Board Heterogeneity and Asset Quality of Listed Deposit Money Banks in Nigeria
Keywords:
Board heterogeneity, Asset Quality, deposit money banks, loan loss provisionAbstract
Concerns over the quality of bank loan portfolios, the accuracy of expected credit loss estimates and the extent to which board composition strengthens credit-risk oversight have raised questions about whether heterogeneous boards actually improve asset quality in Nigerian deposit money banks. Against this background, this study examined the relationship between board heterogeneity and asset quality of listed deposit money banks in Nigeria. Board heterogeneity was measured by board age diversity, board tenure diversity, board gender diversity, board independence diversity and board professional diversity, while asset quality was measured by loan loss provisioning accuracy (LLPA). Firm size, measured as the natural logarithm of total deposits, was included as a control variable. The study adopted an ex-post facto research design and used a balanced panel of 110 bank-year observations from eleven listed deposit money banks. The analyzable t-period covered 2015 to 2024, with actual loan write-offs from 2016 to 2025 providing the corresponding t+1 denominators. Descriptive statistics, correlation analysis, regression diagnostic tests, pooled least squares, fixed-effects and random-effects estimations, and the Hausman specification test were conducted. The Hausman result (Chi-square = 11.2310; p = 0.0815) supported the random-effects estimator. Board age diversity had a negative but insignificant relationship with LLPA (Coeff. = -1.144876; p = 0.4084), while board tenure diversity had a positive and statistically significant relationship (Coeff. = 5.306962; p = 0.0123). Board gender diversity (Coeff. = -0.058482; p = 0.9517) and board independence diversity (Coeff. = -0.298048; p = 0.7674) had negative but insignificant relationships, whereas board professional diversity had a positive but insignificant relationship (Coeff. = 3.931744; p = 0.1923). It was concluded that board heterogeneity significant influences the asset quality of deposit money banks in Nigeria. The recommendations made include; deliberate tenure balance supported by credit-risk expertise, independent director challenge of executive credit assumptions and multifaceted impairment calibration.
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