Proportion Of Independent Directors Research Articles

Internationalization speed and corporate long-term performance: Exploring the inverted U-shaped relationship

Using data from China's A-share listed companies spanning 2002 – 2022, our research uncovers an intriguing inverted U-shaped dynamic between the velocity of firms' internationalization and their long-term performance. It reveals that while an initial acceleration in internationalization bolsters performance, an overly rapid pace can subsequently lead to a deterioration. Critically, the proportion of independent directors acts as a moderating factor, as a higher concentration of these directors facilitates a balance between the speed and risks associated with internationalization, ultimately optimizing long-term corporate performance. These findings offer vital insights for companies navigating their internationalization strategies and emphasize the importance of robust corporate governance.

Research on Relationship Between Governance Structure and Corporate Performance of Chinese Technology Companies

In the post-pandemic age of 2023, the economy is in recovery. Despite the distinctive qualities of technology firms, such as quick development and high levels of innovation, they face problems such as economic downturns and funding issues. As a result, the corporate governance structure is critical to guaranteeing the firms' long-term viability. The purpose of this article is to examine 252 publicly traded technology companies and investigate the link between corporate financial performance and corporate governance arrangements. This article used Ordinary Least Squares (OLS) analysis to look at the link between board independence, Chief Executive Officer (CEO) duality, ownership concentration, and return on equity (ROE). The regression findings indicate a negative association between ROE and the proportion of independent directors. However, there is no substantial association between the duality of ROE and the CEO, and ROE has a U-shaped relationship with ownership concentration. The study's findings imply that corporate executives and regulators should adopt an effective monitoring mechanism to ensure the impartiality and reliability of independent directors' oversight. To ensure strong financial performance, organizations should maintain appropriate levels of independent director percentages and stock concentration.

How effective is corporate governance in preventing financial fraud in Indonesia Kompas100 firms?

This study examines the relationship between corporate governance practices and the incidence of financial fraud among firms listed on the Kompas100 Index in Indonesia. Utilizing a panel dataset of 1,000 companies over the period from 2015 to 2023, the research employs a Fixed Effects Model (FEM) to analyze the impact of key governance variables, including board composition, ownership structure, and audit committee effectiveness, on fraud occurrence. The findings reveal that firms with a higher proportion of independent directors and more effective audit committees are less likely to engage in financial fraud. Conversely, concentrated ownership and higher leverage are associated with an increased likelihood of fraud. These results underscore the importance of robust governance mechanisms in preventing fraud, particularly in the context of Indonesia's evolving corporate landscape. The study also discusses the limitations of the research and offers policy recommendations to strengthen corporate governance frameworks, thereby enhancing the integrity of Indonesia's financial markets.

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 BOARD STRUCTURES IN INCREASING BANK ACCOUNTABILITY: GLOBAL EXPERIENCE

The governance of banking institutions plays a critical role in the stability and integrity of financial systems globally. The structure of the board of directors significantly influences how banks manage risks, comply with regulations, and align operations with the interests of shareholders and other stakeholders. Understanding how board structures differ across regulatory and cultural landscapes is crucial for enhancing bank accountability and performance. This article aims to critically evaluate how various board structures impact the accountability of banking institutions across different global contexts. The goal is to identify effective governance practices that can be adapted to improve bank accountability worldwide. Employing a comparative case study methodology, this research analyzes board structures in banking institutions across continents including North America, Europe, Asia-Pacific, the Middle East, Africa, and Latin America. Data from primary sources like interviews and secondary sources such as regulatory documents and academic articles are synthesized to assess the impact of board configurations on governance and accountability. The analysis reveals that effective board structures often include a high proportion of independent directors, robust audit and risk committees, and a commitment to diversity, which correlate with enhanced accountability and financial performance. However, variations exist due to cultural, economic, and regulatory differences that influence board effectiveness across regions. The findings suggest that while there is a global trend towards standardizing governance practices, local adaptations remain essential. The study recommends that banks and regulators focus on enhancing board independence, diversifying board composition, and strengthening risk oversight to improve governance frameworks. Future governance models should incorporate a dynamic approach to adapt to technological advancements, economic shifts, and societal expectations, ensuring that banking institutions can effectively meet emerging challenges and opportunities.

