Composition Of Supervisory Boards Research Articles

The Impact of Policy Interventions on Systemic Risk across Banks

What is the impact of policy interventions on the systemic risk of banks? To answer this question, we analyze a comprehensive sample that combines an original set of bank-specific bailout events with the balance sheets of key affected and nonaffected European banks between 2005 and 2014. We find a positive and significant association of guarantees with systemic risk that is somewhat weaker in the long run when the regulator appoints members to the supervisory board. The short run association between recapitalizations and systemic risk is also positive for large and less capitalized banks, while in the long run, recapitalizations are linked with reduced systemic importance, especially for less profitable banks and in cases when the regulator limits management pay. Liquidity injections are positively linked with systemic risk, but the long-run effect is mitigated for small or better capitalized banks. In the short run, injecting liquidity is associated with reduced systemic risk when the regulator imposes restrictions on supervisory board composition or on management pay or capital payouts.

The effect of international experts on company financial performance

Objective: The article aims to evaluate the influence of international supervisory board experts on firm financial performance, based on the impact of international experts’ characteristics, such as their knowledge, experience, independence, and connections. Methodology/research approach: The empirical study is based on a unique handcollected dataset covering a final sample of 256 companies listed on the Warsaw Stock Exchange (WSE) and which operated on the market during the observation period 2010- 2015. The Generalized Least Squares (GLS) regression model with a random effect is employed to test the hypotheses. Findings: The findings strongly suggest that the presence of supervisory board members with an outside perspective and international experience may exert a positive impact on companies’ operational outcomes. Research limitations/implications: The research has practical implications for Polish governmental agencies, as it verifies the usefulness of the recommendations for supervisory board composition presented in the Best Practices for WSE Listed Companies. Originality/value: The study contributes to the existing literature on the factors that affect company performance. Consequently, great value is added to the research on supervisory board characteristics that are crucial for effective monitoring and advisory roles, enhancing the quality of corporate governance.

ПІДХОДИ ДО КОМПОЗИЦІЇ НАГЛЯДОВИХ РАД КОМЕРЦІЙНИХ БАНКІВ В УКРАЇНІ В КОНТЕКСТІ ПІДВИЩЕННЯ ЕФЕКТИВНОСТІ ЇХ ДІЯЛЬНОСТІ

Анотація. Корпоративне управління є важливим елементом ефективної банківської діяльності. Наявність задекларованих процедур і стандартів процесу ухвалення управлінських рішень зменшує рівень непрогнозованості і підвищує довіру між банками та їхніми контрагентами. Дотримання на практиці таких процедур, перш за все, залежить від композиції органів управління банку. Незважаючи на трирівневу структуру органів управління українських банків, стаття сфокусована на аналізі підходів до формування наглядових рад і впливу таких підходів на ефективність банківської діяльності. У процесі дослідження здійснено структурування теоретичних концепцій, пов’язаних із впливом складових елементів корпоративного управління на ефективність банківської діяльності. Окрім того, проведено систематизацію емпіричних досліджень за цією проблематикою. У контексті дослідження підходів до формування складу наглядових рад визначено головні законодавчі відмінності та фактори, що на них впливають. Здійснено дескриптивний аналіз структури наглядових рад комерційних банків України, висновки якого вказують на значну неоднорідність у підходах до формування складу наглядових рад. Визначено головні тенденції, які панують у банківському секторі за цим аспектом, а також виокремлено фактори, які впливають на наявність таких тенденцій. Установлено існування формального підходу, за якого «найбільш популярним» варіантом є склад ради з п’яти членів, троє з яких — незалежні. Побудовано модель впливу варіативності складу ради банку на ефективність його діяльності. З’ясовано, що для підвищення ефективності власної діяльності банкам слід розглянути варіанти розширення складу ради новими членами з відмінними освітніми напрямами і компетенціями. Ключові слова: корпоративне управління, наглядова рада, ефективність банку. Формул: 2; рис.: 1; табл.: 4; бібл.: 19.

An exploration on measuring and assessing ‘Tone at the Top’ with Dutch listed companies (AEX)

This article explores the measurement and assessment of Tone at the Top (TATT) in CEO letters of Dutch listed companies (AEX) over a 10 year period. A combination of quantitative (text analysis) and qualitative research (close reading) is conducted. The main findings indicate that measured TATT is relatively stable for AEX companies over time. However, at closer examination significant deviations from the mean TATT are evident. Possible explanations are provided for these out-of-range TATT scores through the identification of several variables, e.g., difficult operating circumstances, investments and disinvestments, changes in the composition of supervisory boards, corporate governance, and compliance with law and regulations.

