43
Finance, Accounting and Business Analysis
Volume 7 Issue 1, 2025
http://faba.bg/
ISSN 2603-5324
DOI: https://doi.org/10.37075/FABA.2025.1.04
Risk Management and the Financial Performance of Listed Real
Estate/Construction Companies in Nigeria: The Moderating Role of
Board Structure
Asimiyu Kolawole Adegoke
1
* Akinwumi Olusegun Akinola
2
Department of Banking and Finance, Achievers University Owo, Ondo State, Nigeria
1
Department of Accounting, Emmanuel Alayande University of Education, Oyo, Nigeria
2
* Corresponding author
Info Articles
Abstract
History Article:
Submitted 12 October 2024
Revised 21 February 2025
Accepted 15 March 2025
Purpose: The study explored the moderating effect of board structure
(board size and gender diversity) on the nexus of operational risk, market
risk and financial performance of listed real estate and construction
companies in Nigeria.
Design/Methodology/Approach: The study implemented ex-post facto
research design to analyze the variables on a panel data of audited annual
reports of selected companies. The sample size was the population size
consisting using the census sampling method. The study used the
secondary data retrieved from corporate annual reports and corporate
websites of the companies listed on Nigeria exchange group between
2014 and 2023. The data was analyzed using panel least square method.
Findings: Market risk exhibited a positive significance with ROA, while
the negative relationship with Tobin’s Q was statistically insignificant.
Operational risk exerts an insignificant negative and positive effect on
ROA and Tobin's Q, respectively. Board structure has a favourable but
insignificant moderating effect on the connection between market risk
and ROA. However, board structure showed a significantly negative
moderating effect on the link between market risk and Tobin's Q. Lastly,
board structure showed positive but insignificant moderating effect on
the relationship between operational risk and financial performance.
Practical Implications:
Companies should invest in more reliable risk management systems to
effectively detect, evaluate, and reduce operational and market risks.
This can lessen the detrimental effects of these risks on financial
performance indicators like Tobin's Q and ROA. It is important to
improve board governance procedures because board structure has a
major moderating effect on the link between market risk and Tobin's Q.
Originality/Value: Firstly, the study examined the influence of
operational and market risks on financial performance. The study further
explored the moderating effect of board structure (board size and gender
diversity) on the nexus of operational risk, market risk and financial
performance in the context of real estate and construction companies in
Nigeria.
Paper Type: Research Paper
Keywords:
Board Size, Gender
Diversity, Financial
Performance,
Market Risk, Operation
Risk
JEL: G3, M14, M41
*
Address Correspondence:
E-mail: kolaadegoke@ymail.com
1
akinwumiolusegunakinola@gmail.com
2
Asimiyu K. Adegoke, Akinwumi O. Akinola / Finance, Accounting and Business Analysis, Volume 7, Issue 1, 2025
44
INTRODUCTION
This study explored how board structure moderates the influence of risk management on the financial
performance of listed construction and real estate companies in Nigeria. Financial performance is crucial to
corporate efficiency, and business plan efficacy influences stakeholder trust and sustainability. Financial
statements, which show the company's capacity to develop and maintain stakeholder interest, are commonly
used to evaluate performance (Osevwe-Okoroyibo and Emeka-Nwokeji 2021; Harken and Taurgurt 2023).
Financial performance depends on risk management, which tackles issues including but not limited to credit,
market, liquidity, and operational risks. However, ineffective information sharing and openness hampered
the need to improve effective risk management strategies (Malahim 2023).
Businesses require more capacity to implement risk management strategies due to the detrimental
impact on business operations caused by ineffective control of the openness of an entity's information
disclosure (Mesrawati et al. 2022). By concentrating on liquidity, market, and operational risks, risk
management might lead to enough reserves, allowing companies to survive future economic distress (Tan et
al. 2019). Effective risk management strategies are often associated with better financial outcomes. Proactive
risk management is linked to better cash flow, higher profitability, and improved company financial health
(Muhammad et al. 2022). The agency model states that effective risk management reduces information
asymmetry and aligns the interests of managers and shareholders, which leads to better business outcomes
(Ali et al. 2024). Similarly, the contingency hypothesis asserts that the organisational setting affects how
successful risk management techniques are. In order to maximise financial success, businesses must modify
their risk management plans to match their unique environment and set of circumstances (El-Chaarani and
Abraham 2022).
Corporate performance is greatly influenced by corporate governance, which is evident in the
composition and duties of the board of directors. Directors supervise performance appraisals, offer advisory
assistance, and distribute required resources to guarantee operational effectiveness. Effective corporate
governance increases transparency, accountability, and stakeholder trust, reducing financial misstatements
and promoting confidence (Guizani and Abdalkrim 2022). The Nigerian Securities and Exchange
Commission has implemented rules to enhance risk management systems in various sectors, such as real
estate and construction. This research also underscores the impact of market risk, which refers to financial
losses resulting from price fluctuations in commodities, equities, interest rates, and foreign exchange. Both
anticipated and unexpected risks can majorly impact financial results, especially in uncertain economic
conditions. Thus, it is crucial for the sustainability and performance of construction companies on the stock
exchange to manage operational and market risks effectively (Najat and Elsadig 2022; Yousef et al. 2023).
Financial factors frequently result in operational challenges and poor outcomes for real estate and
construction companies in Nigeria, significantly impacting their performance (Ayininuola et al. 2018). The
financial aspects mentioned are a lack of liquid project funds, excessive debts, ineffective asset handling, and
poor profit margins (Akapan et al. 2024). Increased competition in the sector worsens these difficulties even
more. Although risk management failures have been extensively documented in various industries, such as
the financial sector, these failures are frequently a result of deficiencies in corporate governance. Boards
often need to acknowledge or deal with companies' risks, indicating a need for more efficient risk oversight
and management mechanisms (Judith et al. 2022; Eni-Egwu et al. 2022).
Additionally, past research (Olaniyan and Adegoroye 2024; Oladokun et al. 2020; Okoye et al. 2022;
Martin and Marcel 2020; Widhaistuti et al. 2019) has pointed out the effects of financial elements on the
underperformance of construction companies, yet they offer minimal understanding of how risk
management and board structure interact to affect financial results. The financial performance is
significantly impacted by operational and market risks, with governance factors like board size and gender
diversity potentially reducing these effects. This study assesses how the board structure affects the link
between risk management and financial performance in Nigerian listed real estate and construction
companies. The study aims to uncover how governance can improve financial outcomes, enhance risk
mitigation strategies, and promote long-term sustainability by analysing the moderating roles of board size
and gender diversity.
