Corporate Board Characteristics Research Articles

The effect of corporate board characteristics on loan monitoring decisions

Motivated by a paucity of research into the impact of corporate governance from a debtholder perspective, we examine the impact of corporate governance on loan monitoring decisions. The active and close involvement of a major UK bank facilitated the development of extremely realistic experimental scenarios with a great deal of accurate institutional detail. The results show that the likelihood of loan officers increasing the level of monitoring in the context of a debt covenant breach is associated with board independence, director financial expertise and the presence of a blockholder. A two-way interaction between financial expertise and board independence is also documented. Since likelihood of debt covenant breaches continues to be an important variable in studies of accounting choice and corporate finance the paper provides insights into associated debt contracting costs and their determinants. Apart from extending the academic literature, this study provides additional evidence on the efficacy of good corporate governance in reducing debt contracting costs that should also be of interest to regulators and practitioners

Board characteristics and the financial performance of Nigerian quoted firms

PurposeThe purpose of this paper is to investigate the impact of corporate board characteristics on the financial performance of Nigerian quoted firms. Board characteristics studied comprise board size, board skill, board nationality, board gender, board ethnicity and CEO duality.Design/methodology/approachThe study employed the random‐effects and fixed‐effects generalised least squares (GLS) regression to test the six hypotheses formulated for the study, while controlling for firm size and firm age.FindingsUsing panel data from 122 quoted firms in Nigeria between 1991 and 2008, it was found that board size, CEO duality and gender diversity were negatively linked with firm performance, whereas board nationality, board ethnicity and the number of board members with a PhD qualification were found to impact positively on firm performance. The result of the robustness test using the same board characteristics for 160 small firms showed that board duality was positively linked to firm performance, while a PhD qualification was negatively linked to firm performance.Practical implicationsThe study contributes to the understanding of the board‐performance link by examining both the traditional variables such as board size, CEO duality and other organisational attributes such as ethnic diversity, foreign nationality and competence variables represented by women and PhD holders, respectively. The results provide an insight for practitioners and policy makers on the importance of relying on institutional specifics in the prescription of corporate governance codes.Originality/valueThe study adds value to the global corporate governance discourse in two ways: first, the use of Nigeria, which is claimed to have one of the weakest business cultures in the world, and secondly, using a good number of proxies that are country‐specific for corporate boards.

New Zealand Corporate Boards in Transition: Composition, Activity and Incentives between 1995 and 2010

We document changes in New Zealand corporate board characteristics between 1995 and 2010, a period centred around the 2003 introduction of the NZX Corporate Governance Best Practice Code. Unsurprisingly, the representation of non-executive, independent and female directors on NZ boards rose during the period, as did real chair and director fees and the importance of board committees, while average board size fell. Perhaps more surprisingly, much of this movement occurred before 2003. Moreover, there are some intriguing dfferences between New Zealand and other, mainly larger, countries. We use this information to identify a number of unanswered questions about New Zealand corporate boards.

The Composition Of Corporate Boards Of Directors: Does Industry Matter?

<span style="font-family: Times New Roman; font-size: small;"> </span><p style="margin: 0in 0.5in 0pt; text-align: justify; mso-pagination: none; mso-add-space: auto;" class="MsoNormalCxSpFirst"><span style="color: black; font-size: 10pt;"><span style="font-family: Times New Roman;">The purpose of this study is to identify and examine differences in corporate board characteristics across four industries.<span style="mso-spacerun: yes;"> </span>Using a sample of 2592 US publicly traded firms, eleven board characteristics were identified and then examined across manufacturing, retail trade, finance/insurance, and services industries.<span style="mso-spacerun: yes;"> </span>Our analyses revealed significant differences in each of the eleven board characteristics examined.<span style="mso-spacerun: yes;"> </span>Implications and areas for future research are discussed.</span></span></p><span style="font-family: Times New Roman; font-size: small;"> </span>

CEO and Board Characteristics as Determinants of Private Benefits of Control: Evidence from the Russian Stock Exchange

This paper investigates whether and how various characteristics of CEOs and corporate boards are related to the severity of corporate governance problems within firms. The latter is proxied by private benefits of control, which we measure for dual class stock firms using the voting premium approach. Our empirical analysis is based on data from Russia and takes advantage of the extreme corporate governance problems in the country, considerable variation in corporate governance practices across firms and over time, and presence of a large and exogenously created (during the process of privatization) group of dual class stock companies. The data are assembled from the RTS, SKRIN and SPARK databases and include over 200 firms observed in 1997-2009, with over 1000 observations in total. Our econometric analysis suggests a quadratic relationship between private benefits of control and CEO ownership with a minimum at about 4% CEO ownership, a positive association between CEO tenure and private benefits, and a quadratic in CEO age with a dip in private benefits at about 52 years of age. There is also a quadratic relationship between private benefits of control and board size, implying the optimality of medium-sized (about 9-10 directors) boards. We find no gender effects on private benefits of control.

