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ISSN No. 2454-6186 | DOI: 10.47772/IJRISS | Volume IX Issue XXVI October 2025 | Special Issue on Education
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Board of Directors Competence and Market Performance in Listed
Deposit Money Banks in Nigeria
AFOLABI Ademola Joshua
1
, IGBEKOYI Olusola Esther
2
, JABAR Adebola Abass
3
, AWOTOMILUSI
Niyi Solomon
4
1234
Accounting Department, Afe Babalola University, Ado-Ekiti
DOI:
https://dx.doi.org/10.47772/IJRISS.2025.903SEDU0659
Received: 16 October 2025; Accepted: 21 October 2025; Published: 14 November 2025
ABSTRACT
The study investigated how the board of directors’ competence affects market performance in Nigeria’s listed
deposit money banks. The study specifically examined how strategic competence, measured by strategic
oversight, vision, and stakeholder alignment, impacts Tobin’s Q, assessed the role of technical competence based
on directors' education, financial knowledge, and professional background, and evaluated the influence of board
effectiveness using meeting frequency and director shareholding on market value. This study adopted an ex-post
facto design relying on existing data beyond the researcher’s manipulation. The population consisted of 13
deposit money banks listed on the Nigerian Exchange Group as of December 31, 2024, while a sample of 5
banks was purposively selected based on continuous listing and complete disclosures. Secondary data were
obtained from published annual reports of the firms and NGX filings for the period 2015 to 2024, coinciding
with the revision of corporate governance regulations. Data collected were analyzed using descriptive statistics
and panel regression, with the Prais–Winsten regression with panel-corrected standard errors employed to correct
for heteroskedasticity and autocorrelation. The findings reveal that strategic competence has a significant
positive effect on market performance, showing that boards with stronger oversight, visionary capability, and
stakeholder alignment enhance firm valuation. Technical competence also exerts a significant positive effect,
indicating that directors’ educational, financial, and professional expertise strengthen investor confidence and
firm value. Similarly, board effectiveness, measured through meeting frequency and director shareholding,
significantly improves Tobin’s Q, confirming that engaged and ownership-aligned boards enhance performance.
Among the control variables, firm size was found to significantly increase market performance, while leverage
had a significant negative effect. The study concludes that in the Nigerian context, market performance is
strongly shaped by strategic competence, technical competence, and board effectiveness. It recommends that
governance policies should prioritize directors with strong strategic vision and oversight, include members with
proven technical expertise, promote board effectiveness through regular meetings and director shareholding, and
that regulators should emphasize competence-based appointments in updated governance codes.
Keywords: Board competence, Strategic competence, Technical competence, Board effectiveness, Market
performance, Tobin’s Q.
INTRODUCTION
Investor perception significantly influences firm valuation, often reflecting stakeholders' views on a company's
credibility, governance quality, and future growth prospects. While effective corporate governance frameworks
in developed economies have enhanced market confidence and performance, ongoing strategic shifts and
emerging risks require boards to remain agile and responsive (Teti et al., 2023). In developing countries, things
are more unstable, poor governance and a lack of skilled board members often result in weak and inconsistent
market performance (Kyere & Ausloos, 2021). In Nigeria, even with several reforms in the banking sector,
deposit money banks listed on the stock exchange continue to struggle. Their Tobin’s Q ratios go up and down,
showing that investors are not consistently confident in these banks (CBN, 2020). Normally, boards are expected
to lead companies towards long-term growth, but recent trends suggest a disconnect between what boards are
supposed to do and what is actually happening. This raises important questions about whether the people leading
these banks have the competence needed to improve their performance in the market.
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When banks underperform, it’s not just a company problem; it affects the whole economy. It reduces investor
trust, limits access to capital, and even weakens public trust in the financial system. For individual firms, it
hinders growth and can lead to layoffs or shutdowns (Ejeh & Emeni, 2017). For society, this erodes progress in
financial inclusion and destabilizes the economy. Over the years, regulators and stakeholders have introduced
reforms like corporate governance codes and board performance evaluations to improve oversight (SEC Nigeria,
2018). While these have brought some progress, many board members still lack the specific strategic capabilities
needed to drive market value. This is the critical space where board competence, especially the ability to think
strategically and act effectively, can make a difference.
Board competence is increasingly seen as essential to a company’s market success. This competence includes
strategic abilities like setting long-term direction, aligning with stakeholders, and having a visionary outlook. It
also covers technical skills such as professional qualifications, industry-specific knowledge, and financial
literacy (Pucheta‐Martínez & García‐Meca, 2019). Another aspect is how effective a board is—do they meet
frequently? Do they own shares in the company and have skin in the game? (Muriithi & Waweru, 2017). These
three areas, strategic competence, technical expertise, and board effectiveness, make up a framework for
assessing how boards influence performance. In Nigeria, where banks struggle with consistent market results,
strengthening these competencies could help boards respond better to economic challenges and investor
expectations. Therefore, measuring and improving these board attributes is a practical step toward better market
performance.
Several past studies have examined how boards impact company performance, but many leave important
questions unanswered. For example, Kyere and Ausloos (2021) confirmed that board expertise supports
performance in Africa, but didn’t explore specific strategic or technical elements. Uwuigbe et al. (2018) looked
at Nigerian banks and their governance structures, but their focus was on financial performance metrics like
return on assets and equity, not market valuation tools like Tobin’s Q. Also, many studies lack depth, use limited
data ranges, or ignore the evolving nature of board roles. Few researchers have looked closely at how elements
like meeting frequency or director shareholding relate to market value. These gaps point to the need for a more
detailed and up-to-date study using relevant market-based metrics.
To address this, the current study focuses on how different dimensions of board competence affect Tobin’s Q, a
measure that reflects investor perception and market value. These dimensions include strategic competence
(strategic oversight, visionary ability, stakeholder alignment), technical competence (educational, financial, and
professional skills), and board effectiveness (measured through meeting frequency and board shareholding).
While earlier studies, such as Pucheta‐Martínez and García‐Meca (2019), emphasized the role of external board
members and institutional investors, they didn’t explore how internal capabilities shape market outcomes.
Moreover, most existing research uses one-time snapshots, ignoring how board influence evolves. This study
proposes a longitudinal approach that examines trends over time, offering clearer insights into how boards
contribute to long-term market strength in Nigerian banks.
Reviewing the literature shows some clear gaps. Many studies like those by Uwuigbe et al. (2018) and Kyere
and Ausloos (2021) focus on financial rather than market performance. Others fail to break down board
competence into specific, measurable skills such as strategic planning or professional qualifications.
