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Article
Publication date: 27 March 2007

Anthony Kyereboah‐Coleman and Nicholas Biekpe

The fundamental objective of this study is to contribute to the debate by empirically examining the determinants of board size and its composition from a small and…

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Abstract

Purpose

The fundamental objective of this study is to contribute to the debate by empirically examining the determinants of board size and its composition from a small and developing country perspective.

Design/methodology/approach

The paper uses a quantitative approach based on secondary data from firms listed on the Ghana Stock Exchange. Panel data multiple regressions within both fixed and random effects techniques estimations were carried out.

Findings

Board size and its composition are a function of firm and industrial characteristics. Specific findings are that, while firm level risk has a positive relationship with board size, CEO tenure has a negative correlation with board size; and that firms with larger institutional shareholding employ less outside directors

Research limitations/implications

A study of this nature requires a large sample base. It is therefore obvious that sample size was the main limitation of the study. Though, this limitation does not compromise on the validity of our findings, study findings and its general interpretation should be done with some degree of caution.

Originality/value

Since, most of the studies in this area have been largely theoretical and have concentrated in developed countries, this paper makes an important contribution by looking at the issue empirically from a small and developing country perspective.

Details

Journal of Accounting & Organizational Change, vol. 3 no. 1
Type: Research Article
ISSN: 1832-5912

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Article
Publication date: 16 August 2021

Srikanth Potharla and Balachandram Amirishetty

This study aims to examine the significance of the non-linear relationship of board size and board independence on the financial performance of listed non-financial firms in India.

Abstract

Purpose

This study aims to examine the significance of the non-linear relationship of board size and board independence on the financial performance of listed non-financial firms in India.

Design/methodology/approach

The study draws the sample of the listed non-financial firm in the Indian market from the year 2011–2018 and applied panel least squares regression with and without industry fixed effects on the model with quadratic equation. Quantile regression is also used to test the robustness of the results. The financial performance is measured through one accounting measure (i.e. return on assets [ROA]) and one market-based measure (i.e. Tobin’s Q). The empirical model also controls firm-specific variables which are expected to have an impact on financial performance.

Findings

The study found that the relationship of board size and board independence with the financial performance of a firm is in a non-linear inverted U-shape. The results are qualitatively similar for both ROA and Tobin’s Q after controlling industry fixed effects.

Originality/value

This is the first study in India which tests the non-linear relationship of board size and board independence with the financial performance of the firm. The study contributes to the limited literature on the implications of board characteristics on the performance of the firms in India.

Details

Journal of Indian Business Research, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1755-4195

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Article
Publication date: 29 April 2021

Henry Chalu

The purpose of this paper is to examine the determinants of audit report lag in Sub-Saharan African Central Banks. In this case, the determinants were divided into two…

Abstract

Purpose

The purpose of this paper is to examine the determinants of audit report lag in Sub-Saharan African Central Banks. In this case, the determinants were divided into two categories: independent variables and mediating variables. The independent variables, which were generated from board characteristics, included board size, board gender diversity, governor duality, audit committee size and audit committee meetings. The mediating variables were auditing characteristics and they comprised audit mandate, audit approach and audit quality.

Design/methodology/approach

The study used data from 192 observations from African Central Banks' financial reports for the period 2000–2016. The data collected were analyzed using path analysis, whereby four regression models were run and tested simultaneously. From the analysis, the study determined total effects and then decomposed the total effects into direct and indirect effects.

Findings

The study results indicate that in the case of board characteristics, governor duality and audit committee size were found to have a positive influence on audit report lag. In the case of audit quality, only audit mandate was found to have a negative influence on audit quality in the Central Banks. However, the introduction of mediating variables increased the positive effect of governor duality and audit committee size, while also making board size and board gender diversity have a significant negative effect on audit report lag.

Practical implications

The findings of this paper have implications for the practice and policy of the auditing and governance of Central Banks, which includes designing appropriate governance structures as well as proper auditing strategies.

Originality/value

This is the first study which has examined factors influencing audit report lag in Central Banks. Previous studies on Central Banks' governance have examined the independence and autonomy of the Central Banks, as well as their accounting. This paper extends prior studies by examining the effects of those factors. Another contribution is the study's application of auditing characteristics as mediating variables.

