Political Connections and Financial Performance of Listed Companies in Nigeria

This study examines the relationship between political connections of board directors and the financial performance of listed companies in Nigeria over the period 2010–2024. Drawing on a panel dataset of 151 firms listed on the Nigerian Exchange Group (NGX), the study employs ex-post-facto research design and panel regression analysis to investigate how politically connected directors influence Return on Assets (ROA) and Tobin's Q (TQ) as proxies for accounting-based and market-based financial performance, respectively. The study controls for firm size, industry type, firm age, board size, research and development expenditure, CEO characteristics, and ownership structure. The fixed-effects and random-effects estimators are applied alongside the Hausman specification test, with further robustness tests including variance inflation factors (VIF), heteroskedasticity tests, and serial correlation diagnostics. Findings reveal that political connections exert a statistically significant positive effect on ROA but a non-significant negative effect on TQ, suggesting that while political ties enhance short-term accounting profitability through preferential access to government contracts, regulatory forbearance, and credit facilitation, they erode long-term market value by raising agency concerns and efficiency distortions. The results are consistent with the resource dependence theory and the rent-seeking hypothesis. Control variables including firm size, CEO duality, and concentrated ownership demonstrate significant influence over financial performance. The study contributes to the emerging literature on corporate governance in developing economy contexts by offering fresh empirical evidence from Nigeria's institutional environment. Policy implications and avenues for future research are discussed.