Stakeholders' Perceptions on Corporate Governance Constitution and Their Implications on Board Performance

This study takes steps towards developing behavioral principle-based board process as success dimension to effective board role performance. In the literature, dominant corporate governance research that centered on rule-based board structure has so far yielded conflicting and ambiguous results. These could not transform effective corporate functioning, thus inconclusive. This study also stimulates debates about the extension of corporate governance literature in the stakeholder theoretical perspective, which incorporates both shareholders and non-shareholding stakeholders, as a comprehensible preference to the traditionally dominant agency model in an attempt to offer a more inclusive approach and strengthen the existing governance structure in Nigeria. This suggests having employee representatives and creditor seats on board to participate in firm’s top decisions.The study also examines factors responsible for reported weak enforcement in relations to board performance, with the broad objective of investigating if the combination of these factors constitute effective corporate governance and explain board performance. Based on survey perceptions of 154 respondents from the Nigerian capital market sampled participants, the study employs confirmatory factor analysis (CFA) in a structural equation modeling (SEM) approach. Thus, a model that relates board process and three stakeholders constructs to board performance is proposed. Building upon board process dimensions such as cognitive conflict, effort norms, use of knowledge and skills, and groupthink; this study finds that board process is significantly related to board performance. In addition, building upon the three stakeholder constructs, this study also finds creditor participation to be significantly related to board performance. However, employee participation and regulatory enforcement show insignificant relationship with board performance. The study concludes that combination of board process and creditor participation constitutes effective corporate governance.