Corporate Board Characteristics Research Articles

Ibero-American corporate ownership and boards of directors: implementation and impact on firm value in Chile and Spain

From a corporate governance point of view, this paper addresses the question of how corporate ownership and board characteristics influence firm value for a sample of Ibero-American companies. Specifically, we analyse indexed non-financial companies from Chile and Spain for the period 2007 – 2016, using the GMM panel data technique. Our research is novel in considering a two-country approach, with one emerging and one developed country, and in analysing how corporate ownership and board characteristics, in addition to contextual variables, determine firm value. Our results assess the efficiency of corporate governance mechanisms. Although findings are intriguing regarding ownership concentration, they confirm the benefits of a good board of directors. This type of board is characterised by a large size, sufficiently independent directors, and a balance in terms of gender diversity. We provide several policy recommendations from our main findings.

Directors’ Interlock, Gender Diversity and Firm Performance: A Panel Data Approach

In the recent era, along with the developed economy, women empowerment becomes a key agenda of sustainable development in a developing economy also. Their involvement in every sector of the economy becomes a significant social agenda. The mandatory participation of women in the corporate board, according to the Indian Companies Act 2013, turns into a debatable issue and becomes a true interest among policymakers as well as researchers. In this juncture, this study tries to analyze the impact of women director on the value of the Indian corporations. Along with gender diversity of the board, the proportion of executive directors, the busyness of executive directors are considered as the explanatory variables of the study. Size of the board, number of board meeting held, size of the firm and growth of the firm are considered as control variables. On the other hand, Tobin's Q, a market-based performance measurement and ROA, an accounting based performance measurement are taken as the response variables. The basic intention of this paper is to explore the relationship between corporate board characteristics and firm performance and it has been assessed through panel data regression model by taking 78 listed Indian companies from BSE – 100 for the period of 9 years (2008–2016). Statistical analysis of the study spells out that the women representation enhances the knack of the corporate board to influence the firm value in a positive manner. Whereas by supporting the agency theory, multiple directorships by executives play a depressing role in value creation for the firms.

Ownership, Compensation and Board Diversity as Innovation Drivers: A Comparison of U.S. and Canadian Firms

Using a large sample of North American firms, from 1999 to 2016, we investigate the effect of corporate governance structures, specifically ownership, board characteristics, and executive compensation contracts on innovation intensity and output. We consider both R&D expenditures and patents as innovation proxies and evaluate consequences of the economic downturns of 2000 and 2008. We find that R&D investment increases with ownership by institutional blockholders and with the number of institutional owners, confirming the key role institutions play in innovation activities of firms. We observe higher R&D levels for firms with more independent boards, more females board members and more outside directorships held by directors. We report that firms with CEO/chair of the board duality have lower R&D intensity, as do firms with higher ownership by directors and with a higher mean board age. Innovation is negatively related to CEO salary levels, but positively related to the ratio of incentives to total compensation, confirming that incentives contribute to aligning shareholders and management interests, which leads to better long-term decisions. However, those incentives reduce the number of patents. We do not find any systematic changes in R&D for the 2000 recession, however there is an increase for the 2008 financial crisis.

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.

Can board environmental orientation improve U.S. firms' carbon performance? The mediating role of carbon strategy

AbstractOverwhelming evidence from prior research suggests a positive association between corporate board characteristics and carbon performance; however, very little is known about the mechanisms linking the two variables. This study attempts to fill this gap by developing and empirically testing a conceptual model that highlights the role of carbon strategy in the relationship between board environmental orientation (BEO) and carbon performance. We argue that BEO can directly and indirectly influence carbon performance through carbon strategy. Using structural equation modelling to analyse data consisting of 2,301 U.S. firm‐year observations over the 2005–2015 period, we find that the greater the BEO is, the better its carbon performance (i.e., lower greenhouse gas emissions). The results also provide evidence of the mediating effect of carbon strategy on the relationship between BEO and carbon performance. Splitting the sample into high and low carbon‐intensive industries shows a partial mediation effect in high carbon‐intensive industries and a full mediation effect in low carbon‐intensive industries. The findings of the study and its implications for scholars, policymakers, managers, investors, and environmentalists are discussed.

