Percentage Of Outside Directors Research Articles

Does board structure influence firm disclosure? Evidence from selected sub-Saharan Africa countries

This study examines the effects of board structure on information disclosure in annual reports of the listed firms in Sub-Saharan Africa countries' stock exchanges. Findings indicate that board size is positive and significantly related to information disclosure. However, findings indicate that the percentage of outside directors is not significantly related to information disclosure. This study contributes to corporate governance literature, especially in regard to the association between attributes of board structure and information disclosure. Findings of this study provide some practical benefits to regulators and policymakers in understanding the nexus between board structure and information disclosure in Sub-Saharan Africa. This would help policymakers and regulators to formulate policies and regulations with regards to board structure and good corporate governance practices, specifically those related to information disclosure.

Board Diversity, IPO Underpricing, and Firm Value: Evidence from Korea

Purpose: We investigate the impact of board diversity on initial public offering underpricing and firm value. Design/methodology/approach: We examine the relationship between board diversity and IPO underpricing by collecting data on the board size and composition of 470 IPOs listed on the Korea Exchange (KRX) for the period 1999-2018. Findings: We find a significant average first-day return (35.24%), similar to the results of previous studies on IPO underpricing, but the underpricing decreases with an increase in board diversity. Using first-day returns and Tobin’s Q as measures of underpricing and firm value, respectively, we find that a larger and more diverse board of directors maximizes shareholder wealth. Specifically, when measured by Tobin’s Q, firm value is positively related to the percentage of outside directors and board size. Gender diversity on the board, growth opportunities, and profitability positively influence firm value. Employing a dummy variable for female members to measure the presence of female directors on a board, we find that the presence of female directors significantly enhances firm value. Research limitations/implications: This study has implications for theories of corporate governance in the body of literature on financial decision-making. It analyzes how diversity in boards of directors plays a critical role in determining IPO prices, together with how diversity affects the future value of firms. However, this study still has some limitations in that the effects of IPO underpricing and corporate governance have not been completely analyzed. Therefore, we expect that further studies on additional variables will be conducted to provide meaningful implications. Originality/value: This study bridges the gap between corporate governance and IPO underpricing literature. While many theories on IPO underpricing have been rigorously examined, few have investigated the effects of the board of directors. We analyze how diversity in boards of directors plays a critical role in determining IPO prices, together with how diversity affects the value of firms.

Investigate the relationship between corporate governance mechanisms and abnormal stock returns of listed companies in Tehran stock exchange Top of Form

Objective: The present article examined the relationship between certain corporate governance variables include the percentage of outside directors and audit quality and abnormal stock returns. The main objective was to evaluate the effect of some forms of corporate governance on abnormal stock returns to see whether these variables make any devaluation and negative returns in the market or not. Methodology: The methodology was based on the application of panel data and testing the hypotheses through the analysis of multiple regression. Results: The results obtained from 71 companies listed on Tehran Securities Exchange from 2007 to 2013 represented a significant negative relationship between board outside directors and abnormal returns. It was also revealed that there is a significant relationship between audit quality and abnormal return. Conclusion: Finally, training managers and stakeholders can help the implementation of proper corporate governance. Shareholders should be aware of the benefit of the existence of independent outside directors on the board, the audit committee, institutional investors etc. which are among the standards of corporate governance.

The effect of the board of directors on the performance: Case of Tunisian banks

The board of directors plays a crucial role as an internal structure of corporate governance. Certainly, its efficiency is needy on the existence of numerous issues; the greatest significance is correlated to its characteristics that relay principally to the individuality of its memberships, board dimension, combining the purposes of pronouncement and regulator as well the grade of the individuality of the audit board and the diverse gender of the committee. To assess the authenticity of our assumptions, which stipulate the presence of deterministic characteristics of the committee on the profitability of Tunisian banks, we evaluated by three different ratios i.e., ROA (return on asset), ROE (return on equity), and MP (market performance); and we estimate three models with linear regressions. The empirical findings were performed on a data sample composed of 11 Tunisian banks listed on the Stock Exchange of Tunisia (SET) during the period from 1999 to 2018. From the estimated regressions, we find a satisfactory outcome indicating the significance of the influence of the characteristics of the committee on the banking performance in Tunisia. Then, the percentage of outside directors negatively affects the level of the financial performance of banks. The number of institutional administrators performs an essential role in improving financial performance. Finally, the duality of the Presidency of the Council General-Directorate has a negative effect on the level of stock market performance of Tunisian banks.

