Appointment Of Directors Research Articles

The Carrot and the Stick: Bank Bailouts and the Disciplining Role of Board Appointments

We empirically examine the Capital Purchase Program (CPP) used by the US government to bail out distressed banks and its implications for regulatory policy. We find strong evidence that a feature of the CPP—the government’s ability to appoint independent directors on the board of an assisted bank that missed six dividend payments to the Treasury—had a significant effect on bank behavior. Banks were averse to these appointments—the empirical distribution of missed payments exhibits a sharp discontinuity at five. Director appointments by the Treasury were associated with improved bank performance and lower CEO pay. (JEL G21, G28, G32, G34, G35, G38, H81)

Women's participation in corporate management in India and the Companies Act of 2013

This study examines the position of women on the Board of Directors (BOD) of a company and evaluates the laws and practices for appointing female directors on the board of Indian corporations. This paper evaluates “Section 149 (1) of the Indian Companies Act 2013,” which deals with the compulsory appointment of female directors. This study also discusses the female quota system in the context of corporate governance. The study appreciates the steps taken by the government to appoint female directors, which will promote women’s empowerment. This study also discusses the positions of other countries in the world. Furthermore, this study argues that while quota provisions are necessary to achieve gender equality, companies must motivate females for leadership.

Relationship between the composition of the audit committee and earnings quality in Tier One banks in Nairobi City County, Kenya.

This study investigates the relationship between audit committee composition and earnings quality in Tier One banks in Nairobi City County, Kenya. The composition of audit committees, particularly the presence of independent directors, financial experts, and industry experts, is hypothesized to significantly influence the quality of reported earnings. Using a sample of six Tier One banks over the period 2016-2021, this study employs a correlational research design to examine this relationship. Data was collected through questionnaires administered to 90 respondents across operational, middle, and lower management levels, with a response rate of 67%. The study utilized descriptive statistics, correlation analysis, and multiple regression analysis to analyze the data. Key findings indicate a positive and statistically significant relationship between audit committee composition and earnings quality. Specifically, the presence of independent directors (r = 0.38, p < 0.05), financial experts (r = 0.29, p < 0.05), and industry experts (r = 0.26, p < 0.05) on the audit committee were all positively correlated with measures of earnings quality. The regression analysis further confirmed these relationships, controlling for other audit committee characteristics such as size and meeting frequency. These findings suggest that the composition of audit committees plays a crucial role in enhancing the quality of financial reporting in Tier One banks in Kenya. The study recommends that regulatory bodies and bank management prioritize the appointment of independent directors with relevant financial and industry expertise to audit committees. This research contributes to the existing literature on corporate governance in the banking sector and provides practical implications for improving financial reporting quality in emerging markets.

Banker directors on board and corporate tax avoidance

We investigate how shareholder-debtholder conflict of interest affects the corporate tax avoidance using a unique setting of the affiliated and unaffiliated commercial bankers’ board representation. Consistent with the notion that board representation grants lenders’ access to private information that helps monitor and influence firms’ tax practice, we find that appointments of affiliated banker directors significantly reduce firms’ tax avoidance behavior, while appointing unaffiliated banker directors shows no such effect. The impact of affiliated banker directors on alleviating tax avoidance is stronger among firms with severer conflict of interest between shareholders and debtholders, specifically among firms with weaker corporate governance, higher financial leverage and higher CEO stock ownership.

Beyond borders: Interlocking directorships and stock price reactions of Islamic firms

Announcing a director's additional appointments may positively reflect the skills and negatively reflect the workload of the director and, therefore, may influence how investors perceive the shareholder value of the director's home firm. We examine the announcement effect of 276 additional appointments on the stock price of Islamic firms from 2010 to 2022. Event study tests show that the appointment of directors to other firms in Islamic jurisdictions decreases the home firm's stock price, on average. For appointments to non-Islamic firms, the stock price increases in the appointing firm's relative market capitalization, which brings prestigious benefits to the home firms.

