Corporate Boards Of Directors Research Articles

Board of Directors, Audit Committee and Firms’ Performance

This study explores the different attributes of audit committees and boards of directors' effect on firm performance. Mainly the board’s size and independence and the audit committee’s employment, size, independence, financial experience, and frequency of meetings. This paper also talks about resource dependency theory which considers that. Non-independent directors have a positive effect on firm performance. On the contrary, agency theory suggests that the more independent the board is, the better the performance. Many accounting scandals and worldwide failures in corporate governance have occurred in the past few decades, affecting stakeholders and taking a heavy toll on national and global economies. After many infamous corporates, the United States passed the Sarbanes-Oxley Act (SOX), which acted to heighten the responsibilities of the board of directors in corporations, promotes fairness to both shareholders and stakeholders alike by enforcing listed companies to employ independent, knowledgeable, and proactive audit committees and directors and ultimately set the utmost importance on the protection of investors and stakeholders.  Taking a sample of 96 companies, the results show that a more extensive and independent board positively affects business results, and the same applies to the implementation of an audit committee. However, our results found no link between the different characteristics of audit committees with firm performance. The findings above give us insight into how companies’ governance operates.

Determinants of Intra-group Interlocking in European listed business groups

Purpose: The phenomenon of Interlocking Directorship within the same busi-ness group (the Intra-group Interlocks, IgI) has received little attention by scholars, especially when the interlocked affiliated-group companies are listed. Focusing on listed business groups, characterized by the presence of at least two affiliated-listed companies, and following the contingency perspective, this study aims to explore the determinants of IgI. Design/methodology/approach: The study analyses the controlling sharehold-er type (family, State, coalitions), the business ties, and the separation between ownership and control, focusing on 315 business groups listed in different Europe-an countries, i.e., Belgium, France, Greece, Italy, Spain, and Portugal. The social network analysis is applied to these groups, to compare the networks that originate from the corporate board of directors. Findings: In groups controlled by the State the density of social links is lower than in those controlled by families and coalitions. The strength of IgI is also relat-ed to the degree of correlation of firms' industries, even if this correlation is influ-enced by the separation between ownership and control and by the country regula-tion that protects minority shareholders. Overall, the results show that for listed groups the agency theory better explains the determinants of the IgI phenomenon. Originality/value: This study contributes to the understanding of why board members of listed parent companies sit (or do not sit) in the listed subsidiary boards. Relying on agency theory and resource dependence theory, it also propos-es a theoretical framework.

Impact of women on corporate boards of directors on product quality

We analyze the impact of women on corporate boards of directors on product quality. We innovate firstly by integrating the broad but fragmented research on the topic, offering a first simultaneously testing of a larger set of variables identified to be significant in earlier studies. Second, we add alternative indicators of female representation in board of directors as a potential determinant of product quality. Third, we use evaluation scores of goods by the nonprofit foundation “Stiftung Warentest” as a quality indicator, thus adding to a regionally diversified evidence. We find a significant positive effect of female board directors on product quality.

Diversity–performance nexus in an emerging economy: an investigation of family and non-family firms