Therefore, the study examined the influence of operational and market risks on financial
performance. The study further explored the moderating effect of board structure (board size and gender
diversity) on the nexus of operational risk, market risk and financial performance of listed real estate and
construction companies in Nigeria between 2014 and 2023. The choice of 2014 as the foundational year is
based on the economic and regulatory environment of Nigeria's real estate and construction industries. 2014,
the Nigerian government introduced important policies and reforms to enhance the financial and
construction industries. These changes were intended to tackle systemic risks, strengthen corporate
governance, and boost the financial stability of publicly traded firms.
Asimiyu K. Adegoke, Akinwumi O. Akinola / Finance, Accounting and Business Analysis, Volume 7, Issue 1, 2025
45
This study has important academic, practical, and policy implications as it explores a vital gap in
understanding how board structure influences the relationship between risk management and financial
performance in publicly listed construction and real estate firms in Nigeria. This research enhances the
existing understanding of corporate governance by examining how board characteristics, particularly board
size and gender diversity, can moderate the impact of operational and market risks on financial performance.
This research analyzes the impact of board structure on the effectiveness of risk management, offering
practical guidance for boards and executives to create governance frameworks that strengthen risk
supervision, reduce operational difficulties, and boost financial results. For the construction and real estate
industries that are especially susceptible to financial difficulties like insufficient liquidity, low profit margins,
and significant market fluctuations (Buzaubayeva et al. 2024). This research presents tailored strategies for
different sectors to bolster governance systems, guaranteeing resilience to risks and improving
competitiveness. The results will guide regulators, including the Nigerian Securities and Exchange
Commission, regarding the significance of board structure in advancing transparency, accountability, and
sustainable risk management approaches. By highlighting the importance of gender diversity and the size of
boards, the research aligns with international corporate governance trends and offers evidence-backed
suggestions to enhance governance structures in Nigeria.
LITERATURE REVIEW AND HYPOTHESES DEVELOPMENT
Theoretical Background
The study is established on agency and stakeholder theories. Agency theory highlights the distinction
between ownership (principals) and management (agents), noting that conflicts emerge since agents
frequently prioritise their interests over those of shareholders, leading to heightened expenses like
monitoring, control, and losses stemming from unfavourable choices (Jensen and Meckling 1976; Fama and
Jensen 1983; Berle and Means 2017). The board of directors acts as a governance tool to address agency
issues by monitoring managerial behaviour, lowering agency expenses, and improving organisational
effectiveness. The board's composition, such as its size and gender diversity, enhances its effectiveness in
overseeing and ensuring that managers' actions align with the interests of shareholders (Eisenhardt 2018).
According to the theory, smaller and more diverse boards can enhance oversight and decision-making,
ensuring that risk management strategies successfully improve financial performance. Through establishing
distinct performance standards and implementing accountability via governance frameworks, boards
function as "cost-effective tools" to synchronise risk management with the organisation's profitability (Dong
et al. 2022).
Stakeholder theory expands agency theory by shifting the focus from just shareholders to encompass
all parties impacted by organisational decisions, including employees, customers, suppliers, and the
community (Freeman, 1983). Efficient governance frameworks, like properly formed boards, are essential
for reconciling varied stakeholder interests while meeting financial objectives. Gender diversity on boards
brings in different viewpoints. It improves decision-making by considering the issues of a broader range of
stakeholders, while the ideal board size facilitates efficient teamwork without making decisions overly
complex (Wirawan and Willim 2024; Zaid et al. 2020). A varied and suitably sized board tackles operational
and market risks, aiding in managing stakeholder expectations and reducing adverse effects, thereby
enhancing financial performance (Judita et al. 2022). This underscores the board's balancing function in
ensuring that risk management strategies correspond with maximising shareholder wealth and addressing
stakeholder interests.
In general, the theoretical framework suggests that the composition of the board (size and diversity in
gender) influences the connection between risk management (operational and market risks) and financial
performance by improving oversight and decision-making. Agency theory highlights the board's function in
minimising agency issues and enhancing performance. In contrast, stakeholder theory focuses on its capacity
to balance and meet the demands of various stakeholders, thereby establishing a comprehensive approach
to governance and risk management. Collectively, these theories establish a basis for comprehending how
board structure can enhance the relationship between risk management and financial performance in
dynamic, risk-sensitive sectors.
Risk Management and Financial Performance
Risk is an intrinsic element in every organisation; variability in returns is a key indicator. Although
risks can lead to adverse results, they can also be handled, embraced, or allocated to others. In financial
management, risk is vital in maximising shareholder wealth by navigating the risk-return tradeoff, as
increased risks frequently align with greater possible returns (Abdic et al. 2024). Businesses encounter
various kinds of risks, such as credit, market, operational, and liquidity risks, making risk management an
expert field. Efficient risk management necessitates skilled individuals overseen by impartial managers,
Asimiyu K. Adegoke, Akinwumi O. Akinola / Finance, Accounting and Business Analysis, Volume 7, Issue 1, 2025
46
rendering it essential for organisational achievement. The capital asset pricing model (CAPM) and arbitrage
pricing theory (APT) claim a positive correlation between risk and anticipated returns, establishing the basis
of financial economics in investment evaluation (Ajagbe et al. 2024; Ali et al. 2024).
This research thus concentrates on operational risk and market risk due to their influence on financial
performance. Operational risk refers to losses arising from insufficient or failed internal processes,
individuals, systems, or external occurrences, encompassing legal risks while omitting strategic or
reputational threats (Ayodele and Onyekachi 2020). The Basel Committee on Banking Supervision classifies
operational risk into three types: nominal risk- which involves frequent, repetitive losses related to regular
activities; ordinary risk- which results in less frequent but significant losses that are not critical for financial
institutions; and exceptional risk- characterised by rare, large-scale threats that jeopardise the institution's
existence. Operational risk is becoming more important because of the growing complexity of financial
services, stressing the necessity for strong governance and efficient risk management (Yousef et al. 2023;
Yusuf and Adeoye 2020).
