Conservative Business Strategy as Moderator of Board Independence and Corporate Performance Nexus in Nigerian Financial Companies

The relationship between board independence and corporate performance is one that is replete with mixed results. This paper analyzes board independence and firm performance in the presence of conservative business strategy. The issues addressed focus on whether board independence contributes meaningfully to performance and whether conservative strategy amplifies the role of board independence in mitigating agency conflict and thus improving firm value or performance. To address this, 312 firm-year observations of firms in the Nigerian financial sector from 2007 to 2018 were analyzed using the ordinary least squares (OLS) regression model, panel data model, and structural equation model (SEM). In the OLS and panel data models, board independence did not show any significant influence on performance. In both models however, conservative strategy was significant. The inclusion of conservative strategy in the model increased the coefficient of determination (R2) to 32.1% and 31%, respectively, for the OLS and panel data models. In the structural equation model, conservative strategy was also significantly related to performance but negatively related to board independence. The evidence from this study shows that conservative business strategy moderates the link between board independence and firm performance. It is therefore recommended that firms should adopt conservative strategy to gain the monitoring and advisory roles of board independence, especially when true independence cannot be guaranteed.