Board Of Director Composition Research Articles

Investors’ demand in Initial Public Offering (IPO): Shariah compliance, corporate governance and macroeconomic factors

Purpose Initial Public Offering (IPO) is a major milestone for a company. It allows a private company to issue shares to a much broader group of investors and become public. But conclusive evidence of the driving forces behind investors’ demand is yet to be identified. Therefore, the major purpose of this study is to assess the level of investors’ demand in IPO and how investors’ demand in IPOs is affected. Design/methodology/approach The study will employ 80 IPO companies of a Muslim-majority country, Bangladesh, starting from 2013 to 2021 with application of linear and quantile regressions. Apart from that, t-test will be used to compare means of groups of Shariah-compliant and non-Shariah-compliant firms and IPOs under fixed-price and book-building mechanism. Findings Oversubscription is higher for IPOs issued through fixed-price method compared to book-building method, but no significant difference is found in oversubscription for Shariah firms compared to non-Shariah firms based on t-tests. The authors found IPO size, firm size, IPO risk, proportion of shares offered to public, and bank interest rate to have significant impact on the IPO demand. Some models found non-Shariah compliance status of IPO companies to be a significant factor for the investors to demand IPO. Quantile regression results found board independence to have a positive association with larger, less-subscribed firms and board size to have a negative relation with IPO demand, for smaller firms with high demand. Research limitations/implications Future studies may apply the findings to other settings, especially into the reasons behind preference for non-Shariah-compliant firms and higher demand for IPOs during higher interest rate. Equity issuing firms and issue managers can benefit from this study by wisely deciding on the proportion of shares for public, issue size and board of director composition. Shariah considerations cannot be ignored given that more information on Shariah compliance is disseminated among investors despite current non-preference for Shariah-compliant IPOs. On the other hand, institutional investors and general investors should consider firm-specific, governance and macroeconomic factors in IPO investment. Likewise, regulators would do well to bring in quality IPOs with characteristics mentioned in this study for ensuring stability of the market. Originality/value The main contribution of the study is identifying determinants of IPO demand: faith, governance, macro issues – understanding whether one or many of the above factors drive investor demand in IPOs of a Muslim-majority country will be the main contribution.

Corporate Governance and Firm Performance: Evidence from Microfinance Institutions in Tanzania

This study examined the impact of corporate governance on the performance of a firm. Two elements of corporate governance were involved namely the board of directors composition and audit committee composition which were assessed to find out their relations to Microfinance Institutions' (MFIs) financial performance. This study was done to contribute specific insights to the relationship and influence of corporate governance on firm performance especially due to limited literature in Tanzania. The study used a cross-sectional design, in which data were collected at a single point in time. Quantitative data were collected from 80 CEOs/Managers of MFIs under study. The study found that most of the respondents, which is equivalent to 66.2%, had the title of managers or supervisors and 17.4% were the CEOs/Directors. Moreover, MFIs agreed to have boards with independence (M=4.48, SD=0.49) and gender diversity (M=4.67, SD=0.41). Moreover, MFIs agreed to have an audit committee with members who had accounting/auditing/finance expertise. The findings from regression results further show that the relationship was significant between board composition (board independence and gender and geographical diversity) and audit committee composition (educational background and experience in microfinance issues) with the firm’s performance. The study concludes that corporate governance influences the financial performance of MFIs in Tanzania. The study recommends that MFIs and policymakers should ensure that the board of directors is characterised by independence and gender and geographic diversity. Also, the audit committee should comprise members who are experts in microfinance to enhance performance.

