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Article
Publication date: 16 October 2017

Margaret M. Cullen and Niamh M. Brennan

Boards of directors are assumed to exercise three key accountability roles – control, monitoring and oversight roles. By researching one board type – investment fund boards – and…

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Abstract

Purpose

Boards of directors are assumed to exercise three key accountability roles – control, monitoring and oversight roles. By researching one board type – investment fund boards – and the power relations around those boards, the purpose of this paper is to show that such boards are not capable of operating the three key roles assumed of them.

Design/methodology/approach

The authors conducted 25 in-depth interviews and a focus group session with investment fund directors applying a grounded theory methodology.

Findings

Because of their unique position of power, the authors find that fund promoter organisations (that establish and attract investors to the funds) exercise control and monitoring roles. As a result, contrary to prior assumptions, oversight is the primary role of investment fund boards, rather than the control role or monitoring role associated with corporate boards. The findings can be extended to other board-of-director contexts in which boards (e.g. subsidiary boards, boards of state-owned entities) have legal responsibility but limited power because of power exercised by other parties such as large shareholders.

Practical implications

Shareholders and regulators generally assume boards exercise control and monitoring roles. This can lead to an expectations gap on the part of shareholders and regulators who may not consider the practical realities in which boards operate. This expectations gap compromises the very objective of governance – investor protection.

Originality/value

Based on interviews with investment fund directors, the authors challenge the control-role theory of investment fund boards of directors. Building on our findings, and following subsequent conceptual engagement with the literature, the authors differentiate control, monitoring and oversight roles, terms which are often used interchangeably in prior research. The authors distinguish between the three terms on the basis of the level of influence implied by each.

Details

Accounting, Auditing & Accountability Journal, vol. 30 no. 8
Type: Research Article
ISSN: 0951-3574

Keywords

Article
Publication date: 5 October 2015

Thoranna Jonsdottir, Val Singh, Siri Terjesen and Susan Vinnicombe

The purpose of this paper is to examine how directors’ roles and social identities are shaped by gender and board life stage, using pre- and post-crisis Iceland as the setting…

Abstract

Purpose

The purpose of this paper is to examine how directors’ roles and social identities are shaped by gender and board life stage, using pre- and post-crisis Iceland as the setting. Recent theoretical work suggests the importance of directors’ monitoring and resource provision roles at certain board life stages; however, there is limited empirical evidence of directors’ identification with these roles as well as social role identification as a member of the board.

Design/methodology/approach

The authors contribute empirical evidence from interviews with 23 corporate directors in Iceland on individual identification with the director role of monitoring and resource provision, relational identification with the CEO role and social identification as a member of the board.

Findings

Prior to the crisis, male directors identified more strongly with resource provision and with their social roles and less strongly with monitoring roles. Compared to their male counterparts, pre-crisis female directors identified more strongly with monitoring and did not identify with their social roles. After the crisis, mature boards’ male director role identities were little changed; male directors continued to identify with resource provision and social identification, rather than monitoring, roles. Compared to pre-crisis, post-crisis female directors described greater identity with their resource provision roles and reported that male directors resented their attempts to fulfill their monitoring roles. In post-crisis, newly formed diverse boards, male and female directors reported very similar role identities which reflected balanced monitoring and resource provision roles, for example providing the board with ethical individual identities and unblemished reputations. The findings of this paper indicate that board composition and life cycle stage might have more impact on director identity than a pre- or post-crisis setting. These findings suggest implications for theory, practice and future research.

Originality/value

This paper provides further empirical evidence of the roles male and female directors identify with on corporate boards. Its originality lies in the context of the board work in terms of newly formed and mature boards, before and after the financial crisis, with differing gender composition (male-dominated and gender-balanced boards).