Corporate boards, shareholding structures and voluntary disclosure in emerging MENA economies

PurposeThe purpose of this paper is to investigate the level of voluntary compliance with, and disclosure of, corporate governance (CG) best practices, and the extent to which board characteristics and shareholding structures can explain discernible differences in the level of voluntary CG disclosure in a number of emerging Middle Eastern and North African (MENA) economies.Design/methodology/approachThe paper uses a number of multivariate regression methods, namely, ordinary least squares, weighted, non-linear, lagged-effects, two-stage least squares and fixed-effects regression techniques to analyse data collected for a sample of listed corporations in emerging MENA economies from 2009 to 2014.FindingsFirst, in general, MENA listed firms have a relatively lower level of voluntary compliance with, and disclosure of, CG practices compared to listed firms in developed countries. Second, the evidence suggests that corporate board characteristics, including board diversity, have a positive association with the level of voluntary CG disclosure. In contrast, the findings indicate that unitary board leadership structure, director shareholdings and government shareholdings negatively impact on the level of voluntary CG disclosure. The study does not, however, find any evidence to suggest that family shareholdings have any significant relationship with the level of voluntary CG disclosure. The findings are generally robust to alternative measures and potential endogeneity problems.Originality/valueThis is one of the first empirical efforts at investigating the association between CG mechanisms and voluntary disclosure in emerging MENA economies that observably relies on a multi-theoretical framework within a longitudinal cross-country research setting.

Impact of Corporate Board and Audit Committee Characteristics on Voluntary Disclosures: A Case Study of Listed Manufacturing Companies in Sri Lanka

Impact of Corporate Board and Audit Committee Characteristics on Voluntary Disclosures: A Case Study of Listed Manufacturing Companies in Sri Lanka

The impact of corporate social responsibility disclosure and board characteristics on corporate performance

AbstractThe study aims to investigate the impacts of corporate social responsibility disclosure and board characteristics such as (board independence, the board size, and gender diversity) on corpo...

Corporate governance and voluntary risk and forward-looking disclosures

PurposeThe purpose of this paper is to examine the impact of corporate governance on risk and forward-looking disclosures in Qatar.Design/methodology/approachThe authors automatically measure levels of risk and forward-looking disclosures in the annual reports of Qatari firms for the period 2008–2014. The authors also use two ways clustered error pooled panel regressions to examine the determinants of these disclosures.FindingsThe authors find that firms with a higher percentage of foreign ownership disclose more forward-looking information; conversely, board size has a negative impact on the forward-looking disclosure. Financial firms tend to disclose less forward-looking information, however, they tend to disclose more forward-looking information after the 2008 global financial crisis. The authors also find negative relationships between the risk disclosure and both the number of non-executive members of the board of directors and duality role of the CEO.Research limitations/implicationsThe study uses the quantity of disclosure as a proxy for the quality of disclosure.Practical implicationsThe findings should help the users of corporate annual reports in Qatar to understand managerial incentives for reporting risk and forward-looking information. This should help regulators to set a proper set of disclosure rules. Moreover, this study increases our understanding of the behavior of international investors and the board characteristics (i.e. board size) in motivating risk and forward-looking disclosures in Qatari firms.Originality/valueThe authors provide the original empirical evidence on the impact of corporate ownership and board characteristics on risk and forward-looking disclosures for Qatari firms using two ways clustered error pooled panel regressions.

Corporate board characteristics and environmental disclosure quantity: Evidence from South Africa (integrated reporting) and Nigeria (traditional reporting)

The study examined the influence of corporate board characteristics on environmental disclosure quantity of listed firms in two leading emerging economies: South Africa and Nigeria which practice i...

Influence of board characteristics on CSR: a study of Indian firms

This study examined the relationship between corporate social responsibility (CSR) and board characteristics among large Indian firms. The examined board characteristics included the proportion of independent directors and female directors on the board. The final study sample included 171 firms that operate across multiple representative industries, and period of the study was from 2014 to 2016. Panel data analysis used the proportion of independent directors and female directors on the board as independent variables and CSR spending as the dependent variable. Board size, firm age, firm size, industry type, and profitability were the control factors. Available empirical evidence using the ordinary least squares and random effects estimation models showed that while female directors influenced a firm's CSR, independent directors did not have an impact. The results remained robust using alternate measures of a firm's CSR and different estimation methods.

