Corporate Governance Mechanism and Performance of Deposit Money Banks: A Theoretical Discourse

Chigbu, C. K. and Adesope, O. M. (2026).Corporate Governance Mechanism and Performance of Deposit Money Banks: A Theoretical Discourse.Afrisophia: Journal of African Experiment, Thought and Experience, Vol. 3, No. 3, pp. 1-23. https://doi.org/10.5281/zenodo.22673995 AbstractCorporate governance mechanisms constitute a fundamental pillar upon which the performance of deposit money banks rests, particularly in developing economies where regulatory frameworks and institutional environments present unique challenges to effective bank management. This paper examines the theoretical linkage between corporate governance mechanisms and bank performance, drawing extensively from agency theory, stewardship theory, and resource dependence theory to construct a comprehensive theoretical discourse on how governance structures shape financial outcomes in deposit money banks. The study explores key governance dimensions including board diversity, board independence, board supervision, and audit committee effectiveness, and their respective connections to bank performance measured through profitability, asset quality, and operational efficiency. The theoretical analysis reveals that robust governance structures significantly reduce agency conflicts between shareholders and management, align managerial incentives with organisational objectives, and facilitate access to critical resources that enhance competitive advantage. The paper further situates its arguments within the institutional context of deposit money banks in developing economies, where governance deficits have historically contributed to bank distress and financial instability. The study contributes to the existing theoretical corpus by synthesising competing perspectives on governance effectiveness and proposing contextualised theoretical propositions that advance scholarly understanding of the governance-performance nexus. The implications for regulatory policy, board structure design, and institutional reforms in the banking sector are carefully delineated, offering a robust platform for future empirical inquiry. Keywords: Corporate Governance, Board Structure, Bank Performance, Agency Theory, Deposit Money Banks, Developing Economies.