Details

Gender in Management: An International Journal, vol. 30 no. 7
Type: Research Article
ISSN: 1754-2413

Keywords

Article
Publication date: 11 April 2023

Ashish Kalra, Omar S. Itani and Sijie Sun

This study examines the contextual variables that can curb the negative effects of role conflict on job satisfaction and enhance the positive effect of job satisfaction on…

490

Abstract

Purpose

This study examines the contextual variables that can curb the negative effects of role conflict on job satisfaction and enhance the positive effect of job satisfaction on creativity and service performance. More specifically, adopting the job demands-resources theory, the authors explore the interactive effect of frontline employee (FLE) self-monitoring and FLE-manager trust on the relationship between role conflict and job satisfaction. Extending this line of inquiry, the authors adopt social identity theory and analyze the moderating effect of FLE-manager identification on the relationship between job satisfaction and creativity and between job satisfaction and service performance.

Design/methodology/approach

Dyadic data utilizing 122 responses from FLEs and their managers were obtained from FLEs working with a major financial services firm in India. Structural equation modeling and PLS were used to assess the hypothesized relationships.

Findings

The negative relationship between role conflict and job satisfaction is reduced at higher levels of FLE self-monitoring and FLE-manager trust. Furthermore, FLE manager identification accentuates the effect of job satisfaction on creativity and service performance.

Practical implications

Organizations should invest in developing FLEs' personal and job-related resources to reduce the deleterious effects of role conflicts on FLEs' job outcomes. Specifically, managers should hire FLEs who are high in self-monitoring while enhancing FLE-manager trust and FLE-manager identification.

Originality/value

Role conflict is inevitable in a service job and can have serious negative downstream consequences. Hence, the study explores the important contextual factors that can help an organization develop policies to reduce the negative effects of role conflict.

Details

Journal of Service Theory and Practice, vol. 33 no. 3
Type: Research Article
ISSN: 2055-6225

Keywords

Article
Publication date: 19 June 2017

Leticia Pérez-Calero Sánchez, Jaime Guerrero-Villegas and José Manuel Hurtado González

Using a contingency approach, the purpose of this paper is to study how organizational factors (such as the organizational life cycle, firm size, firm ownership concentration and…

Abstract

Purpose

Using a contingency approach, the purpose of this paper is to study how organizational factors (such as the organizational life cycle, firm size, firm ownership concentration and firm technology) determine the relative importance of the monitoring and provision of resources roles provided by board members.

Design/methodology/approach

This paper highlights the importance of contingency factors in carrying out board’s roles using a sample of 579 European firms registered in the STOXX Europe 600 index. The authors used a longitudinal analysis for the period from 2002 through to 2011.

Findings

The results show that the monitoring role is more relevant for companies that are large, are operating at the mature and stagnant stages, have a dispersed ownership and are low-technology. However, the provision of resources role is more relevant for companies that are in the growth and stagnant stages, and have a concentrated ownership.

Originality/value

The traditional analysis that relates the board’s structure and composition to the board’s roles focuses on determining what board should be the best. It plays little attention to analyzing which organizational factors affect the importance and presence of monitoring or resource dependence roles. In this regard, this work adds significant insights to agency theory and resource dependence theory as, with a contingency framework, the research aims to find what functions the board needs to develop in order to get better firm performance.

Details

Management Decision, vol. 55 no. 5
Type: Research Article
ISSN: 0025-1747

Keywords

Book part
Publication date: 1 December 2004

M.Ameziane Lasfer

I test empirically the hypothesis that the monitoring role of the board of directors depends on the severity of the agency problems and the amount of information needed to monitor

Abstract

I test empirically the hypothesis that the monitoring role of the board of directors depends on the severity of the agency problems and the amount of information needed to monitor. I show that in high growth firms, where the agency conflicts are low and managers are likely to reveal more information to get advice, boards are more independent but less likely to monitor, while in low growth firms, boards are less likely to be independent, but the relationship between firm value and board independence is strong. Overall, boards become more independent but monitor less as firms’ growth opportunities increase, suggesting that managers trade off the amount of information released to the board to get a better advice and to mitigate the monitoring role of the board.

Details

Corporate Governance
Type: Book
ISBN: 978-0-76231-133-0

Article
Publication date: 15 March 2019

Thi Tuyet Mai Nguyen, Elaine Evans and Meiting Lu

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.

