Firm Board Research Articles

Corporate Boards and Firm Value: Evidence from Nigeria

Aim: The basis for the formation of the corporate board is to, among others, give strategic direction to the firm, monitor the activities of the salaried agents and reduce the likelihood of disincentive to investment. The aim of this study is to examine the efficacy of corporate boards in relation to the value of firms listed in Nigeria. Study Design and Methodology: It is a cross-sectional research design that empirically examined the influence of board mechanisms and Tobin’s Q of firms listed on the Nigerian Stock Exchange. The study used annual data of a panel sample of 85 firms from 2004 through 2023, It applied a Generalized Least Squares (GLS) econometric technique. Place and Duration of Study: This study examined the role of the boards of firms listed on the Nigerian Stock Exchange between 2004 and 2023. Results: The findings argued in favour of smaller boards, increased board independence and higher market capitalisation since they showed significant improvements in value of the firms in the sample. The findings imply that smaller boards that are highly independent tend to have better corporate governance and thus, superior firm value. Conclusion: In conclusion, the results advocate that the regulatory agencies and boards of the studied firms enact policies that will encourage minimum board sizes that are sufficiently independent.

Venture capitalist directors and managerial incentives

We examine the effect of board members with venture capital experience (VC directors) on executive incentives at non-venture-backed public firms. VC directors serving on the compensation committee are associated with greater CEO risk-taking incentives (vega) and pay-for-performance sensitivity (delta). These effects are more substantial if VC directors are from highly reputable VC firms. Using the change of direct flight availability to VC hub cities caused by major airline mergers and annual estimates of VC dry powder per industry as instruments, we show that these results are causal. In addition, VC directors are more focused on growth performance goals in CEO compensation contracts. We also document that prior finding of greater research intensity and innovation when VC directors serve on boards of public firms is partly explained by stronger CEO incentives instilled by such directors. Lastly, we find that having VC directors on nominating and/or governance committees is associated with a higher likelihood of forced CEO turnover.

The composition of listed family firm boards in South Africa: Alignment to best practices and governance codes

Purpose: As elsewhere in the world, family firms (FFs) play a critical role in the South African economy. There is, however, scant research on how, if at all, listed South African FFs differ from their non-family counterparts concerning board composition and independence. The purpose of this study was to address this knowledge gap by investigating director and chair independence, chair-chief executive officer (CEO) role duality, board race and gender diversity, as well as board rotation at FFs listed on the Johannesburg Stock Exchange (JSE) over the period 2006 to 2022. The study was informed by the agency, socioemotional wealth, and stewardship theories.Design/methodology/approach: Data were collected on 753 directors who served on the boards of 37 JSE-listed FFs. Data sources included Bloomberg and the FFs’ integrated reports and websites. Data were analysed by examining trends in the considered variables over time.Findings/results: While family involvement at board level remained relatively constant, considerably fewer family members served as board chairs and CEOs towards the end of the research period. Board independence increased significantly over the research period.Practical implications: Shareholder activists’ requests for improved board governance of JSE-listed FFs seem justified. Activists should, however, also consider the benefits of family stewardship when evaluating director and chair independence in these firms. This study also identifies practical implications for nomination committees and investor education.Originality/value: The use of multiple theoretical lenses provides a balanced view of board governance at JSE-listed FFs. The study contributes to the scant body of knowledge on board composition and independence in listed FFs in South Africa, which will enable future FF research.

