Corporate Governance Board Research Articles

Board skill diversity and corporate environmental responsibility: the moderating effects of formal and informal pressures

Purpose This study aims to investigate the impact of board skill diversity (BSD) on corporate environmental responsibility (CER). In addition, this study explores the moderating effects of formal regulatory pressure and informal media pressure. Design/methodology/approach This study uses Chinese high polluting companies as the sample and uses regression analysis. Robustness checks, including instrumental variable regression, Heckman two-stage model and propensity score matching method, are performed to test the robustness of the results. Findings The findings suggest that BSD significantly improves CER performance. Both formal regulatory pressure and informal media pressure strengthen the positive impact of BSD on CER. Further channel analyses reveal that BSD improves CER performance by promoting corporate proenvironmental behaviors rather than by restricting environmental violations; skill diversity of executive directors has a more significant effect on CER than that of independent directors. Finally, the moderating effect of regulatory pressure is only significant after the implementation of the Environmental Protection Law, and the moderating effect of media pressure mainly concentrates on negative media coverage. Practical implications The involvement of directors with more diverse skills is essential to improve corporate proenvironmental behaviors. Companies should select qualified directors with different skills to further improve their performance on environmental protection and sustainable development. Social implications Regulators and standard-setters should develop efficient guidelines on corporate board governance to enhance the positive role of companies in environmental and sustainable development. Originality/value This study broadens the research on the determinants of CER by examining the influence of BSD on CER and the moderating roles of various stakeholder pressures, thereby providing a deeper understanding of corporate environmental performance and sustainable development.

Corporate Governance and Financial Performance of Selected Commercial Banks in Kenya

The primary purpose of this study was to determine whether or not corporate responsibility had an impact on the bottom lines of a sample of Kenyan commercial banks. The research's specific goal was to ascertain how compensation for boards was calculated, consumer protection, nonperforming loans, and risk management on the financial performance of selected Kenyan commercial banks. This research was based on the following theories: agency theory, resource dependency theory, control theory, public choice theory and bank risk management theory. The present investigation employed an expressive research strategy. The 44 Kenyan business banks that were the focus of this analysis as at December 2022. The target respondents were the chief finance officers and credit officers. This study used a census-style methodology because the quantity of participating banks was manageable. Surveys that were semi-structured with a mix of open-ended and closed-ended questions were used to gather primary data. Descriptive statistics like frequency, average, and deviation from the mean, and inductive statistics like regression and correlation analyses were used to examine the data. After that, we use tables and figures to display the results. While respondents generally accept that board remuneration and consumer protection measures have a good impact, the statistical significance differs. NPLs are found to have a negative impact on financial performance, which is consistent with current research advocating responsible lending practices. Risk management is also seen as important; however, opinions differ. The findings of the study emphasize the significance of risk management and the good impact of board compensation and consumer protection, as well as the negative impact of NPLs. Transparent board compensation schemes, strong consumer protection measures, careful NPL management, and thorough risk management methods are among the recommendations. The study recommends future research areas to further the study on the impact of corporate supremacy in financial success. Keywords: Corporate governance Board compensation, Consumer protection, Nonperforming loans, Risk management, financial performance

Board diversity and shareholder voting

The lack of diversity across gender and race of corporate boards has been one of the most significant issues in corporate board governance in recent years. Given the critical role that shareholders have in approving director appointments, we analyze voting patterns in director elections to investigate whether and how shareholders value board diversity. Using a broad sample of director elections from 2008 through 2018, we find evidence that shareholders provide greater voting support for diversity on boards, particularly gender diversity. Our findings also indicate greater additional support for diverse boards rather than for individual candidates. However, the magnitude of incremental voting support for diversity is small, and we find little evidence that the additional support is sufficient to affect voting outcomes. These findings persist over time and across key institutional shareholders who have been some of the most outspoken proponents of board diversity (i.e., SRI funds), questioning shareholders’ commitment to promoting board diversity.

Naive independent directors, corporate governance and firm performance.