Details

Journal of Accounting in Emerging Economies, vol. 11 no. 4
Type: Research Article
ISSN: 2042-1168

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Book part
Publication date: 4 March 2008

Carl Pacini, William Hillison and David Marlett

Extant research on non-financial service firms indicates that board size is a key determinant of firm performance. Property-liability (P&L) insurers, however, face a…

Abstract

Extant research on non-financial service firms indicates that board size is a key determinant of firm performance. Property-liability (P&L) insurers, however, face a different set of agency costs and a more intense regulatory environment than most non-financial firms. Both of these factors were reinforced by the implementation of the Financial Services Modernization Act in 2000. We document a significant inverse relation between publicly traded P&L insurer performance and board size in the post-Financial Services Modernization Act period. Publicly traded P&L insurer performance, measured by market-to-book ratio, return on revenues, and the operating ratio, was enhanced for firms with smaller board sizes in 2000 and 2001. Ironically, we find that publicly traded P&L insurers on average increased board size in 2000 and 2001. In a post-Financial Services Modernization Act environment, board size appears to be related to publicly traded P&L insurer performance, but more research is necessary to develop a complete understanding of its role in P&L insurer corporate governance.

Details

Research in Finance
Type: Book
ISBN: 978-1-84950-549-9

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Book part
Publication date: 1 November 2008

Arun Upadhyay

Board size has received significant attention among researchers and regulators. However, the advisory role of boards has not been studied much. In this study I examine the…

Abstract

Board size has received significant attention among researchers and regulators. However, the advisory role of boards has not been studied much. In this study I examine the notion that investors value larger boards for their advisory capabilities. Prior studies examine board size in the context of monitoring role of corporate boards and find opposite effects on debt holders and equity holders. Using market-based measures of total firm performance, which take both equity and debt into account; I find that larger boards are associated with greater economic value added (EVA). Using a sample of S&P 1500 firms from 2000 to 2003 and controlling for various firm and industry characteristics, I also find that the board size is positively associated with firm productivity and various other efficiency measures such as return on assets (ROA), return on equity (ROE) and Sales-Turnover ratio. I argue that firms with larger boards, valuing the advisory role of directors offer greater compensation to the directors. Overall the results indicate that large board size has a positive impact on firm's performance. The results are robust to alternative measures of firm performance and other key variables.

Details

Institutional Approach to Global Corporate Governance: Business Systems and Beyond
Type: Book
ISBN: 978-1-84855-320-0

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Article
Publication date: 31 March 2020

O. Volkan Ozbek and Brian Boyd

Corporate spin-offs have become more popular as a restructuring technique in recent decades. The market performance of these spun-off subsidiaries has been considered…

Abstract

Purpose

Corporate spin-offs have become more popular as a restructuring technique in recent decades. The market performance of these spun-off subsidiaries has been considered critical, as positive market signals are vital to the success of these newly independent firms. Drawing on both the stewardship and resource dependence theories, this study aims to examine how two critical governance characteristics (namely, CEO duality and board size) affect the change in the market valuation of spun-off subsidiaries. This study proposes that both board size and CEO duality of spun-off subsidiaries should positively influence the change in market valuation.

Design/methodology/approach

This study used the SDC Platinum database to identify completed corporate US spin-offs between 2000 and 2014. To ensure consistency across spin-off events, this study included only those in which 100 percent of outstanding shares of spun-off subsidiaries were distributed. The study confirmed the SDC Platinum listings using online resources such as The Wall Street Journal and Lexis/Nexis. The study used weighted least square (WLS) regression to test all the proposed models.

Findings

This empirical analysis of 134 US-based spin-offs supported both main hypotheses. Furthermore, the analysis also finds that firm size has significant moderating effects on the link between governance structure and market performance.

Originality/value

These findings contribute to the governance literature on corporate spin-offs by advancing our understanding of the role of CEO and board characteristics in improving these subsidiaries' market valuation, as well as the moderating effect of the firm size.

Details

Journal of Strategy and Management, vol. 13 no. 3
Type: Research Article
ISSN: 1755-425X

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Article
Publication date: 21 May 2020

Ankur Shukla, Sivasankaran Narayanasamy and Ramachandran Krishnakumar

The purpose of the paper is to explore the impact of board size on the accounting returns and asset quality of Indian banks.

Abstract

Purpose

The purpose of the paper is to explore the impact of board size on the accounting returns and asset quality of Indian banks.

Design/methodology/approach

This paper uses ordinary least squares regression, robust regression and panel data methods for estimation, based on data collected for a sample of 29 Indian banks that are listed on the National Stock Exchange (NSE) and form part of the NSE-500 index over a period of eight financial years 2009-2016. The data pertaining to the board size of the sample banks is collected from the annual reports of banks, whereas the data relating to return on assets (ROA) and ratio of the gross non-performing assets to total assets and control variables (bank age and bank size) is extracted from ACE Equity database.

Findings

This paper concludes that the size of the governing board has a positive impact on the accounting returns (measured through ROA) of the Indian banks. Further, board size is observed to be insignificant in determining the asset quality of Indian banks.

