Board Capital, CEO Power, and Financial Distress Prediction in Listed Nigerian Firms

This study examines the joint effects of board capital and chief executive officer power on the ability to predict financial distress in listed Nigerian firms. Financial distress prediction models have traditionally relied on financial ratios, but recent literature highlights governance variables as significant predictors, reflecting the role of human capital and power dynamics in governing financially stressed organisations. Board capital, encompassing the collective human capital (expertise, qualifications) and social capital (network connections, external affiliations) of board members, is expected to enhance oversight quality and reduce financial distress risk. CEO power, measured through duality, tenure, equity ownership, and compensation dominance, is expected to reduce governance effectiveness and increase distress susceptibility when poorly managed. Drawing on Altman's Z-score model as the baseline financial distress predictor and extending it with governance variables, this study develops an augmented distress prediction model using panel data from forty-five listed firms over eight years, including a sub-sample of firms that experienced regulatory interventions or trading suspensions. Logistic regression and survival analysis are applied. The study addresses a gap in the Nigerian governance literature by integrating governance and financial variables within a unified distress prediction framework. Findings are anticipated to offer superior prediction accuracy compared to purely financial models. Keywords: board capital, CEO power, financial distress, corporate governance, listed firms.