Board Leadership Structure Research Articles

The relationship between board leadership structure and earnings management in Asia-Pacific

Purpose This study aims to review the growing research area of behavioral corporate governance; it explores the relationship between CEO duality attributes and earning management in the context of Asia-Pacific countries. Over time, the use by boards of chief executive officer (CEO) duality has fluctuated, and the scholarly conceptualizations of the phenomenon have become more complex. Design/methodology/approach This paper uses panel data from 330 firm years from Australia, Malaysia, The Philippines and Pakistan by taking a sample of three years from 2011 to 2013. Findings The results of the analysis reveal that the board leadership structure was not associated with firm performance and financial reporting quality. However, female CEOs impacted negatively on firm performance in Malaysia, The Philippines and Pakistan. Further analyses expose that the firm size was negatively related with performance, whereas established firms in Australia had strong reporting quality. However, large boards assured healthier reporting quality in Australia and Malaysia. Practical implications This paper provides empirical evidence that a unitary leadership pattern has no significant impact on companies in the Asia-Pacific, and it would be of interest to regulatory bodies, business practitioners and academic researchers. Originality/value This paper contributes to the literature on corporate governance and earnings management by introducing a framework for identifying and analyzing moderating variables that affect the relationship between the leadership structure and a firm’s financial reporting quality.

The dynamic relationship between CEO duality and firm performance: The moderating role of board independence

For a panel of U.S. firms, we employ system GMM to estimate a dynamic model of the relationship between firm performance and governance characteristics including board leadership structure. Our results provide convincing evidence that a joint leadership structure, i.e., CEO duality has statistically significant negative impacts on firm performance. We also document that this effect is positively moderated by board independence. The results are robust across a number of sensitivity tests. The findings are consistent with arguments advanced by both agency theorists and some management scholars that though duality might reduce firm performance through managerial entrenchment, it can provide benefits to the firm in the presence of board vigilance.

Board diversity and corporate voluntary disclosure (CVD) in the annual reports of Bangladesh

This is an exploratory study designed to investigate the extant and nature of corporate voluntary disclosure (CVD) in corporate annual reports of Bangladesh. Specifically, examine the relationship between board diversity and corporate voluntary disclosures. The paper is based on a sample of 106 listed non-financial companies in Dhaka Stock Exchanges (DSE) from the period 2007-2011 and all the companies are selected by Judgment Sampling. The study is used ordinary least squares regression model to examine the relationship between explanatory variables and voluntary disclosure. Using an unweighted relative disclosure index for measuring voluntary disclosure, the empirical results indicate that Percentage Female Director (PFD), Board Leadership Structure (BLS) and Total Assets (TA) are positively association with corporate voluntary disclosure (CVD). In contrast, the extent of corporate voluntary disclosure is negatively associated with a Percentage of equity owned by the insiders to all equity of the firm higher management ownership.

Corporate Board Structure in the United States and India: A Comparative View

This study contributes to the existing body of knowledge concerning corporate governance practices by examining the corporate board and governance structures of American and Indian listed companies in a comparative study. Two hundred companies have been considered out of which 100 companies are listed on NYSE (New York Stock Exchange) and 100 companies are listed on BSE (Bombay Stock Exchange). T-test has been used for comparison between sample means from the two data sets (United States and India). To measure the year-wise variation in the mean values of variables, one-way ANOVA (analysis of variance) has been applied. Results of the study demonstrates that boards of US listed companies are relatively larger with majority of independent directors on board, prominence of combined board leadership structure and relatively more gender diverse as compared to Indian boards. The paper can be quite useful to academics and policy makers in terms of understanding developed and developing country corporate governance structures.

The impact of CEO duality attributes on earnings management in the East

Purpose– This study aims to examine an important, yet understudied, relationship between board leadership structure and earning management. With conflicting theoretical and empirical evidence underpinning the debate the practice has fluctuated, investor perception of board leadership structure has altered, international regulation has reacted, scholarly conceptualizations of duality have become overly complex and the need to understand duality and conclude the debate has increased.Design/methodology/approach– This study examines the relationship between board leadership structure, firm financial performance and financial reporting quality of Australian, Malaysian and Pakistani publicly listed companies by using a sample of three years from 2011 to 2013.Findings– Results based on data collected from Australia, Malaysia and Pakistan indicate that the board leadership structure is not associated with firm performance and financial reporting quality. However, the female chief executive impacts negatively on firm performance in Malaysia and Pakistan. Further analyses reveal that the firm size is negatively related, while the grown firms in Australia having strong financial reporting quality.Research limitations/implications– The study is based on Australian Stock Exchange-20, Kuala Lumpur Stock Exchange-30 and Karachi Stock Exchange-30 companies from 2011 to 2013; however, a large sample from other emerging economies is required.Practical implications– The paper provides empirical evidence that unitary or dual leadership structure has no impact on public listed companies and would be of interest to regulatory bodies, business practitioners and academic researchers.Originality/value– This paper contributes to the literature on corporate governance and firm performance by introducing a framework for identifying and analyzing moderating variables that affect the relationship between board leadership structure and firm financial reporting quality.