Board of directors’ composition and carbon emission performance

Board of directors’ composition and carbon emission performance

Nonexecutive director influence on informational asymmetries in Caribbean offshore financial centers

AbstractQuestion/issueThis is a study of the relationship between nonexecutive director personal ownership and firm's bid ask spreads in listed firms from across the Caribbean offshore securities exchanges.Research findings/insightsWe report that bid ask spreads increase with nonexecutive ownership. However, this result is reduced (negatively moderated) in the context of higher formal institutional quality and also if the territory has a fixed exchange rate regime but exacerbated (positively moderated) if the firm is located within an offshore jurisdiction.Theoretical/academic implicationsThe results regarding the influence of nonexecutive director ownership on firm liquidity‐based transaction costs, namely, market estimates of bid ask spreads, are interpreted in terms of the contingency of this relationship on the wider institutional context. The effectiveness of nonexecutive directors is highly contingent upon the specific institutional context. Higher formal institutional quality and the presence of a strong macroeconomic tie between territory and Organisation for Economic Co‐operation and Development (OECD) country lead to a reduction in these costs, while offshore financial centers lead to their increase. We argue that this highlights a shortcoming of agency theory's more limited view of institutions.Practitioner/policy implicationsThe results support regulator's focus on board of director composition and in particular nonexecutive remuneration in the form of ownership. Given the increasing dominance of Anglo‐American governance, firms worldwide are increasing the proportions of nonexecutive directors on their boards. However, their role is acutely context specific which is reflected in the relationship between their personal ownership and the liquidity‐borne transaction costs of the firm as a whole.

Can Board Gender Diversity Better Control Earnings Manipulation: Evidence from Banking Industry

The purpose of this paper is to examine the contribution of the board's gender diversity compared to its other characteristics in limitation earnings manipulation in the banks. The empirical study carried out on Tunisian banks over a period extending from 2001 to 2019, using the Panel-Corrected Standard Errors, allowed us to show that board gender diversity, turns out in this study of a considerable contribution to the board of directors composition since it has moderated accounting manipulation to avoid losses. As for the board independence, it has reduced earnings manipulation measured by the abnormal provisions. However, it turns out that board size and board duality does not have a significant effect on earnings manipulation.

Board of Directors Composition, Cash Conversion Cycle and Firms Performance: An Empirical Evidence from India

This paper examines the influence of cash conversion cycle (CCC) on the performance of Indian pharmaceutical companies. Furthermore, it aims to find out whether corporate governance measured by board of directors' composition moderates the relationship between CCC and firms' performance. The analysis of this paper is based on a panel dataset of 82 companies over the period from 2008 to 2017. The study uses generalised method of moment (GMM) model for estimating the results. Return on assets (ROA), net operating margin (NOM), and Tobin Q (TQ) are used as proxies for firms' performance, while CCC is used as an independent variable. Leverage and firms' size are used as control variables. The study revealed that CCC negatively affects the profitability of Indian pharmaceutical companies. Furthermore, it is also revealed that board of directors' composition moderates the association between CCC and firms' profitability. The study seeks to contribute to the existing literature by evaluating CCC on the performance of pharmaceutical companies in a different context; India.

Corporate Governance Practices in Senegalese Microfinance Institutions

The objective of this paper is to analyse the corporate governance practices in Senegalese microfinance institutions (MFIs), in order to judge their effectiveness. The question is whether in this microfinance setting, governance structures are well implemented and function as well as in conventional firms. In the MFI's literature and specifically in an African environment, there are not too much studies assessing the state of corporate governance practices. This paper aims to provide insights, using the Senegalese MFIs’ setting. To reach this end, a survey is conducted over a sample of 99 MFIs. The exploratory factor analysis is used to measure our constructs, from a sand of items collected through a questionnaire. Once the constructs are built, a factorization is performed, and the Cronbach's Alpha (α) allows us the judge the effectiveness of the axes obtained. The results indicate that: - Board of directors (BODs) in Senegalese MFIs are characterized by a plurality of roles. These include a disciplinary, as well as an advisory role. - The composition of BODs in Senegalese MFIs and their mode of operation meet the optimality requirements. - Finally, the BODs in Senegalese MFIs display traits of competency, through two dimensions which are the general competence and the knowledge of the external environment. The practical implications of our results is that Senegalese MFIs have well-functioning BODs. Then being MFIs does not prevent adherence to the best corporate governance practices. The existence of well-functioning BODs should translate into improved financial and social performances.