Effect of Managerial Competency and Corporate Governance on the Performance of Indonesian Life Insurance

The success of insurance companies in general and in Indonesia depends on the performance of the company's executives and board of directors. The aim of this research is to analyze the influence of managerial competence and independent commissioners on the performance of insurance companies in Indonesia. The number of life insurance companies in this research sample was 22 companies from 2018 to 2022, so the total research data was 110. After removing 10 outlier data, the final data analyzed was 100. This research models the relationship between managerial competence, the proportion of independent board of directors and the performance of life insurance companies. The results of this research show that managerial competence and the proportion of independent directors, which are proxies for governance, have a significant and positive relationship to the performance of insurance companies in Indonesia, both partially and simultaneously. Manager competency and corporate governance mechanisms have improved company performance.

Research on the influence of fiscal policy uncertainty on corporate strategic investment – Evidence from China

ABSTRACT Corporations should pay attention to various policies issued by The Chinese government when making strategic investment. This paper discusses the influence of fiscal policy uncertainty on corporate strategic investment and its mechanism. The results show that the uncertainty of fiscal policy has a nonlinear effect on strategic investment. With the increase of fiscal policy uncertainty, strategic investment increases first and then decreases. The nonlinear mediation effect model and the nonlinear moderation effect model show that the uncertainty of fiscal policy affects the strategic investment of corporations by influencing corporate financing constraints and investor sentiment, which is weakened by the size of corporations and strengthened by the business environment. Further research shows that the nonlinear effect between fiscal policy uncertainty and strategic investment is stronger in non-state-owned corporations, corporations with a low proportion of independent directors and corporations without industrial policy support. Finally, this paper puts forward some suggestions for The Chinese government and corporations to deal realistically with the uncertainty of fiscal policy.

Executive compensation and corporate sustainability: Evidence from ESG ratings

Selecting A-share listed companies in Shanghai and Shenzhen, China, during the period of 2012–2021 as research subjects, this study examines the relationship and operational mechanisms between executive compensation and corporate ESG Ratings. It is found that executive compensation incentives can significantly enhance corporate ESG Ratings. This effect is achieved through promoting green innovation efficiency, enhancing environmental information disclosure, and improving financial performance. However, this positive impact weakens with an increase in management shareholding, but strengthens with a higher proportion of independent directors. When compensation exceeds appropriate levels, overcompensation leads to a decline in ESG Ratings. The significance of this study lies in revealing potential pathways for enhancing corporate sustainability through executive compensation incentives, while also emphasizing the importance of formulating appropriate compensation strategies.

Corporate biodiversity disclosure: The role of institutional factors and corporate governance

AbstractExtensive environmental degradation also has a negative impact on biodiversity, which plays a crucial role in both human survival and economic development. This condition has prompted various parties, including companies, to provide their contributions in preventing further severe damage. This study aims to examine the role of institutional factors, namely environmental performance and governance at the national level, as well as the role of corporate governance factors represented by board size, the proportion of independent directors, board diversity, and the presence of sustainability committees, in the corporate disclosure of biodiversity initiatives. The sample of this study comprises companies from 37 countries during the period 2016–2020. The study adopts a quantitative approach and utilizes analytical methods such as logistic regression and fixed‐effect panel data analysis. Research findings indicate that the national environmental performance as an institutional factor, board size, and the existence of sustainability committees as representatives of corporate governance mechanisms are positively associated with corporate biodiversity disclosure. Meanwhile, the national governance index and the proportion of independent directors have a negative impact. Lastly, in general, the proportion of female board members does not significantly affect biodiversity disclosure. However, additional tests reveal its significance in companies operating in the environmentally‐sensitive industries.