Supervisory Board Composition and Firm Financial Performance: A Case of Companies Listed on the Warsaw Stock Exchange

Purpose: This paper investigates the relationship between the internal governance structure and financial performance of Polish companies. Ensuring diversity of corporate boards has been on the agenda of various regulators on a national and international level as it is generally expected corporate boards that are more diverse will be more competent and more effective monitoring managerial actions, and therefore positively impact company performance. Methodology: This paper uses a sample of companies listed on the Warsaw Stock Exchange and examines the two main compositional features of company supervisory boards (independence and experience) and their practices by companies. We also investigate the effect of diversity on company performance. As our empirical methodology, we use linear regression analysis. Findings: Our findings support the proposal that diversity matters, especially in terms of the presence of experienced members on supervisory boards, and that such diversity positively affects financial results. In addition to the main finding, the results of the study indicate also the importance of the ownership structure. Family firms and companies with a higher level of gearing are more likely to perform less effectively. Originality: To date, research on the association between supervisory board diversity and financial performance in either the Polish or Central and Eastern European capital markets has been limited. The paper also points to the importance of having experienced members on a company’s supervisory board. Independent members on supervisory boards do not seem to have a similar association.

The Changing Composition of the Supervisory Boards of the Eight Largest Banks and Insurers During 2008-2014 and the Impact of the '4 4 Suitability Screenings'

In this article we describe the changes in the composition of management boards and supervisory boards that have taken place in the Dutch financial sector since 2008. In particular, we consider the effects of the introduction of suitability screening for executive directors and supervisory directors at the four largest banks and the four largest insurers in the Netherlands (the 4+4 screenings). In the summer of 2012, the supervisory directors of these eight institutions were the first group to undergo suitability screening, enabling the impact of screening on the composition of the board to be examined in isolation. This article demonstrates that the composition of the management boards and supervisory boards of these Dutch financial institutions has changed substantially since 2008. Notable findings are the fall in the average size of the supervisory boards from 9.3 to 7.3 supervisory directors, the increase in the percentage of female supervisory directors to 27.6%, and the recovery in the number of foreign supervisory directors, which showed a constant decline after 2008, started to rise again in 2012 and reached 19% in 2014. There has been hardly any change in the average age of executive directors and supervisory directors, the average term of office or the size of the management board.

The Impact of Supervisory Board Composition on CSR Reporting. Evidence from the German Two-Tier System

Corporate social responsibility (CSR) reporting is becoming increasingly relevant in light of modern corporate governance. There is growing activity among empirical research in one-tier systems that considers the link between board composition and CSR reporting. This study is the first of its kind on the German two-tier system with special regard for the supervisory board. We analyze gender diversity, expertise, the presence of former managers, frequency of meetings, and the size of the supervisory board. Our multiple regressions indicate that gender diversity has a positive impact on CSR disclosure intensity, which is in line with prior studies on one-tier systems. Our findings have implications for both users and public policy and suggest that current European corporate governance regulations could help to increase the decision usefulness of CSR reporting.

French supervisory board gender composition and quota threat: changes from 2008 to 2010

Purpose– The purpose of this paper is to explore how an environmental threat (possible quotas for female supervisory directors) might change supervisory board gender composition in SBF120 French company boards between 2008 and 2010.Design/methodology/approach– From a census of supervisory board membership of SBF120 companies in France in January 2008 and December 2010, data were obtained to test hypotheses relating to changes in gender composition of boards and demographic differences between new and earlier director appointees. The authors drew on institutional theory to inform the discussion of this paper’s findings.Findings– The authors reveal significant increases over 2008-2010 in SBF120 board female representation and significant cohort differences between recent and earlier appointees. Newer female appointees differed from male peers and from earlier appointed females and males, bringing youth and international experience. New females were more likely to gain CAC40 seats than their male peers. There was an increase in boards with multiple female directors.Research limitations/implications– Actual motivations for increase in female appointments are unknown, but institutional theory provides possible explanations, as suggestion of coercive forces loomed. Chairmen of larger firms may have made strategic choices to attract younger and English-speaking foreign women, before the rush. Limitations include the descriptive nature of the paper, but it sets a benchmark for later studies to monitor progress in depth.Practical implications– The talent pool for female directors has widened to include foreign English-speaking women, bringing a range of new insights and experience of international governance practice to traditional French boardrooms. However, this could be seen as further discriminatory practice that requires female appointees to bring more human and social capital than that required of their male peers.Originality/value– This is the first paper charting the changes in supervisory board composition during the three-year period of environmental unrest as quotas were proposed and legislated in France and comparing new and existing cohort French director demographics.

Inside or outside control of banks? Evidence from the composition of supervisory boards

This paper examines the composition of supervisory boards of 41 large German banks in 1999–2010. We find that the supervisory board structure reflects both outside control by major shareholders and inside control by other stakeholders. The largest group among non-employee board members is made up of bank managers. The high proportion of former executives and German board representation indicates significant inside control. The chairpersons of banks controlled by banks are less likely to be former executives of the same bank than are the chairpersons of banks controlled by non-banks. Over time, representation of industrial and insurance companies on banks’ supervisory boards has decreased and the representation of banks and foreign shareholders has increased.

