Abstract
Purpose: Knowing the factors that might affect board structure is an important step in understanding boards and their role in corporate governance. This research aims to examine the effect of firm characteristics closely related to corporate governance mechanisms, such as the model of corporate governance, shareholder capital concentration, and stock exchange listing on board structure variables (size, independence, and gender diversity). Methodology: The sample of this study stems from large Macedonian joint-stock companies. We run a hierarchical linear regression of board characteristics on common demographic firm characteristics as control variables and contextual firm characteristics related to corporate governance mechanisms as independent variables. Findings: Joint-stock companies in the Republic of North Macedonia have relatively small boards, which provide no positive effects that would originate from the larger number of board members. Moreover, the number of outside independent members is small, insufficient to influence the boards with greater objectivity, independence, and quality. Larger companies with a one-tier model have statistically significant larger corporate boards and a larger number of independent directors. Implications: The best corporate governance practices worldwide must be used as a basis for future improvements of corporate governance in joint-stock companies in developing economies.
Highlights
The theory of and research in corporate governance provides evidence that the ability of boards of directors to perform their service, strategy, and control roles mostly depends on board structure characteristics, such as size, composition, diversity, com mittees, and meetings (Pearce and Zahra, 1992)
Our study aims to examine the effect of firm characteristics related more closely to corporate governance mechanisms, such as the model of corporate governance, share holder capital concentration, and stock exchange listing on board structure variables
According to the data from the joint-stock companies under scrutiny, we note that the joint-stock companies with a one-tier governance model have the average number of board members at 5.6
Summary
The theory of and research in corporate governance provides evidence that the ability of boards of directors to perform their service, strategy, and control roles mostly depends on board structure characteristics, such as size, composition, diversity, com mittees, and meetings (Pearce and Zahra, 1992). The review of the few studies that investigated the direct link between firm characteristics and board structure characteristics reveals possible determinants of effective corporate boards, such as general firm characteristics (ownership, industry; Ferreira and Kirchmaier, 2013), the firm’s external environment regulation, legal and operating environment (Pearce and Zahra, 1992; Hermalin and Weisbach, 1998; Boone et al, 2007), corporate strategy (Hermalin and Weisbach, 1998), corporate restructurings (Ning et al, 2007), the scope and complexity of the firm’s operations (Boone et al, 2007), the past financial performance of the company (Pearce and Zahra, 1992; Herma lin and Weisbach, 1998), other corporate board’s characteristics (Hermalin and Weisbach 1998; Ning et al, 2007), country effects (Ferreira and Kirchmaier, 2013), and national institutional characteristics (Guest et al, 2008). The literature and empirical research lack studies that more closely investigate possi ble determinants of effective corporate board structure in relation to corporate gover nance mechanisms
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