This paper mainly explores the effect of naive independent directors on firm performance. Using hand-collected data on Chinese listed companies, this study finds that the proportion of naive independent directors is positively associated with firm performance, and an increased proportion of naive independent directors reduce the probability of tunneling of controlling shareholders and financial distress. The findings are robust after using alternative explanatory variables and retro-causality tests. Furthermore, the relation between naive independent directors and firm performance mainly existed in firms with lower shareholdings of the largest shareholder and firms with lower financial leverage. Moreover, this paper finds that firm size, corporate ownership type, and equity balance degree are important factors affecting the appointment of naive independent directors. This paper offers further empirical evidence to the existing research related to naive independent directors and provides an effective way to improve corporate board governance.

Nexus Between Equity Pricing Models and Equity Price Fragility: Empirical Insights From Pakistan

Purpose: The study tests conventional and behavioral pricing multifactor impact on price fragility from the equity market of Pakistan.Methodology: The positivist approach is used to deduct study rationale via probability sampling. At the same time, systematic sampling for data collection of PSX is tested in parallel to mean-variance random walk theory.Findings: The impact of conventional factors is significant on price fragility in the short run and vice versa in the long run. Specifically, herd behavior and disposition effects are found to be insignificant. But size, value, illiquidity, and price earning had a significant impact on price fragility in the short run.Limitations: The current research has not covered the desired scope of the topic due to time limitations, lack of harmony in corporate data on databases, and literature on price fragility being very scarce.Implication: In PSX, there is a need to develop a corporate culture to promote the standard modern financial practice to enhance financial productivity and sustainability. For corporate culture to be established, corporate governance boards should be established, and family governance systems should be replaced by an independent democratic board. Mispricing and arbitragers need serious control.Originality: The value of the research is that little research currently exists on about pricing multifactor impact on price fragility.

Impact of Board Characteristics, Firm Level Factors and Political Connections on Cost of Capital: Evidence from Pakistan

The purpose of the study is to analyze the impact of board characteristics, firm level factors and political connections on cost of capital. The sample of study comprises of 175 non-financial companies listed on Pakistan Stock Exchange from 2008 to 2021. Fixed effect model is used for analysis of data. The findings revealed that Increasing board independence and leverage has a negative influence on the cost of capital. Whereas, Board size, Audit committee size impact the cost of capital positively. The study resolute that the cost of capital is not influenced by political connections, firm size, or institutional ownership. The research identified that there was a decline in the cost of capital, along with an increase in board independence and leverage. In addition, the cost of capital is unaffected by political connections, the size of firms and institutional shareholdings. In contrast, the cost of capital grew due to an increase in the size of the Board and the Audit Committee. The study suggests that In Pakistan non-financial firm’s maximum family own business and very low focus on management and foreign owners. Alternative prospective of managerial and foreign ownership firms should minimized the agency problems as family ownership. And for the best improvement of corporate governance board of directors should bring a transparency, accountability and fairness financial reporting.

Corporate governance and risk disclosure: evidence from integrated reporting adopters

PurposeThis study aims to examine the impact of corporate governance attributes, in the form of board characteristics, on risk disclosures provided through integrated reporting (IR).Design/methodology/approachDrawing upon an agency theory perspective, this study examines the effect of the main corporate governance board characteristics (size, gender diversity, independence and meeting frequency) on the level of risk disclosure provided by a sample of 95 IR adopters from 24 countries for 2018.FindingsThe results suggest that firms are slow to realise IR’s potential to produce innovations in risk disclosure mechanisms. In addition, certain board characteristics, such as gender diversity, independence of directors and meeting frequency, are positive drivers of the risk disclosure provided via IR.Originality/valueTo the best of the authors’ knowledge, this is the first study that investigates the impact of corporate governance mechanisms on risk disclosure provided via IR. Connecting corporate governance mechanisms to IR risk disclosure practices can contribute to enhancing the practical and theoretical understanding of the role that the board of directors may play in stimulating transparency and accountability about risks via an alternative communication tool, IR, to the benefit of both investors and other stakeholders.