Market risk involves possible financial or non-financial losses resulting from fluctuations in market
elements, such as interest rates, currency exchange rates, stock prices, and commodity prices. The African
Development Bank recognises four categories of market risks: currency risk- associated with changes in
exchange rates; interest rate risk- impacts companies' capital expenses and operations; liquidity risk- emerges
from liquidity shortages caused by inadequate management; counterparty credit risk- connected to the
handling of assets and liabilities (Asaba 2024). Shifts in market elements like interest rates and stock prices
directly impact company performance and profits. As per arbitrage pricing theory, market risk factors such
as interest rates, inflation, and currency fluctuations impact stock returns by changing expected cash flows
and discount rates. This theory highlights a strong connection between risk and return, consistent with the
primary principle of finance, which states that investors demand more reward for accepting increased risks
(Chitta and Soni 2023; Buzaubayeya et al. 2024).
Risk Management and Financial Performance: Moderating Role of Board structure
This study focuses board size and gender diversity, as essential board structure variables. In an
organisational setting, the board operates as a team working together to reach strategic objectives, with
normative and prescriptive roles (Hasan & Mohammed 2023). Researchers have discussed the influence of
board size on company performance. Lipton and Lorsch (1992) claimed that smaller boards are more
efficient since larger boards may need help in decision-making and coordination. Conversely, Hermalin and
Weisbach (2018) proposed that bigger boards could improve alignment and decrease agency costs. However,
they might also restrict involvement in decision-making. Than (2018) observed that boards with an average
size of seven enhance monitoring capacity and positively affect earnings per share.
Moreover, Dalton et al. (2018) highlighted that the link between board size and company
performance differs based on unique firm characteristics and national institutional settings. Gender diversity
is viewed as a way to enhance board efficiency and financial outcomes. Adebobola (2023) highlighted that
varied boards prevent the dominance of any individual or faction, ensuring equitable representation of
stakeholders and improving resource reliance. Researchers such as (Safieddine and Daouk 2021; Burke
2021; Van der Walt and Ingley 2021) analysed the impact of gender diversity on the lack of women on
boards, the factors contributing to this underrepresentation, and the experiences and views of women
directors. In general, scientists concur that greater diversity enhances governance by utilising a wider range
of talent and viewpoints, resulting in improved decision-making and organisational performance.
Research on operational risk indicates that weak internal controls, low employee morale, or external
disruptions can result in inefficiencies, higher expenses, and loss of revenue, adversely affecting financial
results (Malahim 2023). Concerning market risks, variations in interest rates, exchange rates, and
commodity prices greatly influence profitability, as elevated volatility creates difficulties for companies to
maintain consistent financial results (Muhammad et al. 2022). Smaller boards tend to be more nimble and
effective in making decisions. In contrast, larger boards can offer varied viewpoints and enhanced
supervision. An ideal board size balances the intricacy of risk management and the capacity to make prompt
and effective decisions. Bigger boards can enhance financial performance by strongly supervising risk
management measures (Lipton and Lorsch 1992; Hermalin and Weisbach 2018).
Varied boards boost creativity, problem-solving, and decision-making by integrating different
viewpoints, experiences, and skills. Gender-diverse boards question management assumptions more often,
enhancing the effectiveness of risk identification, assessment, and mitigation tactics. This subsequently
improves financial performance by lessening vulnerability to unmonitored risks (Biggins 2021; Adebobola
2023). Kafidipe et al. (2021) looked at risk management in deposit money banks, corporate governance, and
the extent to which operational issues in Nigerian banks have been repressed. The outcome indicates that
the bank's financial results have been adversely affected, however significantly. A good business governance
framework, on the other hand, improves bank sustainability and loan competitiveness. The number of board
Asimiyu K. Adegoke, Akinwumi O. Akinola / Finance, Accounting and Business Analysis, Volume 7, Issue 1, 2025
47
committees has a favourable influence on Tobin Q, while the size, independence, directors' shareholdings,
and meetings of the board were all negative. In contrast, the ROE (Return on Equity) is positively connected
with board size, executive autonomy, and board committees.
Igbinosa et al. (2024) explored board diversity in Nigerian firms and analyses whether the effect of
board structure on financial performance (return on equity and return on capital employed). The Ordinary
Least Squares (OLS) regression was adopted and findings revealed that there is strong positive association
between board size and corporate financial performance. There is a positive association between external
executives and corporate financial performance. However, a negative association was observed between
directors’ ownership and firm performance. The study reveals a negative association between ROE and CEO
duality, while a strong positive association was observed between ROCE and CEO duality.
Hassan (2023) examined corporate governance across Asian nations through secondary data, finding
that it correlates with the prevailing culture of the area. Udoh (2022) examined market risk in Nigerian
deposit money banks, finding that interest rates positively impact profitability. In contrast, exchange rates
and commodity prices exhibit negative correlations. Fenty Chandra and Hanifah (2023) investigated credit
risk, liquidity risk, and operational risk in public commercial banks of Indonesia, emphasising that corporate
governance was ineffective in moderating these risks, while profitability was more affected by external
influences. Likewise, Allen et al. (2020) discovered that operational risk adversely affects return on assets
(ROA) and return on equity (ROE) in banks operating in Tanzania. Peter et al. (2021) investigated market
risk within Kenyan microfinance institutions, discovering that interest rates and financial leverage enhance
financial performance, whereas foreign exchange risk adversely impacts it. Finally, Martin and Marcel
(2020) showed that better corporate governance practices significantly improve financial performance in
non-financial publicly traded companies in the United Kingdom.
Arising from the discussions made above, the study formulates the following hypotheses:
H
0
1: Market risk has no significant effect on financial performance.
H
0
2: Operational risk has no significant influence on financial performance.
H
0
3: Board structure does not moderate the interaction between market risk and financial performance.
H
0
4: Board structure has no moderating effect on the interaction between operational risk and financial performance.
Research Gap
There has been considerable research on corporate governance, risk management, and financial
performance. However, a notable knowledge gap remains about how board structure affects the relationship
between risk management and financial performance in Nigeria's real estate and construction industry.