Bank-affiliated directors' monitoring, earnings management, and financial reporting quality in emerging markets: Evidence from India

In this novel investigation of creditor governance in an emerging market, this paper examines the monitoring by Indian lenders of firms' earnings management and financial reporting quality through the appointment of a bank-affiliated director to the borrower's board. Specifically, we study the effect of having a bank-affiliated director on the board (a “BDB”), prior to the implementation of India's Insolvency and Bankruptcy Code (IBC). This setting represents a business environment characterized by underdeveloped financial institutions, a weak legal system, and inefficient bankruptcy resolutions. Unlike the U.S., where BDBs play a limited monitoring role, our evidence suggests bank-affiliated directors played an active role in firm governance and lowered earnings management as well as improving financial reporting quality in India during the period of our study. Specifically, we find lower discretionary accruals among firms with BDBs in cross-sectional, pre-post, performance matched, and propensity score matched analyses – signaling higher reporting quality and less earnings management. This finding holds after controlling for endogeneity and when measures of accounting conservatism or earnings persistence are utilized as additional measures of reporting quality. Further, the dampening effect of BDBs on discretionary accruals is more pronounced for companies subject to greater information asymmetry and those prone to agency problems. In addition, firms with BDBs on the board have less volatile ROAs and lower idiosyncratic risk, consistent with BDBs encouraging borrowers to pursue less risky investments to safeguard creditors' interests. As the first examination of the monitoring influence of BDBs on financial reporting quality – and earnings management in particular – in an emerging market, our results provide unique insights for policymakers and creditors seeking to enhance governance and reporting quality of firms in evolving business environments.

Excess is just as bad as deficiency: Parent director appointments and subsidiary innovation input

AbstractCorporate parents are important to subsidiary development. Drawing on the parent–subsidiary relationship perspective, this paper examines the impact of parent director appointments on subsidiary innovation input. Although existing research indicates that disproportional board representation can enhance control, the literature is silent on the effects of proportional board representation. Using a sample of listed nonfinancial Chinese subsidiaries between 2007 and 2021, we find that parent director appointments in line with shareholdings significantly enhance subsidiary innovation input. The positive effect is more pronounced when the parent appoints an executive manager, and the subsidiary operates in regions with a favorable institutional environment. Based on the analysis of innovation willingness and resource, the mechanism test reveals that parent moderate appointment of directors can improve innovation input by alleviating financial constraints and fostering a greater appetite for risk.

Do independent directors inform the share of CSR criteria in executive compensation? Moderating effect of gender diversity

AbstractThis paper extends and enriches the current research on CSR, CEO compensation contracts and characteristics of the board of directors by examining an underexplored question related to the potential impact of independent board members on the share of CSR criteria in executive compensation. It also considers a potential moderating effect of gender diversity in this relationship. Empirical analyses of a sample French firms listed on the SBF120 index between 2014 and 2021 show that independent directors have no impact on the inclusion of CSR criteria in the annual bonus of senior executives. They also reveal that gender diversity can strengthen the role of independent directors in indexing executive compensation to CSR criteria. The findings can be useful for corporate boards and policymakers seeking to boost the adoption of CSR criteria in executive compensation contracts. They provide empirical support for the Zimmermann law (2011) and urge the policymakers to boost the appointment of female directors on boards.

Antecedents of Independent Directors on Joint Venture Boards

The presence of independent directors on corporate boards is often seen as an important means of monitoring to address principal-agent problems and of providing external resources and advice to management. In joint ventures (JVs), however, shareholder-management frictions can be lessened by appointing insiders to management and board positions, whereas access to valuable expertise, resources, and networks are provided by the partners themselves. A natural question, then, is why and when do partners appoint independent directors to JV boards? We argue that the appointment of independent directors to joint venture boards is primarily driven by principal-principal conflict considerations, which are unique in the joint venture context compared with conventional widely held corporations. Consistent with this argument, we find that the likelihood of appointing independent directors increases when JVs face more exchange hazards due to the competitive overlap between partners and the broader functional scope of the JV. However, given that JVs also have alternative governance mechanisms to mitigate shareholder conflicts, we also find that more complex contractual agreements can potentially substitute for independent directors on JV boards. Although relational governance is often highlighted as a key facet of JV governance, we do not find such a substitution effect for this supporting governance mechanism. Overall, our research therefore highlights several interesting domain translation issues when applying existing corporate governance insights to the joint venture setting. Our paper concludes with a call for future research on independent directors serving on JV boards, as JVs represent an organizational form that has been neglected in corporate governance research.

