MEDIATING EFFECT OF FINANCIAL LEVERAGE ON THE RELATIONSHIP BETWEEN CORPORATE GOVERNANCE MECHANISMS AND LEASING IN LISTED NON-FINANCIAL FIRMS IN NIGERIA
MEDIATING EFFECT OF FINANCIAL LEVERAGE ON THE RELATIONSHIP BETWEEN CORPORATE GOVERNANCE MECHANISMS AND LEASING IN LISTED NON-FINANCIAL FIRMS IN NIGERIA
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Date
2024-11
Authors
MUSA-MUBI, Aliya
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Abstract
While acknowledging the agency problems associated with capital structure of corporate firms
and the search for optimal alternative finance sources, this thesis examines the finance choice
of leasing in listed non-financial firms in Nigeria. It investigates the effect that corporate
governance mechanisms have on its utilisation with emphasis on the mediating role that
financial leverage (other debt components in firms’ capital structure) plays in the relationship.
For a sample of 53 listed non-financial firms, data were obtained for leasing, financial leverage,
Board structure, share ownership and firm-level variables (profitability, firm size and growth)
covering the period, 2012-2021. Based on a correlation research design, regression was first
run to ascertain the effects of Board size, Board independence, Board gender diversity,
Specialised Board committee, managerial ownership, foreign ownership, institutional
ownership and ownership concentration on leasing in these firms. For the mediation analysis,
regression was run within the framework of structural equation modelling (SEM) with the
Monte-Carlo approach to test for mediation applied in order to conclusively determine the
presence of any indirect effects. Findings reveal that Board size, Board independence, Board
gender diversity, presence of a specialized Board committee and managerial ownership,
significantly affect leasing in listed non-financial firms in Nigeria. Financial leverage was also
found to mediate the relationship between Board gender diversity (partial mediation), foreign
ownership (partial mediation), institutional ownership (full mediation) and leasing. The study
therefore, concludes that corporate governance mechanisms affect leasing in listed nonfinancial
firms in Nigeria and that financial leverage plays a mediating role in the ascertained
relationship. Recommendations are made for policies by regulatory bodies which advocate for
substantial number of Board members, independent, non-executive Board Directors and
females on the Board as this would positively affect the choice to finance by leasing. Given
respective idiosyncrasies, firms can determine the optimal levels in relation to size and gender.
However, independent, non-executive directors should comprise the majority of Board
directors. Listed non-financial firms in Nigeria are also advised to devise or strengthen
strategies that would enhance efficiencies of specialised Board committees such as providing
clear mandates, training, and conduct of performance reviews to ensure effectiveness. Levels
of managerial shareholding should be limited in order to avoid adverse effects on employment
of leases. In addition, incentives (bonuses, allowances, insurance schemes and other perks) can
be provided to managers to employ debt financing where appropriate especially as it relates to
leases
Description
A THESIS SUBMITTED TO THE SCHOOL OF POSTGRADUATE STUDIES, AHMADU BELLO UNIVERSITY, ZARIA IN PARTIAL FULFILLMENT OF THE
REQUIREMENTS FOR THE AWARD OF DOCTOR OF PHILOSOPHY (PhD) IN ACCOUNTING AND FINANCE DEPARTMENT OF ACCOUNTING FACULTY OF MANAGEMENT SCIENCES AHMADU BELLO UNIVERSITY, ZARIA