ENTERPRISE RISK MANAGEMENT COMMITTEE, FIRM SIZE AND PERFORMANCE OF LISTED DEPOSIT MONEY BANKS (DMBS) IN NIGERIA

Abstract

The objective of this study was to examine the effect of the Enterprise Risk Management Committee (ERMC) on the performance of Deposit Money Banks (DMBs) in Nigeria, with firm size as a mediating variable. Specifically, the study investigated the mediating effect of firm size on the relationship between ERMC size, ERMC activism, ERMC composition, ERMC gender diversity, and ERMC expertise, and firm performance, measured by return on capital employed (ROCE). An ex-post facto research design was adopted, as the study did not involve the manipulation of variables but aimed to establish effects and mediation. The population comprised listed DMBs in Nigeria, and a purposive sample of ten (10) banks was selected based on the availability of annual reports over an 11-year period (2012–2022), which defined the time scope of the study. Data were analyzed using Structural Equation Modeling (SEM). The results revealed that firm size did not significantly mediate the relationship between ERMC size, ERMC activism, and ERMC gender diversity and firm performance. However, firm size significantly mediated the effect of ERMC composition and ERMC expertise on the performance of DMBs in Nigeria. Based on these findings, the study recommends that banks, regardless of their size, should maintain a moderately sized ERMC in compliance with existing regulations. While considering their unique contexts, banks should adhere to regulatory guidelines on ERMC meeting frequency, as excessively frequent meetings may increase operational costs. Banks are also encouraged to include more non-executive members in the ERMC. Additionally, smaller banks should seek to expand in order to benefit from the positive mediating effect of firm size on the relationship between ERMC composition and expertise and firm performance. The gender composition of the ERMC should not be a major concern, regardless of the bank’s size. Lastly, banks should ensure that their ERMCs include more non-executive members with strong accounting expertise.