantly correlated with the moderating variable, the inflation rate. The study comes to the conclusion that corporate governance and the return on assets of Nigerian consumer goods companies are significantly correlated. The study recommends that firms should have an optimum size of the board, improve the independence of the board, the diligence of the board, and gender diversity. These would be beneficial to the firms in their oversight, strategic decision-making, and financial performance. Further, the policymakers should sustain macroeconomic stability by regulating inflation. Governments should also maintain the macroeconomic environment by controlling inflation. The economic environment would have a positive impact on the profitability of the firms.