Search results

This paper aims to investigate the joint effect of board independence and gender diversity on the effectiveness of boards in monitoring CEO compensation in a continental European context, i.e. France.

Fixed-effect regressions are used to study the impact of board independence, gender diversity and their interaction, i.e. the proportion of female independent directors on the different components of CEO compensation (total, fixed and variable).

The authors observe that both the proportions of independent directors and women sitting on the boards positively influence the various components of CEO compensation. However, the interaction of these factors, i.e. the proportion of female independent directors, is negatively associated with CEO compensation. These results suggest that independent women directors improve board effectiveness in monitoring CEO compensation, especially its fixed component.

The results of this research help to elucidate the importance of women being appointed to boards as independent directors to properly monitor managerial pay. These results provide support to the approach of the French Cope-Zimmerman law of January 2011, which promotes female representation on boards as independent directors to enhance board decision-making. Thus, evidence presented and discussed in this paper should provide useful insights for academics, corporate managers and regulators.

The purpose of this article is to investigate how ownership structure, especially family and/or venture‐capital involvement, as well as entrepreneurial activities, defined as strategic change and renewal, help explain the involvement of independent members on boards of directors. The CEOs of 2,455 small and medium‐sized, private enterprises from practically all industries were contacted in a telephone survey, resulting in an exceptionally high response rate. The findings reveal that family firms are more reluctant to involve independent directors on their boards than non‐family firms, that presence of venture capitalists increases the frequency of independent board members and that ownership has an impact on board roles. The results do not support the hypothesised relationship that independent directors enhance entrepreneurial activities. One implication of our study is that the often‐argued‐for strategic contribution of outsiders to the boards in family firms may be overemphasised. Another implication is that family firms that choose to acquire additional capital should be aware that this could result in a change in the board composition and the loss of control of the business. However, new and external owners' inclusion on the board seems to be negotiable since there are also venture capitalists that do not insist on board representation.

This study aims to investigate the impact of board independence on the cash dividend payments of family firms listed on the Borsa Istanbul (BIST) in balancing controlling families’ power to mitigate agency problems between family and minority shareholders in the post-2012 period. The authors focus on this period because Turkish authorities implemented mandatory regulations on the employment of independent directors on boards from fiscal year 2012.

The research model uses a panel dataset of 153 BIST-listed family firms over the period 2012–2017, employs alternative dependent variables and regression techniques and is applied to various sub-groups to improve robustness.

The empirical results show a strong positive effect of board independence on dividend decisions. The authors further detect that family directorship exhibits a negative effect, whereas both board size and audit committees have positive influences but chief executive officer (CEO)/duality has had no significant impact on the dividend policies of Turkish family firms since the new compulsory legal requirements in the Turkish market.

The findings suggest that independent directorship and dividend policy are complementary governance mechanisms to reduce agency conflicts between families and minority shareholders in Turkey, which is a civil law-based emerging country characterized by high family ownership concentration.

The authors present evidence that Turkish family firms’ corporate boards have evolved, to some extent, from being managerial rubber stamps to more independent boards that raise opposing voices in family decision-making. However, independent directors’ preference for dividend-induced capital market monitoring implies that their direct monitoring is less effective than it is supposed to be. This suggests a need to revise the Turkish Corporate Governance Principles to enhance independent directors’ monitoring and supervisory power.

This is thought to be the first study to provide insights on how board independence influences dividend policy in controlling agency problems in Turkish family firms since Turkish authorities introduced compulsory rules on the employment of independent directors on boards.

The purpose of this paper is to examine the gender diversity on boards and its effect on stock market liquidity in French boardrooms.

Using a sample of French firms between 2002 and 2012 listed on the Paris Stock Exchange (SBF120), the study uses ordinary least squares and three-stage least squares (3SLS) regressions to address endogeneity concerns on the board gender diversity.

The results show that stock market liquidity is positively and significantly associated with the presence of women directors. The authors find that investors’ decisions vary according to their positions in the board: women independent members decrease illiquidity costs, while the presence of female inside directors increases daily trading volume. In addition, the presence of female inside directors increases the firm’s ability to implement better strategies that cope with economic, social and environmental constraints which leads investors to positively react. Surprisingly, the presence of female independent directors reduces company involvement in sustainable development projects.

The empirical findings contribute to the current debate on the benefits of gender diversity on corporate boards and the effectiveness of gender-quota laws. It shows that appointing insider female’ directors incite investors to trade more stocks while appointing independents ones reduces their trading costs.

This paper shows that the benefits of female directors appointing depend on their independence of management team.

This study addresses the endogeneity between stock market liquidity, corporate governance and gender diversity. It is the first study to distinguish between the effects of women inside and independent directors on investors’ trading decisions.