Previous research has concentrated on different areas, sectors, or overall governance structures without
tackling the unique risks and governance issues encountered by companies in Nigeria. For instance, Hassan
(2023) and Fenty et al. (2023) investigated corporate governance in Asia and Indonesia yet overlooked the
analysis of particular industries or the moderating effect of board structure. Udoh (2022), Allen et al. (2020),
and Peter et al. (2021) examined operational and market risks but restricted their study to financial
institutions, omitting non-financial sectors such as real estate and construction. Martin and Marcel (2020)
examined corporate governance, yet they still need to consider industry-specific dynamics and types of risk.
This research addresses this gap by examining how board size and gender diversity influence the connection
between operational and market risks and financial performance, offering insights specific to the distinct
governance and risk management issues in Nigeria's real estate and construction industry.
METHODS
This study used an ex-post facto research design to analyse the dependent, moderating and
independent variables on panel data of audited annual reports of selected companies. The study population
comprised nine listed real estate and construction companies in Nigeria. The sample was the population
size, and the census sampling method was used. The study used secondary data retrieved from annual
corporate reports and corporate websites of the companies listed in the Nigerian exchange group between
2014 and 2023. The data was analysed using the panel least square method. The study conducted the
Hausman specification test to specify whether the fixed effect and random effect models were appropriate
for analysing the panel data (Creswell & Creswell 2018).
Empirical Model
The mathematical model stated below was to examine the moderating effect of board structure on
risk management and financial performance.
Asimiyu K. Adegoke, Akinwumi O. Akinola / Finance, Accounting and Business Analysis, Volume 7, Issue 1, 2025
48
Y= f(OR, MR, BS, BGD)
(1)
Where Y = financial performance, OR = operational risk, MR = market risk, BS= board size and BGD=
board gender diversity
Regarding financial performance, some studies have used accounting-based measures, such as return
on assets (Willey et al., 2023; Martin & Marcel 2020) or market-based measures, such as Tobin's Q
(Mesrawati et al. 2022). Based on this variation, this study adopts ROA and Tobin's Q. The justification for
combining ROA and Tobin's Q was to ensure a comprehensive assessment by integrating internal
operational efficiency and external market valuation. ROA is less sensitive to market volatility, while Tobin's
Q captures market dynamics and growth potential. Both reduce bias and provide a more balanced
performance evaluation (Nguyen & Tran 2023). Risk management indicators were operational and market
risks because operational and market risks capture critical internal and external uncertainties affecting
financial stability and success (Patrick, 2024). Their inclusion in the empirical model aligns with studies
(Suratman et al. 2024; Pervetica and Ahmeti 2023), emphasising the importance of managing risks in
achieving financial goals. Operational risk represents the ratio of total cost to income of firms in a financial
year. In contrast, market risk is measured as the rate of change in equity price, commodity price, interest
rate and foreign exchange rate in a financial year (Musa & Tahir 2024). Board size and gender diversity were
used as a proxy for board structure. Both board size and gender diversity are central components of corporate
governance, influencing strategic decisions, oversight functions, and firm performance (Mustapha et al.,
2024). Board size was measured as the total number of board members (Obaje and Ogirima, 2022) while
gender diversity was spelt as the ratio of female directors to the number of directors (Slama et al., 2019).
As a result, the multivariate models were specified as follows:
ROA
it
= ∂
0
+ ∂
1
OR
it
+ ∂
2
MR
it
+ ∂
3
BSIZE*BGEND*OR
it
+ ∂
4
BSIZE*BGEND*MR + µ
it
(2)
QT
it
= ∂
0
+ ∂
1
OR
it
+ ∂
2
MR
it
+ ∂
3
BSIZE*BGEND*OR
it
+ ∂
4
BSIZE*BGEND*MR + µ
i
(3)
Where:
ROA= Return on Asset for firm i in year t
QT= Tobin’s Q for firm i in year t
OR= Operational Risk for firm i in year t
MR= Market Risk for firm i in year t
BSIZE= Board Size for firm i in year t
BGEND= Board Gender Diversity for firm i in year t
µ = Error term.
Table 1. Description of Variables
Type
Measurements
Source
Endogenous
This is the ratio of (Price Market value of shares +
Book value of liabilities) to the book value of asset
of.
Mesrawati et al.
(2022)
Endogenous
The ratio of net income to total assets in a financial
year.
Martin and
Marcel (2020)
Exogenous
The cost to income ratio of firms in a financial year.
Ajagbe et al.
(2024)
Exogenous
Rate of change in equity price, commodity price,
interest rate and foreign exchange rate
Ajagbe et al.
(2024)
Moderator
The total number of directors on the corporate
board
Obaje and
Ogirima (2022)
Moderator
The percentage of female directors on a corporate
board.
Slama et al.
(2019)
Source: Author's Compilation (2025)
Asimiyu K. Adegoke, Akinwumi O. Akinola / Finance, Accounting and Business Analysis, Volume 7, Issue 1, 2025
49
RESULTS AND DISCUSSION
Descriptive Analysis
Table 2. Results from Descriptive Statistics
BGEND
BSIZE
MKR
OPR
ROA
QT
Mean
0.193611
9.875000
1.059292
0.172500
0.105000
0.094444
Median
0.180000
8.000000
1.021000
0.190000
0.070000
0.050000
Maximum
0.600000
17.00000
1.460000
0.350000
1.090000
1.070000
Minimum
0.000000
4.000000
0.550000
0.000000
-1.800000
0.000000
Observations
90
90
90
90
90
90
Source: Research Output, 20245
The average Tobin's Q for publicly traded real estate and construction companies throughout the
research period is -0.555. A Tobin's Q value under 1 suggests that the market assesses the firms' assets at a
lower value than their replacement cost. In this instance, a value of 0.09 indicates that the market perceives
the conglomerate's assets as valued at merely 9.4% of their replacement cost. Investors may interpret the
average Tobin's Q value of 0.09 as an indication that the valuation of the company's assets is low. A low
Tobin's Q may suggest that the company's management could use its assets more efficiently to create value.
This may result from inadequate operational effectiveness, unfruitful investments, or management
shortcomings.
