Selecting Board Members Research Articles

Ansiedad financiera en el gobierno corporativo mexicano:efecto de la autoeficacia y neuroticismo

financial anxiety affects board members in their judgment concerning strategic decisions for their organizations. Both, financial self-effi-cacy and neuroticism bear on the financial anxiety of board members. By applying a structural equation model, this paper analyzes the effect ofboth factors on the financial anxiety of board members in public, private, and non-profit corporations in Mexico. The approach of the structuralequation model is quantitative, non-experimental, and cross-sectional; and is based on a sample of 155 board members of Mexican institutions.The results show that financial self-efficacy affects negatively financial anxiety; whereas higher degrees of neuroticism affect positively financialanxiety. Following these results, it is advisable to consider these personality traits as relevant criteria for the selection of board members in Mexicaninstitutions. Corporate governance policies and practices should also be developed to ameliorate the effect of neuroticism and incentivize the effectof financial self-efficacy in the judgments of board members regarding organizational strategy. The methodology of this study is useful for boardsin institutions of other countries.

Enterprise risk management, corporate governance and insurers risk-taking behaviour in South Africa: evidence from a linear and threshold analysis

PurposeThis study examines the linear and non-linear effects of enterprise risk management (ERM) and corporate governance (CG) on insurers’ risk-taking behaviour.Design/methodology/approachThe study employed panel data of 63 insurers from South Africa over the period 2015 and 2019. The study used the generalised method of moments (GMM) to determine the direct relationship, while the dynamic panel threshold technique was utilised to discover whether there is non-linearity in the relationship and the threshold level at which ERM and CG stimulate insurance risk-taking.FindingsThe result from the GMM elicits a positive relationship between ERM and risk-taking, implying that insurers with a robust ERM system are more likely to pursue higher risks. The empirical evidence also suggests that board size and board independence improve insurers’ risk-taking. Contrarily, gender diversity shows an inverse relationship with risk-taking. The dynamic panel threshold regression confirms non-linearities between ERM, CG and risk-taking. The empirical evidence indicates a U-shaped relationship between ERM and risk-taking, implying that a robust ERM system increases insurers’ risk-taking and vice-versa. Further, board size and independence reveal an inverted U-shaped relationship, suggesting that larger boards and a higher proportion of independent directors exhibit lower risk-taking. However, gender diversity presents a negative relationship, demonstrating a strong impact at higher threshold levels. This tells that the presence of females on the board reduces insurers’ risk-taking preferences.Practical implicationsDue to the risk-bearing nature of the insurance business, it is required that they ensure a robust ERM system for prudent risk-taking decisions. This demands strict adherence to ERM principles and allocating sufficient resources for effective implementation. Also, there is a need for strong CG structures that pay more attention to diversity when selecting board members due to their influence in ensuring improved risk-taking choices.Originality/valueThis study contributes to the existing literature by providing insights into the under-researched role of ERM and CG in insurers’ risk-taking behaviour. The study further extends the literature by providing evidence on the non-linearity and threshold levels at which ERM and CG influence insurers’ risk-taking choices. The findings are unique and contribute to the growing body of literature documenting the need for strong ERM and CG systems in insurance companies.

The role of multiple board directorships in sustainability strategies: symbol or substance?

AbstractMultiple board directorships are a global phenomenon in the business environment and have come under intense debate from regulators, professionals, and academics alike. At the same time, sustainability has become a major challenge for firms in the current scenario. The main objective of this paper is to investigate whether multiple directorships lead firms to symbolic or substantive sustainability strategies. After performing different methodological approaches and robustness tests, our findings highlight that multiple directorships lead to symbolic sustainable development by significantly intensifying environmental, social and governance (ESG) reporting practices, although this is not supported by substantial ESG actions. This symbolic behaviour is even more evident in socially and environmentally sensitive industries. Given the ongoing regulatory and professional discussions concerning multiple board directorships, the ever-increasing importance of sustainability and the significant consequences of symbolic ESG strategies, our paper has direct implications for firms in the selection of board members, as well as for regulators and professionals when refining their legislation and recommendations concerning boards.