The Influence of Ownership Structure, Board Composition and Financing Decisions on the Performance of Manufacturing Companies in the Consumer Goods Sector

This research aims to investigate the impact of ownership structure, board size, proportion of independent directors, funding decisions, company size, and dividend policy on the performance of consumer goods manufacturing companies. Purposive sampling was employed for data collection. Results indicate that ownership structure and board size positively and significantly influence company performance, as measured by Tobin's Q and ROA. However, the proportion of independent directors, funding decisions, company size, and dividend policy do not exhibit significant effects. Consequently, effective management of ownership structure and board size is crucial for enhancing company performance in the consumer goods manufacturing sector. These findings provide valuable insights for companies to improve their performance and corporate governance practices, fostering stability and sustainability in alignment with economic trends.

Board Gender Diversity, Governance, and Firm Value: An International Evidence

Using firms across 95 countries, the paper finds that a higher percentage of females on the boards is associated with better corporate governance practices concerning the proportion of independent directors, governance disclosure, employee Corporate Social Responsibility (CSR) training, existence of a CSR committee, and board age diversity. Propensity score matching finds that a higher representation of females on the boards can improve board independence, disclosure, CSR training, and firm value. Based on instrumental variable analysis, the findings show that more female directors positively and significantly affect the board age diversity, independent directors, governance disclosure (with GDI annual), and market value.

Military independent directors and merger activity

AbstractIn this article, we examine the relation between independent directors with past military service and merger activity. We find that firms with a greater proportion of independent directors with military experience complete fewer mergers, and the deals are of smaller value. Our results are robust to instrumental variable estimation. The reduction in merger and acquisition activity is concentrated in firms with weak CEOs, suggesting independent directors with military service do not improve firm agency problems.

Does internal audit matter? Audit committee, its attributes, and corporate social responsibility reporting quality

This study explores the nexus between internal audit, audit committee attributes, and Corporate Social Responsibility (CSR) disclosure quality in A-share listed companies on the Shanghai and Shenzhen stock exchanges from 2010 to 2019. Utilizing refined samples and robust datasets, this investigation reveals critical insights that a robust internal control system significantly correlates with higher-quality CSR disclosure, underscoring its pivotal role in safeguarding non-financial reporting integrity and enhancing transparency in CSR disclosures. Larger audit committees are positively associated with improved CSR disclosure quality. This highlights the strategic advantage of a diverse and expansive audit committee in navigating the complexities of CSR reporting. Contrary to expectations, the proportion of independent directors on the audit committee and the frequency of audit committee meetings do not show a significant positive relationship with CSR disclosure. Companies benefit from strategic investments in internal control systems, crucial for non-financial reporting integrity and fortified CSR disclosure practices. In conclusion, this study provides concise insights into critical factors influencing CSR disclosure quality in Chinese companies, offering actionable implications for corporate practices and regulatory frameworks. AcknowledgmentThis paper is co-funded by the European Union through the European Education and Culture Executive Agency (EACEA) within the project “EU BEST PRACTICE OF LIFE CYCLE ASSESSMENT, SOCIAL, ENVIRONMENTAL ACCOUNTING AND SUSTAINABILITY REPORTING” – 101047667-ERASMUS-JMO-2021-MODULE https://jm.snau.edu.ua/en/eu-best-practice-of-life-cycle-assessment-social-envi­ron­mental-accounting-and-sustainability-reporting/ Oleh Pasko expresses sincere gratitude for the support from the Kirkland Research Program, generously provided by the Leaders of Change Foundation established by the Polish-American Freedom Foundation.

