EFFECT OF CORPORATE GOVERNANCE MECHANISM ON STOCK PRICE VOLATILITY OF LISTED INSURANCE COMPANIES ON STOCK EXCHANGES OF NIGERIA AND SOUTH AFRICA: A COMPARATIVE ANALYSIS

Abstract

Despite the existence of regulatory frameworks (including Corporate Governance Codes) for the insurance industries of top African economies, capital market activities still appear unpredictable and prices of stocks becoming more volatile. This study investigated effect of corporate governance mechanism on stock price volatility, with the purpose of comparatively estimating the effect of non-executive directors’ composition, gender diversity, and audit committee independence on stock price volatility of listed insurance companies on stock exchanges of Nigeria and South Africa for the period 2009-2019. Data were extracted from audited annual reports and accounts of all listed insurance companies in Nigeria and South Africa. The data were analyzed using Panel Ordinary Least Square (OLS) regression with the aid of E-views 10.0 statistical software. Findings indicate that non-executive directors’ composition and audit committee independence exert significant positive effect on stock price volatility of listed insurance companies in Nigeria, while in South Africa, non-executive directors’ composition and audit committee independence have insignificant positive effect on stock price volatility. However, gender diversity has insignificant negative effect on stock price volatility in both countries. The study recommends that quoted insurance companies in Nigeria and South Africa should maintain independent audit committee and diverse board (including women participation) in line with global best practices. In addition, non-executive directors on the Board should have or acquire requisite experience or expertise in relation to factors affecting share price stability in the insurance industry.