The Effect of Credit Committee Characteristics on Bank Asset Quality in Nigeria

Abstract

This study aims to evaluate the effect of credit committee characteristics on bank asset quality in Nigeria. The paper examines the credit committee characteristics namely: credit committee independence, credit committee non-executive directors, credit committee size, credit committee meetings, credit committee gender, credit committee expertise, credit committee chair-gender, credit committee chair-independence and chief executive officer in credit committee, and their influence on non-performing loans. Descriptive research design is used on a sample consisting of 18 commercial banks in Nigeria. Secondary data is obtained from the published annual reports covering thirteen (13) years period (2006-2018). Data analysis involved Correlation Coefficient, Multiple Regression Analysis and Dynamic Panel Model estimations using Generalize Method of Moments. The study finds that credit committee independence and credit committee size have a significant negative relation while credit committee gender, credit committee meetings, credit committee chair-independence, and presence of chief executive officer in credit committee have a significant positive relation with non-performing loans. The study therefore recommends that, policymakers and bank executives in Nigeria should concentrate their efforts on the characteristics of credit committee as a whole, rather than on a few elements that have been scientifically demonstrated to have an impact on bank asset quality. This may likely enhance the quality of bank assets.