Methodologically, many rely on cross-sectional data, which doesn’t account for changes over time. Furthermore,
little attention is paid to Nigeria’s banking sector, despite its importance. This study fills those gaps by using a
comprehensive scorecard approach and Tobin’s Q to understand how different aspects of board competence
affect market outcomes over time.
The main objective of this research is to investigate how the board of directors’ competence affects market
performance in Nigeria’s listed deposit money banks. The goal is to uncover whether competent boards can drive
better market outcomes. Specifically, the study will: (i) examine how strategic competence measured by strategic
oversight, vision, and stakeholder alignment impacts Tobin’s Q; (ii) assess the role of technical competence
based on directors' education, financial knowledge, and professional background; and (iii) evaluate the influence
of board effectiveness using meeting frequency and director shareholding on market value.
This study is important because, despite numerous reforms, Nigerian banks still struggle with market
INTERNATIONAL JOURNAL OF RESEARCH AND INNOVATION IN SOCIAL SCIENCE (IJRISS)
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performance. Previous studies often use accounting measures like ROA and ROE, which don’t fully capture
investor confidence or firm value (Kyere & Ausloos, 2021). By using Tobin’s Q, a more market-focused metric,
and evaluating board competence through a detailed scorecard, this research provides a more relevant and
actionable perspective. The scope includes all listed deposit money banks in Nigeria over multiple years to ensure
comprehensive and valid results. Insights from this study could help improve governance standards, inform
regulatory decisions, and enhance investor trust in Nigeria’s banking sector.
LITERATURE REVIEW
Conceptual Review
Market Performance
Market performance represents how effectively a firm is perceived in the capital market, particularly in terms of
stock valuation and investor sentiment. It highlights the extent to which a company's strategic and financial
decisions influence investor confidence and overall firm value. Zhou et al. (2022) describe it as a firm’s ability
to deliver shareholder value as reflected in market metrics, while Omran and El-Diftar (2023) emphasize its
measurement through indicators like the market-to-book ratio or Tobin’s Q. These definitions shift focus from
internal accounting results to how external stakeholders interpret and respond to a firm's actions, thereby
underlining the importance of perception, positioning, and market expectations in assessing performance.
To quantify market performance, Tobin’s Q is widely used as a key metric. It compares a firm’s market value to
the cost of replacing its assets, with values above one indicating strong investor confidence and perceived future
profitability. Recent studies (Lee et al., 2021; Ahn & Kwon, 2024) favor Tobin’s Q for its sensitivity to intangible
drivers like innovation and governance quality, making it ideal for strategic and governance-based research.
While other indicators, such as market capitalization or stock return volatility, are sometimes used, Tobin’s Q
remains dominant due to its ability to link strategic foresight with market value. This makes it a robust proxy for
evaluating firm performance in both academic and practical contexts.
Board of Directors’ Competence
Board of Directors’ Competence refers to the ability of board members to provide long-term direction, strategic
oversight, and ensure stakeholder alignment. According to Naciti et al. (2021), strategic competence is “the
capability of the board to engage in strategic thinking, including the articulation of vision and the assessment of
strategic alternatives.” Similarly, Ali and Usman (2023) define it as “the board's proficiency in guiding strategic
objectives, balancing diverse stakeholder interests, and ensuring accountability through effective oversight.”
Strategic competence is often manifested in the board’s visionary capacity, ability to oversee strategic risk, and
alignment with stakeholder expectations. It ensures that the board plays a proactive role in shaping a firm’s
trajectory. In contemporary governance studies, this competence is linked with sustainable value creation and
effective risk management, especially in volatile markets (Ali & Usman, 2023).
Board of Directors’ Strategic Competence
Board of Directors’ Strategic Competence refers to the collective ability of board members to influence and
guide an organization’s strategic direction through informed oversight, long-term visioning, and alignment with
stakeholder expectations. According to Aliyu and Ismail (2023), strategic competence reflects the board’s
cognitive capacity, strategic insight, and decision-making experience that contribute to firm-level outcomes.
Similarly, Mohammed and Kehinde (2022) define it as the board’s capability to offer foresight, monitor strategy
execution, and promote stakeholder-oriented governance to enhance firm value. This study emphasizes three
dimensions of strategic competence: Oversight, Visionary Capability, and Stakeholder Alignment, which are
pivotal in shaping corporate governance effectiveness and performance in listed firms.
Board of Directors’ Technical Competence
Board Technical Competence encompasses the functional knowledge and expertise of board members, such as
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educational background, financial literacy, and professional experience. As per García-Sánchez and García-
Meca (2020), technical competence refers to “the board members’ cumulative educational qualifications,
professional credentials, and domain-specific knowledge that enhance decision-making quality.” Likewise, Zhou
and Wang (2022) define it as “the specialized skills and qualifications possessed by board members that allow
for accurate evaluation of financial and operational matters.” These competencies are essential in ensuring
informed scrutiny of complex financial reports, investment decisions, and regulatory compliance. Research has
consistently shown that directors with strong financial and professional credentials contribute to enhanced
monitoring, reduced earnings manipulation, and improved firm outcomes (Zhou & Wang, 2022). Therefore,
technical competence supports sound judgment and reduces the likelihood of strategic and operational missteps.
Board of Directors’ Effectiveness
Board Effectiveness, as a dimension of competence, involves the operational behaviors and internal dynamics
of the board that influence its performance, commonly assessed through meeting frequency and ownership
structure. Ujunwa et al. (2021) define board effectiveness as “the degree to which the board fulfills its governance
roles efficiently, typically measured by regularity of meetings and directors’ engagement.” Also, Mensah and
Darko (2024) describe it as “a measure of how actively the board contributes to value creation, often signaled
by board diligence (frequency of meetings) and vested interest (shareholding ownership).” Frequent board
meetings are indicative of timely decision-making, strategic responsiveness, and close monitoring. Similarly,
when directors hold substantial equity, they are more likely to act in shareholders’ interests. These indicators
serve as objective proxies for board commitment and governance quality. Hence, effective boards both in
structure and conduct are essential for executing competent oversight and aligning governance with the firm's
strategy.
THEORETICAL REVIEW
Agency Theory
Agency Theory, propounded by Jensen and Meckling in 1976, is a foundational theory in corporate governance.
It explains the relationship between principals (shareholders) and agents (managers), where the former delegates
decision-making authority to the latter. The core assumption of the theory is that agents are self-interested and
may not always act in the best interests of the principals, leading to agency problems such as misalignment of
goals, moral hazard, and information asymmetry. To mitigate these issues, Agency Theory advocates for
governance mechanisms like monitoring (board oversight), incentives (shareholding), and accountability
structures to align managerial decisions with shareholder interests (Jensen & Meckling, 1976; Eisenhardt, 1989).