PurposeThe empirical study aims to examine the impact of board diversity with respect to gender and nationality on firm performance in an emerging economy. This research further splits the sample into family and non-family domains and investigates the diversity–performance nexus in isolation.Design/methodology/approachThe sample consists of 183 listed companies in Bangladesh over the period 2007 to 2017. This study employed the generalised method of moments (GMM) technique to address the possible endogeneity issue in the governance–performance connection. To underscore the strength of diversity, three distinctive assessment measures were used: percentage representation of females and foreign directors, the Blau index and the Shannon index.FindingsThe results for the full sample models reveal that board heterogeneity regarding both female and foreign directors positively and significantly influences firm performance as measured by return on assets (ROA). Further to this, female directors in family-owned businesses have a positive association with profitability, whereas foreign nationals demonstrate a significant positive association with performance in non-family firms. Additionally, at least three women directors are needed to make a positive difference in profitability; however, a sole director with foreign nationality is capable of demonstrating a similar impact on performance.Practical implicationsThe findings are significant for policymakers and organisations that advocate diversity on corporate boards of directors, and the minimum number of diverse board members needs to be considered depending on the identity to bring about a significant change in organisational outcome. Therefore, the findings of this study may be applied to other emerging economies with similar institutional characteristics.Originality/valueThis study reinforces the existing stock of knowledge on the impact of board diversity on the profitability of firms, especially in the context of an emerging economy – Bangladesh. Irrespective of the given backdrop, this study finds that both gender and nationality diversity in the case of Bangladesh is found to have a positive and significant effect on financial performance with respect to all the diversity metrics, i.e. the proportionate number of female and foreign directors on the boards, the Blau index and the Shannon index.

The Role of Gender Diversity in Corporate Governance for Quality Assurance of Financial Reports with Audit Fees as Moderating Variables

This study used audit fees as a moderating variable to examine how gender diversity on the board of directors, board of commissioners, and audit committee affects the quality of financial statements. In this study, financial statements for a sample of LQ 45 companies listed on the Indonesia Stock Exchange from 2019 to 2021 were employed to collect the data, which were then analyzed using Eviews 9. Gender diversity of the board of commissioners, board of directors, committee board audit, employed the percentage of the number of the board of directors, board of commissioners, female audit committee compared to the total number, audit fee to logarithmic audit fee, and quality of financial statements to proxy for Discretionary Accrual modified by Jones model. The findings demonstrate that gender and women play a key role in the Corporate Governance process, particularly on the board of directors, board of commissioners, and audit committee. The role of women in supervision, such as the board of commissioners and audit committee, was able to enhance the quality of the company's financial statements, despite the inability of the board of directors' to increase the quality of financial statements when examined. The role of women in supervision, such as the board of commissioners and audit committee, was able to improve the quality of the company's financial statements, despite the board of directors' ability to increase the quality of financial statements in their function not being examined. The role of audit fees also appeared to be pivotal in overseeing the quality of the presentation of the financial statements of the company. Service fees are procured for carrying out financial statement audit services and detecting the possibility of fraud committed by the board of directors. If the audit fee is compensated highly, it tends to be more professional, therefore minimizing Discretional Accrual and strengthening the supervision carried out by the board of commissioners and female audit committee. Similarly, it can enhance the quality of financial reports. The findings of this study will: (1) give investors, professionals, and stakeholders’ information about the factors that affect gender diversity; (2) give capital market authorities guidelines for taking into account gender diversity on corporate boards of directors, commissions, and audit committees while taking into account the effect on the quality of financial reports; and (3) help accountants in developing countries like Indonesia develop more suitable accounting guidelines. This study contributes to the gender diversity literature. Additionally, this study adds to and broadens the literature by presenting empirical data from a single emerging market, such as Indonesia, on the impact of audit fees and gender diversity between gender diversity and financial reporting quality, as this relationship has not previously been studied.

Governance diversity: Its impact on strategic variation and results

AbstractThis paper investigates the impact of four drivers of Governance diversity, namely gender, tenure, age, and educational attainment, on strategic direction and variation. It then incorporates corporate financial results as a moderating variable, testing how it impacts the links between board diversity and strategic variation. Strategic variation or change is assessed based on measuring deviation from past strategies. Our sample consists of 5011 firm‐year observations from 930 firms in the United States between 2010 and 2018. The findings indicate that the four drivers of Governance diversity show a positive relationship between the corporate board of directors and strategic variation/change. However, the strength of the effect depends on overall firm results/performance.