Corporate culture, corporate governance, and independent directors: evidence from textual analysis

PurposeTaking advantage of a unique measure of corporate culture obtained from advanced machine learning algorithms, this study aims to explore how corporate culture strength is influenced by board independence, which is one of the most crucial aspects of the board of directors. Because of their independence from the corporation, outside independent directors are more likely to be unbiased. As a result, board independence is commonly used as a proxy for board quality.Design/methodology/approachIn addition to the standard regression analysis, the authors execute a variety of additional tests, i.e. propensity score matching, an instrumental variable analysis, Lewbel’s (2012) heteroscedastic identification and Oster’s (2019) testing for coefficient stability.FindingsThe results show that stronger board independence, measured by a higher proportion of independent directors, is significantly associated with corporate culture. In particular, a rise in board independence by one standard deviation results in an improvement in corporate culture by 32.8%.Originality/valueConducting empirical research on corporate culture is incredibly difficult due to the inherent difficulties in recognizing and assessing corporate culture, resulting in a lack of empirical research on corporate culture in the literature. The authors fill this important void in the literature. Exploiting a novel measure of corporate culture based on textual analysis, to the best of the authors’ knowledge, this study is the first to link corporate culture to corporate governance with a specific focus on board independence.

Is corporate governance a significant factor in corporate social responsibility disclosure? Insights from China

This comprehensive study delves into the intricate relationship between corporate governance and Corporate Social Responsibility Disclosure (CSRD) within the framework of China’s institutional landscape. By analyzing an extensive dataset comprising 35,435 firm-year observations from 3,889 A-share listed companies spanning the years 2006 to 2019, the research scrutinizes various governance mechanisms, including board size, independence, CEO duality, and ownership concentration.The investigation affirms that larger boards and a higher proportion of independent directors exert a positive influence on CSRD. In contrast, a substantial shareholding ratio held by the largest shareholder proves to be a hindrance to the transparent disclosure of CSR initiatives. While the impact of CEO duality on CSRD is noted, the statistical significance of this relationship remains inconclusive.These findings underscore the nuanced dynamics of governance and ownership structures in shaping CSR initiatives. The findings highlight the nuanced impact of governance and ownership structures on CSR initiatives, offering valuable insights for managers and policymakers navigating CSR strategies in China’s business landscape. The insights garnered from this study hold valuable implications for both corporate managers and policymakers navigating the landscape of CSR strategies within the unique contours of China’s business environment. AcknowledgmentThis paper is co-funded by the European Union through the European Education and Culture Executive Agency (EACEA) within the project “Embracing EU corporate social responsibility: challenges and opportunities of business-society bonds transformation in Ukraine” – 101094100 – EECORE – ERASMUS-JMO-2022-HEI-TCH-RSCH-UA-IBA / ERASMUS-JMO-2022-HEI-TCHRSCH https://eecore.snau.edu.ua/Oleh PASKO expresses sincere gratitude for the support received from the Kirkland Research Program, generously provided by the Leaders of Change Foundation established by the Polish-American Freedom Foundation.

Combining or Separating Management and Control: Effects on the Performance of French Listed Companies with Monist Structures

This study of the determinants of the choice to combine management and control functions, and then the impact of this choice on the performance of large French companies with monistic structures, relies on agency, entrenchment, stewardship, and substitution theories. The results, based on data from 2011–2021, show that the decision to combine functions depends on the human capital of the board of directors and the CEO’s seniority; independent directors and the proportion of capital held by the executive instead favor separation. This choice has no influence on the company's financial performance. However, when the proportion of independent directors is high or the board possesses a high level of human capital, combining the management and control functions benefits the company's financial performance.

Board Attributes and Sustainability Disclosure of Listed Manufacturing Firms in Nigeria

This study examined the board attributes on sustainability disclosure of listed Nigerian manufacturing firms. This study used an ex-post facto research design with a population of 34 consumer goods and industrial goods firms with a sample size of 18 firms selected using purposive sampling. This study utilized the annual reports of these firms from 2013 to 2023 to gather necessary data, employ multiple regression techniques, and analyze the data through STATA software 13. The result revealed that board size has a negative and significant effect on sustainability disclosure. Both the board meetings and board independence have a positive and significant effect on sustainability disclosure. This concludes that board size negatively and significantly influences sustainability disclosure. On the other hand, board meetings and independence have a positive relationship with sustainability disclosure. The study recommends that firms should ensure that they work with an ideal number of board of directors, as this will improve sustainable decision-making; every board meeting and every properly structured board meeting should incorporate sustainability to enhance the aspect of disclosure; and that firms should enhance board independence for the effectiveness of oversight and sustainability reporting through a higher proportion of independent directors.