The average ROA value of 0.105 indicates that, on average, the evaluated companies or assets are
producing a return of 10.5 per cent on their overall assets. A 10.5 per cent ROA indicates that the company
makes 10.5 cents in profit for every dollar of assets. This is a positive return, reflecting efficient management
and utilisation of resources. This figure can act as a standard for evaluating the performance of various firms
in the same sector. Companies with a notably above 10.5% ROA may demonstrate greater efficiency,
whereas those with a lower ROA might exhibit reduced efficiency.
Gender diversity showed an average of 0.19, indicating that women comprise 19% of the board. The
figure indicates a significant gender disparity and a lack of gender diversity. The low average value suggests
a potential area for enhancement. Companies that lack significant gender diversity might consider
implementing measures and policies designed to enhance gender equality and inclusiveness. As a result, an
average value of 0.19 could suggest an opportunity to more effectively leverage the benefits of gender
diversity in enhancing creativity and business success.
The typical count of members on the boards of directors for the companies being examined is
approximately 10, as shown by the average board size of 9.8. A board with ten or more members is
considered a good size. It is perfectly sized, facilitating a balance among various perspectives and effective
decision-making. This board size might function properly. Typically, they are sufficiently large to provide a
range of viewpoints and areas of knowledge yet compact enough to make decisions swiftly. Having ten
members allows for directors with diverse backgrounds, experiences, and skill sets. This diversity may
enhance the board's ability to tackle complex issues and make sound decisions.
An average market risk value (beta) of 1.059 offers perspectives on these firms' comparative volatility
and risk characteristics about the general market. A beta of 1.059 suggests that, on average, real estate and
construction firms are 5.9% more unstable than the general market. If the market index shifts by 1%, the
stock prices of these firms are anticipated to alter by around 1.059%. This beta level indicates that real estate
and construction firms face a greater market risk than the typical company. This implies that the stock prices
of these companies will typically change in line with the market but with increased volatility.
With a mean operational risk of 0.172500, these businesses could be more efficient at generating profit
because expenses only account for 17.25% of their revenue. In general, this indicates effective cost control.
Businesses that have a lower operational risk ratio are more resilient to changes in revenue or expense
increases. A higher number indicates that businesses are more susceptible to changes in revenue or cost
increases. The comparatively low operational risk ratio could result from reasonable governance procedures,
such as cost-cutting initiatives, proper use of resources, or the executives' strategic monitoring. Outcomes
also revealed that all the parameters have 90 observations, which can be ascribed to data accessibility on the
study variables.
Asimiyu K. Adegoke, Akinwumi O. Akinola / Finance, Accounting and Business Analysis, Volume 7, Issue 1, 2025
50
Correlation Analysis
Table 3. Correlation matrix of real estate and construction firms
Correlation
BGEND
BSIZE
MKR
OPR
ROA
QT
BGEND
1.000000
BSIZE
0.157897
1.000000
MKR
0.253003
0.331240
1.000000
OPR
0.135573
-0.144167
-0.288506
1.000000
ROA
0.088406
-0.035874
0.201784
-0.051539
1.000000
QT
-0.002616
0.254287
0.072338
0.038746
0.026260
1.000000
Source: Research Output, 2025
Table 3 provides a concise overview of the interrelationship among the variables. Tobin's Q shows a
positive correlation with board size (0.254), market risk (0.072), and operational risk (0.039). This indicates
that modifying the explanatory variables will lead to an equivalent rise in Tobin's Q by 25 per cent, 7 per
cent, and 4 per cent, respectively. Only board gender diversity exhibits a negative correlation (0.0026) with
Tobin's Q, suggesting that an alteration in gender diversity results in a 0.2 per cent decrease in firm value. In
addition, ROA has a positive correlation with gender diversity (0.089) and market risk (0.201). This indicates
that an alteration in the explanatory variables will lead to a corresponding rise in ROA by 9 per cent and 20
per cent, respectively. The board size (-0.036) and operational risk (-0.05) exhibit a negative relationship
with ROA, indicating that alterations in board size and operational risk reduce ROA by 4 per cent and 5 per
cent, respectively. The table thus indicates that the correlations among independent variables could be
stronger, suggesting a lack of multi-collinearity typically linked to time series data.
Unit Root Test
The Levin, Lin and Chu T unit root test was conducted on each of the series under study.
Table 4. Results of Unit Root Test
Variables
Levin, Lin and Chu T
Intercept
Intercept and Trend
None
BGEND
0.2637
0.0000**
0.1609
BSIZE
0.7216
0.0001**
0.3257
MKR
0.9964
0.0000**
1.0000
OPR
0.0003**
0.2643
0.3399
ROA
0.2538
0.0000**
0.0274**
QT
0.0003**
0.7315
0.2173
**5% level of significance
Source: Research Output, (2025)
Table 5. Summary of Unit Root Test Results
Levin, Lin and Chu T
Variables
Level
I(d)
BGEND
0.0000**
I(0)
BSIZE
0.0001**
I(0)
MKR
0.0029**
I(0)
OPR
0.0062**
I(0)
ROA
0.0000**
I(0)
QT
0.0003**
I(0)
Source: Extract from Table 4
The study used the Levin, Lin and Chu T-test to test the unit root among the series. The null theory
was 'presence of unit root test (i.e. no non-stationarity) against the alternative proposition 'series is
stationary'. If the computed p-value exceeds the benchmark p-value (0.05), then the null hypothesis is
accepted, and it is concluded that data variables are non-stationary and vice-versa. Results from Tables 4
and 5 showed that all the parameters are stationary at their level form indicated as I (0). This implies that
there is no form of co-integration relationship among the variables.
Asimiyu K. Adegoke, Akinwumi O. Akinola / Finance, Accounting and Business Analysis, Volume 7, Issue 1, 2025
51
Analysis of Hausman Specification Test
Table 6. Results of Hausman Specification Test
Correlated Random Effects - Hausman Test
Test Summary (Panel A)
Chi-Sq. Statistic
Chi-Sq. d.f.
Prob.
Period random
3.485252
6
0.7459
Test Summary (Panel B)
Chi-Sq. Statistic
Chi-Sq. d.f.
Prob.