The Effect of Independent Board of Directors Composition, Independent Audit Committee and Firm Characteristics to The Integrated Reporting Disclosure of The Manufacturing Firms Listed in Indonesian St

The Effect of Independent Board of Directors Composition, Independent Audit Committee and Firm Characteristics to The Integrated Reporting Disclosure of The Manufacturing Firms Listed in Indonesian St

A Thematic Review on Composition of Board of Directors (BOD) and Its Impact on Performance

This thematic paper has been prepared to find out how the composition of Board of Directors makes impact on performance of firms. To find this impact, the articles published in international journals have been reviewed. In addition to this detailed study of the legislator, the provision regarding composition of BOD in Nepal was made as stated in BAFIA and Company Act. The Board of Directorsis the elected members among the shareholders who could best represent the interest of each and every member. Corporate boards are one of the, if not the most important, internal corporate governance mechanisms that monitor and advise management in fulfilling the mandate to protect shareholder interests.There is still much debate as to the relationship between firm performance and boards of directors, which are arguably the main component of corporate governance.The thematic review concludes that the relationship between BOD and performance was not found on the basis of existing literature reviewed. Thus, the study opened the ground for the researcher to test this empirically.NCC JournalVol. 3, No. 1, 2018, Page: 65-70

Entrepreneurial orientation and innovation in family SMEs: Unveiling the (actual) impact of the Board of Directors

Drawing on stewardship and resource dependence theories, we examine how the board of directors (BoD) influences the link between entrepreneurial orientation (EO) and ambidextrous innovation in small and medium sized family firms (family SMEs). Our analysis of 230 Spanish family SMEs shows that family involvement in the BoD has a negative effect on their ability to turn EO into innovation. Moreover, we show that the BoD's strategic involvement in service and control tasks and the provision of knowledge and skills have positive effects, whereas the intensity of BoD activity has a surprisingly negative effect. These findings underscore that the effects of the BoD on the entrepreneurship-innovation link are more complex than previously thought, pointing to the important role of both BoD composition and BoD functioning for enabling innovation in family SMEs.

Board political experience and firm internationalization strategy

PurposeThe purpose of this paper is to empirically examine the link between board of director composition and firm performance. Specifically, the paper argues that board political experience influences the firm’s internationalization strategy as directors with significant political experience provide guidance, resources, and network access that enhance the firm’s international presence. The authors also posit that board political connections would be more helpful for firms operating in high-regulation industries.Design/methodology/approachThe authors tested the predictions using data from 156 large US firms. Data on directors’ background were gathered from SEC proxy filings, while data pertaining to internationalization were obtained from Compustat and Mergent Online databases. Hierarchical moderated regression analysis was employed to empirically test the hypothesized relationships.FindingsThe findings provide strong support for the positive relationship between board political experience and the degree of firm internationalization. Contrary to the authors’ predictions, the level of industry regulation does not seem to significantly affect this relationship.Research limitations/implicationsFirms aggressively pursuing international strategy could benefit from having directors on their board with robust political experience. One of the limitations of the study is that the types of international activities for firms is not specified in the study as it might be in the form of joint-venture capacity, strategic alliances or for firms that might be born-global.Originality/valueThis study makes original contribution to the on-going research on board political activity and firm performance through internationalization strategy. The findings suggest that having directors’ with political experience is an important asset in influencing firm’s corporate strategy.

The Impact of a Going-Concern Audit Opinion on Board of Directors

Paper examines the impact of a going-concern audit opinion on the corporate governance, measured by the changes in board of directors’ composition. External auditor’s opinion is used as a measure to address agency problems in companies. We examine this impact on sample of 55 companies listed on the Banja Luka Stock Exchange which have received going-concern audit opinion for 2013 financial reports. In this paper, the relationship between going-concern audit opinion and the corporate governance is investigated observing changes in board of director composition and additional requests for rigorous board performance evaluation after the shareholder’s assembly have received external auditor’s report. Results show that board of directors of companies that received going-concern audit opinions have not suffered serious consequences such as rigorous board performance evaluation, reduction of board size or changes of board members. This highlights the importance of measures that need to be put in place in order to increase of external auditor’s role in corporate governance.

