Moderating Role of Board Autonomy in the Relationship between Credit Risk and Financial Performance of Listed Deposit Money Banks in Nigeria.

The goal of this study is to assess the moderating impact of
board autonomy on the association between credit risk and
banks’ financial performance. The dataset include 12 listed
banks in Nigeria from 2012 to 2022 utilizing non-performing
loans, loan loss provision and insider lending as surrogates
for credit risk exposure, while board independence and firm
size were used as moderating and control variable
respectively. In addition, return on Asset was used as proxy
for financial performance indicator. The empirical findings
indicated that non-performing loan and insider loans have a
significant detrimental effect on financial performance
whereas loan loss provision showed a weak reverse impact.
Moreover, the moderated model revealed that board
independence exerts a substantial positive influence on the
relationship between all the three variables, converting it
from a negative to a positive due to the moderating effect.
Loan loans provision, insider lending change from negative
to positive significant relationship while non- performing
loans changed from negative significant to positive
insignificant relationship. This findings implies a
considerable moderating influence of board independence
on the relationship, indicating that banks should prioritize
credit risk management, particularly in control and
oversight of non-performing loans, compliance with 5%
policy of insider lending. In addition, regulators and
management of banks should ensure that all banks
independent non-executive directors are majority at all
times as they prove to be playing a significant role in
mitigating credit risk which in turn result to superior
performance.