Impact of competent board structure on financial performance

Effective corporate governance practices are considered crucial for the success of transforming and developing economies. This research delves into the importance of a competent board structure in improving firm performance and mitigating financial crises. The study employs quantitative research methods, focusing on firm performance measured through return on assets and Tobin’s Q. The independent variable of the study is board competence, with a sample comprising two hundred companies listed on the Pakistan Stock Exchange (PSX). Panel data spanning a decade from 2012 to 2021 is analysed using techniques such as the Hausman test, fixed effect model, and random effect model to test hypotheses. To address multicollinearity and heteroscedasticity, the study incorporates the variance inflation factor (VIF) and the heteroscedasticity test. The findings suggest that an optimal board structure, characterised by competence, enables effective strategy implementation, thereby providing organisations with a competitive edge. Independent directors, devoid of personal affiliations or biases, can exercise impartial judgment and demonstrate competence. While academic qualifications are often prioritised in the selection of board members, they do not always ensure superior performance.

Are Board Member’s Strategic Orientations Associated with Customer Focus? Empirical Evidence from Insurance Companies in Uganda

This paper investigates the potential association between the strategic orientations of board members and customer focus within Ugandan Insurance firms. The evaluated strategic orientations encompass analysis, proactiveness, futurity, defensiveness, riskiness, and aggressiveness. Using a descriptive cross-sectional survey design, the research was conducted among a population of 131 insurance companies licensed in Uganda for 2023. The study’s effective sample revealed a 74.7% response rate. The study findings reveal that board members’ strategic orientations are positively and statistically significantly associated with customer focus. The findings further reveal that the most important board member strategic orientations in the insurance sector in Uganda are analysis, defensiveness, and futurity with a customer focus. The study findings further reveal that futurity is negatively and statistically significant with a customer focus. The study concludes that board member strategic orientations are strongly associated with customer focus in the insurance companies in Uganda. The study recommends that top management enhance strategic orientation awareness among board members, align with customer-focused goals, select board members with diverse orientations, and conduct regular board member evaluations.

A Grounded Theory Examination of Supervisory Boards’ Governance Capability Indicators in Publicly Traded Firms: A Sustainability Perspective

Embedded within the sustainable development framework, our research leverages proceduralized grounded theory to refine and universalize supervisory governance capabilities, thereby aiming to assess the theoretical saturation of the resultant model and to devise a comprehensive, sustainability-inclusive index of supervisory board governance competence. Focusing on five publicly traded Chinese companies, the research employs a tripartite coding process integral to grounded theory methodologies. By methodically refining case studies, it identifies sustainability-oriented governance capacity indicators. Data are conceptualized and compartmentalized via open coding, then divided into five primary clusters via axial coding, resulting in sustainability-focused governance capacity indicators for supervisory boards. Using selective coding strategies, the study uncovers forty-two competency indicators pertinent to sustainable corporate governance, organized into three domains across eight sustainability-related dimensions. These include individual characteristics, sustainability value judgment, experiential wisdom, collaborative communication for sustainable practices, resource integration, general employment prerequisites, professional application in sustainability, and sustainable business acumen. The findings enhance supervisory board member selection and performance assessment processes, promoting sustainable corporate governance. They also clarify supervisory roles in sustainability, offering a holistic view of supervisory board internal governance mechanisms. By maintaining the objectivity of these indicators, the study advances the field.

THE IMPACTS OF BOARD FAULTLINES ON INNOVATION PERFORMANCE IN CROSS-BORDER MERGERS AND ACQUISITIONS

Based on the team faultlines theory, this paper examines the impact of different types of board faultlines on innovation in cross-border mergers and acquisitions (M&As). Using the data of Chinese firms’ cross-border M&As, this paper finds that information-based faultlines and social category faultlines have an inverted U-shaped relationship with innovation in cross-border M&As. Cultural distance weakens the role of information-based faultlines on innovation in cross-border M&As. This paper enriches the research on the factors influencing innovation in cross-border M&As and provides a basis for firms to select board members and create suitable board faultlines.

An analysis of the influence of female directors on environmental innovation: When are women greener?

