Decision Friction vs. Monitoring: Does Board Independence Hamper Resilience in Emerging-Market Banks?

Corporate governance guidelines often emphasize board independence to minimize agency costs. Yet, in highly concentrated emerging markets, strict compliance with outside-monitoring mandates can be associated with structural bottlenecks and decision friction during economic shocks. We evaluate how board independence and corporate social responsibility (CSR) relate to bank valuations during systemic disruptions, using data from the 10 systemically important commercial banks listed on the Nigerian Exchange (NGX) from 2013 to 2024. This panel captures 120 bank-year observations, representing 87.4% of total commercial banking industry assets. Long-run parameters are estimated using a Pooled Mean Group (PMG) Panel ARDL framework with robust Driscoll–Kraay standard errors, supplemented by a non-parametric Random Forest machine learning feature importance diagnostic. The machine learning model identifies CSR expenditure (LTCSR) as the most important predictor of bank value restoration, outranking traditional balance-sheet controls like equity book value and asset scale. The parametric estimations reveal a significant long-run independence discount (β = −0.342, p < 0.05), where a 10 percentage point increase in outside directors is associated with an absolute 0.034 unit market valuation penalty, a trend theoretically consistent with crisis-driven decision friction. However, the underlying banking network shows high recovery elasticity, absorbing 69% of external valuation shocks within a single annual cycle (φ = −0.690, p < 0.01). Finally, a quadratic inflection point (translating to an actual annual monetary expenditure threshold of approximately ₦1.67 billion Naira) paired with asymmetric quantile distributions indicates that CSR serves as a plausible emergency reputational shield for lower-quantile institutions (q25) but acts as a strategic asset for market leaders (q90). These findings suggest that macroprudential supervisors should consider shifting from rigid, headcount-based compliance toward functional capability thresholds.