Financial Disclosure Information, Board of Directors, and Firm Characteristics among French CAC 40 Listed Firms

In the context of economic globalization, the need for high-quality financial disclosure has become desiderative. The aim of our study is to analyze the effect of a set of financial attributes, firm characteristics, and board of director features on financial disclosure level among companies listed at CAC 40. The sample used in this study consists of the 40 largest companies operating in French (index CAC 40). The findings of our study show that a high level of financial disclosure will show the effectiveness of corporate governance represented by the percentage of outside directors and would tend to face fewer difficulties in accessing capital markets. Equally, financial disclosure level is positively associated with financial attributes, such as firm size and profitability. We find that firms with little stock price volatility and small board size disclose more financial information than other firms.

Board Independence, CEO Ownership, and Compensation

Using the percentage of outside directors as a proxy for board monitoring, we find empirical evidence that board monitoring and CEO pay–performance sensitivity (PPS) are substitutes. In 2002, major US exchanges began to require that the boards of listed firms have more than 50% outside directors. In the case of firms affected by this requirement, their CEO PPS decreased significantly because of a reduction of CEO ownership relative to the control group, especially in the case of firms in which outside directors are better informed. We find that this substitution in governance mechanisms did not change overall firm value.

Do Investors Care About Director Tenure? Insights from Executive Cognition and Social Capital Theories

Governance scholars debate the value of directors as an effective governance mechanism. We suggest that this value varies with director tenure. We study both how shareholder assessments of the value of individual directors vary with director tenure and whether director tenure actually makes a practical difference to governance effectiveness. Using data from abnormal stock price reactions to the sudden deaths of 274 outside directors, and integrating executive cognition and social capital perspectives applied to the dual roles of director monitoring and advising, our results confirm a curvilinear relationship between the assessed value of directors and tenure. We find that directors are more highly valued by investors over a tenure period between 7 and 18 years, moderated by director involvement on key committees. Further, in examining the S&P 1,500, we find that a one standard deviation increase in the percentage of outside directors in this prime tenure period strengthens the CEO pay-performance linkage by 2.5%, suggesting that directors in this tenure period are more effective in aligning CEO and shareholder interests. Our results demonstrate that individual director tenure makes a difference in governance effectiveness, and shareholders accurately assess this difference. Additionally, our findings provide important boundary conditions for when theories of executive cognition and social capital may be more/less applicable regarding director tenure.

Dual class shares, board of directors’ effectiveness and firm’s market value: an empirical study

This study aims to identify whether a relationship exists between the controlling shareholders’ voting power and outside directors’ effectiveness in maximizing firms’ financial performance. We analyze a panel data with 3057 observations for the 2000–2012 period using a random effects model, logit and probit regressions, and the two-stage model of Heckman in the Brazilian stock market. Our findings show that firms whose controlling shareholders use dual class shares to leverage their voting power have less independence from the board and worse financial performance and market value. Further, the percentage of outside directors tends to be ineffective in increasing the firm’s value, and in changing the firm’s chief executive officer (CEO) when (1) the controlling shareholder’s voting power is leveraged, or (2) when the CEO assumes a position on the board of directors simultaneously. We interpreted that these results are in line with the arguments in favor of the existence of a new agency cost, which is related to the undue obedience of board members to authority, such as the largest controlling shareholder or the CEO in Brazilian listed firms.

Outside directors and firm performance across family generations in Lebanon

This paper investigates the relationship between the percentage of outside directors and financial performance in non-listed family firms while considering the generational effect. Using longitudinal data on 322 Lebanese firms covering the period 2008–2010, a regression analysis indicates that firm profitability depends upon the percentage of outside directors only in second and later generations. In first-generation family firms, the replacement of an inside director by an outsider has no significant impact on performance. In contrast, in the second and subsequent generations, outsiders can be used as an effective governance mechanism to reduce agency costs and thus enhance performance. Local entrepreneurs and regulators could build upon these results to implement better corporate governance practices in order to enrich the growth and prosperity of Lebanese family firms.

The Relationship between Ownership Structure and Earnings Forecast Accuracy the Iranian Companies

Creating and income estimates by the managers of the main sources of information for investors and other persons considered. This is one of the most important duties and opens the door, he could identify the optimal profit for their investors. The audited financial statements with data collection Iranian companies on the Stock Exchange during the period 1386 to 1391 found that the statistical data processing software: The correlation between the percentage of ownership and acceptable institutional investors, the percentage of outside directors, CEO resolution of the Board of Directors responsible for the accuracy of the predicted dependent variable interest there.