Investigating the Link among Corruption, Corporate Governance and Corporate Performance in Family Businesses: A Future Research Agenda

Family businesses have distinct characteristics that differentiate them from other firms. Researchers must meticulously analyze issues, with a specific focus on the interplay of family business dynamics, considering this factor. The main objective of this research was to provide insight into the adverse effects of family companies, particularly how the power dynamics inside these organizations might enable corruption or fraud and how corporate governance can help in mitigating these phenomena. Specifically, family businesses can be investigated by considering unique characteristics such as ownership and control, generational dynamics, and corporate governance. To address the study topic, a bibliometric analysis was conducted using the R statistical programming language and the bibliometric tools Biblioshiny and VOSviewer. Data were obtained from the Scopus database and examined in documents. The lack of unbiased external evaluation, the ineffectiveness of internal audits, disputes between different generations, the dominance of family members, and the narrow extent of governance all contribute to the exacerbation of tensions that promote corruption inside family firms. Moreover, the findings indicate that CEO duality correlates with the occurrence of corruption and fraudulent activities, such as manipulating profits. Furthermore, the findings suggest a correlation between the qualities of the board and instances of corruption and bribery inside family firms. These factors also increase the probability of financial statement fraud.

Who affects CEO compensation? Firm performance, ownership structure, and board diversity

This paper examines the relation among firm performance, ownership structure, and board gender diversity on the firm board and CEO compensation, i.e., total compensation, salary-based compensation, and bonus-based compensation. The paper employs a unique dataset from S&P 1500 firms from 2007 to 2018. The empirical results suggest that large and diversified boards are the main determinants of CEO compensation, in line with the theory. Moreover, longer-tenured CEOs who also hold the board chairperson position receive greater compensation and bonuses than their peers. In addition, a firm financial performance affects CEO compensation, with the influence being more pronounced in the CEO's total compensation. This paper adds to the existing literature on CEO compensation, corporate governance, and board attributes, especially when revealing empirical support for the link between board diversity and CEO compensation against a strong demand for sound corporate governance practices.

Board team faultlines and enterprise innovation investment

This paper selects the data of China's A-share listed companies from 2012 to 2022 to study the relationship between the board of directors' fault zones and firms' innovation investment. It is found that the larger the board team faultlines is, the more board members can utilize their respective expertise, which has a positive impact on innovation investment; the unity of the duality of the board of directors can enhance the positive impact of the board team faultlines on the innovation investment of the enterprise. Compared with state-owned enterprises, non-state-owned enterprises are more enthusiastic about exerting the board's subjective ability to enhance innovation strategies.

Work Overload, Time Pressure and Social Influence on the Work Efficiency of the Financial and Tax Auditor: Evidence from Peru

Objective: This research presents a research model on the effects of work stress and its components: work overload, time pressure and social influence on audit efficiency, taking into account the perceptions of both the financial and tax auditor. Methodology: A partial least squares structural equation model (PLS-SEM) was used on the basis of a total of 240 responses from financial and tax auditors belonging to the Professional Associations of Lima and Callao in Peru. Results: According to the PLS-SEM model, it is suggested that work overload is the most important factor affecting audit efficiency. Time pressure has an impact on the quality of work, as well as social influence on audit efficiency and its components: quality of work and employee welfare. Research Implications: Further research could address the evolution of the effects of the variables. Also, cross-cultural research should be considered, considering other cities in Latin America. Practical Implications: Senior management and boards of audit firms should consider constructing a career path that encompasses the variables investigated and their impact over time on the auditor's career. Originality/value: The study contributes to the development of scientific literature on the characteristics of financial and tax auditing in Peru and the behavior of auditors.

Corporate board, assurance and sustainability reporting practices: a focus on selected African countries

PurposeIn recent times, stakeholders have called on corporate organizations especially those charged with governance to embrace full disclosure on non-financial issues, especially sustainability reporting. Based on this premise, this study aims to examine the influence of corporate board and assurance on sustainability reporting practices (SRP) of selected 80 firms from 8 countries in sub-Saharan Africa.Design/methodology/approachTo measure the corporate board, the authors use both board variables and audit committee variables. Also, the authors adapted the sustainability score model as used by previous authors in the field of sustainability disclosure to measure SRPs. The analysis was done using both ordered logistic regression and probit regression models.FindingsThe results show that the combination of board corporate and assurance has a positive and significant impact on the sustainability reporting practice of selected firms in sub-Saharan Africa.Practical implicationsThe study places emphasis on the need for strong collaboration between the corporate board and external assurance in evaluating and enhancing the quality of sustainability disclosure.Originality/valueThe study bridged the gap in the literature in the area of corporate board, assurance and SRP of corporate firms which has received little attention within sub-Saharan Africa.

