Board independence and firm performance: evidence from Kuwait
International Journal of Law and Management
ISSN: 1754-243X
Article publication date: 23 November 2020
Issue publication date: 10 February 2021
Abstract
Purpose
This paper aims to reduce the knowledge gap by using a large sample and different regressions while controlling the endogeneity and causality issues.
Design/methodology/approach
This study used the ordinary least square (OLS) and two stage least squares (2SLS) regressions to control the endogeneity and causality problems; this estimation strategy allows for comparison of both estimates to identify any inconsistency and biases in the parameters.
Findings
General speaking, this study found that board independence negatively affected firm performance based on Tobin’s Q only and the relationship between the two variables ran from board independence to firm performance but not vice versa.
Originality/value
The current independent directors are not adding value to Kuwait’s listed firms. Some directors who represent large shareholders and the conflict between large shareholders and small shareholders could affect the role of independent directors in Kuwait. To best of the researchers’ knowledge, this study is the first to consider board independent after controlling the issues of endogeneity and causality in Kuwait; thus, the results could be useful for Kuwaiti firms, regulators and policymakers.
Keywords
Citation
Al-Saidi, M. (2021), "Board independence and firm performance: evidence from Kuwait", International Journal of Law and Management, Vol. 63 No. 2, pp. 251-262. https://doi.org/10.1108/IJLMA-06-2019-0145
Publisher
:Emerald Publishing Limited
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