Abstract
This study investigates correlations between board characteristics and firm performances. For this purpose, six board characteristics were chosen: (1) equilibrium between non-executive and executive members of the board of directors; (2) independence of board members; (3) selection of board members by the assistant role of the Nomination Committee; (4) training the members’ competences; (5) remuneration policy of board members by the assistant role of the Remuneration Committee; (6) improuving the accountability and transparency of financial information by the assistant role of the Audit Committee. The financial performances are represented by Return on assets (ROA) and Tobin’s Q. The present study sample consists of 55 Romanian non-financial companies which are listed on the Bucharest Stock Exchange (BSE) in 2012. We found the following characteristics in the majority of boards of directors: equilibrium between non-executive and executive members, independence of the members and concerns on training competences. On the other hand, the majority of companies do not have, within their governance system, advisory committees (such as Nomination, Remuneration or Audit Committees), which are meant to help the board in its decision-making. No statistically significant association was found between any of the board characteristics and performances represented either by Tobin’s Q or ROA, but the findings are in line with numerous studies conducted in developing countries and may be explained by various shortcomings which characterise the lagging of transition economies.
Highlights
Romania is one of the emerging European countries which belong to the former communist bloc, together with Poland, the Czech Republic, Slovakia, Croatia, Bulgaria, Hungary and Germany
The present research focuses on identifying the relationships between various board characteristics and firm performances in the emerging market of Romania
Some board characteristics considered to be necessary for corporate governance efficiency were selected having in mind, the data sources provided by ‘Comply or Explain Statement’ such as: equilibrium between non-executive and executive members of the board of directors, independence of board members, selection and training of board members; the role played by Nomination, Remuneration and Audit Committees in the company’s governance
Summary
Romania is one of the emerging European countries which belong to the former communist bloc, together with Poland, the Czech Republic, Slovakia, Croatia, Bulgaria, Hungary and Germany. In 1989, changes occurred in Eastern Europe which mark the exit of these countries from communism. This period marked the recovery of these countries from a major setback, as compared to other democratic countries in Europe. Since 1989, Romania has faced a complex process of internal transformation, in order to achieve a functioning market.
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