In the context of previous studies, Agency Theory has been widely applied to explain how board competence,
strategic, technical, and effective governance serve as a control mechanism to reduce agency costs and improve
firm performance. For example, Ahn and Kwon (2024) found that boards with strong financial and professional
expertise enhance transparency and reduce earnings manipulation. Similarly, Ali and Usman (2023) used Agency
Theory to argue that visionary and strategic boards help align long-term goals of managers and shareholders,
thereby enhancing market valuation. The theory provides a useful framework for linking board structures and
behavior (frequency of meetings, equity ownership) to market performance metrics such as Tobin’s Q and stock
market valuation, as these metrics are sensitive to perceived managerial efficiency and governance quality.
Despite its widespread use, Agency Theory is not without criticism. On the positive side, it provides clear,
testable propositions and a strong basis for governance reforms (Letza et al., 2020). However, critics argue that
it oversimplifies human motivation by focusing too narrowly on self-interest and neglecting collaborative or
stewardship behaviors (Davis et al., 1997). It also assumes a static view of principal-agent relationships and does
not fully capture the dynamics of board heterogeneity or strategic competence in complex environments.
Nevertheless, for the study of Board of Directors’ Competence and Market Performance, Agency Theory remains
highly relevant because it directly addresses the mechanisms through which boards influence managerial conduct
and, by extension, firm value. It is particularly suitable for examining how specific board capabilities (oversight,
financial skills, shareholding) function as tools to safeguard shareholder wealth and boost market confidence.
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Empirical Review
The Board of Directors' Strategic Competence and Market Performance
Empirical investigations into the strategic competence of boards and their impact on market performance have
evolved significantly over time. One of the earliest works by Zahra and Pearce (1989) explored how strategic
board roles, including oversight and vision-setting, influence corporate outcomes. Using a survey-based design
across 100 U.S. manufacturing firms, the study employed regression analysis and found a positive relationship
between strategic oversight and market valuation. Although foundational, the study did not explore stakeholder
alignment, nor did it use contemporary metrics like Tobin’s Q, which limits its relevance to modern governance
environments. Later, Hillman and Dalziel (2003) expanded this discussion by integrating agency and resource
dependence theories to model how director expertise and board capital influence firm performance. Their
analysis of archival data from Fortune 500 firms confirmed that strategically competent boards enhanced market
positioning. However, the study remained theoretical in nature and lacked empirical validation in developing
economies where governance structures differ.
In a study focused on Australian firms, Nicholson and Kiel (2007) assessed the influence of board intellectual
capital on market performance, revealing that boards demonstrating visionary capacity positively affected stock
performance. Using a sample of 147 publicly listed companies and regression methods, the study provided early
empirical support for the role of strategic insight. However, it failed to disaggregate board functions such as
stakeholder engagement or oversight depth. Similarly, Minichilli et al. (2009) conducted a cross-national
comparative study between Italy and the U.S., examining how board processes impacted firm performance.
Using structural equation modeling, they observed that boards actively engaged in strategic oversight and
forward-looking planning had stronger impacts on market value, particularly in investor-oriented contexts. While
the study offered strong methodological rigor, it did not isolate stakeholder alignment as a separate construct,
which limits its theoretical completeness.
Further contributing to the empirical evidence, Adams and Ferreira (2012) investigated the dual monitoring and
advisory roles of boards using panel data from over 1,500 U.S. firms and employing GMM estimation. They
found that strategic oversight, especially when exercised by diverse boards, significantly influenced Tobin’s Q.
However, visionary capability and stakeholder sensitivity were not directly measured, leaving partial gaps in
strategic competence analysis. Shifting focus to the African context, Nkundabanyanga et al. (2014) surveyed 108
service firms in Uganda and found that oversight and stakeholder alignment by the board significantly enhanced
market credibility. Despite its value in an emerging market setting, the study relied heavily on self-reported
performance data and did not address visionary leadership. In a similar line, Ali, Qureshi, and Khan (2017)
analyzed 200 listed firms in Pakistan using archival data and OLS regression. They revealed that visionary boards
strongly influenced Tobin’s Q in high-growth firms. However, they did not investigate stakeholder alignment or
oversight in detail.
Studies have continued to emphasize the strategic dimension of board roles. Garcia-Sanchez et al. (2020)
examined the relationship between board capital, stakeholder engagement, and market performance using panel
data from European firms. Applying 3SLS modeling, they concluded that stakeholder-oriented and visionary
boards improved both ESG scores and market value. The study’s strength lies in its multidimensional view of
board competence, though its focus on ESG diluted direct insights on core strategic oversight. Building on the
stakeholder theme, Naciti, Cesaroni, and Garzoni (2021) conducted a mixed-method study of Italian SMEs and
confirmed that long-term strategic vision and stakeholder sensitivity were key drivers of positive investor
perception and firm growth. While the study introduced rich qualitative insights, its focus on family-owned firms
limits its applicability to broader corporate settings.
Mensah and Darko (2024), who used panel data from 250 listed firms in Ghana and Nigeria to examine the effect
of board strategic competence on Tobin’s Q. Employing fixed-effects regression, they found that oversight and
visionary capacity significantly enhanced market performance, and that stakeholder alignment moderated this
relationship positively. This study stands out for its robust empirical model and regional focus, though it
acknowledged that stakeholder alignment was not measured with a direct construct. Collectively, these studies
highlight a consistent positive relationship between the strategic competence of boards and market performance.
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However, gaps remain in the simultaneous measurement of all three dimensions: oversight, visionary capability,
and stakeholder alignment, particularly in emerging markets and using disaggregated empirical models.
Board Technical Competence and Market Performance
Influence of board technical competence on market performance has grown in prominence, particularly as firms
recognize the importance of director expertise in financial decision-making and strategic oversight. One of the
earliest contributions is by Forbes and Milliken (1999), who sought to understand how board members' cognitive
resources, including education and professional experience, influenced strategic decision-making and
performance. Using a conceptual-empirical approach based on qualitative data from U.S. firms, the study
suggested that educational and professional diversity enhanced strategic effectiveness. However, the study
lacked quantitative performance metrics like Tobin’s Q, limiting its empirical strength.
Anderson, Mansi, and Reeb (2004) conducted a large-scale archival study on U.S. firms to assess the impact of
financial expertise on firm credit ratings and market value. The study, based on regression analysis of panel data
from 252 S&P 500 firms, found that firms with financially competent directors had lower bond yield spreads
and higher market valuations. This study’s strength lies in its robust financial metrics, though it focused more on
financial markets than broader corporate performance. Similarly, Petra (2005) analyzed whether financial
literacy among board members contributed to better corporate governance and market outcomes. Using
secondary data from 100 U.S. corporations and regression models, Petra found a significant positive correlation
between board financial expertise and return on equity. However, the study did not explore educational or
professional background in depth, presenting a gap in comprehensive board competence analysis.