The manner in which publicly traded companies’ management teams handle their firm’s free cash flows (FCF) has been an issue for many decades, because it is difficult to determine whether these management teams work for their own benefit or for that of their shareholders. Recent financial scandals have heightened mistrust of management. This mistrust, in turn, may have increased the pressure to reduce the portion of FCF left under management’s control. Boards of directors control dividend payout decisions, thus determining the portion of FCF available to corporate management. This paper examines whether the 2002 legal response to corporate financial reporting scandals, which came in the form of many new initiatives and requirements imposed by the Sarbanes–Oxley Act of 2002 (SOX) on all publicly traded firms, was relevant to dividend payouts. This question is investigated by noting that the impact of these new requirements differed among firms. Some firms had already introduced the use of independent directors and fully independent committees prior to SOX making them compulsory in 2002. This paper examines whether these “pre-adopters” experienced less change in their dividend payout policies than those firms that were forced to change the composition of their board and committees.

This investigation examines the effect on dividend payouts for listed firms attributable to the SOX and concurrent changes in stock exchange regulations that compelled increased use of independent directors and fully independent committees. To study the impact of SOX and the associated, required, changes in the composition of boards of directors for many firms, the difference-in-differences methodology is employed to overcome the endogeneity concerns that have consistently challenged prior governance studies. This was accomplished by examining the effects on dividend payouts associated with the exogenously forced addition of independent directors to the boards of publicly listed firms. The results reveal that there is a significant positive relationship between firms that were compelled by law to change their boards and increases in average changes in dividend payouts and percentage changes in dividends paid, when compared to firms that had pre-adopted the Sarbanes–Oxley corporate board composition requirements. A further exploratory analysis showed that the same significant positive relationship is detected for increases in average changes in total dollars distributed, where stock repurchase dollars are combined with dividend payouts. These findings imply that these board composition changes led to decisions that increased dividend payouts in percentage terms, as well as dividend payouts and total dollars distributed in aggregate dollar amount terms.

The purpose of this paper is to examine the perceptions of independent directors in Vietnam about their roles and challenges when sitting on the boards of listed companies.

The study uses mailed questionnaires to collect data. The authors sent surveys to 810 independent directors from 354 listed companies and received feedback from 170 respondents.

The authors examine several aspects of independent directors’ work on the board (such as the roles of and challenges for independent directors) as well as board environment (such as information provision or board interaction). Findings suggest that independent directors in Vietnam place more emphasis on their advisory role than their monitoring role. In addition, they also point out their challenges including information asymmetries and the influence of controlling shareholders. These challenges are significant and they prevent independent directors to properly execute their independent role on the board. These findings reflect the unique features of corporate governance in transition economies.

The authors contribute to the literature through providing an insightful view about the nature of the work performed by this type of director in a transition economy. The study is also one of the first studies to use a qualitative instrument to provide an explanation of how controlling shareholders influence independent directors on boards of directors.

This study aims to examine the link between boards and audit committees and firm performance in Kuwaiti listed firms in the context of recent and extensive corporate governance regulatory reform.

Panel data regression analysis with fixed effects and clustered standard errors of firm performance for 61–97 listed industrial and services firms in Kuwait over a seven-year period. The dependent variables are the returns on assets and equity, the debt-to-equity ratio and leverage and Tobin’s Q and the independent variables comprise board of directors and audit committee characteristics, including size, the number of meetings and the numbers of independent and outside board and expert committee members. Firm size, subsidiary status and cash flow serve as control variables.

Mixed results with respect to the characteristics of the board of directors. Board size and independent and outsider board members positively relate only to Tobin’s Q and insiders only to debt to equity. For audit committee characteristics, committee size, independence and expertise positively relate to the return on equity and committee size and expertise only to Tobin’s Q. Of the five performance measures considered, board and audit committee characteristics together best determine Tobin’s Q.

Data from a single country limits generalisability and control variables necessarily limited in a developing market context. Need for qualitative insights into corporate governance reform as a complement to conventional quantitative analysis. In combining accounting and market information, Tobin’s Q appears best able to recognise the performance benefits of good corporate governance in terms of internal organisational change.

The recent corporate governance code and guidelines reforms exert a mixed impact on firm performance, with audit committees, not boards, of most influence. But recent reforms implied most change to boards of directors. One suggestion is that non-market reform may have been unneeded given existing market pressure on listed firms and firms anticipating regulatory change.

