Determinants of board structure: Evidence from Australia

Abstract

Linck et al. (2008) investigate the determinants of board structure in the US, an environment that features high litigation risk and low ownership concentration. In contrast, using a hand-collected data set that includes information from more than 1000 firms, this paper investigates the determinants of board structure in Australia, an environment that features low litigation risk and high ownership concentration. Multivariate analyses suggest that whereas board size and board independence increase with firm size, CEO duality decreases with firm size. Additional tests suggest that high ownership concentration increases board size, decreases board independence and increases CEO duality. These results imply that if high litigation risk against directors (as in the US) plays a monitoring role in corporate governance, ownership concentration appears to offer an alternative governance mechanism in countries such as Australia, which feature low litigation risk.