Board of directors and industry determinants of corporate philanthropy

Purpose– The purpose of this paper is to extend the current research on corporate philanthropy and organizational outcomes by empirically exploring two specific types of antecedents: board of director composition and industry membership.Design/methodology/approach– A theoretical framework was developed based on the resource dependence and stakeholder theories which suggest that the extent that firms build relationship with certain stakeholders is closely tied to the personal and social background of board members, in turn influencing the allocation of resources to corporate philanthropy. Hierarchical multiple regression analysis as well as analysis of variance withpost hoccomparisons was conducted using multi-year data philanthropic data from 104 US corporations.Findings– The results provided empirical support for a positive relationship between the number of female board directors and the level of corporate philanthropy. In addition, the results showed significant inter-industry variations in the level of corporate philanthropy. This indicated that the rather aggressive role of philanthropy in mitigating reputational challenges associated with product-market dysfunctions. Contrary to the theoretical predictions, the results did not support a positive relationship between the proportion of outside directors and level of philanthropy.Research limitations/implications– The authors believe the empirical finding on the relationship between industry membership and corporate philanthropy is a significant contribution to the philanthropy literature. Accordingly, by empirically showing the disproportionately higher level of philanthropy by some prominent industries (such as gas and oil, financial services and chemical) than their counterparts, the authors contribute to the understanding of sector-level determinants of corporate philanthropy.Practical implications– Since board of directors have a direct involvement in reviewing and approving major corporate initiatives, the choice of these directors is more likely to influence the amount of resources committed to philanthropic causes. Consistent with other studies in the larger corporate social responsibility research, the authors found that more women directors on the board are associated with greater philanthropic spending. Hence, a major implication of the study is that shareholders and the general corporate community need to pay close attention into who is elected to serve as director of business organizations as these directors’ background and experience could shape major social responsibility initiatives such as corporate philanthropy.Originality/value– By empirically investigating the relationship between board composition and philanthropy, this study extends the scholarly discussion to focus on the role of the board in shaping the level of firm commitment in overall CSR. In addition, this study provides empirical evidence on the role of industry context in the level of commitment in corporate philanthropic activities.

Are organizations destined to fail?

Purpose – The purpose of this paper is to explore the non-financial causes of organizational success or failure, provide a better understanding of the symptoms of financial distress and improve the predictive capacity of financial failure models. Design/methodology/approach – The paper utilizes exploratory case studies in investigating the relationship of non-financial factors to organizational success or failure across a sample of sector-specific Australian firms listed on the Australian Stock Exchange. A two-tailed study was designed, in which seven cases from both extremes were chosen from three Australian business sectors: finance, property and manufacturing. Findings – Non-financial factors associated with the organizations studied impacted their success or failure. These factors included management skill, experience and involvement in organizational strategy, feedback and resultant activity, together with board of director composition. The identification of financial and non-financial factors and sound internal processes could be utilized for the development of an early warning predictor of organizational success or failure. Research limitations/implications – The use of this method is very time-consuming but is highly valuable in case study research, providing a more in-depth understanding of how non-financial factors impact organizational success or failure. Practical implications – The research will provide a better understanding of the symptoms of financial distress and improve the predictive capacity of financial failure models. The improvement in prediction of organizational failure will reduce the costs of failure to all areas affected, from the large corporation to the small business. The inter-connectivity of all businesses to each other often results in a knock-on effect of failure with the cost being borne by all members of the community in some manner. The level of social impact and cost of failure can only be seen by the enormous costs of the Global Financial Crisis failures. Originality/value – This paper contributes to the literature on effective qualitative research and explores important areas of consideration for those conducting qualitative multiple-case studies. It is intended to be of use to researchers investigating the area of predictors of organizational failure or success.

Do the Board of Directors Composition and the Board Interlocking Influence on Performance?

This study analyzes the influence of composition of the Board of Directors and their social relations (board interlocking) on performance of Brazilian companies. A descriptive study based on documentary research was conducted with a total of 1,163 companies' observations and 18,119 standardized observations regarding directors. Simultaneous equations were applied to the data analysis. The survey results showed that, regarding the influence of composition of the Board of Directors on the performance of the companies, among variables used to identify its characteristics, that some showed endogeneity. Among the characteristics of the Board of Directors, the duality of the board was exogenous when comparing market performance (Tobin's Q) and the outsiders were also exogenous for internal performance (Return on Equity). Thus, the duality of the board is more influenced by the specificities of each company than by the market value of the companies. The characteristic outsiders are more influenced by the institutional environment than by the ROE. The practice of board interlocking proved to be insignificant in relation to the market value, indicating natural selection. Therefore, it is not possible to infer that the board interlocking can increase the dependency of the management, compromising the role of monitoring. Also, it is not possible to state that better positioned and central companies in the corporate relationships network show better performance.