Corporate board attributes and bankruptcy

This paper examines how the composition and characteristics of corporate boards relates to firms' success and solvency; the study here focuses on the question of insolvency. This study finds that both board composition and member characteristics relate to whether or not firms can avoid bankruptcy. Boards have a major role to play in whether or not the company can remain solvent. A more versus less independent board, one which is larger and comprised of older members, has more members currently serving as CEOs of other companies, and whose independent/outside directors own less stock is best positioned to help a firm remain out of bankruptcy. Firms may use the results to custom tailor boards as older members retire and new members are inducted.

Owners, Boards, Managers and the Private Benefits of Control: A Study of Dual Class Stock Firms in an Emerging Market

This paper investigates whether and how various characteristics of CEOs and corporate boards are related to the severity of corporate governance problems within firms. The latter is proxied by private benefits of control, which we measure for dual class stock firms using the voting premium approach. Our empirical analysis is based on data from Russia and takes advantage of the extreme corporate governance problems in the country, considerable variation in corporate governance practices across firms and over time, and presence of a large and exogenously created (during the process of privatization) group of dual class stock companies. The data are assembled from the RTS, SKRIN and SPARK databases and include over 200 firms observed in 1997-2009, with over 1000 observations in total. Our econometric analysis suggests a quadratic relationship between private benefits of control and CEO ownership with a minimum at about 4% CEO ownership, a positive association between CEO tenure and private benefits, and a quadratic in CEO age with a dip in private benefits at about 52 years of age. There is also a quadratic relationship between private benefits of control and board size, implying the optimality of medium-sized (about 9-10 directors) boards. We find no gender effects on private benefits of control.

The Effect of Corporate Board Characteristics on Loan Monitoring Decisions

Motivated by a paucity of research into the impact of corporate governance from a debtholder perspective, we examine the impact of corporate governance on loan monitoring decisions. The active and close involvement of a major UK bank facilitated the development of extremely realistic experimental scenarios with a great deal of accurate institutional detail. The results show that the likelihood of loan officers increasing the level of monitoring in the context of a debt covenant breach is associated with board independence, director financial expertise and the presence of a blockholder. The two-way interaction between financial expertise and board independence is also documented. Apart from extending the academic literature, this study provides empirical evidence on the efficacy of good corporate governance in reducing debt contracting costs that should also be of interest to regulators and practitioners.

The Composition Of Corporate Boards Of Directors: Pre- And Post-Sarbanes-Oxley

<p class="MsoNormalCxSpFirst" style="text-align: justify; margin: 0in 0.5in 0pt; mso-pagination: none; mso-add-space: auto;"><span style="color: black; font-size: 10pt; mso-themecolor: text1;"><span style="font-family: Times New Roman;">The purpose of this study is to examine corporate board characteristics pre- and post-Sarbanes-Oxley.<span style="mso-spacerun: yes;">   </span>More specifically, using a sample 1141 US publicly traded firms, board characteristics were identified and then changes in these characteristics were examined across the years 2001, 2004, and 2007.<span style="mso-spacerun: yes;">  </span>Our analyses reveal significant changes in 8 of 10 board characteristics examined.<span style="mso-spacerun: yes;">  </span>Implications and areas for future research are discussed.</span></span></p>

Evaluating the Characteristics of Corporate Boards Associated with Layoff Decisions

The paper evaluates the characteristics of corporate boards associated with layoff decisions using a large sample of UK firms suffering performance declines over the period 1994–2003. The results show that firms are less likely to respond to performance declines with employee layoffs when they have large boards. Further analysis shows that layoff decisions are positively associated with the proportion of outside directors and directors’ remuneration. The findings provide some support to the recommendations of the Cadbury Report (1992) and Higgs Review (2003) on the importance of the structure and composition of board of directors in the corporate governance process.

Characteristics of CEOs and corporate boards with women inside directors

Women corporate inside (executive) directors constitute an elite minority of leaders of large corporations. This study examines the characteristics of CEOs and boards of Fortune 1000 firms that had women who held the dual leadership positions of corporate director and executive officer in 1998 in order to determine whether firms with women insiders had substantially different characteristics than firms without. We find that compared with firms without women inside directors, firms with women inside directors were characterized by CEOs with longer board tenure, more family ties, and fewer director interlocks, and by boards that were larger, with more insiders, and that utilize a management Chair of the board. Corporate governance implications are drawn for the presence of women at the top of the executive hierarchy.