Board gender diversity and bank risks: Evidence from Australia

Recently, regulators and investors have shown an increasing interest in the promotion of diversity in the corporate boards of directors. In this paper, we employ data from the Australian bank boards to provide new insights on the diversity-risk nexus, based on a dataset of the Australian banks for the period of 2004 to 2019. We examine board gender diversity from two perspectives across the board and among board leaders. Our results support the context-dependent impact of gender diversity on the board of directors and highlight the beneficial impact on the risk of banks when considering gender diversity and the presence of a dominant gender group in the boardroom.

The Political Connections and Firm Performance on Global Fortune 500 Oil and Gas Companies

The purpose of this research is to highlight the significance of the paradox of corporate political ties on business performance. Corporate - political affairs are said to provide a resource-based and competitive advantage in a wide range of industries. Effect through corporate boards of directors has been discovered in many high-performing industries, and it is believed to be economically beneficial to the country. Previously, political affiliations were always used as an independent variable to explore their relationship with business indicators such as company performance, corporate actions, and exclusive rights. In this study, we used 152 data from the Fortune Global 500 between 2012 to 2017 to determine the impact of politics on company success in a particular industry; oil and gas. According to the relationship hypothesis, strong political connections are more likely to have a favourable impact on business outgoing.

By what way women on corporate boards influence corporate social performance? Evidence from a semiparametric panel model

Given the contrasting empirical results of the literature, the question of the influence of the presence of women on corporate boards of directors (WOCB) on the corporate social performance (CSP), we revisit this problem by developing a semi-parametric approach to capture the non-linear effects of this relationship. The results show that sociological diversity, organizational learning, and pluralistic regulation all play critical roles in CSP. Feminization of the Board successfully helps to the enrichment of its decision-making by increasing the total cognitive, knowledge, and skill diversity. Nonetheless, when a threshold value is achieved, the positive marginal impact of Board feminization on CSP declines while WOCB grows, implying a diminishing marginal utility.

Soft gender diversity regulations for boards of directors: the moderating role of firm ownership and control structure

ABSTRACT Women are significantly underrepresented worldwide on corporate boards of directors, leading to board gender diversity regulations. Drawing from agency and socioemotional wealth theories, we investigate the moderating effect of ownership structure, shareholder identity and shareholder control on how gender diversity codes and soft quotas influence women’s representation on boards. We analyse our sample of Spanish Stock Exchange firms using panel data Tobit models. The results show that a single large shareholder enhances the positive impact of regulations, while multiple blockholders diminish it. Blockholder identity also matters: family control of board seats and families as the sole large shareholders reduce the positive impact of board gender diversity regulations on women’s board representation. In family firms, the balance of power between family and non-family shareholders also affects the impact of regulations. Our findings highlight the need to consider firm ownership and control structure when developing regulations to promote board gender diversity.

Women on a Corporate Board of Directors and Consumer Satisfaction

Consumer satisfaction is a widespread measure of company success, and it shows positive interdependence with several key performance indicators of an enterprise. Although many researchers emphasize that women directors have a positive influence on the economic success of a firm, little research has focused on the impact that females on a board of directors have on customer satisfaction. This paper resumes previous insights on determinants of customer satisfaction and shows that a more balanced gender representation in corporate governance bodies can positively affect customer satisfaction with a company.

Gender quotas and company financial performance: A systematic review

AbstractSeveral countries have mandated sex quotas on corporate boards of directors. We systematically reviewed empirical studies that compared company profitability and financial performance before and after introducing legislated quotas. The search yielded 348 unique hits and nine studies were retained, including 20 effects. Four were null, 11 were negative, and five were positive, all of the latter for Italian and French companies. We conclude that quotas for women on corporate boards have mainly decreased company performance and that several moderating factors must be taken into account when assessing causal effects of quotas on company performance.