Antecedents of Corporate Board Independence in Simultaneous Equation Framework: Evidence from India

This paper drew attention to the core aspect of corporate governance, that is, installation of greater independence in corporate boards. However, it is to be noted that the empirical association between board independence and firm value has not yet been established decisively. Coupled with this fact, board independence, in turn, is determined by several factors, for example, firm value, inside ownership, leverage, firm's dividend payout policy, and so forth. Viewing the lack of such evidence in the Indian context, it became very crucial to analyze the aforementioned factors by using a sample of top Indian corporates. The data was empirically tested by means of three-stage least square regression, which unequivocally accounted for the endogeneity between board independence and firm value. The findings of 3SLS analysis suggested that inside ownership, leverage, dividend payouts, and combined board leadership structure appeared to be significant determinants of board independence. These results will be suitable for policy makers, regulators, and academicians.

Board Leadership Structure of PubliclyyTraded Insurance Companies

CEO duality is a contentious issue driving much debate amongst regulators and business leaders. It is also an aspect of corporate governance, to which insurance companies have made significant changes in recent years. Despite its significance, we know little about the determinants of CEO duality in the insurance industry and its impact on firm performance. This paper addresses these research questions. We find strong evidence that CEO duality is a complex decision, which insurance firms fine-tune in response to their individual circumstances. Compared to other industries, the insurance industry is unique in that the costs and benefits of CEO duality vary more with firm size. We find no evidence that CEO duality is detrimental to firm performance. If anything, the valuation impact of CEO duality appears to be positive for large insurers. Our results have important policy implications. Evidence suggests that regulatory initiatives targeting CEO duality of insurance firms should pay close attention to the role of firm size. It may also be desirable to promote regulations that can provide insurance companies decision flexibility in adjusting their leadership structures to competitive environments.

Outside Directors and Firm Performance: The Moderating Effects of Ownership and Board Leadership Structure

This study examines the nature and significance of the moderating effects of ownership and board leadership structure on the relationship between outside directors and firm performance. Using a sample of 42 non-financial Tunisian firms over the period 2004-2010, the results confirm the agency view of the positive relationship between board independence and performance. Similarly, in accordance with agency theory predictions, the results show that family ownership and CEO duality moderate negatively the outside directors–firm performance relationship. However, contrary to the predictions, institutional ownership moderates negatively that relationship. This can be explained by the substitution effect between corporate governance mechanisms. On the other hand, the largest shareholder ownership seems as a homologizer variable that influences the strength of the outside directors-firm performance relationship.

Earnings Informativeness, Board Size, Board Composition and Board Leadership Structure

One of the functions of board of directors is to monitor the quality of financial reporting.Therefore, it is important to understand whether board of director characteristics influence the quality of financial reporting.This paper examines whether earnings informativeness varies with board size, board composition and board leadership structure. We measure earnings informativeness by earnings and stock returns relationship.Our data consists of 3,761 firm-year observations of Malaysian firms listed on Bursa Malaysia over the period 2001–2012. Our results show that earnings informativeness is greater for firms that separate the roles of Chairman and CEO. However, the evidence shows that earnings informativeness does not vary with board size and board composition.

The joint effect of board characteristics on financial performance

Purpose– This paper aims to investigate the joint effect of board characteristics on financial performance. Most of the existing literature implicitly assumes that the relationship between either board composition, or board leadership structure and financial performance is direct.Design/methodology/approach– The generalized least squares method was performed as a panel data analysis on a sample of 40 Egyptian listed firms during the period from 2008 to 2010.Findings– The results demonstrated that under board leadership structure that assigns the duties of the CEO and chairman to the same person, increasing the proportion of non-executive members to the total number of directors has a negative impact on firm financial performance.Practical implications– First, corporate governance structures do not operate in a vacuum, and therefore, corporate governance mechanisms must be considered and assessed altogether. Second, failure to understand the underlying interdependency among corporate governance mechanisms may result in arguments that blame some corporate governance designs for poor financial performance. Third, there is no single board governance mechanism that can be considered ideal, but there are combinations of these mechanisms that are preferred.Originality/value– The paper adds to the corporate governance literature by providing empirical evidence from the emerging market of Egypt. The evidence shows that the relationship between board characteristics and financial performance is not a monotonic relationship. Consequently, these findings imply that existing evidence explaining the relationship between board characteristics and financial performance needs to be interpreted with some caution.