This paper develops a unique analysis of the impact of board gender diversity on environmental innovation, considering diverse factors that determine the influence of female directors. To that end, different methodological approaches are employed, including panel data analysis and quantile regression. A number of robustness tests are also considered. Using a sample composed of the firms listed on the FTSE-250, our results highlight that the one-size-fits-all approach proves to be inappropriate to understand the role of female directors. Particularly, our findings confirm that board gender diversity positively impacts environmental innovation, but only when there are at least three women in the boardroom, and only for firms with greater levels of environmental innovation. Moreover, the effect of board gender diversity is strengthened in the presence of CSR committees, but weakened in boards with larger size and longer tenure. Given the ever-increasing importance of environmental innovation and the ongoing debates surrounding gender diversity, our evidence has direct implications for firms when selecting board members, for regulators and professionals when refining their legislation and recommendations, and for academics when defining theoretical frameworks and methodological approaches.

Impact of Artificial Intelligence on Corporate Board Diversity Policies and Regulations

With the use of artificial intelligence (AI) technologies in company activities, discussions on how to use AI in company management have emerged. Although AI is not legally recognised as a director in company law, there are examples of robot directors such as Vital, which have managed to get a seat in the corporate boardroom. Today, AI is on the verge of playing an important role in corporate governance. However, whether it has a seat on the board of directors or an important role in decision making is still a hot topic. Another critical discussion in the field of corporate governance in recent years is board diversity, which aims to improve the corporate decision-making process and create efficiency. This article attempts to anticipate the potential impact of AI on corporate board diversity policies and regulations. Therefore, this article seeks to examine the effects of the inevitable use of AI in the corporate decision-making process on corporate board gender diversity discussions and regulations under three possibilities: AI as a board member, AI as an enabler to assist a decision maker or AI being used to help decision making such as selecting board members.

Examining the relationship between board member selection criteria and board boundary spanning into internal, upward, and outward accountability environments

AbstractPrevious literature establishes a contingency‐based framework of external conditions, internal organizational characteristics, and board attributes and composition that impact board effectiveness and calls for more industry‐specific nonprofit studies to build the field's knowledge of the factors that lead to nonprofit board effectiveness. In this manuscript, we use a national study of nonprofit charter school boards to answer this call. Controlling for internal organizational characteristics and external conditions, we examine how board member selection criteria is related to levels of board boundary spanning in inward, upward, and outward accountability environments. Selecting board members because of their knowledge of the organization, have membership in the group being served and for their willingness to give time is all associated with higher levels of inward, upward, and outward accountability activities. Alternatively, selecting board members because they are friends/acquaintances of current board members is associated with lower levels of activities across all three accountability environments. Our findings suggest that charter school boards may be recruiting board members who can relate to multiple stakeholder groups across accountability environments rather than selecting for members who operate in distinct accountability environments.

Voluntary cybersecurity disclosure in the banking industry of Bangladesh: does board composition matter?

PurposeCybersecurity disclosure (CSD) provides users with valuable information and significant insights about a firm's susceptibility to cyber risk and its management. It is argued that the board of directors, with its oversight role, should be vigilant in managing cyber risk and disclosures. This study aims to measure the extent of CSD of the banking companies and examines the association between the characteristics of board composition (i.e. board size, board independence and gender diversity) and CSD.Design/methodology/approachThis study adopted automated content analysis to find out the extent of CSD in the listed commercial banks of an emerging country, Bangladesh, where CSD is voluntary. Further, multiple linear regression is applied to determine the relationship between board composition and CSD.FindingsThe findings reveal an increasing trend of CSD over the sample period (2014–2020). The study confirms a significant positive relationship between board independence and CSD. The study also demonstrates that the higher presence of female directors on the board is associated with higher CSD. However, no consistently significant relationship is found between board size and CSD.Research limitationsThe study is based on listed banking companies only. Hence, the results can not be generalised to companies in other sectors. Also, it is important to acknowledge that we focused on the quantity (not the quality) of CSD contained in annual reports.Practical implicationsThe study provides an overall understanding of current trends of CSD in the Banking sector of a developing country. Regulators may use our findings to understand the current level of CSD and assess the need for issuing guidance in this regard. The association between board composition and CSD has implications both for banks when selecting board members and policymakers when establishing requirements concerning board composition under corporate governance guidelines.Originality/valueThis is one of the very few studies in the context of an emerging economy where CSD is voluntary. The paper contributes to a narrow stream of research investigating CSD and its association with board composition. Notably, it contributes to understanding how board composition is associated with CSD in the banking industry, which is highly exposed to cyber risk.