Van der Walt and Ingley (2007) examined how educational and professional backgrounds influence board
strategic involvement and, in turn, organizational performance in New Zealand firms. Through a survey of 120
listed companies and factor analysis, they concluded that higher educational diversity and professional expertise
contributed to improved firm reputation and strategic agility. Yet, the study did not directly link these
competencies to stock performance or Tobin’s Q. In a similar context, Mishra and Mohanty (2014) evaluated
Indian manufacturing firms and found that directors with accounting and finance degrees significantly improved
market-based performance measures. Their archival study used regression analysis and provided evidence that
financial competence not only enhances governance quality but also investor confidence. Despite this, the study
lacked analysis on professional qualifications such as industry certifications or board memberships.
Ntim, Lindop, and Thomas (2015) investigated the effects of board financial and educational capital on firm
valuation in South African listed firms. Using panel data of 169 companies and generalized least squares (GLS)
regression, they discovered that both educational qualifications and financial literacy among directors positively
influenced Tobin’s Q and market-to-book ratio. The study’s strength was its emerging market focus and use of
multiple performance indicators, but it did not capture sector-specific dynamics. Ujunwa (2016) further explored
this topic in Nigeria, analyzing the role of board member qualifications on firm performance. His cross-sectional
study of 122 listed firms found that financial and professional competence had a significant impact on market
value. However, the study relied on self-reported measures for board competence and did not account for board
tenure or independence.
García-Sánchez and García-Meca (2020) conducted a panel data study of European firms to evaluate the role of
board technical expertise in enhancing financial performance and market trust. They found that boards with
members holding professional certifications and advanced degrees were associated with better investor ratings
and stock performance. Although rigorous in statistical modeling, the study largely focused on large-cap firms,
leaving a gap in small and mid-sized firms. In the same year, Agyemang and Castellini (2020) analyzed Ghanaian
firms and confirmed that technical expertise especially in finance and law had a positive effect on market
valuation. Using fixed effects regression and a sample of 100 firms, they emphasized the importance of
combining educational background with industry-specific experience.
Zhou and Wang (2022) explored Chinese listed firms and the effect of financial and educational competence of
board members on firm value under regulatory pressure. With a sample of 500 firms and panel data spanning
2010–2020, the study used robust regression techniques and revealed that boards with strong financial and
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educational qualifications had a consistently positive impact on Tobin’s Q. Their study’s strength lies in its
regulatory focus and large sample size, but it did not measure the influence of non-financial professional
experience (e.g., legal, strategic consulting), presenting a direction for future inquiry.
Board Effectiveness and Market Performance
Board effectiveness particularly in terms of board meeting frequency and shareholding has consistently
examined how these mechanisms influence firm performance and investor confidence. One of the earliest
influential studies is by Vafeas (1999), who investigated the relationship between board meeting frequency and
firm value using a sample of 307 U.S. firms. Employing panel data analysis and fixed-effects regression, the
study found a positive correlation between the frequency of board meetings and firm performance, measured by
Tobin’s Q. This work provided early empirical validation for the idea that more active boards are better monitors.
However, it did not address directors' shareholding as a governance mechanism, which limits its
comprehensiveness.
Building on this, Yermack (2004) analyzed how various board characteristics, including shareholding and
meeting frequency, impact firm valuation. Using archival data from large U.S. corporations and cross-sectional
regression analysis, the study found that firms with higher managerial ownership and more frequent board
meetings exhibited stronger market valuation. The strength of this study lies in its robust dataset and the
integration of multiple governance variables. However, it did not distinguish between executive and non-
executive ownership, leading to a generalized interpretation of shareholding influence. Similarly, Conger,
Finegold, and Lawler (2001) focused on board behavior and effectiveness in U.S. firms using qualitative data.
They argued that meeting frequency enhances accountability, but the lack of quantitative performance metrics
like market returns or Tobin’s Q was a major limitation.
In a study situated in the UK, Guest (2009) examined the effects of board structure and activity including meeting
frequency on firm performance. Using panel data from FTSE-listed firms and generalized method of moments
(GMM) estimation, the study found that board activity, particularly the number of meetings, significantly
improved market performance. However, the study noted diminishing returns beyond a certain meeting
threshold. It did not evaluate shareholding patterns, which restricts the full assessment of board effectiveness.
On the African continent, Uwuigbe (2011) studied Nigerian firms and revealed that both board meeting
frequency and director equity holdings positively influence firm performance. The study used a sample of 30
firms over five years and applied regression analysis. Although the study was regionally relevant, its limited
sample size weakened generalizability.
Kalsie and Shrivastav (2016) conducted a broader analysis of Indian firms, examining how board diligence
(measured by meeting frequency) and insider ownership affect firm valuation. Using a large dataset of NSE-
listed companies and applying panel regression, they found that high-frequency meetings and higher promoter
shareholding had a significantly positive effect on Tobin’s Q. This study's strength lies in capturing both
dimensions of board effectiveness, though it lacked qualitative insights into boardroom dynamics. In the same
year, Bhatt and Bhatt (2017) assessed Indian corporate boards and concluded that director ownership is a strong
predictor of market performance. Their study employed cross-sectional regression using data from 120 firms and
supported the idea that ownership-aligned boards reduce agency costs. However, board meetings were not
included, missing a crucial dimension of board effectiveness.
Rashid (2018) explored the interplay between director attendance, board meetings, and firm performance in the
context of Bangladesh. Using panel data of 90 firms and fixed-effects models, the study confirmed that frequent
board meetings and active participation are positively associated with market value. However, the study
acknowledged challenges in data availability on director shareholding. In a Sub-Saharan context, Ujunwa,
Okoyeuzu, and Modebe (2021) investigated Nigerian listed firms and found that both frequent meetings and
equity stakes held by board members improved Tobin’s Q and investor confidence. The strength of this study
lies in its inclusion of both board structure and ownership as determinants. Still, the authors noted that ownership
concentration could potentially lead to entrenchment rather than better performance.
Ali and Usman (2023) examined emerging markets and found that board diligence, as captured through meeting
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frequency and substantial director shareholding, contributes positively to firm valuation and strategic outcomes.
Using panel data from 200 firms across Asia and Africa, the study employed random-effects regression. Their
findings affirm the dual importance of active governance and ownership alignment in enhancing market-based
performance. However, the study did not distinguish between short-term and long-term performance effects.