Corporate Board of Directors’ Attributes and Audit Fees

Abstract This study examines the effect of corporate board of directors’ attributes on audit fees for Nigerian listed Deposit Money Banks (DBMS). The study adopts an ex post facto research design and uses data on 10 deposit money banks sampled via purposive sampling technique using data spanning from 2012 to 2018. Results based on Generalized Method of Moment show that corporate board of directors’ proxies do not significantly influence audit fees of Nigerian deposit money banks. However, firm size and profitability are found to affect external audit fee significantly. The study therefore concludes that corporate boards of directors’ attributes do not individually significantly affect audit fees in Nigerian listed Deposit Money Banks. Arising from the findings, it is recommended that corporate governance practices should be strengthened so as to aid external audit.

Board of Directors’ Knowledge Heterogeneity: A Literature Review and Multi-Domain Research Agenda

The objective of this paper is to systematically review and critique the literature on corporate board of directors’ knowledge heterogeneity. Based on the analysis of corporate governance and management research articles published over the past 30 years in leading peer-review journals, we aim to conceptualize knowledge heterogeneity in a corporate board setting, disentangle the heterogeneity effects, and model the process of knowledge heterogeneity of corporate directors. Finally, we advance a multi-domain research agenda to encourage scholars to engage with the topic in new and not previously considered ways.

Economic Democracy at Work: Why (and How) Workers Should be Represented on US Corporate Boards

Workers should have representation on corporate boards of directors in the United States. Employees are key stakeholders whose contribution is necessary for the success of innovative enterprises. In contrast to the “shareholder primacy” theory of corporate governance, which claims that only shareholders should have decision-making authority, the argument made here is that also granting employees a voice on the corporate board will have positive effects for employees and the company as a whole. Yet implementing such a reform in the twenty-first-century US context is not simply a matter of importing a European model. Effective policy design requires consideration of the US workforce structure and the important prohibition on employer-dominated organizations in US labor law, and developing appropriate mechanisms for worker-director election, representation, and worker organization. Worker representation on boards will not be effective in a vacuum, but is an important component of overall reform efforts to strengthen the US economy.

THE RELATIONSHIP BETWEEN BOARD CHARACTERISTICS AND CORPORATE DIVIDEND POLICY: EVIDENCE FROM JORDAN

This paper examines the impact of Board characteristics (board size, board independence, and board gender) on the corporate policy of dividend for a set of 128 firm-year listed companies of the manufacturing sector from Amman Stock Exchange between the years 2016-2018. The board directors have a great influence in handling the agency conflict. They approve any decision made by the executive manager before any decisions made in any manner. Also, dividends can be used as a tool of mitigating agency conflict. The paper uses panel data approach in analyzing the sample and the results show that there is a positive relationship between the Board of directors' characteristics (Board size, board diversity depicted as outside directors and board gender) and the corporate dividend policy. Our recommendations are that Jordanian manufacturing companies should comply with the Jordanian code of corporate governance and diversify their corporate boards of directors by appointing more outside directors and more female directors within their boards. This will also help to create a healthy relationship between the boards and the owners of the firms or the shareholders and minimize the agency conflict theory.

Do boards influence audit quality? A multidimensional analysis

This study investigates how corporate boards of directors influence the quality of external audit in a sample of service firms listed on the Amman Stock Exchange (ASE). We contribute to the literature by providing empirical evidence on the efficacy of the corporate governance mechanisms through corporate boards to influence audit quality in an emerging country setting (i.e., Jordan). According to Chua (1986), this is mainstream “market-based” accounting research. We regress multiple dimensions that capture the quality of financial statements’ audit on a group of board of directors (BoD) characteristics for total observations of 225 firm-year obtained for 45 companies during the period (2014-2018). Specifically, the multidimensional analysis of the response variable, audit quality, includes audit firm’s internationalization, audit fees, auditor tenure, and the number of licensed practitioners at the audit firm. Using multiple linear (Panel Least Squares – PLS) and logistic regression models, we document empirical evidence that audit quality is positively affected by the independence and size of boards but negatively affected by CEOs duality, while no influence of the board’s expertise on any measures of the audit quality. The study provides implications for policymakers and investors regarding the signals that firms can send regarding the quality of financial statements audit when complying with the best practices of corporate governance

