Board Structure Characteristics Research Articles

Two-tier board characteristics and expanded audit reporting: Evidence from China

This paper investigates the relationship between the characteristics of the two-tier board structure (board of directors and supervisory board) and the disclosure of key audit matters (KAMs) in the expanded audit report. Using a sample of 10,857 firm-year observations of Chinese listed firms spanning the 2017–2020 period, we offer two main results. First, with regard to the board of directors, we find that the auditor discloses a greater number and lengthier content of KAMs when there is a CEO duality and the board meetings are more frequent. Second, conversely, we find that the size and independence of the supervisory board are related to a lower number and length of KAMs disclosure. When we distinguish between account-level KAMs and entity-level KAMs, our further analysis shows that our results are principally associated with account-level KAMs rather than entity-level KAMs. Specifically, we find that CEO duality and the frequency of board of directors meetings are positively related to account-level KAMs. We also find that the size and independence of the supervisory board are negatively related to account-level KAMs. Our further analysis also shows evidence that these two-tier board structure characteristics are associated with the tone of KAMs disclosure in a consistent fashion. Our findings are robust and address endogeneity problems. Overall, our results suggest that the characteristics of the two-tier board structure drive KAMs disclosure, which should be of interest to regulatory bodies, policymakers, auditors, multinational firms, and users of financial reports.

Impact of Characteristics of Board of Directors Towards Risk-Taking Level with Chinese Commercial Banks

Based on the situation that the overall economy is facing a huge shock due to COVID-19, China's banking sector plays an extremely important role as a provider of funds in the social economy and risk management is even more important. Therefore, this paper uses the Chinese commercial banks as a research sample of 730 from 2017 to 2021 and explores the moderating role of three board structure characteristics, namely, the board size, the combination of chairman and president, and the proportion of independent directors, on the relationship between banks' operation risk include market risk, credit risk and liquidity risk and risk-taking level in empirical approach method. The research findings revealed that: 1. liquidity ratio and cost-to-income ratio have a significant negative effect on the risk-taking level of commercial banks. 2. Board size has a negative moderating effect on the relationship between liquidity ratio and risk-taking level, which means that a larger board size can help reduce the effect of liquidity ratio on the risk-taking level of commercial banks. 3. Board size has a negative moderating effect on the risk-taking level of commercial banks. 4. The separation of chairman and president has a positive moderating effect on the relationship between liquidity ratio and risk-taking level, which means that having a different chairman and president may increase the impact of poor liquidity ratio on the risk-taking level of commercial banks. However, the cross-section of the cost-of-income ratio and independent director ratio has no significant effect on the risk-taking level. This paper also makes recommendations based on the findings of the study.

A study on corporate foundation and philanthropy: Does governance matter for organizational performance?

AbstractGiven the increased social and strategic value of corporate philanthropy (CP) in businesses, a growing number of corporations have established associated corporate foundations to institutionalize and formalize their CP. Notably, CP has been channeled through team charitable foundations in professional sport, which are corporate foundations closely tied to their parent teams while having own (quasi) independent governance structure. However, these corporate foundations have received less scholarly attention. The study explores the relationship between corporate foundation governance and organizational performance in the context of professional sport. Specifically, this study focuses on how board structural characteristics, such as board size and board diversity, and board leadership, such as board chair affiliation with the parent team and the presence of a paid executive director, influence the team foundation's total received contributions. To empirically test our hypotheses, the study used longitudinal data of financial and personnel information of team foundations in the United States from 2011 to 2017. The results show that the team foundations with a larger board and paid executive director generate more significant revenues (received from contributions, grants, and gifts). The study illuminates how the internal governing environment shapes and steers a corporate foundation's philanthropic practices and performance.

