Impact Of Board Composition Research Articles

The impact of board composition and internationalisation on strategic change: Longitudinal empirical evidence

This study looks at the effect of board composition on a firm’s propensity for strategic change. We hypothesise that board composition influences strategic change and internationalisation moderates this relationship. We do a longitudinal study of 433 listed firms in the United States. The findings indicate that the board composition represented by two variables, namely board size and CEO duality, leads to less strategic change. In contrast, the third variable, interlocking directorships, leads to more strategic change. Our results also suggest that internationalisation mitigates the negative impact of board size and CEO duality on strategic change and strengthens the positive impact of interlocking directorships. JEL Classification: C12, L20, L21, M10

The impact of board composition on ESG performance: Comparing results from symmetrical and asymmetrical approaches

The impact of board composition on <scp>ESG</scp> performance: Comparing results from symmetrical and asymmetrical approaches

Assessing the Sustainability of Firm Value: The Impact of Board Composition, Firm Size, and Earnings Manipulation in the LQ45 Index

This study examines the roles of board composition, firm size, and earnings manipulation in determining firm value within the context of the LQ45 index, which comprises the 45 most liquid stocks in the Indonesian Stock Exchange. This study involves 45 companies listed in the LQ45 index. The number of samples in this study was 45 companies covering 5 years of data, so the overall number of observations was 225 company years. The findings reveal that independent commissioners and board size have significant positive effects on firm value, while the Corporate Governance Perception Index (CGPI) is not significant. Additionally, the study demonstrates that firm size significantly influences firm value. Earnings manipulation is found to mediate the relationship between corporate governance, firm size, and firm value. These results highlight the importance of board composition and firm size in creating value for stakeholders and emphasize the need to understand better and monitor earnings manipulation practices. The study offers valuable insights for investors, regulators, and policymakers in improving corporate governance and enhancing the integrity of financial markets.

Impact of Board Composition on Bank Performance : Evidence from the Indian Banking Sector

India has recently witnessed a set of banking frauds, pointing toward the possibility of loose corporate governance mechanisms in the banking sector. The present study aimed to evaluate the composition of the board of directors in terms of the corporate governance parameters to assess whether they impacted the performance of the listed Indian banks. The hypothesis for the same was formulated based on the agency and the resource dependency theory . The study made use of the 34 public as well as private sector banks listed on the Bombay Stock Exchange 500 for a period of 12 years (2010–2022). The analysis was conducted using the STAT A software’s fixed-effect panel data regression model. The results suggested that board size, percentage of women directors, and percentage of independent directors on the board of banks impacted the financial performance of these banks. The study shed light on the mechanism and ways to improve bank performance using corporate governance parameters. It makes valuable contributions to the literature on corporate governance and shall be helpful for both managers and policymakers in formulating regulatory guidelines.

Board Characteristics and performance of listed firms in Ghana

PurposeThis study aims to compare the impact of board characteristics on the performance of listed non-financial firms to the impact of board characteristics on the performance of listed financial firms (commercial banks) in Ghana.Design/methodology/approachThe fixed and random effects models with generalized least square specifications are used in estimating regressions to correct for heteroscedasticity and serial correlation. Additionally, this study uses lagged models of the board variables to address the possibility of the presence of endogeneity and to generate robust estimates.FindingsThe empirical results show some similarities and differences on the impact of board characteristics on the performance of listed non-financial firms and banks. On similarities, for both non-financial firms and banks, board size is seen to have a significant non-linear impact on Tobin’s q. Also, the proportion of foreign board members shows a positively significant relationship with firm performance for both listed non-financial firms and banks. The effect of the proportion of board members with higher educational qualifications on firm performance appears to be negative and statistically significant for both sample of firms. On the other hand, the impact of board composition and board gender diversity on firm performance differs from listed banks and non-financial firms.Research limitations/implicationsThe panel regressions for the listed banks were run on 63 observations because of the small sample size for the listed banks. Though enough for estimation purposes, inferences from results should be made with caution.Originality/valueThis paper, unlike most corporate governance – firm performance studies, focuses not only on listed non-financial firms but also on listed banks. From a multi-theoretical perspective, this paper provides a comparative analysis on the impact of board characteristics on financial performance of listed non-financial firms and banks.