Board diversity and firm innovation: a meta-analysis

PurposeIt is commonly stated that increased board diversity leads to the heightened financial performance of firms via the impact that it can have on innovation, but the latter association has, thus far, remained empirically controversial. The aim of this paper is to shed light on this unresolved debate and gap in the literature via studying different types of diversity.Design/methodology/approachA meta-analysis was conducted on the existing empirical evidence on the topic to show whether such an association exists and compare cognitive (expertise and experience) and demographic diversity (gender, nationality and racial/ethnic).FindingsThe results show that there is indeed a positive and statistically significant association between board diversity and firm innovation. This association is driven more by cognitive diversity of the board members than by demographic diversity.Research limitations/implicationsPotential publication bias, heterogeneity in the quality of the existing studies and the diversity in operationalising innovation and board diversity remain as limitations to this meta-analysis.Practical implicationsInstead of focussing on selecting board members based on demographic (surface-level) diversity, selections should be based on the interplay of the experience, expertise and background demographic characteristics of the potential candidates. Otherwise, the minority members might face a “token” status.Originality/valueThe results of this paper suggest that there is a positive association between board diversity and firm innovation. Future research should examine why this link exists. Therefore, the paper concludes with a research agenda for the benefit of potential further studies.

Corporate Governance And Its Effect On Firm Performance In An Emerging Economy

Having a board of directors is very important to ensure the smooth running of business processes and have an impact on the company's financial performance. This study to determine the impact of board characteristics namely board size, board ownership and board composition on the financial performance of organizations as measured by Return on Assets. The study employed a descriptive-explanatory research design based on a cross-sectional approach. Correlation and regression analyses were conducted to determine the depth and extent of the relationship between the variables. The study revealed a positive and significant association between the board size and financial performance on an average of 9 board members. Board composition revealed that having more external directors had no effect on the financial performance, it neither increased it nor decreased it, leading to the rejection of the hypothesis. On the other hand, board ownership was found to be beneficial in terms of having directors as owners of the business, corroborating the Stakeholder Theory. The studies showed that there was still a need to select board members with caution striking a balance between the number of directors as well as their composition to ensure that the organization reaps maximum benefits from the board.

Determining standard functional structures for hospital management boards in central hospitals: Evidence of a developing economy

Zimbabwe’s health service delivery has attracted media attention for three successive decades due to failure by public hospitals to deliver effective service with the blame leveled against the hospital management boards (HMB). Responding to the criticism, the Ministry of Health introduced reforms on public hospital governance practices towards ensuring an effective health delivery system. This was done by improving the structural capacity of hospitals to deal with the increasing demand for health services (Moyo, 2016; Sikipa, Osifo-Dawodu, Kokwaro, & Rice, 2019). Thus, the study sought to determine the standard functional structures within HMBs of Zimbabwe’s 6 central hospitals. To achieve this, the study used a mixed research design in which 66 board members responded to the questionnaire while 9 purposively selected board members were interviewed, respectively. The study revealed that public hospitals require standard functional structures in order to be effective. These include a functional board that has sub-committees, a policy to evaluate the performance of CEOs, and the board itself. Frequency of board meetings, setting of agendas, succession planning, and alignment of goals with interests of various stakeholders. Implementing such functional structures enhances would standard functional structures for hospital management boards in central hospitals

Challenges faced by hospital management boards: A case of central hospitals in the emerging market

Zimbabwe’s health care sector has been on the decline since the attainment of political independence in 1980 with the blame leveled against the hospital’s governance system. Responding to the blame, The Ministry of Health and Child Care, responsible for all public hospitals in Zimbabwe, has revamped the hospital governance system by introducing what is referred to as the hospital management board (HMB) tasked with the responsibility to provide the oversite role (Moyo, 2016; Sikipa, Osifo-Dawodu, Kokwaro, & Rice, 2019). The study, therefore, sought to establish the challenges faced by HMBs in the management of public hospitals with a focus on six (6) central hospitals in Zimbabwe. A mixed-method design was employed using the questionnaire and interviews to collect data from 66 censured board members for the quantitative study, and 12 purposively selected board members for the qualitative study. The study revealed that HMBs faced numerous challenges that include an unconducive economic environment responsible for high costs in hospital health care and services, ineffective policies, a weak referral system, and inexperienced board members. The study recommends that HMBs should be appointed based on relevant experience in public hospital leadership. Drawing from the findings, most HMBs must be reconstituted to include members with relevant experience, a focus on policy issues towards improving the ineffective hospital referral system.