Board Structure and Stock Market Liquidity: Evidence from Saudi's Banking Industry

This paper aims to explore the impact of corporate governance on banks’ stock market liquidity. Specifically, we examine the influence of one of the most important corporate governance mechanisms, board structure, on the stock market liquidity of listed banks in Saudi Arabia. We mainly concentrate on four characteristics of board structure: board size, board independence, board meetings and board busyness, and their impact on bid–ask spread, trading volume, turnover ratio and number of trades (employed as proxies of stock liquidity). This study employs a pooled ordinary least squares (OLS) model to investigate this relationship. Furthermore, we use a lag approach and the generalized method of moments (GMM) estimation to test for endogeneity issues. The findings of the two models are the same as the main estimation model of the OLS. Using a sample of 108 observations representing all banks listed on the Saudi Stock Market (TASI) from 2010 to 2020, we find a positive and significant association between board size and board independence with stock liquidity. However, board busyness is negatively associated with stock liquidity. Furthermore, we examine the relationship between board structure and agency problems. The results show that board size and board independence reduce agency problems, whereas board busyness increases agency problems. The findings of this paper provide implications for Saudi regulators, banks’ board of directors and banks’ shareholders.

The Role of Supervisory Board Heterogeneity on Corporate Irregularity: New Insights and Management Opportunities

By structural equation modeling (SEM), this paper analyzes and explores the four Potential Characteristics of the supervisory board. They are: Individual Heterogeneity of the Supervisory Member (Internal Heterogeneity), Organization Size of the Supervisory Board (Organization Size), Structural Characteristics of the Supervisory Board (Structural Characteristics) and Identity Background of the Supervisory Board (Identity Background). Then, it constructs a path analysis and theoretical model of the influence of supervisory board heterogeneity on corporate irregularities, and verifies each influencing factor and observation index. The results show that individual factor Professional heterogeneity is the most effective indicator of Internal Heterogeneity, but such Internal Heterogeneity has a very limited effect on the occurrence of corporate irregularities. Organization Size has a significant impact on corporate misbehavior, and Number of people is an important factor in constructing Organization Size, yet the frequency of staff Turnover is not significant. Although the Average Age, Party Member Ratio, and Female Ratio can well conceptualize the Structural Characteristics, their effects on supervision performance are not obvious. Identity Background, including factors such as Average Education, Government/University Experience, or External Supervisors, does not improve supervisory performance and reduce the occurrence of irregularities. The above findings provide a foundation for further analysis and integration of multiple heterogeneous factors, as well as further study of the “combined effectiveness” of the supervisory board, and deeper investigation of the actual impact of the supervisory board on irregularities.

Board characteristics and efficiency of value added by banks: Evidence from an emerging economy

This paper estimates the efficiency of value added by banks using their total resources (physical capital resources and intangible resources) and finds an association between board characteristics and efficiency of value added. The paper is grounded in the theory of resource and knowledge based view of the firm, and agency theory, and tries to establish links between these two theories. This study departs from existing literature of examining the effect of board characteristics on financial performance, corporate sustainability, and corporate environmental responsibility, and tries to understand the relationship between board characteristics and the efficiency of value added by banks through their resources. This is also the first study of its kind to study the relationship between board structure characteristics and value creation in Indian banks using the Value Added Intellectual Coefficient (VAIC) methodology. Using the data for 41 commercial banks in India from 2008 to 2017 and by employing Prais-Winsten Regression, this study finds that board meetings and CEO-Chairman duality significantly and positively influence the efficiency of value added by banks through their total resources and intellectual capital resources. At the same time, independence in the boards negatively influences the efficiency of value added through physical capital resources. Overall, the findings of the paper indicate that board governance influences bank performance measured in terms of efficiency of value added. Policymakers, regulators, and bank managers should frame appropriate policies to ensure more board meetings, and the presence of board duality.

Political Connection and Corporate Social Responsibility: Evidence from Indonesia

This paper aims to investigate the influence of political connection on Corporate Social Responsibility (CSR) expense in Indonesia. We use a sample of 682 firm-year observations between 2010 and 2015. Using the individual-level of political connections, we find that the political connection is an important determinant of CSR expense. The political connection effect is analyzed based on the different characteristics of ownership structure, board structure, and affiliated party. We find that state-owned enterprises and privately-owned enterprises that politically connected are positively associated with CSR expenses. Interestingly, the evidence shows that politically connected board of commissioners are more willing to spend in CSR activities, while politically connected board of directors have no significant concern regarding CSR. Furthermore, politically connected firms that contribute to CSR are from government-leaning firms, while opposition-leaning firms show different matters. The findings are robust using different measures of political connection and controls.