Do Employee Interests Affect Target Board Decisions About Acquisition Offers? Evidence from Changes in Unemployment Insurance

We explore whether employee interests affect the evaluation of acquisition offers by target boards of directors. Exploiting changes in state unemployment insurance (UI) as sources of exogenous variation in worker unemployment costs, we find that lower unemployment costs increase acquisition activity. The adoption of state constituency statutes strengthens this relation. Boards of target firms having high labor intensity, low short-term institutional ownership, headquartered in low population or high social capital counties, and with female independent directors, more often strongly weight employee interests. Higher UI levels are also associated with larger postacquisition layoffs. Our evidence supports theories rationalizing target boards’ consideration of employee interests. This paper was accepted by Victoria Ivashina, finance. Supplemental Material: The online appendix and data files are available at https://doi.org/10.1287/mnsc.2022.01379 .

Religion in Family Firms: A Socioemotional Wealth Perspective on Top-Level Executives with Perceived Religiosity

The extent and mechanisms through which religion intertwines with decision-making processes in family firms remain inadequately understood. Family firm owners, driven by their commitment to ethical business practices and the safeguarding of their socioemotional wealth, actively seek cues to inform their decision-making processes. This research demonstrates that, among these guiding cues, top-level executives’ perceived religiosity emerges as a relevant factor. Building upon the socioemotional wealth perspective and conducting a longitudinal analysis based on listed family firms between 2009 and 2018, our findings reveal a positive association between family voting rights and the presence of board members perceived to be religious. Furthermore, this relationship is less pronounced if family firms operate in industries with high research and development intensity. Our study confirms that boards with high shares of religiously perceived directors are positively associated with the appointment of chief executive officers perceived to be religious during succession events. We thereby present a unique perspective that acknowledges perceived religiosity as a micro-level constituent shaping board membership and successor selection. This investigation captures the intricate interplay between religion and family firms under a socioemotional wealth umbrella, offering important insights to the family business ethics discourse. Our research also offers practical implications for board and leadership diversity management in family firms.

Breaking the glass ceiling: unveiling the talent management gap in boardrooms and its impact on low women representation

Extensive research has been dedicated to the study of women on boards, revealing a gradual improvement in the actual representation of women as directors on firm boards. This paper presents a comprehensive critical theory framework that combines talent management with corporate governance, human resources, and gender theories to elucidate the underrepresentation of women on corporate boards. This conceptual study, conducted through theoretical literature analysis, identifies a knowledge gap in the limited attention given to studies on the talent of women serving on boards. The purpose of this essay was to explain the sluggish progress of female directors on boards globally, despite the implementation of different laws and the evident business rationale for enhancing women's presence on boards. This study incorporates divergent and unanimous critical analyses of women on boards research, which either facilitates or impedes the advancement of women to executive positions. The primary discoveries of this study enhance the existing information by pinpointing several obstacles that contribute to the underrepresentation of women on corporate boards. These problems stem from structural factors inside organizations, individual psychological factors, and societal preconceptions. These theoretical perspectives identify obstacles and biases in the process of recruiting, developing, and retaining women directors. The implementation of a suitable talent management solution can address these issues.

Women’s involvement on family firm boards of directors and their role in family business succession as seen through the lens of socio-emotional wealth and goal setting theory

L’avantage de la diversité des genres dans les conseils d’administration des entreprises familiales (EF) continue de susciter un intérêt croissant. Dans cet article, nous examinons les objectifs des femmes qui occupent un poste au sein du conseil d’administration d’une entreprise familiale. La fixation d’objectifs a été utilisée pour identifier ce qu’elles veulent accomplir ici. Comment font-elles la différence ? Nous répondons à cette question à travers le prisme théorique de la richesse socio-émotionnelle (SEW) et de la fixation d’objectifs. Nous contribuons à la littérature soutenant la diversité de genre dans la composition de conseils d’administration, soulignant les objectifs associés aux femmes dans les conseils d’administration des EF, et mettant en évidence leur rôle dans la succession des entreprises familiales.En s’appuyant sur la théorie du SEW et de la fixation d’objectifs, cette étude examine comment les objectifs des femmes influencent la succession. Guidées par la question de recherche, nos données rassemblent trois catégories d’objectifs poursuivis par les femmes dans les conseils d’administration.