Corporate governance and financial reporting quality: a comparative study

PurposeThis paper aims to investigate the impact of corporate governance on financial reporting quality (FRQ) in Pakistan and the UK.Design/methodology/approachIn this paper, three accrual-based models are used to analyse FRQ for a sample of 1,550 firm-year observations, including 78 Pakistani firms and 77 UK firms, for the period 2009–2018.FindingsThe analysis shows that board size has a negative impact on FRQ while foreign ownership has a positive impact for Pakistani and UK firms. It also shows that board independence has a positive impact on FRQ of Pakistani firms, while board meetings frequency and audit committee independence have a negative impact. We make no such observation for UK firms. In addition, the analysis shows that board gender diversity and ownership concentration negatively affect FRQ of UK firms. This study makes no such observation for Pakistani firms.Research limitations/implicationsDue to the study’s focus on Pakistani and UK firms, the findings may not be generalizable to other developed and emerging economies.Practical implicationsThe findings provide valuable insight to policymakers, regulators and investors by suggesting that the impact of board composition on FRQ of both Pakistani and UK firms is weak. The findings suggest that board size and foreign ownership are the attributes that require regulatory focus to increase FRQ. The negative impact of audit committee independence on FRQ induces rethinking among the policymakers in Pakistan and calls for fully independent audit committees.Originality/valueTo the best of the authors’ knowledge, this is the first research endeavour to compare the context of a developed and an emerging economy regarding the impact of corporate governance on FRQ. It also contributes to the governance literature by using three measures of FRQ and a comprehensive set of corporate governance attributes.

Board Structure and Firm Performance in Nigeria

Firm performance is determined in varying categorization of internal factors like managerial structure efficiency, corporate governance set up and ownership structure, which are made up of the firm broad structure, as this affects the ability of firms and control of external factors. In this study, the impact of board composition on firm performance in the manufacturing sector is examined. Primary data constructed from research instruments are based on questionnaires administered to 50 manufacturing firms in Nigeria and is aimed at identifying their corporate governance structure and to relate it to the overall performance of the firms. The qualitative response modeling techniques are also adopted for the empirical analysis. The results from the analysis shows that disclosure policy and measures aimed at guaranteeing board independence are very strong performance enhancing factors. On the other hand, conflict of interest among board members is found to exert significant negative impact on firms performance in the study. It is therefore recommended that corporate boards in manufacturing firms in Nigeria would be more effective with fewer but more committed members. Large-size boards may embellish conflict of interest among members and also decrease the sense of personal responsibility, with each board member taking refuge in the collective position.

Political control and audit fees: an empirical analysis of local state-owned enterprises in England

IMPACT We need to know more about the financial accountability of corporatized public services. In this article, the authors analyse the audit fees of a large sample of English local SOEs from 2009–2017, assessing the impact of board composition and ownership structure on those fees. SOEs with more politicians on their boards of directors had higher audit costs and this was especially so for majority-owned SOEs. This article highlights the need for policy-makers to evaluate the consistency of auditing arrangements for the hybrid arm’s-length organizations delivering public services.

Impact of Board Composition on Pension De‐risking Strategies

AbstractPension de‐risking strategies have been widely adopted by firms with defined‐benefit (DB) pension plans to reduce pension risk. This paper investigates the influence of board composition on pension de‐risking strategies within the UK, focusing particularly on three strategies: changes to pension asset allocations, switches from DB to defined‐contribution (DC) pension plans and pension buy‐ins and buy‐outs. Our findings suggest that firms with larger boards and more independent directors are less likely to invest their pension assets in equities. Survival analysis shows that firms with larger boards are slower to switch from DB to DC pension plans. This is consistent with stakeholder theory, in that firms with large boards or more independent directors are more likely to protect employees’ benefits when de‐risking their DB pension plans. However, firms with more female directors are faster to switch fully from DB to DC pension plans and slower to engage in pension buy‐in and buy‐out transactions. This suggests that female directors encourage fully switching DB pension plans, while they are concerned with the significant costs of pension buy‐in or buy‐out. This research provides clear evidence that pension de‐risking strategies are influenced by board composition. UK pension trustees play a key role in determining switches from DB to DC pension plans, mitigating the impact of independent directors.

