Effect of corporate governance practices on bank performance: The perspective of board members

Abstract

The lingering poor financial performance by banks and bank failure in the past three decades, despite various regulatory actions, has led to a debate on the efficacy of the various regulatory actions and the effectiveness of the practices of corporate governance in Nigerian banks (CBN, 2014; Berger, Imbierowicz, & Rauch, 2016). The study seeks to understand how corporate governance practices influence banks’ performance. The qualitative approach purposively selected three banks and three board interview respondents. Using thematic analysis, the results show that, large board size is not sufficient to improve performance but the broader expertise and other resources the directors bring are the critical elements. The study finds consensus that, outsider directors were desirable, as they provide additional expertise, and assist in making strategic input to improve management decisions. Enhanced monitoring and oversight responsibilities and access to information of board committees improve board effectiveness with favourable effects on bank performance. While the moderating effect of female representation with other governance characteristics on bank performance is subject to the female complementary expertise and their proportion of the board, that of foreign directors appear to be negligible. Bank boards are recommended to be of the right caliber and quantity with adequate resources to offer enhanced monitoring and oversight responsibilities.

Keywords: Corporate Governance Practice, Bank Performance, Board Member, Foreign Representation, Female Representation, Board Member Perspective

Authors’ individual contribution: Conceptualization – V.O.D.; Methodology – V.O.D. and J.K.T.; Formal Analysis – V.O.D.; Investigation – V.O.D.; Writing – Original Draft – V.O.D.; Writing – Review & Editing – V.O.D. and J.K.T.; Supervision – J.K.T.; Project Administration – J.K.T.

Declaration of conflicting interests: The Authors declare that there is no conflict of interest.

JEL Classification: E50, G30, G38, L25

Received: 02.07.2020
Accepted: 15.02.2021
Published online: 18.02.2021

How to cite this paper: Dike, V. O., & Tuffour, J. K. (2021). Effect of corporate governance practices on bank performance: The perspective of board members. Corporate Governance and Sustainability Review, 5(1), 54-64. https://doi.org/10.22495/cgsrv5i1p6