The impact of internal governance mechanisms on environmental performance of Saudi firms

PurposeThis study aims to explore whether firms that have a sustainability committee operating on the board, publish separate sustainability reports that are externally assured by an independent external audit and have large and active boards are more likely to be engaged in environmental practices and have better environmental performance.Design/methodology/approachBased on a sample of firms listed on the Saudi Stock Exchange, covering the period 2014–2021, this study applies panel data models to examine the research hypotheses.FindingsThe findings show significant positive associations between the existence of a sustainability committee, the publication of separate sustainability reports and the independent external assurance of these reports and environmental performance. This study also finds that the composite internal governance index is significant and positively associated with environmental performance.Practical implicationsPolicymakers should support the creation of a sustainability committee on the boards of Saudi firms and review its role and responsibilities. The findings of this study inform regulators of the importance of the existence of independent external assurance of the sustainability reports of Saudi firms to enhance the credibility and reliability of these reports. Managers need to establish devoted committees committed to sustainability-related tasks that help coordinate communications between the firm and stakeholders.Originality/valueThe Saudi Arabian Government has implemented a range of policies and initiatives aimed at improving environmental performance, which is a main focus of Saudi Vision 2030 to achieve environmental sustainability. Therefore, this study provides unique evidence and new insights on the impact of internal governance on corporate environmental performance in the Saudi context.

Corporate social responsibility, board characteristics, and family business in Thailand

AbstractExploring the relationship between corporate social responsibility (CSR) strategy, family business, and board characteristics in Thailand provides invaluable insights into how boards of family businesses integrate CSR considerations, leading to responsible business practices and sustainable development in Thailand. Relying on the top 100 listed firms in the Stock Exchange of Thailand and the Refinitiv's CSR strategy score, we find that family business firms or firms with CEO serving as the chairman of board engage less CSR strategy, being consistent with the agency cost hypothesis and the expropriation view of family businesses. Additionally, in line with the resource dependency theory, female directors, independent directors, board tenure, and board size positively influence a firm's CSR. Additional analyses including the Heckman's sample selection bias and 2SLS instrumental variable approaches show that our results are robust and are not driven by unobserved heterogeneity. More importantly, gender diversity is an exemplary governance mechanism as it is the only board characteristic with a positive effect on CSR in both family and non‐family sub‐samples. While board tenure is positively associated with CSR in the non‐family business sample, larger board size and more board independence in the family business positively influence a firm's CSR. Findings from the family business sample support the functional view of board and socioemotional wealth of family firms.

Do boards effectively link firm objectives to CEO bonus performance measures?

AbstractThis study examines whether S&P 500 boards govern their firms effectively by linking short-term operational objectives to appropriate CEO bonus performance measures. Our cross-sectional regression analysis reveals that firms with higher growth opportunities place more reliance on sales and growth performance measures in CEO bonus plans. We also find that cash-strapped firms emphasize the use of cash-based CEO performance measures. However, boards of high-cost firms do not tie a greater portion of CEO bonus to measures informative of cost-cutting efforts. This observation is contrary to effective-governance expectations and implies that boards should regularly scrutinize CEO bonus measures to ensure alignment with value-creating firm objectives. Additionally, we report an increase over time in the mean weight of social-and-environmental measures in CEO bonus plans. Boards evaluate CEO performance on sustainability issues by including quantifiable short-term performance targets in CEO bonus plans. However, there is currently a dearth of evidence on the optimality of sustainability linked executive pay in the academic literature. Our evidence on the rising weight of social-and-environmental measures in CEO bonus plans should motivate further research on this topic.

