CORPORATE GOVERNANCE MECHANISMS AND SHARE PRICE VOLATILITY OF QUOTED FIRMS: INSIGHTS FROM NIGERIA

Abstract

The study examined how certain corporate governance mechanisms such as audit committee size, ownership concentration; managerial ownership and board Independence engender share price volatility in Nigeria using yearly data for the period 2010-2015. Twenty listed firms were selected as sample size. The study uses both descriptive and inferential statistics to determine the relationship among the variables. The GARCH (1,1) was employed to examine the volatility clustering between some selected corporate governance indicators and how they engender share price volatility among the sampled companies. The findings indicate a positive link in stock price volatility lag and share price volatility while ownership concentration had a strong association with the volatility of share prices. Similarly, the empirical results show that audit committee size was significant and impacted positively on stock price volatility. Additionally, managerial ownership was found to negatively impact on share price volatility and is significant to such a higher level of managerial ownership that induces conditional volatility of stock prices. Premised on these intriguing empirical findings, it was recommended that there is the need for stock market players (such as stock dealers, stockbrokers, institutional investors, among others) to incorporate corporate governance variables into their models for estimating the fair value of stock price returns and evaluating the moderate/or long term performance portfolios of the firm.