Impact of Board Structure Characteristics on Financial Performance: Evidence from Selected Listed Companies in Colombo Stock Exchange

Journal of Business & Technology (JBT) is an open-access journal published by the Department of the Commerce and Financial Management of the University of Kelaniya, Sri Lanka. The journal follows a double-blind peer-review process and is published bi-annually (January, July). JBT aims to publish scholarly research, critical reviews, case studies, practitioner reviews and technology reviews in the fields of business and technology.

Determinants of ownership pattern

Percentage of shares held is considered to be one of the primary measures of ownership structure as this ratio determines how a firm is owned and how the authority is distributed among owners. Studies have been conducted on interrelationships among corporate ownership and board structure characteristics and on the determinants and mechanism by which the ownership structure is formed. Broadly these studies only reflect on one or two governance characteristics with an exception by Agrawal and Knoeber, 1996. The inconclusive studies of ownership structure make it necessary to study the identity the determinants of ownership. Taking a proportionate sample of companies from the four major industries, this study tries to find the factors affecting ownership pattern. Captivating ownership as Indian and foreign promoters, financial performance measured using tobin’s q and duality (chairman and managing director being single person) positively and significantly affect ownership. However, financial leverage negatively impacts ownership. Keywords: ROA-Return on Assets, Tobin’s Q, Corporate Governance

Board demographic diversity, institutional context and corporate philanthropic giving

Research findings generally suggest that board diversity has an effect on performance, be it social or financial, but there is uncertainty as to the strength and direction of the effect. In this study, we respond to two questions: (1) Do differences in the diversity of board demographic characteristics have an effect on Corporate Philanthropic Giving (CPG)? Does the institutional context affect such a relationship? We use a sample of all listed non-financial Chinese firms from 2010 to 2014. Our findings confirm that corporate giving is indeed related to gender, age, tenure, functional and foreign experience diversity. More importantly, the relationships are significantly moderated by the institutional context, as measured by the governance regime and the level of market development. This paper contributes convincing empirical evidence that within-board demographic diversity characteristics, controlled by board structural characteristics, have a clear effect on corporate giving, and that this effect is affected by the institutional context. This in turn should facilitate responding to a wider set of stakeholders’ needs and issues. Each of these findings is a contribution to theory and have important implications for research on corporate social responsibility, or corporate governance, and for managing board composition.

Board characteristics and foreign equity ownership: evidence from Bangladesh

PurposeThe purpose of this study is to examine the effect of board characteristics on foreign equity ownership (FEO) in the listed public limited companies of Bangladesh.Design/methodology/approachThe study collected data from 418 annual reports of listed companies of Bangladesh for the years 2015, 2016 and 2017 to examine the effect of board characteristics on FEO. Ordinary Least Squares (OLS) and Two-Stage Least Squares (2SLS) regression methods are used to test the hypotheses of the study.FindingsThe results show that board size has significant negative influence on FEO. Other board characteristics variables such as board independence and female directorship appear to have an insignificant influence on FEO. However, several firm characteristics variables such as return on assets, market-to-book ratio, firm size and firm age have a significant positive relationship with FEO. While presenting the regression results separately for manufacturing and non-manufacturing firms, the findings reveal a number of differences in the results between the two sectors.Research limitations/implicationsThe major limitation of the study is that it concentrates only on three years annual report data in analyzing the hypothesized relationships.Practical implicationsPolicy makers, regulators and top management can get meaningful insights with respect to optimal board structure and firm characteristics to attract foreign investors as the results revealed significant effects of several board and firm characteristics variables on FEO.Originality/valueThe present study includes the presence of female directors on the board to represent board characteristics. No other study has examined the relationship between FEO and female directors.

