Corporate Governance System and Entrepreneurial Orientation in the Banking Sector: Evidence from a Developing Country

Abstract

Streams of literature on Corporate Governance System (CGS) and Entrepreneurial Orientation (EO) dwelt mainly on the association or effect of CGS dimensions: such as board structure, board size and tenure, on limited aspects of EO. Whereas these dimensions are observable in companies’ documents and end of year reports, stakeholders may have limited understanding of behavioral tendencies exhibited by boards, and the manner in which tasks are being executed. This study was therefore conducted to ascertain the nexus between behavioral indicators of CGS and EO. Specifically, we analyzed whether boards’ effectiveness, knowledge, commitment and involvement correlate with innovativeness, proactiveness and risk-taking. Copies of the questionnaire were self-administered to 101 senior managers of deposit money banks. The data extracted from responses were analyzed using Kendall’s tau-b. Results show that CGS correlates positively with innovativeness and proactiveness; while risk-taking has a moderately positive association with effectiveness, knowledge and commitment, but correlates negatively with boards’ involvement. Based on the results and findings, it was recommended that boards should employ moderate control and supervision; existing corporate governance mechanism should be redesigned to foster innovativeness by promoting flexible business culture for reasonable risk-taking.