Impact of Audit Committee Characteristics on Dividend Yield of Jordanian Listed Financial Companies

The Audit Committee is responsible for overseeing the Board's corporate governance and oversight obligations, including the company's risk management system, internal control system, financial reporting, and internal and external audit tasks. The impact of Audit Committee features on Dividend Policy in financial companies listed on the Amman Stock Exchange was investigated in this study. Dividend Yield per Share was taken into account as part of Dividend Policy in the study, which was based on Jordanian financial enterprises' public financial reports. Multiple regression analysis was employed to examine the impact of AuditCommittee characteristics on DividendYield in Jordanian companies. The results indicated that AuditCommittee characteristics showed a significant effect on DividendYield per Share.

The Effect of Good Corporate Governance on Corporate Social Responsibility in Real Estate Companies Listed on the Indonesia Stock Exchange

The goal of this research was to see how the composition of a good corporate governance board affects the independent board of commissioners, managerial ownership, institutional ownership, and partially audit committee's disclosure of corporate social responsibility, as well as how good corporate governance affects disclosure of corporate social responsibility in real estate companies. Listed on the Indonesian Stock Exchange. The population used in this study were all Real Estate companies listed on the Indonesia Stock Exchange (BEI) in 2015-2019 and samples from research on Real Estate companies were 9 companies with 5 years of observation. The documentation method was utilized to collect data for this study. In this study, descriptive statistics, multiple linear regression analysis, partial test, and determinant test were employed as analysis methods. The findings reveal that while independent commissioners, managerial ownership, and the audit committee have no impact on corporate social responsibility, institutional ownership does. and independent commissioners, management ownership, institutional ownership, and the audit committee all have a substantial impact on corporate governance. Real Estate Companies Listed on the Indonesian Stock Exchange Have a Social Responsibility.

Relationship between Board Characteristics and Dividend Payment Policies

Objective: To investigate the relationship between corporate governance board characteristics and dividend pay-out (e.g. dividend pay-out ratio).
 Method: A panel regression analysis was undertaken to investigate the relationship between corporate governance board characteristics and dividend pay-out (e.g. dividend pay-out ratio). Data was collected from a sample of 29 firms in the top-40 of the Johannesburg Stock Exchange (JSE). Data collected spanned for a period of five years from 2013 – 2018
 Results: Obtained result demonstrate that there is a significant relationship between board diversity, as measured by ethnicity, the board independence and the dividend pay-out ratio.
 Originality/Relevance: Previous studies have asserted that corporate governance affects the level of dividends paid out by a firm. What has remained unclear with the previous studies is whether the dividend pay-out is an outcome or a substitute for effective governance. 
 Theoretical/methodological contributions: The results suggest that there is a strong evidence in favour of the substitution hypothesis, where JSE top 40 boards with a higher degree of independence did not need to use dividends as a tool for monitoring managerial behaviour. The results illustrate evidence supporting the maturity and dividend smoothing theories, and this is observed through the significant relationships established between profitability, previous dividend and the dividend pay-out ratio.
 Social/management contributions: The main contribution of this study being the establishment of the determinants of dividend pay-out policy in South Africa’s JSE listed companies.

The Relationship between Board Characteristics and Dividend Payment Policies

Objective: To investigate the relationship between corporate governance board characteristics and dividend pay-out (e.g. dividend pay-out ratio). Method: A panel regression analysis was undertaken to investigate the relationship between corporate governance board characteristics and dividend pay-out (e.g. dividend pay-out ratio). Data was collected from a sample of 29 firms in the top-40 of the Johannesburg Stock Exchange (JSE). Data collected spanned for a period of five years from 2013 – 2018 Results: Obtained result demonstrate that there is a significant relationship between board diversity, as measured by ethnicity, the board independence and the dividend pay-out ratio. Originality/Relevance: Previous studies have asserted that corporate governance affects the level of dividends paid out by a firm. What has remained unclear with the previous studies is whether the dividend pay-out is an outcome or a substitute for effective governance. Theoretical/methodological contributions: The results suggest that there is a strong evidence in favour of the substitution hypothesis, where JSE top 40 boards with a higher degree of independence did not need to use dividends as a tool for monitoring managerial behaviour. The results illustrate evidence supporting the maturity and dividend smoothing theories, and this is observed through the significant relationships established between profitability, previous dividend and the dividend pay-out ratio. Social/management contributions: The main contribution of this study being the establishment of the determinants of dividend pay-out policy in South Africa’s JSE listed companies.