Period random
6.455354
6
0.3742
Source: Research Output, (2025)
Panel A's results revealed a probability value of 0.7459, below the standard 0.05 significance level,
indicating that the null hypothesis was accepted and the result was insignificant. Consequently, the outcome
indicated that the random effect model was suitable and was used to analyse the research data. Because
Panel B's statistical analysis resulted in a probability value of 0.3742, below the standard 0.05 level of
significance, the null hypothesis was accepted, and the result was deemed inconsequential. Consequently,
the outcome indicated that the random effect model was suitable and was used to analyse the research data.
Regression Analysis
Table 7. Regression Results
Dependent Variable: ROA
Method: Panel EGLS (Period random effects)
Variable
Coefficient
Std. Error
t-Statistic
Prob.
MKR
0.578955
0.202693
2.856313
0.0057
OPR
-0.406877
0.497689
-0.817532
0.4166
MKR*BGEND*BOARD_SIZE
-0.095102
0.060727
-1.566064
0.1222
OPR*BGEND*BOARD_SIZE
0.216195
0.247078
0.875008
0.3848
C
-0.449244
0.239139
-1.878593
0.0648
Dependent Variable: QT
Method: Panel EGLS (Period random effects)
Variable
Coefficient
Std. Error
t-Statistic
Prob.
MKR
0.075458
0.115201
0.655012
0.5148
OPR
0.095661
0.303493
0.315200
0.7536
MKR*BGEND*BOARD_SIZE
-0.044474
0.020633
-2.155453
0.0348
OPR*BGEND*BOARD_SIZE
0.038798
0.095454
0.406456
0.6857
C
-0.144857
0.128402
-1.128150
0.2634
Source: Research Output (2025)
Market Risk and Financial Performance
The regression analysis on market risk and financial performance showed varied outcomes; market
risk exhibited a positive significance with ROA, while the negative relationship with Tobin’s Q was
determined to be statistically insignificant. These results contradict the findings of Najat and Elsadig (2022)
and Peter et al. (2021); however, the outcome is consistent with those of Akpan et al. (2024), Ajagbe et al.
(2024), Udoh (2022). In financial management, a common principle is that increased risk is linked to the
possibility of greater returns. Real estate and construction firms that embrace greater market risk might
implement more assertive growth tactics or allocate resources to risky, high-reward ventures. Companies
with strong risk management strategies may be more capable of taking advantage of such high-risk scenarios,
transforming potential dangers into lucrative opportunities. Under specific market conditions, increased
market volatility may present opportunities for these companies to achieve greater returns if they can
effectively manage the associated risks.
Conversely, the association with Tobin's Q suggests that fluctuations in market risk do not
significantly influence Tobin's Q, and any detected correlation is weak. As a result, investors in real estate
and construction companies in Nigeria may need to respond more vigorously to fluctuations in market risk
when assessing the company's value of its assets. This may be due to their perception that the company's
inherent value remains consistent regardless of market changes.
Operational Risk and Financial Performance
The regression results indicated that operational risk exerts a negative and insignificant positive effect
on ROA and Tobin's Q, respectively. The negative insignificant indicates that ROA generally declines
slightly as operational risk rises; this connection lacks statistical significance. The results align with (Abdic
et al. 2024; Jagirani et al. 2023; Abebe et al. 2022; Mesrawati et al. 2022). This suggests that the influence of
operational risk on ROA is minimal for real estate and construction firms in Nigeria, possibly resulting from
Asimiyu K. Adegoke, Akinwumi O. Akinola / Finance, Accounting and Business Analysis, Volume 7, Issue 1, 2025
52
random fluctuations rather than a genuine underlying effect. Certain real estate firms may concentrate more
on risks affecting ROA and other important performance metrics. Regardless, companies should continually
manage operational risk to avert major losses, and resources may be directed more towards managing risks
that critically affect financial performance.
Moreover, the outcome of Tobin's Q indicated that with a rise in operational risk, Tobin's Q appears
to increase marginally. Nonetheless, this connection does not possess sufficient strength to be considered
statistically significant. Like the ROA situation, firms could invest resources to handle operational risks
efficiently, but they must also consider additional elements that demonstrably influence Tobin's Q.
Market Risk, Board Structure and Financial Performance
Board structure has a favourable but insignificant moderating effect on the connection between
market risk and ROA. This indicates that although there could be likelihood for board structure to affect the
link between market risk and ROA positively, the noted effect is insufficient to form significant conclusions.
However, board structure has a significantly negative moderating effect on the link between market risk and
Tobin's Q. This negative influence indicates that specific features of board structure, including board size
and gender diversity, lessen the impact of market risk on Tobin's Q. Furthermore, this effect is statistically
significant, implying it is improbable to occur by random chance. The notable moderating effect suggests
that the connection between market risk and Tobin's Q varies across different board structures. This
emphasizes the significance of governance practices in influencing how businesses manage and react to
market uncertainties.
Operational Risk, Board Structure and Financial Performance
In this regard, board structure showed positive but insignificant moderating effect on the relationship
between operational risk and financial performance. The influence is positively oriented, suggesting that a
specific type or arrangement of board structure correlates with a distinct outcome related to operational risk
and financial performance. Nonetheless, this impact is statistically negligible, indicating it cannot be reliably
ascribed to an actual relationship because of randomness or other variables. The minor, positive moderating
effect indicates that although board structure may influence the relationship between operational risk and
financial performance, the impact seen is not substantial enough to be deemed significant statistically.
Various board structures can exhibit different levels of efficiency in addressing or alleviating operational
risks, which subsequently may affect financial results.
CONCLUSION
The results demonstrate the importance of board structure in determining how businesses handle
market risks and how those decisions affect their bottom line. Although it is still unclear how board structure
affects operational risk, its substantial impact on market risk and Tobin's Q highlights the importance of
good corporate governance in boosting company valuation in the face of market uncertainty. In order to
reduce financial risks and enhance performance, the study emphasises the necessity of strong risk
management systems and efficient corporate governance procedures. It also implies that further research
may shed more light on other board traits that improve risk management and financial results for
construction and real estate firms in Nigeria.
Based on the conclusion drawn from the study, the study made the following recommendations:
In order to effectively detect, evaluate, and reduce operational and market risks, real estate and
construction companies should invest in more reliable risk management systems. This can lessen the
detrimental effects of these risks on financial performance indicators like Tobin's Q and ROA. It is important
to improve board governance procedures because board structure has a major moderating effect on the link
between market risk and Tobin's Q. This entails boosting the board's diversity and experience, maintaining
independence, and encouraging efficient leadership frameworks to control market risks better.
