The health care sector has historically viewed itself as being operationally different from other businesses. The private healthcare sector plays a large role in the delivery of high-quality care services in many healthcare systems as it accounts for over 62% in Nigeria (African Progress Report, 2017). Despite the size and expected future growth of the private health sector, there are several challenges that hinder its potentials for impact in the overall health system. These according to them include poor healthcare, weak infrastructure, drug counterfeiting particularly in rural areas, lack of appropriate data systems for patient information and financial records and heavy fragmentation of the sector that limits the scalability of interventions and activities that create barriers to accessing much-needed growth capital for the sector (African Progress Report, 2017). According to Seetharaman et al. (2010), the operational cost of healthcare has steadily risen, usually faster than the consumer price index, absorbing a larger proportion of the Gross National Product (GNP). Vian (2008) argues that the bane of the healthcare sector is corruption which has negatively affects the delivery of effective health care and social welfare. These problems result in a heavy outflow of much needed foreign exchange as a result of medical tourism abroad and brain drain. It has been estimated that Nigerians spend over $1 Billion dollars annually on medical tourism (NEEDS, 2004).
As the private sector dominates the Sub-Saharan African health provision landscape, the success of the private healthcare sector will be critical to the quality of the overall health outcomes and by extension the improvement in the macro-economy and increased national welfare. The sustainability of this sector depends on the institutionalization of strong corporate governance. Akinsulire (2006) and Horner (2016) agree that corporate governance structure specifies the distribution of rights and responsibilities among different participants in the corporation such as the board, managers, shareholders and other stakeholders, and spells out the rules and procedures for making decisions on corporate affairs. This then provides the structure through which the company's objectives are set and communicated; the means of attaining them as well as monitoring performance are specified. The need to investigate the impact of board characteristics especially board financial education on company performance arise as a result of high profile corporate failures around the world (Oyeleke et al., 2016; Hernsberger, 2016; Shammari, 2018).
Countries all over the world have taken giant strides to ensure good corporate governance due to the negative effect of corporate failures on organizations and national institutions. Erin et al. (2017) posit that one of the steps taken is to diversify the board by including directors with financial expertise or background. In Nigeria, a response has been made by Securities and Exchange Commission (SEC) in collaboration with the Corporate Affairs Commission (CAC) by launching a Code of Corporate Governance for Nigerian public companies in 2003 and was further reviewed in 2011. One of the main provisions of the code for corporate governance centered on the financial expertise of the board of directors (SEC, 2004). The board is held responsible for all the activities of the company and even for the failure of other elements of the corporate governance chain. The shareholders are helped in this regard by statutory and regulatory provisions and institutions but by far the strength of the internal control mechanism is more germane to the success of the company than all external control measures. Since the internal control mechanism is essentially established by the Board, it exercises utmost control over the safety and most economic use of the resources of the enterprise.
Several authors (Kirkpatrick, 2009; Ame et al., 2017; Erin et al., 2017) argue that the failure of most financial institutions was due to the lack of financial expertise of board members. Consistent with this argument, Uwuigbe et al. (2017) opine that board oversight functions cannot be left in the hands of board members who know-nothings in financial matters. They further argue that a large number of board members that are financial illiterates put the organization at a financial risk. Because when it comes to the financial discussions, many board members " zone out". Without an appropriate level of financial understanding, the right questions may never be asked, which eventually may affect the company's performance.
Firm's financial performance is an important concept that relates to the way and manner in which financial resources available to an organization are judiciously used to achieve the overall corporate objective of that organization, keeps it in business and creates a greater prospect for future opportunities. The ways a firm invests shareholders' funds determines its performance and goes a long way in determining its ability to achieve its objectives. There are many measures of firm performance. In most empirical studies (Barnhart et al., 1994; Kiel & Nicholson, 2003; Sar, 2018) on corporate governance; firm performance is measured using both market-based measures and accounting-based measures. Return on Equity (ROE), Earnings per Share (EPS) and Return on Assets (ROA) are the most commonly used in accounting-based measures. While Tobin's Q and market to book value ratio are the most used measure in market-based performance measures. None of the market-based measures will be employed in this research due to the absence of available data. This study employed the accounting-based performance measure with ROA as a proxy to measure financial performance. This study, therefore, examined the effects of board financial education on firm performance with particular reference to the Nigerian healthcare sector.
Most studies after the financial crisis of 2008 shifted focus from board independence, which is nowadays heavily regulated, to board quality. Board quality represents the quality of the board members in relation to their educational qualifications, industry experience and age. The study of Pozen (2010) and Bertsch (2011) found that industry experience alone is not sufficient to tackle wide issues in corporate governance model. They found that financial education coupled with industry experience positively influences corporate performance. Research in psychology suggests that educational diversity helps to improve firm performance especially from group composition theory (Dobbin & Jung, 2011). In the upper-echelon theory, Hambrick and Mason cited in Haniffa & Cooke (2008) believes that managerial educational background has a significant influence on the organizational outlook, corporate performance, and strategic business models. Consistent with this view, Hitts & Tyler (1991) reveal that the educational background of corporate executives affects organizational strategic decisions which invariably impact firm performance. The findings of Graham & Harvey (2002) reveal that CEOs with MBA are more knowledgeable in using financial models in evaluating projects that have a positive and significant impact on the organization.
Smith et al. (2006) posit that a study on financial education within the corporate governance context is few in literature. Most studies conducted on board financial education and financial performance was mostly done in the US. However, in recent times studies from other countries began to pay more attention to board financial literacy and education (Peters et al., 2010; Kahveci & Wolfs, 2019). Agrawal & Chadha (2005), in their study, concluded that organizations that have an independent director with a background in accounting or finance have a higher probability to improve earnings compared to other firms with non-accounting or finance background. Similarly, Haniffa & Cooke (2008), study corroborated the findings of Agrawal & Chadha (2005), that board members with financial education have the potential for delivering improved firm performance.
In fact, the amendments to the United States Securities and Exchange Commission's disclosure rules in 2009 intend to increase, among others, director qualifications, thereby also reflecting an increased interest in director qualifications and experience (Okoye et al., 2017). The nexus between education and performance was empirically studied extensively in the US and lately in researches conducted in other countries particularly in developing ones. Hambrick et al. (1996) showed that the average education level of top management team members is positively associated with the growth in market share and growth in profits. Golec (1996) showed that holders of MBAs manage investment funds that perform better. In line with the above, Chevalier & Ellison (1999), revealed that managers of funds that attended higher-SAT undergraduate schools perform more. This revelation is in tandem with Gottesman & Morey (2006), who identified a positive association between the quality of MBA programmes attended by the managers and fund...