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Abstract

Purpose

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.

Design/methodology/approach

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.

Findings

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.

Originality/value

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.

Details

Asian Review of Accounting, vol. 27 no. 1
Type: Research Article
ISSN: 1321-7348

Keywords

Article
Publication date: 11 May 2015

Giovanna Michelon, Saverio Bozzolan and Sergio Beretta

The purpose of this paper is to investigate two research questions. Is internal control system (ICS) disclosure, as a monitoring mechanism, associated with the characteristics of…

4161

Abstract

Purpose

The purpose of this paper is to investigate two research questions. Is internal control system (ICS) disclosure, as a monitoring mechanism, associated with the characteristics of the board of directors, particularly the audit committee as the main board committee devoted to the effectiveness of ICS? Does the regulatory environment, particularly the regulation on ICS disclosure as an external governance/monitoring mechanism play a role in shaping the relationship between board monitoring and ICS disclosure and, if so, how?

Design/methodology/approach

The authors study the ICS disclosure of 149 companies listed in four European financial markets (London, Paris, Frankfurt and Milan), each with its own regulations about ICS disclosure, during a six-year period (2003-2008).

Findings

The findings support an inverse association between the extent of ICS disclosure and the proxies for board monitoring. The authors also find a statistically significant negative relationship between board monitoring and substantial ICS disclosure but no relationship between board monitoring and formal ICS disclosure. The evidence also shows that the regulatory environment moderates the relationship between board monitoring and ICS disclosure by introducing trade-offs among monitoring mechanisms.

Research limitations/implications

An important caveat of the research is that it does not explore if and how investors use ICS disclosure to evaluate the firm.

Practical implications

The authors propose a framework for the analysis of ICS disclosure that overcomes limitations of previous literature that has neglected the importance of the content beyond the extent of ICS disclosure. Through this framework researchers, practitioners and standard setters are able to separate merely descriptive, formal un-useful disclosure (boilerplate information) on the composing elements of the ICS from substantial disclosure regarding the functioning of the ICS (monitoring function).

Originality/value

The authors also provide evidence that the relationship between board monitoring and ICS disclosure varies with the content of the information communicated, thus offering guidance for future research not to focus on measuring the extent or quantity of disclosure but on the variety and complexity of the information communicated.

Details

Journal of Applied Accounting Research, vol. 16 no. 1
Type: Research Article
ISSN: 0967-5426

Keywords

Article
Publication date: 13 November 2017

Chwee Ming Tee

The purpose of this paper is to examine the association between politically connected (POLCON) firms and stock price synchronicity, and whether this association can be attenuated…

Abstract

Purpose

The purpose of this paper is to examine the association between politically connected (POLCON) firms and stock price synchronicity, and whether this association can be attenuated by institutional investors.

Design/methodology/approach

This paper uses an ordinary least square regression model to examine the association between POLCON firms and stock price synchronicity; institutional ownership and stock price synchronicity; the moderating role of institutional ownership on the association between POLCON firms and stock price synchronicity; institutional domiciles and stock price synchronicity; and the moderating role of institutional domiciles on the association between POLCON firms and stock price synchronicity.

Findings

The result shows that POLCON firms are positively associated with stock price synchronicity. Further, the author also finds that institutional monitoring, through higher ownership by local institutional investors is associated with lower stock price synchronicity. In addition, this study documents evidence that institutional investors, particularly local institutional investors can improve stock price informativeness in POLCON firms.

Research limitations/implications

The results suggest that POLCON firms are plagued by severe agency problems, resulting in limited flow of firm-specific information to the capital markets. However, the author shows that POLCON firm’s agency problems can be attenuated through effective monitoring by institutional investors. Further, institutional domiciles are shown to be significantly associated with stock price synchronocity. However, effective monitoring is largely driven by local institutional investors, in line with the geographical proximity theory.