ROLE OF INDEPENDENT DIRECTORS IN MITIGATING FINANCIAL STATEMENT FRAUD: INSIGHTS

The role of independent directors has gained increasing attention in corporate governance, particularly in their ability to mitigate financial statement fraud. This study investigates the relationship between board independence and the likelihood of financial fraud within Indian companies, using the Altman Z-score as a measure of financial health. The analysis explores how the proportion of independent directors on corporate boards impacts fraud detection and prevention, alongside other board attributes such as audit committee size, board size, and gender diversity. The findings suggest that a higher proportion of independent directors significantly reduces the likelihood of financial misreporting, enhancing transparency and accountability. The results highlight the critical governance role of independent oversight, emphasizing the need for stringent regulations and best practices to strengthen board independence in safeguarding financial integrity. These insights contribute to ongoing discussions on corporate governance reforms and provide practical recommendations for firms and policymakers to reduce fraud risk in emerging markets like India.

Relationship Between Board Characteristics and Level of Corporate Disclosure Among Listed Companies in Tanzania

This paper examined the relationship between board characteristics and Level of corporate Disclosure (LCD) among Tanzanian listed companies. Relationships between board size, board independence; directors’ remuneration and LCD were examined. The 105 firm-year observations for 21 listed companies in Tanzania from 2016 to 2020 were used. The study used the agency theory. An explanatory research design was employed. Balanced panel data for analysis were gathered using a survey method. Data were analyzed using descriptive and inferential statistics. Regression analysis was used in testing hypotheses. Findings showed that board size, board independence, directors’ remuneration were positively related to LCD. It was recommended that listed companies should appoint a higher proportion of independent directors to their boards. Independent directors can provide impartial oversight and are more likely to prioritize transparency and disclosure. Companies are adviced to optimize board size aim for a board size that is appropriate for their specific needs and industry. Moreover, listed companies should adopt transparent and fair director remuneration practices. This includes disclosing the structure of director compensation, including; salaries, bonuses, stock options, and other benefits. Policymakers and regulators should consider implementing or strengthening regulations related to board composition, independence, and disclosure practices.

Role of committees in bank valuation: Evidence from an emerging market

The purpose of this study is to examine the effect of corporate governance mechanisms on bank performance in general and the effect of board-constituted committees on bank performance in particular. Primarily, two questions are addressed in the context of the banking sector of India. First, does corporate governance mechanisms reduce the quantum of non-performing assets (NPAs)? Second, does the internal committee affect bank performance? Hence, this paper determines whether independent directors strengthen corporate boards and whether committees affect bank performance. The panel data ordinary least square regression analysis is used for this study. We also use logistic regression models for various committees to find their relationship with bank performance and NPAs. Tobin’s Q is used as proxy for bank performance. Independent variables are board size (BSIZE), proportion of independent directors on the board (PERIND), number of board meetings per year (BMEET), size of the audit committee (AUC), and two measures of the bank business (asset size and loan), and one control variable is time. We use financial and corporate governance data from 2005 to 2018, the study finds that independent directors play a major role on the board. It finds a positive and significant relationship between board independence and bank performance. The performance also increases with the increase in board size but after a point, the curve declines forming and an inverted U-shaped curve is formed. The mandatory internal committees have a crucial role to play, which is demonstrated by their effect on the reduction of NPAs. The significance of a well-functioning board and internal committees in discharging their fiduciary duties is highlighted in this study. An internal committee comprising a majority of independent directors is found to positively affect the performance of banks. They can help managers disburse good-quality loans and keep a check on risk-laden ventures.