Finally, Mensah and Darko (2024) investigated Ghanaian and Nigerian firms and found a statistically significant
interaction between board meeting frequency, shareholding, and Tobin’s Q. Their study applied fixed-effects
modeling and introduced stakeholder perception as a moderating factor. The study’s strength lies in its contextual
relevance and comprehensive governance approach, although it calls for further examination into how board
meeting content (not just frequency) shapes market outcomes.
Gap in Literature
Despite the growing body of literature on corporate governance and firm performance, significant gaps remain
regarding the specific dimensions of the board of directors’ competence and their influence on market
performance. While numerous studies (like Vafeas, 1999; Bhatt & Bhatt, 2017; Ujunwa et al., 2021) have
explored individual governance variables such as board size, meeting frequency, or ownership structure,
relatively few have holistically examined board competence as a multi-dimensional construct. Particularly
underexplored are the sub-dimensions of strategic competence, including oversight, visionary capability, and
stakeholder alignment, and technical competence, such as directors' educational, financial, and professional
qualifications. Most prior studies narrowly focus on board independence or board composition, thereby
overlooking how competence itself drives strategic decision-making and ultimately affects market-based
performance indicators like Tobin’s Q.
Additionally, the empirical evidence is largely skewed towards developed economies, such as the U.S. and the
U.K. (Guest, 2009; Yermack, 2004), with limited focus on emerging markets, especially in Sub-Saharan Africa.
Studies conducted in Nigeria (like Uwuigbe, 2011; Ujunwa et al., 2021) often suffer from limited sample sizes,
outdated governance data, or an overreliance on static cross-sectional methodologies that fail to capture firm
dynamics over time. Moreover, while some studies have examined the frequency of board meetings and director
shareholding, few have jointly assessed these within the broader context of board effectiveness and how they
interact with competence attributes to shape firm value. This leaves a theoretical and methodological gap in
understanding how well-equipped boards are to navigate strategic and financial complexities in volatile markets.
Given these gaps, this study is justified in providing a more comprehensive and context-specific investigation
into how the board of directors’ competence, measured through strategic competence, technical competence, and
board effectiveness, influences market performance. By integrating multiple proxies and adopting a multi-
dimensional view of board competence, the study offers a novel contribution to corporate governance literature.
It also fills a geographic gap by focusing on firms within an emerging market, providing practical insights for
policymakers, investors, and board nomination committees seeking to strengthen governance structures. The
findings could support the development of competence-based selection criteria for directors, aligning corporate
governance practices with performance-driven outcomes.
The hypotheses for this study are:
H₀₁: Board of Directors’ strategic competence has no significant effect on the market performance of firms.
H₀₂: Board of Directors’ technical competence has no significant effect on the market performance of firms.
H₀₃: Board effectiveness has no significant effect on the market performance of firms.
CONCEPTUAL FRAMEWORK
The conceptual framework explores the relationship between the Board of Directors' Competence and Market
Performance. Board competence is assessed through strategic, technical, and effectiveness dimensions. Market
performance is measured using Tobin's Q. The framework suggests that higher board competence leads to better
governance and stronger market outcomes.
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Figure 2.1. Conceptual Review
Independent Variable Dependent Variable
Source: Researcher’s Compilation (2025)
METHODOLOGY
This study uses an ex-post facto design because the study relies on using existing data beyond the researcher’s
manipulation. The population includes 13 deposit money banks listed on the Nigerian Exchange Group as of
December 31, 2024. A sample size of 5 banks was selected using purposive sampling techniques. The study
purposively selected banks based on criteria such as continuous listing, availability of complete financial and
governance disclosures, and relevance to the study’s objectives. Data were obtained from secondary sources
from the published annual reports of the firms and NGX filings for the period of 2015 to 2024. The base year of
2015 was selected because it coincides with the revision of corporate governance regulations by the Financial
Reporting Council of Nigeria (2015). The data collected were analyzed using descriptive statistics and panel
regression analysis.
Model Specification
Following the methodological approach employed by Jonah (2023), this study adapts a multiple regression
analysis to assess the effect of board members’ competence on the market performance of listed deposit money
banks in Nigeria. This analytical technique is appropriate as it combines both time-series and cross-sectional
data, enabling a more accurate and robust estimation of the relationships among variables across multiple banks
over time. The model is specified in its functional form as follows:
ROAᵢₜ = f(BMTᵢₜ, BMQᵢₜ) + εᵢₜ…………………………………………………………………… (i)
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Where: ROA = Return on Assets, ROE = Return on Equity, BMT = Board Member Tenure, BMQ = Board
Member qualification
To align with the study’s focus, the traditional governance–performance model has been modified. The
dependent variable is Tobin’s Q, a market-based metric that better reflects investor perception and firm value,
replacing accounting-based measures like ROA and ROE. The key independent variables, strategic competence,
technical competence, and board effectiveness, capture essential dimensions of board competence. Firm size and
leverage are included as control variables to account for structural and financial risk factors. These adjustments
create a more relevant model for assessing the impact of board competence on market performance in Nigeria’s
banking sector. Thus, the functional model is expressed as:
MAC = f(STC, TEC, BOD, FSI, LEV)
In econometric form, the model becomes:
MAC
it
= α + β₁STC
it
+ β₂TEC
it
+ β₃BOD
it
+ β₄FSI
it
+ β₅LEV
it
+ ε
it
…………….……………….(ii)
Where:
MAC = Market Performance (measured by TBQ), STC = Strategic Competence, TEC = Technical Competence,
BOD = Board Effectiveness. FSI = Firm Size, LEV = Leverage and Ε = Error term; i = firm; t = time (year)
MAC= f(TBQ)………………………………………………………………………………..…(iii)
Where: MAC = Market Performance; (TBQ) = Tobin’s Q
To further break down the functional model to show the explanatory variables
MAC = f(STC, TEC, BOD)…………………………………………….…..…………………...(iv)
MAC = Market Performance, STC = Strategic Competence; TEC = Technical Competence; BOD = Board
Effectiveness
The functional model is thus stated in econometric form as
MAC
it
= α + β₁STC
it
+ β₂TEC
it
+ β₃BOD
it
+ ε
it
………………………..………………………….(v)
Where: it= time;
MAC
it
= α + β₁STC
it
+ β₂TEC
it
+ β₃BOD
it
+ β₄FSI
it
+ β₅LEV
it
+ ε
it
………………………………(vi)
MAC = Market Performance (measured by TBQ), STC = Strategic Competence, TEC = Technical Competence,
BOD = Board Effectiveness. FSI = Firm Size, LEV = Leverage and Ε = Error term;
A priori Expectations
The a priori expectations for this study are informed by established theories of corporate governance and
supported by prior empirical evidence. In line with studies such as Adekunle (2022), the expected signs of the
model variables are guided by their theoretical relationships with market performance. Accordingly, the a priori
expectation equation is expressed as:
β1<0, β2<0, β3>0, β4>0, β5>0
Measurement of Variables
This section describes dependent, independent, and control variables used in the study.
