Corporate Characteristics, Investments in Human Capital and Financial Performance of Deposit Money Banks in Nigeria

Abstract

This study examines the mediating role of human capital investment between corporate characteristics and financial performanc of deposit money banks in Nigeria. The study used an ex-post facto design and obtained online secondary data from annual reports (2009 - 2018) of the eight deposit money banks that CBN classified as international banks in Nigeria. Board structure and firm size, considered as the banks' corporate characteristics, were examined in relation to the human capital investment and financial performance. Panel fixed effect regression was performed to test: (i) effect of corporate characteristics on performance, and on human capital investment; (ii) effect
of human capital investment on performance; and (iii) the mediation role of human capital investment. The results support all seven hypotheses tested in the study. The study concludes that board structure and firm size have significant positive effect on the
financial performance of the banks, and on their human capital investment. Moereover, human capital investment provides a complimentary medition in the effect of board structure and firm size on the banks' financial performance. Theoretically, the study
shows that these constructs can be integrated in a model to understand corporate performance. Practically, the study reveals that banks can improve their performance through effective investments in human capital, by way of wages, salaries, training and development, and related benefits. Such will increase the effectiveness and efficiency of human capital and strengthen the banks' capacity to improve performance. Areas for further studies are also highlighted.