The concept of civil responsibility of the members of board of directors

The object of this research is the definition of the concept of civil responsibility of the board of directors in corporations. The subject of this research is the theoretical positions of different scholars that correlated with the object in question. The author believes that the topic of responsibility of the members of board of directors requires further examination, since case law on this problematic is relatively small, and essence of the topic carries practical, rather than theoretical character. Therefore, special relevance gains definition of the concept of civil responsibility applicable to responsibility of the members of board of directors in corporations. The author offers an original definition of civil responsibility of the members of board of directors in limited liability companies and joint-stock companies; as well as describes financial negative consequences of for violation of responsibilities imposed upon the members of board of directors by corporate legislation and articles of association. A conclusion is made that the definition of responsibility of the members of board of directors is not unique, as in essence similar by content definition can be used with regards to responsibility of any corporate body in the limited liability companies and joint-stock companies respectively.

Relevant issues of responsibility of the members of the board of directors

This article explores most relevant issues of responsibility of the members of the board of directors in corporations, limited liability companies and joint-stock companies. The object of this research is the relations formed as a result of violations by the members of the board of directors of fiduciary duties imposed upon them. The subject is the norms that regulate responsibility of the members of the oversight council of corporations in civil law, related law enforcement practice, as well as the theoretical provisions of various experts. The main goal of this work consists in determination of relevant problems of the institution of responsibility in form of losses of the members of the board of directors in public and private companies. The scientific novelty lies in the analysis of relevant issues pertinent to responsibility of the members of the board of directors. Detailed analysis is conducted on case law of the courts of superior jurisdiction on the matter. The scientific novelty lies in identification of most urgent problems associated with exercising of authorities of the members of the board of directors and proposal of the mechanisms for improvement of their responsibility in the current legislation, namely with regards to allocation of responsibility for the decisions of higher authorities.  The conclusion is made that the development of the institution of responsibility of the board of directors should correspond with the modern requirements, stimulate economic development, entrepreneurial initiative, allow the subjects of responsibility to predict the consequences of their actions (or inaction), and contribute to efficient fulfillment of their responsibilities.

Why Are US Corporate Boards Under-diversified Among Genders and Races?

The popular and academic literatures report that women, Blacks, Hispanics, and Native Americans are under-represented on US corporate boards of directors, relative to their incidence in the US labor force. We confirm this observation by tabulating the presence of female and under-represented racial minority (URM) directors on the boards of the S&P 1500 firms. We examine two hypotheses that may explain this empirical regularity. The first is that qualified female and URM candidates are scarce. Firms must compete for their services, putting price pressure on their compensation and leading to higher compensation for female and non-URM directors. The second hypothesis is a perception that women and URM directors in general are less valuable to firms, leading to lower compensation for them relative to their white male peers. Our evidence is mixed: we find that women (URM) make significantly higher (insignificantly lower) compensation than males and non-URM directors, controlling for firm and director variables (like age, education, achievements, and committee appointments). However, when we compare the compensation of female and URM directors against male and non-URM directors’ compensation on the same boards, that significant difference reverses, even though they have more education and more achievements than those peers. This result is consistent with the “myopic hypothesis” that predicts female and URM are paid less because of a biased view of their value to the board. However, when we compare the average compensation of female and URM directors who hold board leadership roles (dual CEO-Chairs and independent lead directors), we find very low participation of female and URM directors, but they are paid substantially more than their male and non-URM counterparts. We conclude that females and URM directors are chosen by larger firms with larger and more active boards (and higher base compensation), but are very rarely chosen to lead those boards. When they are chosen for board leadership positions, they are paid significantly more than their non-URM male peers. This result is more consistent with the “glass ceiling” hypothesis that appropriate candidates who add to the diversity of the board are scarce and command higher compensation.