Using structural equation modeling to explain board process and board performance in a developing economy

• Main Authors: Tsafe, Bashir Mande, Ishak, Zuaini, Md Idris, Kamil, Ammani, Shahiba
• Format: Article
• Language: English
• Published: Global Strategic Management Inc., USA 2013
• Subjects: HC Economic History and Conditions; QA Mathematics
• Online Access: http://repo.uum.edu.my/9473/1/I.pdf; http://repo.uum.edu.my/9473/; http://www.gsmi-ijgb.com/Documents/IJGB%20V6%20N1%20P03%20-Bashir%20Mande%20-%20Structural%20Equation%20Modeling.pdf

This paper takes steps towards explaining behavioral principle-based board process as factors for effective board performance. Dominant rule-based board structure approach could not transform effective corporate functioning, thus inconclusive. Based on a survey perception of 154 respondents from Nigerian capital market participants, the study employs confirmatory factor analysis (CFA)in a structural equation modeling (SEM) approach. Other studies used EFA and in developed nations.This paper replicates and builds upon board process constructs cognitive conflict, effort norms, use of knowledge and skills, and group think.The study concludes that the constructs are valid measures of the latent constructs and significantly relate to board performance. In addition, the findings in this study seem also to suggest that individual board processes affecting specific board performance indicators, such as effort norms, usage of skills and group think tend to stand out, and are most likely to strengthen the effort of individual board members that reasonably enhance the service and networking roles of the work-groups.The results in this study seem to suggest that board process play a more important role in explaining board role performance, thus this study can be expressed in terms of contribution of theory.As part of their accountability to achieve firm objectives, they should collectively use the necessary knowledge and skills, information and authority to establish, and monitor the system of board firm control through the provision of participative advice. On a more practical note, combination of the afore-mentioned attitudes and roles and understanding the different dimensions of board processes could lead to better functioning of boards to maximize their respective tasks towards board performance.