Do Board Gender Quotas Matter? Selection, Performance, and Stock Market Effects

From business to politics and academia, the economic effects of gender quotas are under scrutiny. We provide new causal evidence based on the introduction of mandatory gender quotas for boards of directors of Italian listed companies. Exploiting staggered board elections, we find that quotas are associated with a new selection of board members, characterized by higher education and lower age, and no significant costs on firm performance or the stock market. This paper was accepted by Yan Chen, behavioral economics and decision analysis.

Corporate governance and firms financial performance amongst private business enterprises in Uganda, a perspective from Lira City

The study examined the effect of corporate governance on firm’s financial performance amongst private business enterprises in Uganda. The study used descriptive and survey design. A mixed method approach which involved both qualitative and quantitative techniques were also used. The study found out that corporate governance significantly influences the financial performance of hotels and manufacturing firms in Lira City and majority of the firms investigated performed on average financially. It was also established that firms whose boards demonstrate high integrity were likely to register positive changes in their financial performance than firms whose boards do not. The study also noted that board independence would propel the firm to grow to greater heights. The study recommends that hotel and manufacturing firm owners should exercise some discipline and leave boards to operate independently. This would allow the board to remain focused on the long-term goals of the firm. The hotel and manufacturing firm owners should be cautious in selecting board members lest they attract many that would increase the firm’s liabilities. Key words: Corporate governance, board diversity, board integrity, firm performance, financial performance.

Cyber democracy for better board representation? The effect of e-voting on excess control in an emerging economy

With a growth in shareholder activism, the influence of shareholders on the make-up and selection of board members is increasingly acknowledged but under-explored. Focusing on one element of activism, this article considers the adoption and use of electronic voting (e-voting) for board elections in emerging economies, testing its effect on the excess control of controlling shareholders. Using a sample of board elections at 809 publicly listed Taiwanese companies, results challenge convention on governance and shareholder democracy. We show that adopting e-voting counterintuitively leads to greater levels of excess control which subsequently harms firm performance—an effect more pronounced in firms characterized by a pyramidal control structure and family-controlled firms. Findings offer an alternative view on shareholder democracy, revisiting expectations of benefits accrued from e-voting. JEL Classification: M10, L21, L25

Does firm payout policy affect shareholders’ dissatisfaction with directors?

In this study we investigate the information content of firm payout policy to shareholders. We focus on the association between a firm’s payout policy and shareholders’ satisfaction with board directors, as expressed by the percentage of negative or withheld votes for directors during annual elections (shareholders’ dissent voting). We fill a gap in the literature by using shareholders’ voting results in the election of board members at annual meeting as a setting to examine shareholder perception of firms’ payout policies. We find that higher share repurchase and/or higher dividend payout are associated with lower shareholders’ dissenting votes. We also find that such relationship is conditional on the level of free cash flow, firm future performance, the degree of management entrenchment, and the type of institutional investors. Our study contributes to the payout literature by providing empirical evidence that shows the outcome of shareholders’ votes in director elections may be influenced by the board of directors’ payout decisions.

The impact of board diversity and voluntary risk disclosure on financial outcomes. A case for the manufacturing industry

Purpose The purpose of this paper is to analyse how board diversity affects firm financial outcomes through the way in which this diversity helps to improve voluntary disclosures. Design/methodology/approach The partial least squares (PLS) technique is used, and a sample of the manufacturing firms listed in Standard and Poor’s 500 for 2009 is studied. In relation to board diversity, two specific characteristics are considered, namely, gender diversity and ethnic diversity. Content analysis techniques are used to measure risk disclosures. Findings The results show that there is a positive association between board diversity and firms’ financial outcomes, which is explained by disclosing risk information. Research limitations/implications The results indicate that the effect of boards of directors on firm outcoumes is influenced by the board involvement in specific strategies, thereby providing encouraging opportunities for future research. Practical implications These findings have implications both for companies, when selecting board members, and for policymakers, when establishing requirements concerning board composition. Moreover, the evidence highlights the role of disseminating risk information, which has direct implications for managers and regulators, who may better understand the value-relevance of risk disclosures. Originality/value The use of PLS technique is one of the novelties of this paper. The novelty of this approach provides fresh insights into the literature, highlighting that the effect of boards on firm outcomes may be mediated by director involvement in specific disclosure strategies.