Do Board Characteristics Affect Bank Performance? Evidence from the Eurozone

This study analyzed the effect of board structure characteristics on bank performance. Over a sample of 50 banks in five Eurozone countries, including the UK, Germany, France, Italy, and Spain, during the period 2000–2019, our empirical evidence has suggested that most board characteristics increase bank performance, while the separation of the roles of CEO and chairman inhibits it. By using fixed effects and random effects regressions, as well as a pooled OLS panel data estimation, we have found that a board size of between 7 and 10 has a significant impact on bank performance. In addition to board size, we have also found that board independence has a positive and significant impact on bank performance. Furthermore, results have shown that the number of board meetings and financial experts plays an important role on bank performance. In contrast, there is no considerable increase in bank performance when the role of CEO and chairman is separated.

Trust within sport NGB boards: association with board structure and board member characteristics

ABSTRACT Research question: Trust is a critical element within organisational and management literature. It reflects the decisions and behaviour of individual actors and the functioning of organisations and their management bodies. However, within the sport governance literature there is a notable absence of work focusing on trust. This study examines the association of trust and structural features within national governing bodies’ (NGBs) boards. Research methods: 242 board members of 65 NGBs from Germany participated in an online survey which comprised questions on trust indicators and boards’ structural features. Probit models were employed to analyse the association between trust indicators, individual board membership characteristics, and the boards' structural features. Results and findings: Results suggest that trust is a multifaceted phenomenon, affected by various (beneficial and detrimental) variables in the specific context of NGB boards. The study makes numerous interrelation and governance dynamics recognisable, with board size, board members’ skill differentiation and temporal stability of boards appearing to be particularly relevant. Implications: The paper complements the professionalisation literature and the leadership discussion in the context of sport governance, particularly with regard to trust-enhancing working conditions within boards. The study also aligns to the good governance literature, revealing that in some respects the issue may be seen to be about trade-offs between trust-based effects and their resultant (positive or negative) outcomes for organisation, board or individual.

BOARD STRUCTURE AND BANK PERFORMANCE: EVIDENCE FROM SERBIAN BANKING SECTOR

Traditional perspective relying on agency theory is based on the assumption that the board structure, as an internal corporate governance mechanism, determines board effectiveness and, therefore, financial performance. Board size, board composition and leadership structure are distinguished as relevant variables of the board structure. Since the results of previous empirical studies are often contradictory, examining the correlation between board structural characteristics and corporate performance is a relevant research question, particularly in banking sector. In order to improve effectiveness of internal corporate governance mechanism, and consequently bank performance, the main research objective is to identify the impact of the board size and the board composition on bank performance in the Republic of Serbia using the CAMELS model. We analyze this relation using Ordinary Least Squares regression analysis on balanced panel data-set of 54 observations. The paper contributes to recent research efforts by making conclusions on the effects of board structure on bank performance, in order to define recommendations for improving performance in banking sector.

Corporate Governance and Firm Performance : The Mediation Effect of Board Roles, Panel Evidence from Sub-Saharan Africa

The study explores the effect of corporate governance on the performance of firms in Sub-Saharan Africa by using both return on equity and return on assets as performance measures. Unique data from 252 listed firms drawn from Nigeria, South Africa, Ghana and Kenya covering thirteen year period of 2006-2018 was used and analysed within the generalised least square panel data framework. Results indicate that the direction and the extent of impact of corporate governance are dependent on the performance measure being examined. Specifically, our findings show that board structural characteristics and firm performance relationship was significant and stronger with return on equity as compared to return on asset. We also find that unlike for frequency of board meetings, the results suggest that board structural characteristics are significant predictors of firm performance and that the monitoring and resource dependence roles partially mediate the relationship between board structural characteristics and firm performance.

Examining the impact of corporate governance reforms on firm performance in emerging markets: The mediating effect of board roles

The notion of corporate governance has been given credence on the policy agenda in many countries across the globe, especially after the frequent non-stop worldwide cases of corporate fraud and scandals. This has brought about the massive campaign on corporate governance reforms on finding dynamic corporate practices, structures, and systems that ensure that firms remain profitable, attractive, and sustainable. This study examines the effect of board structural characteristics (BSC) to achieve firm performance (FP) via the mediating effects of board roles (BRs) (frequency of board meetings (FOBM) and board size (BZ)) and the intervening role of corporate governance (CG) code which is an innovative model. By collecting data for 392 listed companies in South Africa for the period 2006-2018 and by employing the generalized method of moments (GMM) model, the findings of the study reveal that FOBM and BZ mediate the relationship between BSC and FP. Furthermore, the study finds a novelty in the interactive effect of corporate governance reforms with BSC on BRs. The study uncovers significant incremental effects of corporate governance reforms interacting with the BSC. These interactions significantly increase the relation after the implementation of the CG code.