Legal Analysis of Related Party Transactions in the BRICS Countries

Legal literature in the past has often debated whether concentrated corporate ownership (i.e. sizeable corporate conglomerates and corporate enterprises owned by business families or the government of a State) in a relatively close market leads to a high volume of related party transactions between the corporations in the respective market. The emerging economies attract substantial foreign investment due to the rapid growth of their markets and the presence of large publicly listed companies. Concentrated ownership structures in these countries tend to result in the expropriation of resources by controlling shareholders for their personal enrichment. There has been a high corporate failure rate due to related party transactions, despite the adoption of regulatory reforms that promote transparency, accountability, and fairness. Listed companies in the BRICS countries are marked by concentrated ownership structures controlled by either a family or the State. Although there are differences in ownership structures as well as indications of agency problems in the United States and the United Kingdom, the BRICS countries have adopted the same legal strategies to prevent unfair or abusive related party transactions in their respective countries, such as the appointment of independent directors, independent audit committees, CEO duality, and disclosure requirements. This study seeks to conduct cross-country comparative research to assess the ways in which the BRICS countries have regulated related party transactions. Each of the BRICS countries has adopted different monitoring mechanisms to prevent abusive related party transactions, which will be examined in the course of this research.

The influence of non-state-owned shareholder governance on the governance level of state-owned enterprises--Based on the perspective of board resolution behavior and party organization governance.

With an increasing number of heterogeneous shareholders participating in corporate governance in reality, the assumption of shareholder homogeneity in agency theory is gradually relaxing in the modern field of corporate governance. The policy of mixed ownership reform in China provides empirical evidence for studying heterogeneous shareholder governance. To fully understand the governance effects of non-state shareholders, we employ the ownership proportion held by non-state shareholders among the top ten shareholders and the appointment of directors as measures for non-state shareholder governance. Using a panel fixed-effect model from the perspective of state-owned enterprises (SOEs) party organizations, we examine the impact of non-state shareholder governance on the governance level of SOEs. The study reveals that non-state shareholder governance positively affects the governance level of SOEs, with board resolutions playing a crucial role in this relationship. When party members serve as directors, the governance effect of non-state shareholders is more significant. Based on the aforementioned research findings, we recommend further refining corporate governance measures for SOEs within the context of SOE reforms. It is advisable to optimize the party organizational governance structure and leverage the synergistic effects of non-state shareholder governance and party organizational governance. Advancing reforms along the Pareto improvement path will contribute to establishing a distinctive corporate governance system for Chinese SOEs.

Is Program Director Gender Associated With Gender Diversity Among Orthopaedic Surgery Residency Programs?

Women remain underrepresented in leadership roles, faculty roles, and among residents in orthopaedic surgery. It has been suggested that having women in leadership positions in orthopaedic surgery may help to increase the gender diversity of residency programs. However, to our knowledge, no study has explored the relationship, if any, between the gender of the residency program director and the percentage of women in the residency program. (1) Is the program director's gender associated with differences in the percentage of women orthopaedic surgery residents? (2) Do women and men differ in the time to appointment of program director? A list of 207 orthopaedic surgery residencies was obtained from the Accreditation Council for Graduate Medical Education (ACGME) website for the academic year 2021 to 2022. The study excluded 6% (13) of programs; 4% (8) were those without ACGME accreditation and those with initial accreditation, and 2% (5) did not have updated 2021 to 2022 resident lists. Descriptive information on 194 programs was obtained from publicly accessible resources from July 2021 through July 2022. The institution's website and the American Medical Association's (AMA) Fellowship and Residency Electronic Interactive Database (FREIDA) was used to collect residency program characteristics and resident demographics [ 2 ]. Doximity, Healthgrades, and LinkedIn were used to further collect current orthopaedic surgery residency program director demographics, including gender, age, and education/training history. To determine gender, photographs and pronouns (she/her/hers or he/him/hers) used in their biographies were used first. To confirm this, secondary sources were used including their NPI profile, which lists gender; Doximity; and their LinkedIn profile. Scopus was used to analyze research output by the program directors-using the Hirsch index (h-index) as the primary bibliometric metric. A total of 194 program directors were identified, of whom of 12% (23) were women and 88% (171) were men. Of the 4421 total residents among these programs, 20% (887) were women and 80% (3534) were men. A univariate analysis comparing program directors was conducted, with continuous variables analyzed using an independent-sample t-test and categorical variables analyzed using a Pearson chi-square test. With the numbers available, a post hoc statistical power calculation indicated that we could detect an 32% difference in the percentage of women in a program as significant with 80% power at the p < 0.05 level, whereas we might have been underpowered to discern smaller differences than that. With the numbers available, we found no difference in the percentage of women in residency programs run by women program directors than in programs in which the program director was a man (22% [125 of 558] versus 20% [762 of 3863], mean difference 2% [95% CI -1.24% to 7.58%]; p = 0.08). Comparing women to men program directors, women had fewer years between residency completion and appointment to the position of program director (8 ± 2 years versus 12 ± 7 years, mean difference 4 years [95% CI 2.01 to 7.93 years]; p = 0.02) and had a lower mean h-index (7 ± 4 versus 11 ± 11, mean difference 4 [95% CI 1.70 to 6.56]; p = 0.03) and number of publications (24 ± 23 versus 41 ± 62, mean difference 17 [95% CI 3.98 to 31.05]; p = 0.01), although they did not differ in terms of their advanced degrees, duration of training, or likelihood of having taken a fellowship. Orthopaedic residency programs that were run by women did not contain a higher percentage of women residents, suggesting that the gender of the individual in that role may not be as important as has been speculated by others. Future studies should investigate the intersectionality of gender, race, and ethnicity of residents, program directors, and current faculty. The fact that women were placed in program director roles earlier in career may also carry special jeopardy for them. Those roles are difficult and can impair a faculty member's ability to conduct individual research, which often is key to further academic promotions. Given that and the fact that the gender of the program director was not associated with differences in gender composition of residency programs, we believe that increasing mentorship and access to pipeline programs will help promote diversity in residency programs.