The impact of board composition on the dividend policy of US firms

PurposeThis paper aims to examine whether the characteristics of boards are more important in determining dividend policy than management characteristics. The authors show that as the final declarers of dividend policy is a firm’s board, the composition of a firm’s board significantly subsumes the effect of management characteristics that may also influence dividend policy.Design/methodology/approachUsing the dividend declaration dummy variable, the authors run a fixed effect logistic regression of the dividend indicator on board characteristics, and managerial characteristics with firm level controls, year effects and industry effects while clustering standard errors at the firm level. For dividend yield variable which is censored at zero, they use a fixed effect Tobit regression.FindingsThe results of the study show that board characteristics such as average age, female presence and size have a strong positive significant effect, whereas board independent chair and voting right of directors have a negative significant effect on the likelihood of dividend declaration. For dividend yields, the results suggest that the presence of directors with financial expertise and the board size are the main influencers of dividend policy. Managerial characteristics are subsumed by director characteristics for determining dividend policy. The results overall support the evidence on the monitoring role of boards on management.Originality/valueThe originality and value of this study lies in the approach of including a comprehensive number of board characteristics unlike previous studies which makes the study of the influence of board composition on dividends more encompassing.

Impact of Board Composition on Financial Performance of Commercial Banks in Ethiopia

The major objective of the present study is to examine the impact of internal and external board composition on financial performance of commercial banks in Ethiopia. The samples selected for the present study are twelve commercial banks based on ten years financial report for the period of 2009-2018. Both primary and secondary data collection methods employed for the study. Primary data for corporate governance (board compassion) which is independent variable and secondary data for bank financial performance Return on Asset (ROA), Return on Equity (ROE), and Net Interest Margin (NIM) dependent variables of the present study. Explanatory type of study with a quantitative approach was employed to analyze the collected data. Both descriptive and econometric analyses are used for the current study. Descriptive analysis includes mean, maximum, minimum, and standard deviation, whereas, econometric model includes correlation and regression analysis. Fixed effect and random effect econometric analysis has been made using Eviews-9 Software. The present study shows that there is a linear relationship between board compassion (independent variable) and commercial banks financial performance as measured by Return on Assets (ROA). From this, the researcher reveals that there is a positive and statistically significant relationship between board composition and Return on Assets (ROA). There is negative and statistically insignificant relationship between board composition and Return on Equity (ROE) of commercial banks in Ethiopia. Board Composition is negatively correlated with Net Interest Margin (NIM) and statistically significant at 5 % level of significant. The present study concludes that the higher the board composition leads to better financial performance as measured by Return on Assets (ROA), but in contrarily the higher the board composition of commercial banks in Ethiopia decreases the financial performance as measured by Return on Equity (ROE) and Net Interest Margin (NIM).

The Impact of Board Composition on Firm Performance with Reference to Selected Indian Companies

This study examines effects of board composition on firm performance among 24 selected companies which are listed on the National Stock Exchange. It strives to understand the influence of corporate governance by testing 3 variables of board composition namely – board size, number of independent directors and the number of female directors on a company’s profitability measured through the tool – Tobin’s Q. One-way Anova test is used to establish a relationship between each of the three variables of board composition with firm profits. The study is conducted over a period of 5 years from 2013 to 2018 and concentrates on the following sectors - Auto, Financial Services, FMCG, IT, Media, Metal, Pharma, and Realty. The results revealed a significant relationship between board size and number of independent directors with firm profits which meant a firm with a greater sized board or more independent directors also showed higher profits in comparison. While, no significant relationship was found between the number of women directors on a firms’ board and firm performance.

Board composition and board size impact on financial performance of the company

The paper seeks to determine the impact of board composition (proportion of the non-executive directors) and board size on the financial performance of the companies. The study employed panel data of 145 companies for a period of five years and has employed panel regression model to study the relationship between different variables. This study does not find any significant relationship between board size and financial performance of the company. Also, the study concludes a positive relation between non-executive directors and financial performance of the company as these directors bring their expertise, network and resources to the organisation which is crucial for the growth and performance of the enterprise.