Does board characteristics affect the capital structure decisions of Ghanaian SMEs?

The issue of corporate governance has been a growing area of management research especially among large and listed firms. However, less attention has been paid in the area with respect to Small and Medium Enterprises (SMEs). This current study explores the link between corporate board characteristics the capital structure decision of SMEs. The paper specifically assesses how the adoption of corporate governance structures among Ghanaian SMEs influences their financing decisions by examining the relationship between corporate governance characteristics and capital structure using an appropriate regression model. The results show negative association between capital structure and board size. Positive relationships between capital structure and board composition, board skills, and CEO duality are, however, found. The control variables in the model show signs which are consistent with standard capital structure theories. The results generally suggest that SMEs pursue lower debt policy with larger board size. Interestingly, SMEs with higher percentage of outside directors, highly qualified board members and one-tier board system rather employ more debt. It is clear, from the study, that corporate governance structures influence the financing decisions of Ghanaian SMEs.

Characteristics of Corporate Boards in Single-Industry and Conglomerate Media Companies

Although there has been much research into corporate governance generally, little attention has been focused specifically on issues in media companies. The question is further complicated by the increasing frequency with which media enterprises that have traditionally operated within the industrial context of a specific medium are becoming business lines for media conglomerates and must compete for resources and strategic attention from a board more concerned with bottom-line profitability than with traditional media industry norms. This study examines board compositions of 21 firms with leadership positions in 1 or more traditional mass media industries and compares governance structure and results for those firms that are concentrated in 1 media segment to those that operate multiple media segments. Relations between skills sets associated with different categories of board members (legal, finance, consumer/marketing, service, academic, and other), management influence, and other board demographics to the creation of shareholder value were identified based on financial measures of market value, earnings per share, and dividend levels. The relations between board characteristics and strategic measures of capital reinvestment, asset sales, and acquisitions were also examined. A number of significant differences were identified between single-industry and conglomerate firms in these dimensions.

Characteristics of Corporate Boards in Single-Industry and Conglomerate Media Companies

Characteristics of Corporate Boards in Single-Industry and Conglomerate Media Companies

Exit, Voice, and the Role of Corporate Directors: Evidence From Acquisition Performance

This study examines the characteristics of corporate boards for 82 companies that attempted 106 acquisitions during the 1980s. We find that poor performance is more likely to occur in firms that have recently experienced higher turnover of outside and lower turnover of inside directors. Companies with smaller boards, more reputable members, and larger equity holdings also outperform their counterparts. Our results suggest that outside directors resign from the board instead of challenging managerial shirking. We conclude that choosing directors for whom board exit is costly will better reduce agency costs.

CORPORATE GOVERNANCE WITHIN THE CONTEXT OF ANTITAKEOVER PROVISIONS

This paper advances understanding of corporate governance relationships with a longitudinal study of multiple antitakeover options. Prior analyses have been primarily cross-sectional, focused exclusively on a single provision ignoring provisions which require subsequent stockholder approval. The current study uses agency theory, and broadens this perspective by examining the differential impact of institutional investors stockholding, managerial stock ownership, and corporate board characteristics on the rate of adoption of six provisions, including provisions which do and do not require stockholder approval. Results of hazard analyses of the rate of amendment adoption of 185 firms between 1984 and 1988 indicate that the impact of governance variables on antitakeover provisions differ depending on whether these actions require stockholder approval or not. The pattern of differences indicates that institutional investors use their voting power when they are given an opportunity to vote and that substitution between direct shareholder control and managerial stock ownership exists.

CORPORATE GOVERNANCE WITHIN THE CONTEXT OF ANTITAKEOVER PROVISIONS

This paper advances understanding of corporate governance relationships with a longitudinal study of multiple antitakeover options. Prior analyses have been primarily cross-sectional, focused exclusively on a single provision ignoring provisions which require subsequent stockholder approval. The current study uses agency theory, and broadens this perspective by examining the differential impact of institutional investors stockholding, managerial stock ownership, and corporate board characteristics on the rate of adoption of six provisions, including provisions which do and do not require stockholder approval. Results of hazard analyses of the rate of amendment adoption of 185 firms between 1984 and 1988 indicate that the impact of governance variables on antitakeover provisions differ depending on whether these actions require stockholder approval or not. The pattern of differences indicates that institutional investors use their voting power when they are given an opportunity to vote and that substitution between direct shareholder control and managerial stock ownership exists.