Originality/value

This paper contributes to the literature and practitioners in a number of ways. First, to the best of the authors’ knowledge, this is the first study on the impact of board size on the accounting returns and asset quality of Indian banks. The findings of the study contribute new theoretical insights to the body of knowledge on the influence of the size of the board, which may be useful for future researchers. Second, banks may enhance their financial performance by taking cognizance of the findings of this study. Finally, equity investors may make use of the findings of this article in deciding on whether to invest in a bank’s stock/lend to the bank based on board size of the bank.

Details

International Journal of Law and Management, vol. 62 no. 4
Type: Research Article
ISSN: 1754-243X

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Article
Publication date: 14 August 2020

Muhammad Ali and Oluremi B. Ayoko

Demographic faultlines are associated with negative group processes and low performance. Little is known about the formation of faultlines in boards and how they can be…

Abstract

Purpose

Demographic faultlines are associated with negative group processes and low performance. Little is known about the formation of faultlines in boards and how they can be weakened to capitalize on the positive effects of diversity.

Design/methodology/approach

This study draws on social identity theory and faultlines theory to provide insights into how gender and age faultlines are formed in a board. Subsequently, it proposes and tests a U-shaped board size–faultlines strength relationship. Archival data were collected on 288 organizations listed on the Australian Securities Exchange.

Findings

Hierarchical regression analyses indicate that small- and large-sized boards experience stronger faultlines than medium-sized boards.

Originality/value

This study provides pioneering evidence for a U-shaped relationship between board size and demographic faultlines strength. These findings inform practice by suggesting an optimal board size.

Details

Corporate Governance: The International Journal of Business in Society, vol. 20 no. 7
Type: Research Article
ISSN: 1472-0701

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Article
Publication date: 15 December 2017

Muhammad Ali

Board size is an important dimension of corporate governance. The purpose of this study is to propose and test indirect effects of organization size on organizational…

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1420

Abstract

Purpose

Board size is an important dimension of corporate governance. The purpose of this study is to propose and test indirect effects of organization size on organizational performance via board size, in the context of industry.

Design/methodology/approach

The study’s predictions were tested in 288 medium and large organizations listed on the Australian Securities Exchange using archival data.

Findings

The findings of this study suggest the following: organization size is positively associated with board size and this relationship is stronger in manufacturing organizations; board size is positively associated with performance and this relationship is conditional on industry; and organization size has an indirect effect on performance via board size, and this indirect effect is also conditional on industry.

Research limitations/implications

The results provide some support for the resource dependency theory, agency theory and contingency theory.

Practical implications

The findings suggest that directors should take into account the effects of board size and industry to provide a more precise assessment of the board’s performance.

Originality/value

It predicts and tests the pioneering moderating effect of industry (manufacturing vs services) on the organization sizeboard size, board size–organizational performance and organization sizeboard size–organizational performance relationships.

Details

Corporate Governance: The International Journal of Business in Society, vol. 18 no. 1
Type: Research Article
ISSN: 1472-0701

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Article
Publication date: 9 April 2018

Hamadou Boubacar

The purpose of this paper is to study the effect of internal governance mechanisms on the financial and social performance of Niger’s decentralized financial systems (DFS).

Abstract

Purpose

The purpose of this paper is to study the effect of internal governance mechanisms on the financial and social performance of Niger’s decentralized financial systems (DFS).

Design/methodology/approach

This paper investigated the impact of the board size and the CEO/chairman duality on financial performance and sustainability, respectively, measured by the return on assets (ROA) and operational self-sufficiency on one side and social performance measured by the size of loans granted and the percentage of female borrowers on the other side.

Findings

The results show that board size positively and significantly affects the ROA. The author also concludes that the duality of decision and control functions promotes the financial viability of the DFS. Regarding the impact of internal governance on social performance, the author finds that board size positively and significantly affects loan size.

Research limitations/implications

This study focuses on Niger’s 13 largest DFSs. However, an analysis that also includes smaller firms may show different results.

Practical implications

A board size of between 5 and 15 members is recommended. This would help to incorporate key skills and the active involvement of all members.

Originality/value

This research highlights the importance of including internal governance mechanisms, underscores an interesting problem and answers questions raised in the existing literature by invalidating or confirming the results that have been obtained thus far. As the players in the microfinance sector recognize that sound governance is an important factor for a successful outcome in any microfinance institution objective, the paper helps shed some light on the situation of DFS in Niger.

Details

International Journal of Social Economics, vol. 45 no. 4
Type: Research Article
ISSN: 0306-8293

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