Boards must be regularly educated and trained on risk management procedures and their sector's particular
hazards. This will enable board members to properly supervise the company's risk management plans and
make better-informed judgements.
REFERENCES
Abdić, A., A. Rovčanin, and A. Abdić. 2024. The impact of the enterprise financial risk management
function on financial performance in Bosnia and Herzegovina. Financial Internet Quarterly, 20(1):
64–80.
Abebe Z. B., A. A. Abebe, and S. W. Bezabih. 2022. Corporate governance and financial performance in
Asimiyu K. Adegoke, Akinwumi O. Akinola / Finance, Accounting and Business Analysis, Volume 7, Issue 1, 2025
53
the emerging Economy: The case study of Ethiopian Insurance company. Cogent Economics and
Finance, 1- 18.
Adebobola, A., 2023. Gender diversity and board efficiency: A review of corporate governance practices.
Journal of Business Governance, 12(3): 45-60.
Ajagbe, S. T., T. S. Jubril, and I. A. Kareem. 2024. Impact of financial risk management on performance of
Nigerian commercial banks. Journal of Management and Social Science Research, 5(1): 37–55.
Akpan, D.C., P.E. Inwang, and P. D.Akinniyi. 2024. Risk disclosures and market value of listed
construction/real estate companies in Nigeria. ICONIC Research and Engineering Journals, 7(8):314-
327
Ali, F., Khan, M. A., Z. Zahid, and K. Hussain. 2024. Does board diversity influence idiosyncratic risk:
Empirical evidence from Chinese listed firms. Investment Analysts Journal, 1–19.
Allen, S., G. Makaka, and F. Mwinuka. 2020. Effects of operational risk on the financial performance of
banks in Tanzania. Journal of Banking and Finance Studies, 15(2): 45–60.
Asaba, M., 2024. Working capital management, risk management and financial performance of secondhand
car trading companies in Kampala district, Uganda. In Metropolitan Journal of Business & Economics,
3–8, 662–757
Ayininuola, G. M., A. M. Jaffar, and M. M. Famiye. 2018. Barriers to sustainability practices in Nigeria's
construction industry: Consultants' perspective. Civil Engineering Journal, 4(11): 2635-2649.
Burke, R., 2021. Women on corporate boards of directors: Views and experiences. Corporate Governance:
An International Review, 19(2): 104-115.
Buzaubayeva, P., A. Orazbayeva, G. Alina, Z. Baimagambetova, and G. Kenges. 2024. Enhancing financial
performance and risk management in Kazakhstan’s banking sector. Banks and Bank Systems, 19(1):
157–169.
Chitta, S., and H. Soni. 2023. The impact of financial risk management on firm performance: a study in
financial management practices. Revista De Gestão E Secretariado (Management and Administrative
Professional Review), 14(10): 18095–18110.
Creswell, J. W., and J. D. Creswell. 2018 Research Design Qualitative, Quantitative, and Mixed Methods
Approaches. Sage, Los Angeles.
Dalton, D.R., C. M. Daily, J. L. Johnson, and A. E. Ellstrand. 2018. Board size and corporate performance:
A meta-analytic review and research agenda. Strategic Management Journal, 30(3): 125-146.
Dong, Y., C. Liang, and Z. Wanyin. 2022. Board diversity and firm performance: impact of ESG activities
in China. Ekonomska Istraživanja/Ekonomska IstrazIvanja, 36(1): 1592–1609.
El-Chaarani, H., and R. Abraham. 2022. The impact of corporate governance and political connectedness
on the financial performance of Lebanese Banks during the final crisis of 2019- 2021. Journal of Risk
and Financial Management, 15(5): 203-220.
Eni-Egwu, C. O., C. J. Madukwe, and C. B. Ezeilo. 2022. Impact of Selected Corporate Governance
variable on the financial performance of selected quoted Deposit money bank in Nigeria. Journal of
Social Science and Humanities, 2(1): 32-40.
Fenty, C., and M. Hanifah. 2023. Impact of credit risk, liquidity risk, operational risk, and good corporate
governance on profitability of public commercial banks listed on IDX. Asian Journal of Finance and
Accounting, 11(1): 78–95.
Guizani, M., and G. Abdalkrim. 2022. Does gender diversity on boards reduce the likelihood of financial
distress? Evidence from Malaysia. Asia-Pacific Journal of Business Administration, 15(2): 287–306.
Harken, A. and T. Taurgut. 2023. Effect of corporate governance on financial performance: evidence from
a shareholder oriented system. Iranian Journal of Management Studies, 16(1): 79-95.
Hasan, I. and F. Mohammed. 2023. Corporate governance: Roles and characteristics of the board.
International Journal of Corporate Studies, 15(2): 50-67.
Hassan, M. 2023. Corporate governance mechanisms and their importance in Asian countries. International
Journal of Corporate Governance and Culture, 9(3): 23–35.
Hermalin, B. E. and M. S. Weisbach. 2018. The determinants of board composition. The RAND Journal of
Economics, 29(4):589-606.
Jagirani, T. S., L. C. Chee, and Z. B. Kosim. 2023. Relationship between financial risks and firm value: A
moderating role of capital adequacy. Investment Management and Financial Innovations, 20 (1): 69-78.
Jensen M. C., and H. W. Meckling. 1976. Theory of firm: Managerial behavior, Agency Cost and
Ownership structure. Journal of Financial Economic, 3(4): 305-360.
Judita A., S. Daila, and R. Kristina. 2022. The impact of social responsibility on corporate governance
financial performance in the energy sector: Evidence from Lithuania. Corporate social responsibility
and Environmental Management, 1-14.
Kafidipe, A., U. Uwalomwa, O. Dahunsi, and F. O. Okeme. 2021. Corporate governance, risk management
Asimiyu K. Adegoke, Akinwumi O. Akinola / Finance, Accounting and Business Analysis, Volume 7, Issue 1, 2025
54
and financial performance of listed deposit money bank in Nigeria, Cogent Business & Management,
8 (1): 1-14, https://doi.org/10.1080/23311975.2021.1888679
Lipton, M., and J. W. Lorsch. 1992. A modest proposal for improved corporate governance. Business Lawyer,
48(1): 59-77.