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Table 1: Measurement of variables
Source: Researcher’s Compilation (2025)
Data Analysis and Discussion of Findings
This section presents the preliminary regression analysis, encompassing the descriptive statistics and normality
S/n
Variables
Description
Measurement
Source
1
Independent:
Strategic
Competence
The board’s
ability to
guide long-
term vision
and oversight
0 = No evidence of strategic oversight (no
vision/mission, no strategic planning
committee, no stakeholder engagement); 1 =
Moderate evidence (vision/mission or
committee present, limited stakeholder
engagement); 2 = Strong evidence
(vision/mission, dedicated committee, and
active stakeholder engagement present)
Naciti et al.
(2021); Mensah
& Darko
(2024)
2
Technical
Competence
Directors’
qualifications
and expertise
0 = Low competence (less than 25% of board
members have relevant professional
qualifications or certifications); 1 =
Moderate competence (25–50% of board
members have relevant professional
qualifications or certifications); 2 = High
competence (more than 50% of board
members have relevant professional
qualifications or certifications)
García-Sánchez
& García-Meca
(2020); Zhou &
Wang (2022)
3
Board
Effectiveness
Measures
board
diligence and
engagement
0 = Low effectiveness (board meets <4
times/year and <25% of directors hold
shares); 1 = Moderate effectiveness (board
meets ≥4 times/year or 25–50% hold shares);
2 = High effectiveness (board meets >4
times/year and >50% hold shares)
Ujunwa et al.
(2021); Ali &
Usman (2023)
4
Dependent:
Market
Performance
(Tobin's Q)
Indicates firm
value and
market-based
performance
Market Value of Equity plus Liabilities
divided by Total Assets
Nwaiwu &
Joseph (2018);
Mensah &
Darko (2024)
5
Control:
Firm Size
Reflects the
overall size of
the company
Natural logarithm of total assets
Rashid (2018);
Mensah &
Darko (2024)
6
Leverage
Captures
financial risk
from debt
Total Liabilities divided by Total Assets
Kalsie &
Shrivastav
(2016); Bhatt &
Bhatt (2017)
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assessment of the data. It further includes the correlation analysis and the panel regression results.
Descriptive Statistics
Table 2 Descriptive Statistics
Variable
Mean
Std. Dev.
Min
Max
Pr(Skewness)
Pr(Kurtosis)
Prob > chi²
TBQ
0.078
0.072
0.009
0.342
0.0000
0.0018
0.0000
STC
0.960
0.198
0.000
1.000
0.0000
0.0000
0.0000
TEC
1.180
0.482
0.000
2.000
0.1421
0.2984
0.1801
BOD
1.740
0.487
0.000
2.000
0.0001
0.0284
0.0003
FSI
1.133
0.019
1.111
1.191
0.0000
0.0051
0.0000
LEV
0.903
0.012
0.880
0.920
0.2491
0.0143
0.0354
Source: Researcher’s Computation (2025)
Table 2 reports the descriptive statistics and normality test results for the study variables. Market Performance,
measured by Tobin’s Q (TBQ), has a mean of 0.078 with a standard deviation of 0.072, ranging from 0.009 to
0.342. This indicates a modest average valuation of firms relative to their assets, though some firms attained
comparatively higher market performance. The skewness–kurtosis test (Prob > chi² = 0.000) shows significant
deviation from normality.
Strategic Competence (STC) averages 0.96 (SD = 0.198), reflecting that most firms possess strategic governance
mechanisms, though some lack such competence (min = 0). The normality test is significant (Prob > chi² =
0.000), indicating a non-normal distribution. Technical Competence (TEC) has a mean of 1.18 (SD = 0.482),
suggesting moderate representation of board members with technical expertise. Its skewness–kurtosis test (Prob
> chi² = 0.1801) is not significant, implying approximate normality.
Board Effectiveness (BOD) records a mean of 1.74 (SD = 0.487), reflecting relatively strong diversity and
effectiveness across boards, although some are less effective (min = 0). The distribution departs significantly
from normality (Prob > chi² = 0.0003). Firm Size (FSI) averages 1.133 (SD = 0.019), with values narrowly
ranging from 1.111 to 1.191, indicating relative homogeneity in firm size. Its normality test is also significant
(Prob > chi² = 0.000), suggesting non-normality.
Leverage (LEV) has a mean of 0.903 (SD = 0.012), ranging from 0.880 to 0.920, showing consistently high debt
financing among the firms. The skewness–kurtosis test is significant at the 5% level (Prob > chi² = 0.0354),
suggesting non-normality.
Overall, except for technical competence, most variables deviate significantly from normality. This justifies the
use of robust estimation techniques in the regression analysis to correct for potential violations of classical linear
regression assumptions.
Test of Variables
Correlation Matrix
Table 3 Combined Correlation Matrix with VIF
Variable
TOBINQ
STC
TEC
BOD
FSI
LEV
VIF
TOBINQ
1.0000
STC
0.1939
1.0000
1.13
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TEC
-0.2344
0.0770
1.0000
1.06
BOD
-0.3759
-0.1101
-0.1444
1.0000
1.06
FSI
-0.4571
-0.3181
0.0961
0.1579
1.0000
1.19
LEV
-0.0213
0.0136
0.1310
-0.0120
0.1558
1.0000
1.04
Source: Researcher’s Computation (2025)
Table 3 presents the correlation matrix alongside the variance inflation factors (VIFs), which jointly assess the
extent of linear association among the explanatory variables. Tobin’s Q (TOBINQ) shows weak positive
correlation with Strategic Competence (STC, r = 0.194) but negative associations with Technical Competence
(TEC, r = –0.234), Board Effectiveness (BOD, r = –0.376), and Firm Size (FSI, r = –0.457). Its correlation with
Leverage (LEV) is negligible (r = –0.021). This suggests that higher board effectiveness and firm size are, on
average, associated with lower market performance in the sampled firms.
The interrelationships among the independent variables are generally low. For instance, STC and TEC correlate
at 0.077, while BOD and TEC correlate at –0.144. Importantly, none of the correlation coefficients exceeds the
conventional 0.70 threshold, indicating no serious multicollinearity concerns from the correlation structure.
The VIF statistics corroborate this. All explanatory variables have VIF values close to 1 (ranging from 1.04 to
1.19), with a mean VIF of 1.10, far below the common cut-off thresholds of 5 or 10. This confirms the absence
of harmful multicollinearity in the dataset. Consequently, the regression coefficients estimated in subsequent
analyses can be considered stable and reliable.