Corporate governance and dividend pay-out policy in UK listed SMEs

PurposeThe purpose of this paper is to examine the extent to which corporate board characteristics influence the level of dividend pay-out ratio using a sample of UK small- and medium-sized enterprises from 2010 to 2013 listed on the Alternative Investment Market.Design/methodology/approachThe data are analysed by employing multivariate regression techniques, including estimating fixed effects, lagged effects and two-stage least squares regressions.FindingsThe results show that board size, the frequency of board meetings, board gender diversity and audit committee size have a significant relationship with the level of dividend pay-out. Audit committee size and board size have a positive association with the level of dividend pay-out, whilst the frequency of board meetings and board gender diversity have a significant negative relationship with the level of dividend pay-out. By contrast, the findings suggest that board independence and CEO role duality do not have any significant effect on the level of dividend pay-out.Originality/valueThis is one of the first attempts at examining the relationship between corporate governance and dividend policy in the UK’s Alternative Investment Market, with the analysis distinctively informed by agency theoretical insights drawn from the outcome and substitution hypotheses.

Green governance and sustainability reporting in Kazakhstan's oil, gas, and mining sector: Evidence from a former USSR emerging economy

Based on essence of the stakeholder and resource dependence theories, this study examines relationships between corporate board characteristics and sustainability reporting (SR) in oil, gas and mining companies in Kazakhstan. All data on board characteristics and SR were collected manually from annual reports, investment memorandums, sustainability reports, and corporate social responsibility (CSR) reports, while financial data were extracted from financial statements of the companies. The results show that board characteristics such as board size and gender diversity are the most important factors in determining the scope and quality of sustainability information. The findings of the study will be useful for investors, policy makers, regulators and practitioners, as they suggest that effective board characteristics could improve corporate governance (CG) practices, which, in turn, could lead to more transparent and better corporate reporting practices in emerging economies generally and the 15 former USSR countries specifically.

Corporate boards and performance pricing in private debt contracts

We examine the effects of corporate board characteristics on the use of performance pricing in debt contracts. Performance pricing is a recent innovation that plays a role in addressing some debt contracting problems by linking the ex-ante pricing of debt with ex-post firm performance. Results show that debtholders are more likely to use performance pricing in loan contracts for borrower firms with greater board independence and CEOs with higher share ownership, whereas debtholders are less likely to use performance pricing when firms have smaller boards. Debtholders also are more likely to include an interest increasing performance pricing provision in loan contracts when CEOs' incentives are aligned via higher share ownership, but they are less likely to use them in debt contracts when board ownership is lower. Overall, the results suggest debtholders perceive that characteristics associated with effective boards are beneficial and factor them in their contracting decisions.

Corporate Boards and Performance Pricing in Private Debt Contracts

We examine the effects of corporate board characteristics on the use of performance pricing in debt contracts. Performance pricing is a recent innovation that plays a role in addressing some debt contracting problems by linking the ex-ante pricing of debt with ex-post firm performance. Results show that debtholders are more likely to use performance pricing in loan contracts for borrower firms with greater board independence and CEOs with higher share ownership, whereas debtholders are less likely to use performance pricing when firms have smaller boards. Debtholders also are more likely to include an interest increasing performance pricing provision in loan contracts when CEOs’ incentives are aligned via higher share ownership, but they are less likely to use them in debt contracts when board ownership is lower. Overall, the results suggest debtholders perceive that characteristics associated with effective boards are beneficial and factor them in their contracting decisions.