Malahim, S. S. 2023. The Relationship between the Risk Disclosure and Risk Management Committee on
Banks Value: Empirical Evidence From Jordan. International Journal of Professional Business Review,
8(3): e0572. https://doi.org/10.26668/businessreview/2023.v8i3.572
Martin, A., and Marcel, B. 2020. Corporate governance and firm performance: Evidence from non-financial
listed firms in the United Kingdom. European Journal of Corporate Governance 6(4): 50–67.
Mesrawati, M., S. Selly, S. Sherlytan, S. M. Natalia and R. Apryanisaragih. 2022. The effect of DAR, CR,
ROA, & CG mechanism on financial distress in BUMN companies public on Bei Year 2016-2020.
Journal Research of Social Science, Economic and Management, 1(7): 954-967.
Muhammad, H., S. Migliori, and S. Mohsni. 2022. Corporate governance and firm risk-taking: the
moderating role of board gender diversity. Meditari Accountancy Research, 31(3): 706–728.
https://doi.org/10.1108/medar-07-2020-0949.
Musa, H. M., and M. D. Tahir. 2024. Risk management committee attributes and financial performance of
listed financial service firms in Nigeria. Fuoye Journal of Finance and Contemporary Issues, 6(1): 110-
127.
Mustapha, F. G., I. A. Adamu, and Z. Abdullahi. 2024. Why is Gender Diversity Important for Corporate
Boards? Journal of Comprehensive Business Administration Research, 1-7.
Najat, S. M., and M. A. Elsadig. 2022. Mediating effects of Risk Management practice in Iraqi private Banks
Financial performance, Journal of Financial Service Marketing, 6(4): 34-45.
Nguyen, T. H. H., and K. L. Tran. 2023. Institutional investors, corporate governance and firm performance
in an emerging market: evidence from Vietnam, Cogent Economics & Finance, 11(1): 1-20.
Obaje, F. O., and A. Ogirima. 2022. Board size, board gender diversity and firms’ financial performance.
Yamtara-Wala Journal of Arts, Management and Social Sciences (YaJAMSS), 2 (1): 45-58.
Okoye, P. U., J. C. Anosike, and I. F. Asiegbu. 2022. Sustainable construction and development in Nigeria:
Issues, challenges, and prospects. Journal of Environmental Planning and Management, 3(14): 1-20.
Oladokun, V., S. O.Ajayi, A. O. Afolabi, and T. O. Gbadamosi. 2020. Assessing the level of sustainable
construction adoption in Nigeria's construction industry. Case Studies in Construction Materials,
12, e00302.
Olaniyan, O. R., and A. Adegoroye. 2024. Bridging Development and Sustainability: An Analysis of the
Nigerian Real Estate Sector. European Journal of Theoretical and Applied Sciences, 2(2): 809-823.
Osevwe-Okoroyibo, E. E., and N. A. Emeka-Nwokeji. 2021. Examining the effect of audit committee
attributes on firm performance: evidence from listed food and beverage firm in Nigeria. European
Journal of Accounting, Auditing and finance Research, 9 (8): 26-43.
Patrick, T. 2024. The role of risk management on the financial performance of organizations: A Case Of
Study Centenary Bank Ibanda Municipality Western Uganda [Article]. Metropolitan Journal of
Business & Economics (MJBE), 763–779.
Peter, T., M. Otieno, and K. Achieng. 2021. Managing market risk for financial performance: Experience
from microfinance institutions in Kenya. African Journal of Financial Management, 12(3): 112–129.
Safieddine, A., and H. Daouk. 2021. Challenges to gender diversity on boards in emerging markets.
Governance Review, 10(4): 85-98.
Slama, R. B., A. Ajina, and F. Lakhal. 2019. Board gender diversity and firm financial performance in
France: Empirical evidence using quantile difference-in-differences and dose-response models.
Cogent Economics and Finance, 7(1): 1–25.
Suratman, A., A. Erlangga, and A. Budiarti. 2024. The impact of risk management, transformational
leadership on corporate financial performance in the global era. In Journal of Studies in Management
and Finance Economics, 8(7): 540-549
Tan, Z., F. Samuel, and G. Ding. 2019. Impact of financial risk indicator on banks financial performance in
Ghana: Business and Economic Research, 9(4): 2162-4860.
Than, C., 2018. Optimizing board size for effective corporate governance. Corporate Finance Review, 17(1):
23-32.
Udoh, E. J. 2022. Market risk and profitability of deposit money banks in Nigeria. Nigerian Journal of
Financial Analysis, 8(2): 56–73.
Van der Walt, N. and C. Ingley. 2021. Diversity and board dynamics: The impact of gender on decision-
making. Journal of Corporate Leadership, 8(2):77-91.
Widhaistuti R., A. Nurkhin, and Susilowati. 2019. The role of financial performance in mediating the effect
of good corporate governance on financial distress. Journal Economia, 15(1): 34-47
Asimiyu K. Adegoke, Akinwumi O. Akinola / Finance, Accounting and Business Analysis, Volume 7, Issue 1, 2025
55
Willey T., Y. Bhagwat, and M. Deburuine. 2023. An Investigation of the Altman Z-Score measure and the
return on equity of firm in the energy industry: Archives of Business Research, 11(2): 149-155.
Wirawan, J., and A. P. Willim. 2024. The effect of board diversity and financial stability on financial
performance of Banking Sector in Indonesian Stock Exchange. Journal of Asian Multicultural Research
for Economy and Management Study, 4(4): 8–18.
Yousef, A. N., R. Taha, and S. N. Muhmad. 2023. Operational risk and financial performance of banks in
the Middle East and North Africa. Journal of International Studies, 19(2), 93-118.
Yusuf, A. A., and J. O. Adeoye. 2020. Financial performance and risk management in the healthcare sector:
Evidence from Nigeria. Journal of Finance and Healthcare, 8(4): 201-215.
Zaid, M. A. A., M. Wang, M. Adib, A. Sahyouni., and S. T. F. Abuhijleh. 2020. Boardroom nationality
and gender diversity: Implications for corporate sustainability performance. Journal of Cleaner
Production 251, 119652.