Kuwait’s corporate governance reforms codified corporate governance practices already in place among many of its firms in pursuit of organisational legitimacy, and while invoking substantial change to audit committees, involved minor change to firm performance, at least in the short term. Some firms may also have delisted in expectation of stronger corporate governance requirements. Regardless, these direct and indirect processes both improved the overall quality of listed firm corporate governance and performance in Kuwait.

Seminal analysis of corporate governance reforms in Kuwait, which have rapidly progressed from no corporate governance code and guidelines to an initially voluntary and then compulsory regime. Only known analysis to incorporate both board of directors and audit committee characteristics. Reveals studies of the corporate governance–firm performance relationship may face difficulty in model specification, and empirical significance, given the complexity of corporate governance codes and guidelines, leads in changing firm behaviour and self-selection of firms into and out of regulated markets.

In times of vivid debates on the inclusion of women on boards, the purpose of this paper is to shed a new light on the composition of boardrooms in emerging market firms by investigating how family and state ownership affect board-gender diversity in the emerging economies.

This study uses Tobit regression to examine the effect of firm ownership on board-gender diversity. A panel data set of Chinese and Indian firms for the period 2004-2013 is used to conduct this study.

The results show a negative and significant impact of family and state ownership on the proportion of women directors. However, this relationship is seen to be reverse if the firm is operating in international markets. Notably, a negative relationship was seen to persist between ownership structure and board-gender diversity for both female executive and independent board members, whereas a positive impact of internationalization was observed only for independent female directors.

This research addresses the board-gender diversity issue in emerging economies by focusing on firm characteristics which are unique to their business context. Further, this study identifies the conditions under which emerging market firms assimilate or proscribe women on their boards by recognizing the salient features of firms from emerging markets. Hence, in doing so, new evidence is added to the studies on the determinants of board-gender diversity. Lastly, it advances the earlier literature based on resource dependency and agency views and demonstrates the importance of internationalization for the inclusion of women on corporate boards.

The purpose of this paper is to investigate how venture capital (VC) backing influences the board size and independence and how VC backing and board structure impact firm performance in China.

Using hand-collected data from 924 initial public offering (IPO) prospectuses covering the period from January 2004 to December 2012, the authors investigate the impact of VC backing on board size, board independence and firm market performance through regression analysis. A two-stage approach is also used to address the endogeneity issue.

The authors find robust evidence that VC-backed IPOs have more independent boards, after controlling for CEO and firm characteristics, and the potential endogeneity concerns. Furthermore, firms backed by VCs with management political ties (PTs) have more independent directors with industry relevant expertise than other firms. While no significant relationship is found between board independence and firm performance, the authors present some evidence that IPOs which have a larger percentage of independent directors with industry relevant expertise exhibit higher long-term stock returns, and VCs with management PTs also improve IPO long-run stock performance.

Although VC is new in China and the Chinese capital market has relative poor corporate governance and weak minority shareholder protection, the authors find support in this paper that VC backing is valuable to IPO firms in China not only through providing funding but also by providing political ties and industry experience. However, Chinese regulatory and institutional settings have strong impact on test results and they change rapidly, so the results may not apply to other period in Chinese markets.

This paper sheds lights on the influences of VC backing on corporate governance and firm performance in a transitional and emerging economy. It discovers the value of VC investors in a transitional economy as of providing political ties and industry experience. The new definition of independent directors suggested by Suchard (2009) is first used by our paper in the Chinese context.

The quality of financial reporting for the financial institutions is vital for the public, as the negative consequences of manipulated financial statements will not only affect shareholders but also the regulators’ reputation and the society at large. The purpose of this paper is to assess the association between different corporate governance mechanisms and their impact on audit and reporting quality. The gender factor is introduced from a diverse boards’ perspective to highlight any impact of female presence on the quality of financial statements.

The authors examine a sample of financial institutions listed on the FTSE-350 index for the years 2011 to 2015. The financial sector has its own and different regulations, and financial reporting framework and auditors are expected to behave into more scrutiny. Bloomberg database is used to obtain governance and financial data, while firms’ annual reports are used to collect audit fees and audit committee information. A panel data regression is used to test hypotheses. The authors also control for unobservable heterogeneity, reverse causality and endogeneity.

The results suggest that boards with larger size and higher independence pay higher audit fees to enhance the monitoring capacity and protect the wider group of stakeholders. The results also show that women on boards are likely to reduce the risk of manipulated financial statements, as women are more inclined toward truthfulness, cautiousness and conservatism. In addition, the reported results show that audit committees with more independent members are more inclined toward obtaining higher quality audit to enhance firm’s reporting quality.

Given the recent governments’ intervention to avoid financial institutions’ negative impact on the economy, this study is relevant and provide policymakers insights into the existing relationships between audit fees and financial institutions’ governance structure.