Board leadership structure for Chinese public listed companies

It is widely accepted that board leadership structure and whether the chairperson and CEO roles should be undertaken jointly or separately affects the performance of a firm. Despite this consensus, empirical evidence presents major uncertainties as to the direction and degree of this influence. This study contributes to this debate by examining the relationship between board leadership structure and firm performance and the expense ratio, using propensity-score matching methods for Chinese PLCs from 2003–2010. It is reported that whilst CEO duality is not related to companies' profitability ratios, it is linked to a higher expense ratio compared to matched companies with a separate board leadership structure. This indicates that a separate board leadership structure is an effective corporate governance arrangement to reduce agency costs for Chinese PLCs.

Board leadership structure and performance of Chinese firms in Singapore

We examine the effects of board leadership structure on the performance of Chinese firms listed on the Singapore Stock Exchange. Using a sample of 105 firms covering 2009 to 2011, we find that CEO duality positively affects firm performance that can largely be explained by stewardship theory. There is also support for contingency theory as the CEO duality-firm performance relationship depends on whether Chinese firms are incorporated in Singapore or otherwise. This study offers insights for corporate regulators to soften their stance on the monitoring clauses concerning CEO duality. Major stakeholders in Singapore-based Chinese firms may need to bring some balance to board independence, board size, and the nomination process, particularly where CEO duality improves firm performance.

The Role of Board Leadership Structure in Enhancing the Value of Directors' Human and Social Capital

In this paper we study the interaction between board leadership and board capital, shining the spotlight on the interplay between the monitoring and resource provision roles of the board. While the...

Board Leadership Structure, Audit Committee and Audit Quality: Evidence from Manufacturing Companies in Sri Lanka

Purpose: This paper aims to analyze whether the corporate governance attributes such as board leadershipstructure, audit committee meetings held, size of independent non-executive directors and size of non-executivedirectors have significant impact on audit quality of manufacturing companies listed on Colombo Stock Exchange,Sri Lanka during 2011 to 2013.Research Design: The study takes 32 manufacturing companies listed in Sri Lanka out of 36 as sample andemploys binary logistic regression method for modeling the association between a binary dependent variable suchas audit quality and multiple independent variables such as board leadership structure, audit committee meetingsheld, size of independent non-executive directors, and size of non-executive directors.Findings: The study finds the logistic regression model for overall evaluation, statistical tests of individualpredictors and goodness-of-fit. As per the output, Hosmer and Lemeshow test reveals the model for goodness offit with chi-square of 17.503 and with probability value of 0.008, which is significant at five percent levels. Cox &Snell R Square reveal 56.2 % of the variance in audit quality. Whereas board leadership structure and auditcommittee meetings held have significant relationship with audit quality, size of non-executive directors and sizeof independent non-executive directors have shown insignificant association.Research Limitation-As sample size is relatively small, there may be a challenge to generalize the results ofthis study widely.Originality-This research contributes to the literature by adding the significant association between somecorporate governance variables and audit quality. The findings from this research could be generalized to thecompanies similar to this category.

The effect of institutional investor type on the relationship between CEO duality and financial performance

Corporate governance literature presents inconclusive evidence regarding the relationship between board characteristics and financial performance. Remembering that certain types of, but not all, institutional investors exert influence on monitoring and influencing management, this study goes beyond the traditional analyses of institutional investors and focuses on the effect of two different types of institutional investors, namely, pressure-sensitive and pressure-resistant, on the relationship between board leadership structure and financial performance. While pressure-sensitive type includes those institutions that are less likely to challenge management, pressure-resistant type incorporates those institutions that have no business relationships with the firms in which they hold stocks, and therefore are better suited to impose controls on management decisions and behaviour. The findings strongly suggest that institutional ownership moderates the relationship between CEO duality and financial performance, with the relationship being positive (negative) in presence of pressure-resistant (pressure-sensitive) institutional ownership. These findings support prior studies that argue that corporate governance mechanisms, and hence board leadership structure, should be neither modelled nor isolated from other organisational variables. The results of this study can be of interest to researchers in corporate governance, policy makers and managers who aim to maximise the value of their firms and improve board effectiveness.