Board of directors and top management team. CEO relative power and financial returns in Brazil

This article investigates if companies with a stricter control and monitoring system perform better than others in Brazil. The works compares 116 companies in respect to the their independence level between top management team and board directors– being that measured by four parameters, namely, the percentage of independent outsiders in the board, the separation of CEO and chairman, the adoption of contingent compensation and the percentage of institutional investors in the ownership structure – and their financial return measured in terms return on assets (ROA) from the latest Quarterly Earnings release of 2012. Two variables (percentage of outside directors and percentage of institutional investor ownership) are significant in the regression. This paper has provided evidences that the increase in the formal governance structure trough outside directors in the board and ownership by institutional investor might actually lead to worse performance.

Controlling shareholders and the composition of the board: special focus on family firms

This article analyses the relevance of the agency problems that exist between shareholders and managers (type I agency problems) and between majority and minority shareholders (type II agency problems), in determining the composition of the board of directors, differentiating between family owned and non-family owned firms. The hypotheses are tested on a sample of 173 Spanish listed companies for the period 2004–2011. The results of our study indicate that, on one hand, as type I agency problems increase, firms increase their percentage of outside directors and, on the other, as type II agency problems increase, firms increase the ratio of independent to nominee directors. Whether the company is a family firm or not does moderate the influence of insider ownership over the composition of the board. Generally speaking, our findings support the view that firms configure their board of directors in such a way as to best signal to the market both efficient management and a balance of the interests of all shareholders. Likewise, these results could be taken into account when formulating recommendations on the composition of the board of directors.

Determinants of Board of Statutory Auditor and Internal Control Committee Diligence: A Comparison Between Audit Committee and the Corresponding Italian Committees

The literature and many national regulatory frameworks have underlined the importance of audit committees as monitoring mechanisms. In the prevailing Italian firms' corporate governance system, there is no audit committee. Instead, its functions are responsibility of two different committees. One is the Internal Control Committee and the other the Board of Statutory Auditors. In this article, we try to understand whether the determinants of Audit Committee diligence, analyzed by the literature, affect both Internal Control Committee and Board of Statutory Auditor diligence in the firms listed on the Italian stock exchange over a three-year period (2005–2007).Regression analysis results show a lack of relation between Internal Control Committee diligence and the percentage of outsiders in the board, the percentage of independent directors in the board, CEO duality, and presence of blockholders. The results show that the board of director diligence has a positive effect on Internal Control Committee diligence.With regard to Board of Statutory Auditors, data show a lack of relation between its diligence and the percentage of outside directors in the board, CEO duality, and presence of blockholders. Data show a positive and significant relation between Board of Statutory Auditor diligence and both percentage of independent directors in the board and diligence of board of directors.

The Impact Of Corporate Governance And The Sarbanes-Oxley Act On CEO Compensation

This paper examines the effects of corporate governance on CEO compensation in light of regulatory controls introduced by the Sarbanes-Oxley Act of 2002 (SOX). The influence of economic and corporate governance variables on incentive-based CEO compensation are considered, using cross-section time-series panel data that includes multiple observations for the years 1999 to 2005. As expected, sales, firm performance (returns), and CEO age were found to positively affect the incentive components of CEO compensation. CEO duality, board size, and the percentage of outside directors had a significant influence on CEO compensation in the pre-SOX, but not post-SOX, period. The influences of these three variables in the pre-SOX period were not in the expected directions. Stratification of our sample into two groups by size reveals similarities and differences between smaller and larger firms. For both groups, economic determinants are more dominant than corporate governance variables as determinants of incentive-based CEO compensation. We find differences in the pattern and significance of variables between the smaller and larger firms, particularly for corporate governance variables, pre- and post-SOX. These results suggest that the effectiveness of corporate governance mechanisms may vary by size of company.

Governance change and its impact on board decision-making

This study analysed how a new Korean Government regulation influenced the public enterprise board's structures, processes, and decision-making. Furthermore, this research examines factors influencing board's decision-making. To undertake these board studies, meeting minutes which had been recorded in stenographic form were used. The analyses demonstrated that the number of directors increased after enacting the regulation, especially the percentage of outside directors, as did the annual number of board meetings. However, board meeting attendance rate and the number of decisions with amendment did not change. The number of agenda items, both reporting and decision-making types increased.