CEO power and the strategic selection of accounting financial experts to the audit committee

AbstractWe examine the role of CEO power in the appointment of accounting financial experts (AFEs) to firm audit committees. Our results show that firms with powerful CEOs have a lower likelihood of appointing AFEs to their audit committees. In addition, effective AFEs—those characterized by experience, high status, and social independence from the CEO—are less likely to be appointed in firms with powerful CEOs. In the presence of powerful CEOs, effective AFEs are also less likely to be designated audit committee chair. The absence of effective AFEs is associated with the use of accounting discretion by powerful CEOs to meet or just beat analyst earnings forecasts. We find no evidence that AFEs choose to avoid serving on the boards of firms with powerful CEOs. Our findings are consistent with powerful CEOs influencing board appointments post‐Sarbanes‐Oxley Act through informal channels, including through their social ties with nominating committees. Our results suggest that current regulations prohibiting CEO involvement in the director nomination process and specifying who qualifies as a financial expert may be insufficient to ensure audit committee effectiveness and financial reporting quality.

The board gender composition and cost of debt: Empirical evidence from Jordan

AbstractThe present research aims to examine the influences of board gender composition on debt costs and its significance to Jordanian creditors: mainly banks, using agency and resource dependence theories. A sample of 113 non‐financial Jordanian firms listed on the Amman Stock Exchange (ASE) from 2010 to 2019 was utilised to explore the impact of board gender on the cost of debt financing through panel regression analysis. To tackle endogeneity concerns, we employ a two‐step system generalised method of moments estimator. The findings discovered that more female directors on firm boards generated economic benefits for non‐financial sectors, which achieved an average 0.75% cut‐off interest rate incurred by lenders compared to the counterparts with fewer female directors. Our findings are still robust to endogeneity concerns. The findings offered valuable insights for academics, shareholders, firms, and regulators. Shareholders are required to provide more pressure on firms to enhance gender equality. Firms should adjust board gender composition via the inclusion of more female directors while regulators should develop guidelines, such as a minimum female quota in promoting more females to the board. The finding generalisability is limited to developing markets with similar settings. This study bridged a vital gap in the governance literature on the nexus between board gender composition and debt costs in Jordanian contexts where no minimum gender quota exists.

KESAN HUBUNGAN PENGARAH BEBAS DAN PRESTASI SAHAM DI NEGARA-NEGARA ASEAN: TINJAUAN SISTEMATIK

The composition of directors on boards of directors has always been a major topic in studies related to corporate governance to examine its impact on firm performance as well as share performance. Independent directors have become a crucial element in academic debates regarding their presence on boards. Issues related to independent directors have prompted governments and policymakers to update or enforce existing regulations to ensure compliance among firms in increasing their numbers on boards for making the best decisions and overseeing management to safeguard the interests of shareholders. Many academic studies have been conducted in specific areas to assess the effects of independent directors on firm performance, operations, value, and share performance, including in business, economics, finance, accounting, and social sciences. However, the results of previous empirical studies have not yet been consistent enough to serve as a reference for stakeholders such as boards of directors, firms, shareholders, investors, and governments. Meanwhile, such studies are still lacking in ASEAN countries. Therefore, this study aims to critically review existing literature on the impact of the relationship between independent directors and share performance in three ASEAN countries (Malaysia, Thailand, and Indonesia). Furthermore, to identify existing gaps, this study identified several key aspects from a theoretical, contextual, operational, methodological, and measurement perspective in previous empirical research. Based on the results of research in the existing literature, they have not yet been generalized to a broader context, sector, and population. Therefore, to enhance deeper understanding, this study will propose various research avenues related to independent directors and share performance. Hence, based on this study, it can be concluded that the results of existing research are still inconclusive and mixed. Finally, the implications of this study on policy, theory, and practice are discussed.

