Determinants Of Board Structure Research Articles

Characteristics and determinants of the board of directors of growing Spanish SMEs going public

PurposeThe purpose of this paper is to examine the characteristics and the determinants of board structure in small- and medium-sized enterprises (SMEs) in the process of going public within the continental European corporate system.Design/methodology/approachThese issues are explored through the study of all the initial public offerings (IPOs) in the Spanish equity market for growing SMEs, and the statistical methodologies of ordinary least squares regression and stepwise regression are applied.FindingsThe results show that board size is larger than the minimum level established in law and that boards are composed of a majority of non-executive directors. In addition, the determinants of firm characteristics of board structure are firm age, level of financial leverage, and ownership structure.Practical implicationsThis research is significant since its findings should help entrepreneurs reflect on which board structure is most appropriate for this new stage of the life cycle of their company as a listed firm. This evidence is also of interest for regulators and investors, who can, therefore, better understand board structures of SMEs at the moment of IPO.Originality/valueThis paper is the first to study characteristics and determinants of the board of directors of growing SMEs at the moment of going public. This study implies a step forward in research into the governance of small business and IPO literature, since the results differ from the evidence found for large company IPOs and contribute towards the debate regarding the need to consider the context and the type of firm in corporate governance studies.

Determinants of Board Structure: Evidence from India

The paper analyse the role of directors in sustainability of business to ensure good corporate governance. The objective is to highlight the economic and strategic implications of independent role of directors with regards to regulatory framework in India in the light of major corporate governance failure at India's fourth largest software company, Satyam Computers in January 2009. The present paper highlights the long-term strategic perspective for India as far as corporate governance and business sustainability are concerned. The data set consist of nifty companies, from Prowess corporate data base. The paper tries to analyse the impact of various company characteristics and board size on independence of directors. The findings include analysis of role of independence in decision making of corporate including director as far as overall governance is concerned and possible recommendations for future so as to carve out a voluntary good governance culture on a large scale among corporate entities. There is lack of reliable data on various aspects of governance and independence of director. Therefore, the study focused on the availability of data and compliance to regulatory framework in India along with future implications as regards to new Companies Act 2013. All stakeholders including government, investors, corporate sector, regulatory bodies and citizens need clarity on the role of directors, and other key managerial personnel in sustainability of interest of all the stakeholders and overall growth of corporate in India. In India, there is dearth of research in the area of corporate governance practices. This paper aims at highlighting the historical relationship between independence of directors; and overall business sustainability.

The Effect of Board Structure on Banks Financial Performance by Moderating Firm Size

The objective of this study is to provide a comprehensive overview of possible influences that the key players of determinants of board structure - board size and board independence, might have on banks financial performance path to success. Dissimilar with recent researches which were focused to test corporate governance influences on firm performance, this study investigates the role of bank size (log of asset) as moderator on relationship between board size and board independence with banks financial performance. The data of 37 Malaysian banks (21conventional, 16 Islamic) is analyzed by regression models using StataSE 12 software. The results show that the relationship between determinants of board structure (board size, and board independence) and financial performance moderated by firm size. DOI: 10.5901/mjss.2016.v7n1p258

Determinants of Board Structure in Microfinance Institutions: Evidence from East Africa

This study investigates the association between the unique characteristics of microfinance institutions and board structure. The agency and resource dependence theories provided theoretical guidance for this study. Using a panel dataset of 63 microfinance institutions in East Africa, we found that the presence of regulations and international influence is associated with larger boards, while the presence of founders is associated with small boards and less board independence. There is a higher level of board gender diversity in microfinance institutions managed by founders. There is greater diversity of nationalities in microfinance institutions that are internationally influenced. The implications for practice and theory from this study are further discussed. JEL Classification: G21, G34

The Determinants of Corporate Board Size and Independence: Evidence from Malaysia

Board of directors has gained much attention in improving corporate governance in recent years. Many reforms have been done to ensure that board of directors is effective. In general, the codes of good governance in many countries, including developed and developing markets call for greater independent directors in the board. In Malaysia specifically, Malaysian Code on Corporate Governance codified the best practices of good governance and described optimal corporate governance structures. All these reforms show the importance of composition of boards in playing their role as advisors and monitors to the management activities. Our study investigates the determinants of board structure for Malaysian firms from year 2000 to 2007 by grouping the existing theory into 2 hypotheses. We also examine corporate board structure trends and the compliance level of board of directors in Malaysia with the requirement in Malaysian Code on Corporate Governance. Overall, we find that the board independence shows an upward trend throughout the years. Our results also suggest that board size is correlated with the operation level of the firms and the measures in monitoring costs to determine the board independence are consistent with the monitoring hypothesis prediction.