Corporate Governance and Dividend Pay-Out Policy in UK Listed SMEs: The Effects of Corporate Board Characteristics

Purpose: This paper examines the extent to which corporate board characteristics influence the level of dividend pay-out ratio using a sample of UK small and medium-sized enterprises (SMEs) from 2010 to 2013 listed on the Alternative Investment Market. Design/methodology/approach: The data is analysed by employing multivariate regression techniques, including estimating fixed effects, lagged effects and two-stage least squares regressions. Findings: The results show that board size, the frequency of board meetings, board gender diversity and audit committee size have a significant relationship with the level of dividend pay-out. Audit committee size and board size have a positive association with the level of dividend pay-out, whilst the frequency of board meetings and board gender diversity has a significant negative relationship with the level of dividend pay-out. By contrast, the findings suggest that board independence and CEO role duality do not have any significant effect on the level of dividend pay-out. Originality/value: This is one of the first attempts at examining the relationship between corporate governance and dividend policy in the UK’s Alternative Investment Market, with the analysis distinctively informed by agency theoretical insights drawn from the outcome and substitution hypotheses.

The Influence of Corporate Social Responsibility and Board Characteristics on Earnings Management

This paper examines whether firms that act socially responsible and have favourable board characteristics engage in a more transparent financial reporting. In particular, the first question is whether firms with high corporate social responsibility (CSR) engagement exhibit less earnings management than their socially less responsible counterparts. Simultaneously, the second question deals with the level of support of favourable Corporate Governance (CG), leading to a superior transparent financial reporting. The study therefore examines whether firms with high engagement in CSR and high independence in board and selected committees engage in even lower earnings management. The results show that CSR firms engage in lower (1) accrual-based earnings management and (2) real activities based earnings management. Additionally, these firms exhibit lower earnings management, when (1) nomination committee and (2) overall board have higher degrees of independent members. These coherences are non-linear. Most important, there is a interaction level effect between the favourable board independence characteristics and CSR, leading to a superior transparency in financial reporting. However, high-incentive situations are detected in which the magnitude of earnings management is high for all firms. The results are robust to (1) using various models and estimators to compute accrual-based and real activities earnings management, (2) using mean-centered or standardised proxies, (3) using alternative measures for CSR performance respectively grouping and (4) applying additional performance control.

Corporate Board Characteristics, Managerial Entrenchment and Diversification Strategy: Evidence from Tunisian Context

The aim of this paper is to analyze the role of the board of directors and the management entrenchment in the explanation of diversification strategy of the Tunisian firms. In particular we focus on the characteristics of these two opposite directions bodies where the first controls the second in explaining the strategic choices of the firm. We find evidence for the negative effect of the board size and outside directors on the diversification strategy of the firm. The empirical result points also the negative effect of the CEO duality, which is inconsistent with the agency hypothesis.

An Analysis of the Characteristics and Quality of Corporate Boards of Listed Deposit Collecting Banks in Nigeria

The purpose of this paper is to compare the characteristics of corporate boards of Nigerian banks with the ten largest banks globally in terms of five criteria (board size, number of female board members, number of meetings per annum, age of directors, and duality of Chairman and CEO positions). These criteria have been identified as being relevant for sound corporate governance. The paper also examined whether the Nigerian corporate boards complied with the relevant national Nigerian corporate governance codes. The research methodology consisted of a content analysis of the annual reports of the selected banks. The study found significant differences between the sample of international banks and the Nigerian banks with regards to female board membership, the number of board meetings and the average age of board members. Furthermore, not all banks observed the minimum board governance codes. The regulator should require all banks to follow the Central Bank of Nigeria’s code of corporate governance for banks. DOI: 10.5901/mjss.2014.v5n8p198

Gender diversity, board independence, environmental committee and greenhouse gas disclosure

This paper examines the impact of corporate board's characteristics on the voluntary disclosure of greenhouse gas (GHG) emissions in the form of a Carbon Disclosure Project report. Using both univariate and regression models with a sample of the 329 largest companies in the United Kingdom, we find a significant positive association between gender diversity (measured as the percentage of female directors on the board) and the propensity to disclose GHG information as well as the extensiveness of that disclosure. In addition, a board with more independent directors or environmental committee show a higher tendency to be ecologic transparent. However, if the committee is not sufficiently large, independent or active, its effect seems insignificant. The results are consistent with stakeholder theory, suggesting that a diversified and independent board and the existence of a board-level environmental committee may balance a firm's financial and non-financial goals with limited resources and moderate the possible conflicting expectations of stakeholders who have disparate interests. The findings should be useful for top managers and regulators who are interested in improving corporate governance practices and climate-change strategies.