Inside or Outside Control of Banks? Evidence from the Composition of Supervisory Boards

This paper examines the composition of supervisory boards of 41 large German banks in 1999-2010. We find that the supervisory board structure reflects both outside control by major shareholders and inside control by other stakeholders. The largest group among non-employee board members is made up of bank managers. The high proportion of former executives and German board representation indicates significant inside control. The chairpersons of banks controlled by banks are less likely to be former executives of the same bank than are the chairpersons of banks controlled by non-banks. Over time, representation of industrial and insurance companies on banks’ supervisory boards has decreased and the representation of banks and foreign shareholders has increased.

Firm size and board diversity

This study seeks to understand the relation between firm size and supervisory board composition. Specifically, we ask if and how firm size influences occupational and international background diversity in supervisory boards. Relying on resource dependence theory and theories of organizational behavior, we hypothesize that board diversity with respect to directors’ occupational background will increase with firm size, while the relation between firm size and board diversity with respect to directors’ international background will be concave. Using archival data for supervisory board members of 151 German firms listed in the German stock exchange indices DAX, MDAX, SDAX and TecDAX for the business year 2005, we find empirical support for our hypotheses: Both, occupational and international background diversity increase with increasing firm size, but international background diversity does so at decreasing rates.

Shari’ah Supervisory Board Composition Effects on Islamic Banks’ Risk-Taking Behavior

Islamic banks underlie the fundamental principles of the Shari’ah, which encompass all business activities, financial contracts, and transactions. The Shari’ah Supervisory Board (SSB) monitors and certifies compliancy and is unique to the governance structure of Islamic banks compared to their Western counterparts. This study addresses the question of how the compositional characteristics of the SSB influence the loan portfolio risk-taking of Islamic banks. As such, we analyze to which degree the legal supervisory functions of a SSB affect the banks’ risk-taking behavior. Over the period from 2000 to 2010, we regard cross-country bank-level data from the Middle East and Northern Africa as well as from Southeast Asia. Our results reveal evidence that the loan portfolio risk-taking of Islamic banks is positively influenced by increasing size of the SSB, as well as when top ranked Shari’ah scholars with multiple memberships have board mandates and when annual changes occur in the composition of a SSB, regarding particularly previous period variables with second lags. We find that supervisory effectiveness and disciplining power of individual bank SSBs towards the risk-taking in the loan portfolio of Islamic banks decreases in a decentralized Shari’ah-compliant governance structure. The reverse causality analysis shows strongly that SSB factors affect primarily loan portfolio risk-taking, not the other way around.

Do Cross-Shareholdings Reflect Bank Control on German Companies? An Analysis of Interlocking in the Supervisory Boards

This paper aims to analyse the characteristics of the bank-industry relationship in Germany, showing the ties among financial and industrial companies both in terms of cross-equity-shareholdings and interlocking directorates for the years 2001-2002. Specifically the main purpose of the research is to demonstrate, for the panel of German companies investigated, that bank-firm relationship relies not only on patrimonial linkages but also on personal relationships. Therefore, in order to try to measure the extent of the banks role in Corporate Governance and to evaluate in a deeper sense the effective influence they have on the industry management, we carried out two different analyses. The first, takes into consideration the equity relationships between banks/insurances and the German industrial firms, the second analyses the number of seats held by the same banks in the correspondent supervisory board. In particular, in our opinion, the analysis of the composition of the supervisory boards can help to outline the personal relationships above mentioned. Therefore is understood, that we consider the presence of bank's representatives in others than banks' supervisory boards as signal of banks' opportunity to exert power and influence. Obviously the study is carried out taking into consideration the sweeping changes that, since the late 1990s, have undergone in this model.The paper is structured in a straightforward way. Chapter 1 reviews all the relevant literature, discusses the traditional features of the German institutional system and evolving trends. Chapter 2 sets the research hypothesis and the methodological choices of analysis. Chapter 3 deals with the evolving trends of the equity relationships between banks/insurances and the industrial firms of the panel. Chapter 4 integrates the analysis of the previous chapter, with a research on the composition of supervisory boards, and uses the collected data to present a descriptive statistics in order to test the research hypothesis. Chapter 5 summarizes and discusses the results of the research.

Betting on Hitler—The Value of Political Connections in Nazi Germany*

AbstractThis paper examines the value of connections between German industry and the Nazi movement in early 1933. Drawing on previously unused contemporary sources about management and supervisory board composition and stock returns, we find that one out of seven firms, and a large proportion of the biggest companies, had substantive links with the National Socialist German Workers' Party. Firms supporting the Nazi movement experienced unusually high returns, outperforming unconnected ones by 5% to 8% between January and March 1933. These results are not driven by sectoral composition and are robust to alternative estimators and definitions of affiliation.