Cross-owners as monitors: more supervisory or distracted? Evidence from China

ABSTRACT In recent decades, cross-ownership becomes a rapidly growing phenomenon in capital markets across various countries. However, there remains an absence of consensus regarding the efficacy of cross-shareholders in monitoring within the realm of corporate governance. This study delves into this quandary by employing regression analysis on data spanning the years 2007–2018 from Chinese listed firms. Our findings reveal that cross-ownership significantly mitigates agency costs, a conclusion robustly supported through a battery of tests. Key mechanisms driving this phenomenon include information advantage and governance experience, facilitated through channels such as increased shareholding and director appointments. Notably, this positive effect is more pronounced in non-state firms, firms with less concentrated ownership, greater analyst attention, and less trustworthy auditors. In sum, our results underscore the constructive role played by cross-owners in fortifying corporate governance structures.

Editorial: Traditional and innovative methods for understanding corporate governance

The latest issue of the journal is composed of papers which are mostly empirical and contribute new ideas to the major issues of corporate governance, such as the appointment of directors, cultural diversity, emerging technologies, managing default risk, managerial discretion, institutional investors and the policy of proxy voting rights, strategic personalities of firms, ownership structure, etc.

Breaking the linear mould: exploring the non-linear relationship between board independence and investment efficiency

PurposeThis study examines the non-linear effect of board independence on the investment efficiency of listed firms worldwide. This study further tests whether the COVID-19 pandemic, industry competition and economic development influence the relationship between board independence and investment efficiency.Design/methodology/approachThe data are retrieved from the Thomson Reuters (Refinitiv) database and include international data from 33 countries, comprising 21,363 firm-year observations. The authors' regression analyses include firm-specific variables as controls that may impact investment efficiency. The authors also perform various robustness tests including, alternative measures of investment efficiency, weighted least squares regression, quantile regression and endogeneity issues.FindingsThe results reveal a non-linear relationship between board independence and investment efficiency. Specifically, the relationship follows a U-shaped pattern, indicating that the negative impact of board independence on investment efficiency becomes positive after it reaches its optimal point, thus supporting optimal board structure theory. Interestingly, the authors find no significant evidence of board independence’s effect on investment efficiency during the pandemic. In contrast, the relationship between board independence and investment efficiency is significant only during the non-pandemic period. Furthermore, the authors discover evidence of a U-shaped relationship in both emerging and developed markets, as well as in industries with high and low competition.Research limitations/implicationsThe authors' study discovers new evidence on the non-linear impact of board independence on investment efficiency, which has not been explored previously in existing research.Practical implicationsThis study has practical implications for investors by emphasising the importance of corporate governance and the appointment of independent directors. Investors should consider the findings of this study when making decisions related to corporate governance, as they can impact a firm's investment efficiency.Originality/valueDespite a considerable body of literature exploring the link between corporate governance and investment effectiveness, there is a dearth of research on the non-linear effects of board independence. Furthermore, the effects of the COVID-19 pandemic, industry competition and economic development remain unexplored.

