IMPACT OF BOARD INDEPENDENCE, BOARD RISK MANAGEMENT AND BOARD FOREIGN DIVERSITY ON FINANCIAL DISTRESS OF MANUFACTURING FIRMS LISTED ON THE NIGERIAN EXCHANGE GROUP

This study was motivated by the observed persistent financial distress confronting the manufacturing sector, a phenomenon that has emerged as a critical concern in Nigeria and other developing economies. Given the sector's fundamental contribution to national development, understanding the underlying causes and implications of financial distress remains imperative. Its primary objective was to investigate how corporate governance mechanisms affect the likelihood of financial distress of manufacturing firms listed on the Nigerian Exchange Group (NGX). The research used agency theory and employed a quantitative longitudinal research design, using data extracted from the audited annual financial reports of listed manufacturing firms over an eleven-year period from 2014 to 2024. The study focused on a population of all eighty (80) manufacturing firms listed on the NGX as at 31st December, 2024. A purposive sampling technique was applied, investigating 40 of these firms based on complete audited annual financial reports published on the NGX. The descriptive statistic and pooled OLS regression were used for the data analysis. The pooled OLS regression results reveal that board risk management (β = 15.858, p < 0.001) and board foreign diversity (β = 34.636, p < 0.001) significantly mitigate financial distress, with board foreign diversity demonstrating the strongest protective effect among all governance mechanisms examined. Conversely, board independence (β = 1.628, p = 0.882) show no statistically significant effects on financial distress. The model explains 11.4% of variance in financial distress (R² = 0.102, p < 0.001), with control variables firm size and firm age demonstrating significant negative relationships with distress. This study recommends that manufacturing firms should establish mandatory independent risk management committees and pursue strategic board internationalization. While the investors and financial analysts should incorporate governance-weighted investment frameworks. The regulatory bodies (SEC, NXG, FRCN) should mandate board-level risk management committees, create incentives for board internationalization, develop early warning systems and integrate governance into industrial policy. The study contributes to corporate governance literature and offers actionable insights for policymakers, corporate boards, and investors that establishing dedicated risk management committees and pursuing board internationalization represent the most promising pathways for preventing financial distress among Nigerian manufacturing firms. Further, this study's novelty lies in its comprehensive eleven-year analysis (2014–2024), which allows for an in-depth assessment of financial distress trends, policy impacts, and government interventions within Nigeria's manufacturing sector.