Abstract
This paper scrutinizes the effects of adherence to an encoded board configuration on firm efficiency in terms operational and financial performances using an integrated research framework that combines four distinct theories including agency, stewardship, stakeholders and resource dependency models. The research explores three main aspects of compliance outcomes; benefits accrued to conforming firms in terms of enhanced efficiency and market value, board level drivers as well as the external moderators of these benefits using a sample of 127 listed companies on the Nigerian Stock Exchange covering for the period of 1999-2010. Result show that board independence, directors’ cognitive competencies as measured in terms of their educational qualifications and professional experiences are positively associated with efficient management of assets (ROA) and firm stock marketability (Tobin’s q). I find no substantive empirical evidence to suggest that either the adoption of specific leadership structure or directors’ ethnic representation affects firm performance. Moreover, country-level macroeconomic variables, especially the degree of economic openness play a significant role in determining the strength of association between board structure variables and firm performance measures.
Highlights
The spates of corporate scandals of the last twenty-five years had motivated significant drive towards institutional reforms in numerous developed countries (e.g. Toshiba, Olympus, Enron, Lehman Brothers and WorldCom)
The results of the base model regression show that the directors’ years of experience (AVGEXP) and board independence (BI) are positive and significantly associated with Tobin’s q a measure of market value at the 5 per cent level
Board size (BS), CEO duality (CEODUAL), directors’ educational qualifications (DMBA) and ethnic representation were positively related to the performance measure but statistically insignificant
Summary
The spates of corporate scandals of the last twenty-five years had motivated significant drive towards institutional reforms in numerous developed countries (e.g. Toshiba, Olympus, Enron, Lehman Brothers and WorldCom). One of the well cited examples of government response to these scandals is the passage into law of the famous Sarbanes-Oxley Act (2002) which is widely considered to be the most sweeping corporate governance regulation in the past 70 years (Bulent 2009). These waves of institutional reforms in the developed countries have motivated similar moves in the emerging markets. The overstatement of the profit and balance sheets of Cadbury Nigeria Plc and the evidence of share price manipulation at the Fort Oil Plc (formerly African Petroleum) ensured that the two companies became the most famous cases of unethical practices in Nigeria (Egene 2009)
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