BOARD OWNERSHIP AND LIQUIDITY RISK IN LISTED DEPOSIT MONEY BANKS IN NIGERIA
Keywords:
Board ownership, Executive director ownership, Liquidity risk, Loan-to-deposit ratio, Corporate governance, Deposit money banks, NigeriaAbstract
Liquidity risk remains the fault line along which banking systems fail, and the
Accepted Date: 04/06/2026 Published Date: 20/07/2026 Type: Research
Nigerian banking industry has repeatedly demonstrated that solvent banks can still be brought down by funding mismatches. This study examined the effect of board ownership on the liquidity risk of listed deposit money banks (DMBs) in Nigeria, disaggregating board ownership into executive and non-executive director shareholding. An ex-post facto research design was adopted. The population comprised the fourteen DMBs listed on the Nigerian Exchange Group, from which thirteen banks with complete audited records over the ten-year period 2014 to 2023 were selected using the filter technique, giving a balanced panel of 130 bank-year observations. Data were extracted from the audited annual reports and accounts of the sampled banks. Liquidity risk was proxied by the loan-to-deposit ratio, while board size, bank size, capital adequacy ratio, return on assets and a dummy for the Central Bank of Nigeria minimum loan-to-deposit ratio policy served as control variables. Data were analysed using descriptive statistics, Pearson correlation, variance inflation factors, the Breusch-Pagan test, the Hausman specification test and panel regression estimated by pooled ordinary least squares, fixed effects and random effects, with cluster-robust standard errors at the .05 level of significance. Board ownership averaged 6.00% of issued shares (SD = 2.36) while liquidity risk averaged 60.55% (SD = 9.00). The fixed effects estimates show that aggregate board ownership exerts a negative and significant effect on liquidity risk (beta
= -0.936, p < .001), and that this effect is driven entirely by executive director ownership (beta = -1.936, p < .001), whereas non-executive director ownership is statistically insignificant (beta = -0.413, p = .068). The results are confirmed by a robustness check using liquid assets to total assets as an alternative proxy. The study concluded that equity held by executive directors operates as an effective internal governance mechanism restraining liquidity risk, consistent with the convergence-of-interest hypothesis, while the token shareholdings typically held by non-executive directors in Nigeria are too small to generate any comparable incentive effect. It was recommended, in direct response to these findings, that the Central Bank of Nigeria incorporate a minimum executive director shareholding threshold into its corporate governance code for banks, that share-based components of executive remuneration be structured with extended vesting and post-vesting holding periods, and that banks disclose director shareholdings separately for executive and non-executive directors.
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