Does corporate governance affect restatement of financial reporting? Evidence from China

PurposeThe purpose of this paper is to study the impact of corporate governance on financial restatements in China, with a view to providing reference to strengthen the corporate governance and improve the quality of financial information.Design/methodology/approachThe authors investigate associations between financial restatements and corporate governance via a sample of 1,147 listed companies from the period of 2002 to 2006, which includes 880 annual accounting restatements by 465 companies. Logistic model is used to regress restatement dummy variable on not only the equity and board structure, but also the quality of independent auditors. The restatements in this paper are caused by performance‐related accounting errors.FindingsIt was found that accounting misstatements related to performance could be prevented or restrained by strong internal governance, such as a board of higher percentage of outside directors and an audit committee that could oversee the accounting and financial reporting process on behalf of all shareholders, and outside governance, such as a big stockholder and a strong outside auditor from the Big4 accounting firms. However, the matched test shows the effect of audit committee on controlling restatements is endogenous, which relies on the effects of other governance factors.Originality/valueIn China, studies on the impact of corporate governance on financial restatements are few and the existing empirical researches show the selected samples are small, which constitute small part of the revision of accounting errors. In this paper, the data are more accurate and comprehensive than previous research and matched sample method was used to alleviate the impact of endogeneity of some explanatory variables. So, the conclusions are more reliable than in the past.

The Impact of Corporate Governance on Auditor Choice

In this research, the effect of corporate governance on choosing audit firms by companies accepted into the Tehran Stock Exchange has been investigated. The sample consisted of 545 observations (year-company) from 2004 to 2008. The audit firm size has been considered an audit quality criterion. The results of testing the research hypotheses by using a logistic regression model by means of the backward elimination method at the levels of all companies show that increasing the percentage of outside directors will increase the possibility of choosing high-quality audit firms. The percentage of institutional ownership (first hypothesis) has a negative meaningful relationship with the possibility of choosing high-quality audit firms as opposed to what was expected. Therefor only the fifth hypothesis of this research has been accepted regarding all companies. After the industry types were separately observed, the industry type was revealed that as a modifying factor it has an important effect on improving the statistics of the model and that it increases the potential of the power of prediction of the presented models.

The quality impact of governance change on board decision making

PurposeThe purpose of this paper is to investigate how a regulation has influenced board structures, board processes, and board decision making and specifically, to explore the structural differences of a board before and after enforcing a regulation. This paper also investigates the change in operational processes of a board and determines which factors can influence the board's decision making.Design/methodology/approachTo expand the scope of board studies, this study used the board minutes which were recorded in a stenographic form. Data from the board minutes provide the following information: date, director name, attendance rate, agenda, and spoken details by outside directors, etc. The minutes are taken from 24 public institutions in Korea.FindingsThe study on governance structure and processes has demonstrated the following outcomes. First, the number of directors has increased since enforcing the regulation. Second, the percentage of outside directors has increased. Third, the number of board meetings has increased. Fourth, the attendance rate in the board meetings showed a constant rate. Fifth, the number of agenda items in both reports and decisions has increased. Sixth, the SPCA unit of outside directors appeared different according to their job. Seventh, the number of decisions with amendments has increased. Eighth, there are several factors that influence board decisions.Originality/valueThe paper contributes to a better understanding of boards' decisions.

The Role of Board of Directors in CEO Succession: Theory and Evidence

In this paper, I develop a search-matching model which predicts that new CEOs who are better matches to the firms will stay longer, perform better, and require less initial compensation. Using comprehensive EXECUCOMP dataset merged with unique data on CEO succession plans, I find significant benefits to firms that adopt a CEO succession plan: insider successors in such firms have 1) 30% lower hazard rate of early turnover, 2) 10% higher productivity of effort, and 3) $1,000,000 less initial compensation. I also find that more independent boards (measured by the percentage of outside directors) and boards with larger social networks (measured by the average outside directorships of each director) pick CEOs with higher match qualities. All the findings suggest that the time boards spend on screening candidates and the size of boards’ social network play a role in CEO succession. My results also provide support and policy implications for a legal notice from SEC, dated October 27th 2009, which signaled increased concern about CEO succession planning among corporate boards and for the first time allows shareholders to request more disclosure from companies’ CEO succession plans.

Relationships Between Director Profile And Restatements Of Suspect Earnings

<p class="MsoNormal" style="text-align: justify; margin: 0in 0.5in 0pt;"><span style="font-size: 10pt;"><span style="font-family: Times New Roman;">The large number of recent earnings restatements suggests that boards have not been discharging their fiduciary duties very well. This paper examines which director traits, if any, are correlated with the need to restate suspect earnings. We find that the only significant aspect of director profile is director independence: boards with a larger percentage of outside directors are less likely to have restated suspect earnings that boards with a lesser percentage. The paper concludes with some thoughts on why current research practice of focusing on formal corporate governance (board composition, board traits, etc.) needs to be supplemented with research into power dynamics.</span></span></p>