Board characteristics and bank performance in emerging stock market

The paper examines the relationship between financial performance and corporate board characteristics of Tunisian bank during the period of 2005-2018; we explore the impact of board structure characteristics such as board size, independence, institutional and duality on bank performance. Our results confirm the importance of board control within the bank; we find negative relationship between board size, board institutional members and bank profitability. The result proves non-significant enhancement in bank performance when the role of director and board president is separate. We conclude that Tunisian banks need to develop their governance mechanisms; set an optimal size and restructure the board composition. Tunisian banks need to improve their government strategy and the board composition to optimise their performance.

Control and collaboration in Philippine conglomerates: an empirical study on the effects of board structural characteristics on firm performance

ABSTRACT This study investigates the board structure – firm performance relationships of Philippine conglomerates. Agency and stewardship theories are used to specify panel regression models. Accounting and market firm performance measures are used to analyse the relationships. Results show significant: (1) positive associations between the separation of the CEO and Chairman roles; and (2) negative association between a higher proportion of outside, independent directors, and firm performance. This study highlights the opportunity to expand and nuance governance research in emerging markets.

Effect of corporate governance on stock market liquidity: empirical evidence from Indian companies

Despite the crucial role that stock market liquidity can play in the financial markets during times of financial turmoil, little is known about its drivers. The series of high-profile firm failures and economic distresses which have been initiated by liquidity risk mismanagement and model failure has highlighted the mounting importance of stock market liquidity, predominantly in the increasingly integrated global market. Corporate governance has been characterized as a set of mechanisms for board effectiveness and transparent disclosures. It protects investors from opportunistic behavior as it results in improved quality and quantity of information made available to them. It encompasses internal corporate governance variables pertaining to board structure and audit committee characteristics as well as the external corporate variables such as market control and takeovers. Indian companies are required to have more effective boards and are more transparent as required by the corporate governance and tougher disclosure legislations. The information so provided facilitates quality of price formation and helps in improving the stock market liquidity. This paper endeavors to investigate the impact of corporate governance (CG) on the stock market liquidity in Indian companies. The CG and stock market liquidity were measured in the sample BSE 500 listed companies during the FY 2013–FY 2017. Panel data regression model is applied for testing the hypothesized association. In addition, an effort has been made to investigate the overall scope of stock market liquidity in a broader context through a comprehensive analysis of stock market liquidity across industry sectors, size and individual company-specific characteristics. The study provides evidence of the important role played by CG in enhancing stock market liquidity of the company. It can guide the board of directors to enhance financial disclosures which consequently increases stock market liquidity. The analysis provides regulators, educators and investors an insight into the role of CG attributes in capital markets and thus helps them in improving their decision-making. It provides corporate policy makers some of the necessary inputs to chart the course of CG reforms and their enforcement in the country in future.

Determinants of say on pay vote: a configurational analysis

This study is the first to employ a relatively new analytical method to investigate combinations of board structure and other corporate characteristics that lead firms to achieve high levels of say on pay voting, based on configurational analysis. In this pioneering manner, using fuzzy-set qualitative comparative analysis (fs-QCA) and the data from 51 listed firms in three different countries (Italy, France and Spain), the results identify four different causal paths that lead to high voting dissent, and two configurational board governance are identified as prototypes of unsatisfactory governance. These configurations, jointly analysing the interactions, allow us to think more carefully about the structure of boards. In particular, the study contributes to theory by identifying how board structure can affect shareholder voting, and by demonstrating the advantages of the configurational approach. Finally, the analysis could assist shareholders in reflecting upon, and justifying their choice to have a specific board structure.