Effect of Corporate Governance Board Characteristics on Performance of Microfinance Banks in Nigeria.

Effect of Corporate Governance Board Characteristics on Performance of Microfinance Banks in Nigeria.

Board Diversity and Shareholder Voting

The lack of board diversity across gender and race has been one of the most controversial topics in corporate board governance in recent years. Given the central role that shareholders have in approving director appointments, we investigate whether shareholders value diversity on corporate boards by analyzing their voting patterns in director elections. Despite many shareholders’ public commitments of supporting board diversity, we show that shareholders have not historically been proactive in using their votes to motivate companies to increase diversity among corporate boards. This finding persists over time and across key shareholders who have been some of the most outspoken proponents of board diversity.

Corporate Governance and Organisational Survival in Manufacturing Firms in Port Harcourt

This study examined the correlation between corporate governance and organisational survival in manufacturing firms in Port Harcourt. It sought to proffer solutions to survival challenges experienced by firms, through an in- depth application of the concept of corporate governance. Data was collected from 198 management staff through the use of questionnaire. The data was analysed by the use of descriptive statistics and Spearman’s Rank Order Correlation Coefficient. The result revealed a positive relationship between the dimensions of corporate governance board independence and board supervision, and the measures of organisational survival (Innovation and adaptability. Also, the result showed that organisational structure significantly moderates the relationship between corporate governance and organisation survival. The study concludes that board independence has a significant and positive correlation with organisational survival in manufacturing firms. Based on the findings it was recommended that manufacturing firms should ensure that their boards are independent and board supervision should be enthroned to enhance efficiency and corporate survival. Keywords: Corporate Governance, Organisational Survival, Board independence, Board size, Innovation, Adaptability DOI: 10.7176/JRDM/64-06 Publication date: April 30 th 2020

Corporate Governance and Leverage Implications on Firms’ Profitability, Cash Flows and Value in Nigeria

The paper examines the implications of Corporate Governance and leverage on firm profitability (ROA), value (MPS) and cash flows (FCF). The study utilized the agency, stewardship and free cash flow theories. The correlation research design was employed and data collected from ten (10) listed manufacturing firms in Nigeria between the period 2009-2018. The data was analysed for descriptive and correlation properties, with the research hypotheses tested through regression analysis. The results of the study indicates that independent boards have significant negative influence on debt usage, board size does not have a significant effect on debt capital, CEO duality positively impacts the usage of debt financing. The results also indicate that independent boards (BIND) have significant impact on ROA, FCF and MPS, BSIZE is found to exert no statistically significant impact on the financial performance variables, CEO duality negatively impacts both FCF and MPS of the sampled manufacturing firms in Nigeria. Furthermore, the impact of DEBT on ROA and FCF are found to be negative, with the negative effect on ROA being statistically insignificant at the 0.05 level (-0.015, (0.6846)), and the negative effect on FCF being statistically significant at the 0.05 alpha level. The research concludes that the research therefore upholds that capital structure, corporate governance board characteristics and financial performance of manufacturing firms listed on the NSE are significantly related at the 0.05 level. The study recommended that the role of the CEO and board chairman be separated and current debt levels in the manufacturing industry be maintained. Keywords: Corporate Governance, Leverage, Firm Profitability, Firm Cash Flows, Firm Value DOI : 10.7176/RJFA/10-24-04 Publication date: December 31 st 2019

Effect of corporate governance board leadership models and attributes on earnings quality of quoted nigerian companies

Purpose: This study examined the effect of corporate governance leadership models and attributes on firms’ earnings quality using evidence from Nigerian quoted firms.Design/Methodology/Approach: Th...