Endogeneity and the dynamics of internal corporate governance

We use a well-developed dynamic panel generalized method of moments (GMM) estimator to alleviate endogeneity concerns in two aspects of corporate governance research: the effect of board structure on firm performance and the determinants of board structure. The estimator incorporates the dynamic nature of internal governance choices to provide valid and powerful instruments that address unobserved heterogeneity and simultaneity. We re-examine the relation between board structure and performance using the GMM estimator in a panel of 6,000 firms over a period from 1991 to 2003, and find no causal relation between board structure and current firm performance. We illustrate why other commonly used estimators that ignore the dynamic relationship between current governance and past firm performance may be biased. We discuss where it may be appropriate to consider the dynamic panel GMM estimator in corporate governance research, as well as caveats to its use.

Determinants of Board Structure: A Comparison of Publicly-Traded and Privately-Owned Insurance Companies

This paper compares board determinants of publicly-traded and privately-owned property-liability insurance firms and the impact of the Sarbanes-Oxley Act (SOX) on board structure of those firms. Although regulation imposes severe constraints on board structure of insurance firms, we find strong evidence that both public and private insurance firms endogenously choose board structure in ways consistent with the economic theory. Specifically, we find evidence in support of the scope-of-operation hypothesis, the information-cost hypothesis, the incentive-alignment hypothesis, and the executive-power hypothesis for public insurance firms and evidence in support of the scope-of-operation hypothesis and the managerial-discretion hypothesis for private insurance firms. Overall, our board determinants models explain as much as 54% variation in board structure of public insurance firms and 44% variation in board structure of private insurance firms. Although SOX applies to only publicly-traded firms, we find that SOX effects had spilled over to private firms. Larger and less levered private insurance firms are more likely to increase board independence post-SOX, suggesting board governance is resource dependent.

Corporate Performance, Board Structure, and Their Determinants in the Banking Industry

The subprime crisis highlights how little we know about the governance of banks. This paper addresses a long-standing gap in the literature by analyzing board governance using a sample of banking firm data that spans forty years. We examine the relationship between board structure (size and composition) and bank performance, as well as some determinants of board structure. We document that mergers and acquisitions activity influences bank board composition, and we provide new evidence that organizational structure is significantly related to bank board size. We argue that these factors may explain why banking firms with larger boards do not underperform their peers in terms of Tobin's Q. Our findings suggest caution in applying regulations motivated by research on the governance of nonfinancial firms to banking firms. Since organizational structure is not specific to banks, our results suggest that it may be an important determinant for the boards of nonfinancial firms with complex organizational structures such as business groups.

The determinants of board structure

Using a comprehensive sample of nearly 7,000 firms from 1990 to 2004, we examine the corporate board structure, trends, and determinants. Guided by recent theoretical work, we find that board structure across firms is consistent with the costs and benefits of the board's monitoring and advising roles. Our models explain as much as 45% of the observed variation in board structure. Further, small and large firms have dramatically different board structures. For example, board size fell in the 1990s for large firms, a trend that reversed at the time of mandated reforms, while board size was relatively flat for small and medium-sized firms.

The Determinants of Board Structure

Using a comprehensive sample of nearly 7,000 firms from 1990 to 2004, this paper examines corporate board structure, its trends, and its determinants. We study how board structure has evolved over time and, more importantly, we compare board structure across small and large firms in ways suggested by recent theoretical work. Overall, our evidence suggests that firms structure their boards in response to the costs and benefits of the board's monitoring and advising roles. Our models explain as much as 45% of the observed variation in board structure. Further, small and large firms have dramatically different board structures. For example, board size was falling in the 1990s for large firms, a trend that reversed at the time of mandated reforms, while board size was relatively flat over the 1990s for small and medium-sized firms.

The Determinants of Board Structure at the Initial Public Offering

This paper describes board size and composition and investigates the role of venture capital in a sample of 1,116 firms' initial public offerings. First, firms backed by venture capital have fewer insider and instrumental directors and more independent outsiders. Second, we consider board composition as the outcome of a bargain between the CEO and outside shareholders. Representation of independent outsiders on the board decreases with the power of the CEO—tenure and voting control—and increases with the power of outside investors—venture capital backing and venture firm reputation. Third, within the sample of firms financed by venture capital and also consistent with a bargaining model, the probability that a founder remains as CEO is decreasing in venture firm reputation. Finally, we examine the influence of venture capital backing and board structure on firm outcomes in the 10 years after the initial public offering.

The Determinants of Board Structure at the Initial Public Offering

This paper describes board size and composition and investigates the role of venture capital in a sample of 1,116 IPO firms. First, venture capital-backed firms have fewer insider and instrumental directors and more independent outsiders. Second, we consider board composition as the outcome of a bargain between the CEO and outside shareholders. Representation of independent outsiders on the board decreases with the power of the CEO - tenure and voting control - and increases with the power of outside investors - venture capital backing and venture firm reputation. Third, within the sample of venture financed firms and also consistent with a bargaining model, the probability that a founder remains as CEO is decreasing in venture firm reputation. Finally, we examine the influence of venture capital backing and board structure on firm outcomes in the ten years after the IPO.