Practical implications

The results suggest that regulators should increase their surveillance and monitoring effort, particularly on firms with close ties to the government. In particular, POLCON firms should be required to be more transparent in their corporate dealings. Additionally, auditors should intensify their audit efforts on POLCON firm to provide more reliable financial information to minority shareholders, investors and analysts. Finally, institutional investors should be incentivized by the Malaysian Securities Commission, via, the code of governance to play an effective monitoring role in Malaysian firms.

Originality/value

This study reveals that POLCON firms’ severe agency problems can be alleviated by effective institutional monitoring. Further result identifies institutional domiciles as a significant factor in influencing monitoring effectiveness in POLCON firms. This paper provides insights into the dynamic interaction between political connections, institutional monitoring, firm governance and capital markets behavior of an emerging market.

Details

Managerial Finance, vol. 43 no. 11
Type: Research Article
ISSN: 0307-4358

Keywords

Article
Publication date: 12 April 2021

Ameneh Bazrafshan and Reza Hesarzadeh

Prior studies provide mixed evidence on the association of board busyness and firm productivity. Thus, this paper empirically analyzes how board busyness affects firm productivity.

Abstract

Purpose

Prior studies provide mixed evidence on the association of board busyness and firm productivity. Thus, this paper empirically analyzes how board busyness affects firm productivity.

Design/methodology/approach

To measure board busyness, this paper computes the percentage of directors on a board who sit on three or more boards. Furthermore, to calculate firm productivity, the paper employs data envelopment analysis.

Findings

Findings demonstrate that the association of board busyness and firm productivity (association) is generally negative and statistically significant but economically insignificant. In this respect, the findings reveal that the association is negative (positive) and both statistically and economically significant for firms having higher monitoring (advising) needs. Moreover, the findings demonstrate that regulatory oversight (1) weakens the general negative association; (2) changes the direction of association from negative to positive, for firms having higher monitoring needs; and (3) does not influence the association, for firms having higher advising needs.

Originality/value

Taken together, the findings indicate that the association of board busyness and firm productivity is conditional to monitoring/advising needs and regulatory oversight. As such, the findings enrich the current debates on the association. Furthermore, the findings offer novel perspectives to enrich the regulatory frameworks of countries which are constraining multiple directorships.

Details

Personnel Review, vol. 51 no. 3
Type: Research Article
ISSN: 0048-3486

Keywords

Article
Publication date: 1 March 2019

Huaili Lyu and Conghui Yang

The purpose of this paper is to examine the certification and monitoring motivations of third-party underwriting and its effects on credit spreads and earnings management of bank…

Abstract

Purpose

The purpose of this paper is to examine the certification and monitoring motivations of third-party underwriting and its effects on credit spreads and earnings management of bank issuers.

Design/methodology/approach

Ordinary least squares is used to examine the certification and monitoring effects of third-party underwriting. Furthermore, the Heckman two-stage estimation method is used in controlling the endogeneity of sample selection.

Findings

The authors find that financial bonds underwritten by third-party underwriters bear lower credit spreads due to their credibly ex ante certification and effectively ex post monitoring compared with self-underwriting. Moreover, the certification of third-party underwriters can help to select good quality bond issuers with lower earnings management, and the monitoring function also plays an essential role in constraining the behavior of earnings management after the bond issues.

Research limitations/implications

The findings in this study suggest that underwriting types (third-party underwriting) will affect financial bond yields and bank issuers’ earnings management.

Practical implications

On the one hand, the authors should encourage third-party underwriters to actively promote the certification and monitoring functions. For example, given commercial banks the chance to be underwriters when the bond issuers are investment banks, which is not allowed now in China’s financial bond market. On the other hand, the authors should cut off the quid pro quo relations within third-party underwriting because such relations will reduce the certification and monitoring effects of third-party underwriters.

Originality/value

This is the first study to distinguish the certification and monitoring effects by using unique data from China’s financial bond market. And the authors further investigate the adverse effects of quid pro quo relations (hiring each other as lead underwriters) on the certification and monitoring effects of third-party underwriters.

Details

China Finance Review International, vol. 10 no. 1
Type: Research Article
ISSN: 2044-1398

Keywords

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