Do women leaders promote positive change? Analyzing the effect of gender on business practices and diversity initiatives

While most scholarship on gender leadership diversity and organizational outcomes considers the impact of board composition on firm performance, we consider the impact of women CEOs and board members together on a range of organizational outcomes. We test three competing theoretical perspectives related to gender in organizations: gender difference, homophily, and diversity. We rely on a unique data set of CEO characteristics, board composition and firm outcomes of all Fortune 500 companies from 2001 to 2010. We find that firms with women CEOs or gender diverse boards are associated with stronger business and equity practices. We also find that gender diverse leadership teams demonstrate stronger business and equity outcomes than teams characterized by gender homophily.

Dissemination of corporate information via social media and networks in Africa

This paper reports on the extent of online corporate disclosure (OCD) practices among 315 companies listed in 12 African stock markets. The paper examines the impact of board composition and ownership structure on the level of online information dissemination by top African corporations. The paper uses a disclosure index comprising of a comprehensive set of items that fully capture the extent of online information disclosure via all facets of disclosure, namely companies websites, social networks and media sites. Ordinary least squares is used to test the hypotheses. The results reveal the underlying relations among board composition, ownership structure and control variables as the determining factors of OCD. Moreover, Facebook is the dominant platform used for corporate disclosure closely followed by twitter. Although non-financial disclosure via social networks is adopted by most of the companies in the African countries, financial disclosure is adopted by only South Africa and Tunisia.

The Good, the Great and the Independent: The Impact of Board Composition on Investment Behavior

The Good, the Great and the Independent: The Impact of Board Composition on Investment Behavior

The Impact of Director Heterogeneity on Corporate Restructuring Patterns: Beyond Insider/Outsider Duality

This article uses the large US freight railroads, forced to restructure after deregulation due to competitive pressures, as field experiment to study the impact that board composition can have on corporate restructuring activities. In particular, it investigates the effect of director heterogeneity on the nature of restructuring measures by examining a unique firm-level panel of US freight railroads data covering a twenty-year period. While most of the existing empirical research investigating the impact of board composition on specific corporate decisions focuses on the distinction between independent and non-independent directors as main source of director heterogeneity, this article goes beyond this approach and conducts a more fine-grained analysis by classifying directors into categories that seek to better reflect board diversity. CEO characteristics and exogenous environmental characteristics are also taken into account. Overall results indicate that both board composition and CEO characteristics affect corporate restructuring patterns. Results show that there are significant differences in the way directors influence restructuring decisions depending upon their background and stakeholder condition. These findings suggest that boards' diversity matters for the understanding of corporate behavior. They point to the importance of integrating into board research measures of board composition reflecting the potential diversity of interests.

"The Good, the Great and the Independent: The Impact of Board Composition on Investment Behavior"

In many countries with a weak institutional environment and constrained resources, firms face underinvestment due to the diversion of resources away from productive investment opportunities, or tun...

Board Composition, Board Activity and Ownership Concentration, the Impact on Firm Performance

This paper provides a parallel investigation on the impact of board composition, board activity and ownership concentration on the performance of listed Chinese firms. We find that independent directors enhance firm performance effectively than other board factors. The frequency of shareholder meetings, rather than board meetings, is positively associated with firm value. Tradable share ownership concentration has a positive and linear relationship with firm value, while state and total share ownership concentration represent U(V) shapes. Importantly, companies with the highest levels of both total share and tradable share ownership concentration have a greater firm values than companies with the highest levels of only a single concentration.

Corporate Governance Principal-Agent Problem: The Equity Cost of Independent Directors

The classic question in corporate governance is how to manage the conflicts-of-interest that arise from fundamental principal-agent problems. One of the most popular methods of solving the problem is by separating ownership and management. Since 2002, the Sarbanes-Oxley Act has set new standards for board composition by using independent directors, especially for audit committees. This article analyzes the impact of board composition, related to a majority of independent directors, on returns. For this purpose we construct a panel dataset of 2919 stocks over a 10 year period. We find that a majority of independent directors on the board has an overall negative effect on stock returns. We also use our panel data set to show the consequences of the Sarbanes-Oxley Act on the defense or offense mechanisms that companies might pursue over their lifespan.