Board diversity and intellectual capital disclosure of Chinese-listed firms with Belt and Road Initiative projects

PurposeChinese-listed firms with Belt and Road Initiatives (BRI) play a crucial role in advancing the outward investment policy of China. Board diversity can be vital, and intellectual capital disclosure (ICD) showing future earnings can build investor confidence in these firms. This study examines these two relationships in Chinese-listed firms with BRI projects during a predictable business outlook period (2019, pre-Covid period) and unpredictable business outlook period (2020, Covid period).Design/methodology/approachThe study used least squares regression that analysed the target population comprising 79 listed Chinese firms with BRI projects in 2019 and 2020. The China Stock Market and Accounting Research (CSMAR) database provided board diversity data. Analysing annual reports using content analysis provided the ICD data, collected by following an established intellectual capital (IC) coding framework in the literature. After collecting board-related data, the study calculated the diversity between boards in firms (diversity of boards – DOB) using cluster analysis. The study estimated the diversity within each board (diversity in boards – DIB) using Blau's Index.FindingsThe findings indicate that in the predictable business outlook environment, DOB positively associates with ICD, and DIB negatively associates with ICD. In the unpredictable business outlook environment, the DIB and DOB interaction negatively associates with ICD, and DOB positively associates with ICD.Research limitations/implicationsThe findings apply to Chinese-listed firms with BRI projects and further research is required to generalise findings beyond them. This study used annual reports to collect ICD, but a future study could examine BRI firms' social media and website disclosures. The attributes selected for board diversity dimensions can contribute to bounded findings, and future studies could expand the board diversity attributes included.Practical implicationsThe findings provide insights into firms' board composition and structure associated with ICD.Originality/valueThis is one of the first studies providing empirical evidence about board diversity and ICD of Chinese-listed firms with BRI projects.

The role of founder CEO and independent board in family firms' international growth: evidence from India and Italy

PurposeThis paper investigates the role of the founder CEO and board independence in shaping the way in which Indian and Italian family firms (FFs) pursue international growth via two modes, that is exports and FDI. This article claims that country's context matters in determining the relationship between the presence of the founder CEO and FFs' extent of exports and extent of FDI. Further, this article examines the moderating role of board independence on the above-mentioned founder CEO–FF's international growth relationship.Design/methodology/approachUsing a fixed-effect panel data method, this article tests the hypotheses on a sample of 1,275 Indian FF-year observations and 705 Italian FF-year observations over the period 2008–2015.FindingsThis article reveals that the presence of a founder CEO is positively associated with the extent of exports but negatively associated with the extent of FDI in Italian firms. However, in case of Indian firms, the presence of the founder CEO is negatively associated with the extent of exports as well as with the extent of FDI. This founder CEO's influence on the firm's international growth is mitigated by the presence of an independent board in Italian firms; however, this moderation is not significant in the case of Indian firms.Research limitations/implicationsIt is important to capture heterogeneity within family firms and across institutional contexts while studying family firms' international growth. Further, it is important for international business scholars to theorize for different modes of international growth because challenges faced in expansion via exports are different from the challenges faced in expansion via FDI (foreign subsidiaries). Therefore, family firms leadership might prefer a certain mode of international growth.Practical implicationsThe findings of the study imply that national culture and institutional context could play an important role in determining (a) Founder CEO's inclination towards FF's extent of exports and FDI as well as (b) the effectiveness of an independent board in mitigating founder CEO's influence on FF's international growth.Originality/valueThis work is one of the very few studies that examines the impact of FF's heterogeneity and country heterogeneity on two modes of international growth, namely exports and FDI, in the Indian and Italian contexts. Further, this work provides empirical evidence on the independent board's role in mitigating founder CEO's influence in decision making in the case of Italian firms. Extant literature expects an independent board to encourage FFs' international growth both via exports and FDI; this study shows that independent boards could reduce the founder CEO's inclination towards exports and mitigate founder CEO's influence on the decision making; however, this mitigation effect is highly context dependent.