Board Governance, Seeking Best in Class: Perspectives from Chief Executive Officers Serving As Academic Trustees

This study addressed the convergence of academic and corporate board governance practices. The qualitative description case study was conducted through interviews with chief executive officers (CEOs) who also served as academic trustees. The purposive sample of chief executive officers represented six colleges and universities located in the Midwest and Eastern states in the USA, and they embodied diversity in terms of gender and race. The interview approach brought to the fore the perspectives of the participants themselves comparing the two board governance models. Board meetings are convened behind closed doors, and the interviews allowed the researcher to glean the best practices of the two governance traditions, as described by the participants. The study findings identified the CEOs’ perspectives on board member selection and expertise; making decisions; maintaining mission and shareholder value; and, personal and professional rewards. The study also documented the views of CEOs comparing corporate and academic board governance on: Corporate influences, notable distinctions, academic lessons, and best practices in a unique discourse on the convergence of their corporate and academic governance experiences.

Financial Reports Quality and Corporate Social Responsibility

This study explores the correlation between CSR and the quality of financial reports according to Stewardship Theory for 100 Best Corporate Citizens. The empirical results of the overall samples indicated that by practicing CSR, companies can effectively reduce their level of earnings management, providing quality financial reports. The cluster sampling results show that CSR has a mediating effect, reducing the direct effects of corporate governance board structures on the quality of financial reports. This study considers the emergence of Stewardship Theory compensates for the defects and deficiencies of agency theory in explaining the behaviors of managers. This study offers deeper insights to policy makers and investors to understand the association between company CSR performance and their financial reporting quality. The results suggest that company stakeholders should pay more attention when considering the influence of company CSR investment performance.

Comparative Corporate Governance: An International Review of the Corporate Board of Directors

The concept of the corporate board of directors dates back to the seventeenth century. The 1694 charter of the Bank of England seems to have coined the term “director” to describe the members of its governing board. The existence of governing bodies, however, was not novel at the time of the Bank of England’s charter. The East India companies used governing boards as early as the beginning of the seventeenth century. Since the seventeenth century, the function of the corporate governance board has remained relatively unchanged, which is, essentially, to monitor (and manage, where appropriate) company operations. The formation of the corporate governance model can vary across different nations, though. Generally, there are two different approaches to establishing and maintaining a corporation’s governing board. Some countries use a two-tier approach, which establishes a management board and a supervisory board. Conversely, other countries adopt the single-tier approach, which establishes only one board. Generally, each approach assigns differently a specific party’s rights and responsibilities owed to (or due from) the corporation. This comment will compare the differences in the formation and structure of the boards of directors between the unitary and two-tier approaches.

Leading corporate citizenship: governance, structure, systems

PurposeThe purpose of this paper is to benchmark how 25 companies in five industries are addressing corporate citizenship through their governance, structures and systems. The paper aims to look at patterns of leadership practice developing in firms in this regard and what might be shaping them. It also seeks to consider current practices in light of movement toward next‐generation corporate citizenship.Design/methodology/approachThe study surveyed a representative sample of Fortune 500 companies. To benchmark how companies are embedding citizenship into their governance, structure, and systems, two scorecards were devised measuring practices pertaining to: Corporate Board Governance; and Operational Management of Corporate Citizenship. Criteria chosen represent Board and management policies, behaviors, and/or public commitments.FindingsIt was found that, while corporate Boards are assuming more responsibility for oversight of conduct and taking account of specific social and environmental issues, citizenship is not yet fully embedded into Boards or the operating structures and systems of most firms.Research limitations/implicationsCompanies appear to be moving through developmental stages as they integrate citizenship into their governance and operations, with several developmental patterns emerging. While there seem to be specific patterns of development that link to the industry, issues faced, and culture of firms, it is difficult to generalize specific influences within industry from the relatively small sample. Further benchmarking is needed to better understand these issues and which ideas represent best practices going forward.Practical implicationsA next generation approach to corporate citizenship requires more than top down advocacy – this needs to be backed up by Board oversight and engagement and by layered management structures, systems, processes, and policies that make citizenship part of every employee's remit, across the company's value chain.Originality/valueThe paper provides a unique set of frameworks to assess company performance in relation to governing and managing corporate citizenship. It provides much needed data from companies across a number of industries to prompt further discussion on next generation corporate citizenship, where responsible business practices are woven into the corporate DNA.