Linearity Test
Figure 1: Linearity Test for Explanatory Variables and Tobin’s Q (Partial Regression Plots)
Source: Researcher’s Design (2025)
Figure 1 illustrates the partial regression plots between market performance (Tobin’s Q) and each explanatory
variable, controlling for the effects of the other independent variables. The purpose is to examine whether the
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relationship between Tobin’s Q and the predictors is approximately linear, as assumed by panel regression
models.
The relationship between Strategic Competence (STC) and Tobin’s Q is weakly positive, with a flat slope (coef
= 0.021, t = 0.45), suggesting minimal linear association. In contrast, Technical Competence (TEC) exhibits a
significant negative linear relationship with Tobin’s Q (coef = –0.039, t = –2.13), indicating that higher technical
expertise on boards may be associated with reduced market valuation in the sample.
Board Effectiveness (BOD) also shows a significant negative slope (coef = –0.052, t = –2.84), implying that
increases in measured board diversity or effectiveness correspond to lower firm market performance. Similarly,
Firm Size (FSI) displays a negative and statistically significant relationship with Tobin’s Q (coef = –1.413, t = –
2.83), suggesting that larger firms may be less efficient in generating market value relative to their assets.
For Leverage (LEV), the slope is negative but not statistically significant (coef = –0.040, t = –0.54), indicating
no strong evidence of a linear association with Tobin’s Q.
Overall, the linearity checks confirm that the key variables (TEC, BOD, and FSI) demonstrate significant
negative linear trends with market performance, while STC and LEV show weak or negligible linear
relationships. These results validate the linear specification of the regression model, though the directions of
association highlight potential governance and structural constraints in driving firm value.
Diagnostic Tests
Table 4 Diagnostic Test
Test
Null Hypothesis (H₀)
Test
Statistic
p-
value
Decision
Modified Wald Test for
Groupwise
Heteroskedasticity
σᵢ² = σ² (homoskedasticity)
χ²(5) =
170.53
0.0000
Reject H₀ →
Heteroskedasticity
present
Breusch–Pagan LM Test for
Random Effects
Var(u) = 0 (no panel
effect)
chibar²(1) =
0.00
1.0000
Fail to reject H₀ → RE
not appropriate
Hausman Test (FE vs RE)
The difference in
coefficients is not
systematic
χ²(5) =
41.03
0.0000
Reject H₀ → FE
preferred over RE
Wooldridge Test for
Autocorrelation
No first-order
autocorrelation
F(1,4) =
38.90
0.0034
Reject H₀ →
Autocorrelation present
Source: Researcher’s Computation (2025)
Before proceeding with the interpretation of the regression results, several diagnostic tests were conducted to
ensure the validity and robustness of the panel model estimates. These tests focused on heteroskedasticity, the
choice between fixed and random effects, and the presence of serial correlation.
The Modified Wald test for groupwise heteroskedasticity in the fixed effects model produced a chi² statistic of
170.53 (Prob > chi² = 0.0000), leading to the rejection of the null hypothesis of homoskedasticity. This indicates
the presence of heteroskedasticity across the panels, necessitating the use of robust estimation techniques to
correct standard errors.
The Breusch and Pagan Lagrangian Multiplier (LM) test for random effects returned a chibar²(01) value of 0.00
(Prob = 1.0000), failing to reject the null hypothesis that the panel-level variance component is zero. This result
suggests that the random effects model is not appropriate, as there is no significant variation across individual
panels that can be captured by the random effects specification.
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The Hausman specification test, which compares the fixed and random effects estimators, produced a chi²(5)
value of 41.03 with a Prob > chi² = 0.0000. This strongly rejects the null hypothesis that the difference in
coefficients is not systematic, implying that the fixed effects estimator is consistent while the random effects
estimator is biased. This further reinforces the preference for fixed effects over random effects.Finally, the
Wooldridge test for autocorrelation in panel data yielded an F(1,4) statistic of 38.90 (Prob = 0.0034), indicating
the presence of first-order autocorrelation in the error terms. This violates the classical regression assumption of
serially uncorrelated errors.
In summary, the diagnostic tests reveal evidence of heteroskedasticity and autocorrelation, with the Hausman
test validating the fixed effects specification over random effects. Consequently, the study adopts panel-corrected
standard errors (PCSE) as the most appropriate estimation technique, since it simultaneously corrects for
heteroskedasticity, contemporaneous correlation, and autocorrelation, ensuring more reliable inference.
Board of Directors Competence and Market Performance
Table 5 Prais–Winsten Regression with Panel-Corrected Standard Errors (PCSEs)
Predictor
Coefficient (β)
Std. Error
z
p-value
95% CI
Strategic Competence (STC)
0.0323
0.0150
2.15
.038
0.0029, 0.0618
Technical Competence (TEC)
0.0163
0.0061
2.66
.012
0.0043, 0.0283
Board Effectiveness (BOD)
0.0059
0.0018
3.20
.003
0.0023, 0.0095
Firm Size (FSIZ, control)
0.0406
0.0199
2.04
.041
0.0016, 0.0796
Leverage (LEV, control)
–0.0162
0.0046
–3.54
.000
–0.0252, –0.0072
Constant
0.8227
0.2147
3.83
.000
0.4018, 1.2436
Model Summary
R² = .501; Wald χ²(5) = 32.60; p < .001; ρ = .189; N = 50
Source: Researcher’s Computation (2025)
The effect of board competencies on market performance was estimated using the Prais–Winsten regression with
panel-corrected standard errors (PCSEs). This method was chosen to address the presence of heteroskedasticity
and autocorrelation identified in the diagnostic tests and is particularly suited for small balanced panels. The
estimation was carried out on 50 firm-year observations drawn from 5 firms over 10 years.
The overall model is statistically significant, with a Wald chi²(5) = 32.60 (p < 0.0001), confirming that the
explanatory variables jointly influence market performance. The R² value of 0.501 indicates that approximately
50.1% of the variation in Tobin’s Q is explained by the predictors. The estimated autocorrelation coefficient (ρ
= 0.189) points to modest persistence in the error structure across time, which the PCSE estimator corrects for.
The result in Table 5 shows that Strategic Competence (STC) has a positive and statistically significant
coefficient (β = 0.0323, p-value = .038). Since p-value < 0.05, the null hypothesis (H₀₁) is rejected. This implies
that the strategic competence of the board significantly improves market performance, measured by Tobin’s Q.