Искусственный интеллект в корпоративном управлении

The prevalent artificial intelligence (AI) applications of today merely exemplify the full potential of artificial intelligence in the business realm. Artificial intelligence is poised to assume a general role in the management of companies, as it is increasingly being used as a tool to support the administrative work and decision-making of directors and managers. While the appointment of a robotic director may still seem like science fiction, the widespread use of artificial intelligence in corporate governance has proven to streamline the decision-making process. In general, corporate laws around the world are still based solely on human decision-making and deny the role of technology in corporate governance. This results in ineffective regulation strategies for artificial intelligence systems with managerial authority. As a result, there is uncertainty about the legal permissibility and legal implications of implementing artificial intelligence in the corporate sphere, which may discourage corporations from adopting artificial intelligence, even though the technology is likely to optimize the business process. This article aims to highlight the growing importance of artificial intelligence in corporate governance, with a focus on the development of a legal framework and general provisions on the legal position of artificial intelligence. The article offers a legal analysis of the potential role of artificial intelligence in the corporate lawyer’s legal work, focusing on potential risks and ways to minimize them.

BIOLOGICAL ASSET DISCLOSURE: A STUDY ON AGRICULTURAL COMPANIES IN INDONESIA

Research Purposes. This research aims to investigate the effect of biological asset intensity and the characteristics of boards of directors on the disclosure of biological assets. Research Methods The population in this study is the agriculture companies listed on the BEI using a purposive sampling method with 216 samples between 2005 and 2021. Data analysis uses multiple linear regression using STATA version 17. Research Results and Findings. The result indicates that biological asset intensity, board of directors size, and board of directors accounting expertise positively affect the disclosure of biological assets. The evidence has direct implications for companies in selecting directors, as stakeholders may demand the appointment of directors with accounting experts.

WOMAN DIRECTORS ON THE BOARD OF INDIAN COMPANIES: A MYTH OR REALITY

Recently, the companies, JM Financial Properties and Holdings, Shankar Packagings, Krishna Solvechem, a wholly-owned subsidiary of the Maharashtra State Road Development Corporation were fined for not appointing woman director on their boards. The appointment of a woman director on board was introduced in India in 2013 by enacting the legislation, of the Companies Act, 2013. And, the Listing regulations also made it mandatory for listed companies to have one woman director and the rule was to be complied by April 2015. But, from the incident of imposition of the fine, it can be inferred that there is no complete compliance yet even after 8 years. Therefore, an attempt is made to find out how far the rules relating to women directors have been complied within India.

Does directors’ educational background influence financing innovation through corporate venture capital investments? Evidence from France

This study examines whether directors’ educational background influences financing innovation through corporate venture capital (CVC). Our study comprises all CVC operations undertaken by French companies listed on the SBF 120 index between 2000 and 2018. The results show that directors who have graduated from elitist institutions strengthen the involvement of companies in financing innovation. We also find that female directors with a background in management enhance such strategies. These findings have several practical implications for managers and regulators. Thus, to ensure the involvement of corporates in financing innovation, the appointment of directors should be based on specific criteria.

Environmental disclosure practices in mixed ownership models: A study of Chinese private enterprises.

Environmental information disclosure is critical avenue for stakeholders to gauge the fulfillment of corporate environmental responsibilities, as well as a key path for companies to gain social reputation and achieve sustainable development. To achieve both economic and social sustainability and improve the environmental information disclosure by private firms, this study delves into the impact mechanism and realization path of mixed ownership reform on environmental information disclosure among Chinese private enterprises listed between 2010 and 2020. Utilizing a panel fixed effect model, we scrutinize the interplay between state capital involvement and the disclosure of environmental information by private enterprises. Our findings reveal that state capital involvement may encourage private enterprises to disclose environmental information through resource allocation and governance improvements. The higher the shareholding ratio of state-owned participating shareholders, the more it helps private firms to disclose environmental information. State-owned shareholders play a pivotal role in the appointment of supervisors, directors, and executives, effectively improving corporate governance mechanisms and positively moderates how private companies with state-owned capital participate in disclosing environmental information. Moreover, the magnitude of media coverage and the public opinion pressure faced by private enterprises further amplify the influence of state-owned capital involvement on environmental information disclosure. Additionally, our research reveals that corporate profitability partially interplays with the effects of state-owned capital disclosure of environmental information by private companies. According to the research results, we recommend that the government proactively promote mixed ownership reform with private enterprises as the main participants, fully leveraging the resource advantages and influence of state-owned capital. At the same time, it is imperative to strengthen the governance effect of internal state-owned shareholders and external public opinion supervision in private enterprises. Enhancing profitability is also identified as a key driver for private enterprises to engage in more robust environmental information disclosure practices.