Board leadership structure and diversity over CEO time in office: A test of the evolutionary perspective on Italian firms

An evolutionary perspective on CEO-board relations suggests that CEO objectives and interests change over time, and that board roles should shift accordingly, from CEO leadership development during the early stages of CEO time in office toward monitoring during the latest stages. This study examines how two board characteristics, board leadership structure and board diversity, shape innovation investment among Italian firms. Empirical results support the hypothesized effects, suggesting that the board’s effects are contingent upon CEO time in office.

Chairman/CEO Duality and its Effects for the Management of Corporate Governance in Guayana

This research provides a detailed analysis of board leadership structure of corporations in Guyana focusing onwhether individual boards are duality or separately led. There were two questions being asked at the outset. First,would duality led or separately led companies prove more likely to achieve profitability and financial success.Secondly, if neither, was there some other configuration of the board that would be successful in the time frameunder study. The study is of significant importance because up to the present time there is no empirical researchwhich expresses an opinion on the phenomenon based on evidence of local experience. It was intended toestablish that the conclusions drawn regarding these arrangements in companies in the developed world werenot apposite in the Guyanese context and to discover what conclusions were relevant locally. To this end theresearch sought to develop a Guyanese position based on various metrics which were extracted from the AnnualReports of the target companies spanning a three year period i.e. 2009-2011. The evidence is certainlysuggestive if it is not compelling that there is a substantive relationship between board leadership structure andbusiness success in the marketplace of Guyana. Further study is needed, perhaps with a wider window maybe ofa ten year period as that would be likely to provide even more persuasive evidence of a correlation betweenleadership structure and performance.

Corporate governance and risk reporting in South Africa: A study of corporate risk disclosures in the pre- and post-2007/2008 global financial crisis periods

The 2007/2008 global financial crisis has reignited the debate regarding the need for effective corporate governance (CG) through sound risk management and reporting practices. This paper, therefore, examines the crucial policy question of whether the quality of firm-level CG has any effect on the quality and extent of corporate risk disclosures (CRD) in South Africa (SA) with particular focus on the pre- and post-2007/2008 global financial crisis periods. Using one of the largest datasets to-date on CG and CRD, from 2002 to 2011, and distinctively drawing on a multiple theoretical perspective, we find that CRD are largely ‘non-financial’, ‘historical’, ‘good news’ and ‘qualitative’ in nature over the ten-year period investigated. We also find that block ownership and institutional ownership are negatively associated with the extent of CRD, whilst board diversity, board size and independent non-executive directors are positively related to the extent of CRD. By contrast, dual board leadership structure has no significant connection with the extent of CRD. Our results are robust across a raft of econometric models that adequately address different types of endogeneity problems, as well as alternative CG and CRD proxies. Our findings are largely consistent with the predictions of our multi-theoretical framework that incorporates insights from agency, legitimacy, institutional, resource-dependence, and stakeholder theories.

Last dance or second chance? Firm performance, CEO career horizon, and the separation of board leadership roles

In recent years, many firms have chosen to separate their CEO and board chair positions. Prior research has demonstrated that there are three forms that a CEO�board chair separation can take: apprentice, departure, and demotion. In this paper, we examine the antecedents of these three types. Our results show that the three types of separation each have different profiles in terms of the prior performance of the firm, the independence of the board, and the career horizon of the incumbent CEO. The findings in this paper provide unique insights into the factors that drive boards' structural choices. As questions about board leadership structure become more nuanced and more relevant in both scholarship and practice, a full understanding of these factors will only become more important.

Reinvestigating the relationship between ownership structure and inventory management: A corporate governanceperspective

Abstract It is hypothesized in this study that the relationship between institutional ownership and inventory management is more likely to be moderated by other internal corporate governance mechanisms (i.e., managerial ownership, board leadership structure and board size). This is more likely to happen as one weak governance mechanism in one area will be offset by a strong one in another area. Furthermore, the effectiveness of one corporate governance mechanism (i.e., institutional ownership) is more likely to be contingent on some contextual variables. Econometric analysis, using a sample of Egyptian listed firms, provides strong evidence for the applicability of this theme and demonstrates that institutional ownership affects inventory management positively (negatively) when managerial ownership is high (low), CEO duality (non-duality) is in place, or board size is large (small). This conclusion is robust to the use of different control variables and econometric models.