The regression results reveal that Technical Competence (TEC) is positive and significant (β = 0.0163, p-value
= .012). Since p-value < 0.05, the null hypothesis (H₀₂) is rejected. This indicates that directors with technical
expertise significantly enhance the market performance of firms. Board Effectiveness (BOD) is also positive and
statistically significant (β = 0.0059, p-value .003). Given that p-value < 0.05, the null hypothesis (H₀₃) is rejected.
This confirms that effective boards, reflected in meeting regularity and ownership structure, significantly
improve market performance.
For the control variables, Firm Size (FSIZ) has a positive and significant effect (β = 0.0406, z = 2.04, p-value =
0.041). This implies that larger firms are associated with higher market valuation, reflecting the advantage of
scale and stronger market presence. Conversely, Leverage (LEV) is negative and highly significant (β = –0.0162,
z = –3.54, p-value < 0.001), suggesting that higher debt levels reduce market performance as investors penalize
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highly leveraged firms. The constant term is also significant (β = 0.8227, p-value < 0.001), representing the
baseline level of Tobin’s Q when all predictors are held at zero.
DISCUSSION OF FINDINGS
The result shows that board strategic competence (STC) has a positive and significant effect on market
performance. This implies that boards with stronger oversight, visionary capacity, and stakeholder alignment
significantly improve the market valuation of firms. This finding supports Zahra and Pearce (1989), who found
that strategic oversight positively influenced corporate outcomes in U.S. firms, and Hillman and Dalziel (2003),
who emphasized the role of board capital in enhancing firm performance. It is also consistent with Nicholson
and Kiel (2007) and Minichilli et al. (2009), who observed that visionary boards and forward-looking planning
improved stock performance and firm value in developed economies.
In emerging markets, the result aligns with Nkundabanyanga et al. (2014) in Uganda and Ali et al. (2017) in
Pakistan, both of which reported that oversight and visionary capacity enhance Tobin’s Q. More recently, Mensah
and Darko (2024) demonstrated in Ghana and Nigeria that board oversight and visionary capacity significantly
enhance Tobin’s Q, with stakeholder alignment further strengthening the effect. The present study reinforces
these findings within the Nigerian context, showing that strategic competence remains a central governance lever
in boosting market performance.
The regression results further show that board technical competence (TEC) exerts a positive and significant
influence on market performance. This finding suggests that boards with members who possess educational,
financial, and professional qualifications are more effective in guiding firms towards higher market valuation.
This outcome is consistent with Forbes and Milliken (1999), who argued that board members’ cognitive
resources strengthen decision-making. It also supports Anderson et al. (2004) and Petra (2005), who found that
financially competent directors improved corporate governance and reduced risk, leading to higher firm
valuation.
In line with Mishra and Mohanty (2014) and Ujunwa (2016), who found positive associations between board
qualifications and market value in India and Nigeria, respectively, the current findings confirm that financial and
professional expertise provide credibility that reassures investors. The results also corroborate the work of
García-Sánchez and García-Meca (2020) in Europe and Agyemang and Castellini (2020) in Ghana, both of
whom found that professional and educational qualifications among directors enhance stock performance and
market trust. Zhou and Wang (2022) similarly observed that financial and educational qualifications of directors
in China significantly improve Tobin’s Q. Collectively, the present study strengthens empirical evidence that
technical expertise is a critical driver of firm market performance in both developed and emerging markets.
Finally, the analysis shows that board effectiveness (BOD) has a positive and significant effect on market
performance. This indicates that frequent board meetings and director shareholding substantially improve firm
market performance. The result is consistent with Vafeas (1999), Yermack (2004), and Guest (2009), all of whom
reported that more frequent board meetings enhance accountability and positively affect firm valuation. It also
aligns with Uwuigbe (2011) and Ujunwa et al. (2021) in Nigeria, who found that both board meeting frequency
and director shareholding boost Tobin’s Q.
The result also supports evidence from India (Kalsie & Shrivastav, 2016; Bhatt & Bhatt, 2017) and Bangladesh
(Rashid, 2018), which confirmed that director ownership and frequent meetings enhance market value. In a
broader cross-country context, Ali and Usman (2023) demonstrated that board diligence and equity holdings are
strongly associated with firm value in Asian and African firms, while Mensah and Darko (2024) highlighted the
interaction between board meetings, shareholding, and market valuation in West Africa. The present study adds
to this body of evidence by reaffirming that active, engaged, and ownership-aligned boards significantly
contribute to higher market valuation in Nigerian listed firms.
CONCLUSION AND RECOMMENDATIONS
This study examined the effect of board strategic competence, technical competence, and board effectiveness on
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the market performance of Nigerian listed firms, with firm size and leverage included as control variables. Using
panel data covering 50 firm-year observations from 2015 to 2024 and applying the Prais–Winsten regression
with panel-corrected standard errors (PCSEs) to correct for heteroskedasticity, serial correlation, and
contemporaneous correlation, the findings provide robust insights into how board-level competencies influence
firm value measured by Tobin’s Q.
The results show that board strategic competence has a significant positive effect on market performance,
indicating that boards with stronger oversight, visionary capability, and stakeholder alignment enhance firm
valuation. Technical competence also exerts a significant positive effect, highlighting the importance of
directors’ educational, financial, and professional expertise in boosting investor confidence and firm value.
Similarly, board effectiveness, measured through meeting frequency and director shareholding, significantly
improves Tobin’s Q, confirming the role of engaged and ownership-aligned boards in enhancing performance.
Among the control variables, firm size was found to significantly increase market performance, while leverage
had a significant negative effect, showing that larger firms enjoy higher valuation, whereas highly leveraged
firms are penalized by investors.
In conclusion, the study establishes that in the Nigerian corporate context, market performance is significantly
shaped by the strategic, technical, and effectiveness dimensions of board competence, alongside firm-specific
factors such as size and leverage. Strengthening board quality through these competencies will not only enhance
firm valuation but also improve investor confidence and the competitiveness of Nigerian firms in global capital
markets.
Based on these findings, the following recommendations are made corporate governance policies should
prioritize the inclusion of directors with strong strategic competencies, particularly in oversight, visionary
leadership, and stakeholder engagement, as these capabilities enhance market performance; boards should
incorporate members with proven technical expertise in finance, law, and professional practice, as such
competence strengthens governance credibility and market value; firms should ensure that boards remain
effective by holding meetings regularly and promoting equity ownership among directors, thereby aligning board
members’ interests with those of shareholders; regulators such as the Securities and Exchange Commission
(SEC) and the Nigerian Exchange (NGX) should update governance codes to emphasize the appointment of
directors with both strategic and technical expertise, as well as guidelines encouraging active board engagement
and institutional investors should evaluate firms not only on financial indicators but also on the composition and
effectiveness of their boards, rewarding companies that demonstrate strong governance competencies.
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