Firm risk and performance: the role of corporate governance

We established a set of corporate governance assessment indices for examining the potential intermediary role of corporate governance in the relationship between firm performance and risk; furthermore, we identified the key corporate governance variables associated with both firm performance and risk based on 2008–2012 empirical evidence from Taiwan. The results indicate that corporate governance has a suppressed mediating effect on the relationship between firm performance and risk both during and after the financial crisis. Moreover, especially during a financial crisis, corporate governance has a negative moderating effect on the relationship between firm performance and risk; therefore, it acts as a risk buffer to protect companies. Our empirical results also provide evidence that listed companies in Taiwan with higher levels of corporate governance report high firm performance and low firm risk. Based on the findings, we recommend that decision makers considering both value creation and risk control focus on formulating corporate governance strategies, with particular attention paid to annual general meetings participation, chairperson and chief executive officer split, board of directors composition, director remuneration and discipline, and transparency of board structure and ownership information.

The Law of Private Investment Funds

1. Introduction to Private Investment Funds 2. Marketing Private Investment Funds 3. Taxation of Private Investment Funds 4. The Legal Duties Arising from the Provision of Investment Advisory and Management Services 5. The Regulatory Duties Arising from the Provision of Investment Advisory and Management Services 6. Governance Issues in Partnerships Used as Private Investment Funds 7. Governance Issues in Offshore Companies Used as Private Investment Funds 8. Invester Protection Failures in Private Investment Funds 9. Recent US and EU Regulatory Responses 10. Self-Regulation and Private Actors 11. Side Letters as a Means of Mitigating the Governance Challenge 12. Board of Directors Composition as a Means of Mitigating the Governance Challenge 13. Listings of Private Investment Funds as a Means of Mitigating the Governance Challenge 14. Evaluating and Implementing Private Monitoring Solutions

The impact of board of director oversight characteristics on corporate tax aggressiveness: An empirical analysis

This paper examines the impact of board of director oversight characteristics on corporate tax aggressiveness. Based on a 812 firm-year dataset of 203 publicly-listed Australian firms over the 2006–2009 period, our regression results show that if a firm has established an effective risk management system and internal controls, engages a big-4 auditor, its external auditor’s services involve proportionally fewer non-audit services than audit services and the more independent is its internal audit committee, it is less likely to be tax aggressive. Our additional regression results also indicate that the interaction effect between board of director composition (i.e., a higher ratio of independent directors on the board) and the establishment of an effective risk management system and internal controls jointly reduce tax aggressiveness.

An Empirical Examination of the Relationship between Board of Director Composition, Ownership Structure and Accounting Conservatism

An Empirical Examination of the Relationship between Board of Director Composition, Ownership Structure and Accounting Conservatism

Biotechnology valuation and governance: Drug development and board of directors composition

This paper examines the valuation of biotechnology firms and measure firm value relative to the firms’ drug development pipelines, alliances with other firms, and the varied composition of those firms’ boards of directors. Unsurprisingly, the advancement of drugs in the pipeline is associated with increased valuation, and the failure of drugs in testing is found to have negative impacts.  Findings do not support the notion that companies engaged in partnerships or alliances have better performance. Extending prior research, the study finds that the presence of medical doctors on the boards of directors is significantly positively associated with the price-to-book ratio and firm value. Drug approvals seemed less likely for small cap firms; this outcome is likely the result of small cap firms with more promising prospects being acquired, and exiting “small cap” status. Among other findings, a higher number of drug approvals among such targeted diseases as AIDS and cancer are observed; modestly higher approval rates are observed in concert with a relatively higher proportion of financiers – such as hedge fund managers and investment bankers – on biotechnology boards.  Findings are important to the investor, the biotechnology manager and the regulator.