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Article
Publication date: 13 June 2008

Tin Yan Lam and Shu Kam Lee

This paper seeks to examine the relationship between chief executive officer (CEO) duality and firm performance and the moderating effects of the family control factor on

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Abstract

Purpose

This paper seeks to examine the relationship between chief executive officer (CEO) duality and firm performance and the moderating effects of the family control factor on this relationship with respect to public companies in Hong Kong.

Design/methodology/approach

This study employs publicly available data from financial databases and the annual reports of a sample of 128 publicly‐listed companies in Hong Kong in 2003.

Findings

Neither agency theory nor stewardship theory alone can adequately explain the duality‐performance relationship. The empirical evidence suggests that the relationship between CEO duality and accounting performance is contingent on the presence of the family control factor. CEO duality is good for non‐family firms, while non‐duality is good for family‐controlled firms.

Research limitations/implications

The study is based on publicly available financial data, and actual board processes are not observed.

Practical implications

The design of board leadership structure is contingent on corporate ownership and control (family control or not).

Originality/value

The paper provides empirical evidence that CEO duality is not necessarily bad for public companies in Hong Kong and would be of interest to regulatory bodies, business practitioners, and academic researchers.

Details

Corporate Governance: The international journal of business in society, vol. 8 no. 3
Type: Research Article
ISSN: 1472-0701

Keywords

Article
Publication date: 21 September 2022

Tony Abdoush, Khaled Hussainey and Khaldoon Albitar

Due to stakeholders’ concerns on the contribution of corporate governance in monitoring insurance companies during financial crisis, this study aims to investigate whether…

Abstract

Purpose

Due to stakeholders’ concerns on the contribution of corporate governance in monitoring insurance companies during financial crisis, this study aims to investigate whether and how various corporate governance practices would have affected firm performance of listed and non-listed insurance firms in the UK during financial crisis.

Design/methodology/approach

This study uses a unique manually collected data set from listed and non-listed insurance firms in the UK and applies different regressions models to test the hypotheses and to address the endogeneity problem.

Findings

The findings show that board non-duality and the presence of a majority shareholder improve firm performance in insurance companies. Furthermore, the findings for the sub-samples indicate a stronger positive association between board of directors and firm performance in listed insurance companies after the financial crisis, while a positive impact has been found between large shareholders and external audit firms in non-listed insurance companies before and during the crisis.

Practical implications

The results offer important practical implications for the government, management, shareholders and policymakers. For example, regulators and policymakers should benefit from these results to revise the recommendations for corporate governance mechanisms that prove to be effective on firm performance, as well as those mechanisms that have different or unexpected effects among listed or non-listed firms and/or during the turbulent periods. Investors should be aware of those specific corporate governance mechanisms that would have higher effect on performance of UK insurance firms in which they are considering to invest in.

Originality/value

This study contributes to the current literature by exploring the effect of corporate governance on financial performance by comparing between listed and non-listed insurance companies during financial crisis. Further, to the best of the authors’ knowledge, this is the first study to use two new insurance-related performance measures, the revenue growth ratio and the adjusted combined ratio, as performance proxies to explore whether these new variables create any insights.

Details

International Journal of Accounting & Information Management, vol. 30 no. 5
Type: Research Article
ISSN: 1834-7649

Keywords

Article
Publication date: 9 February 2015

Hayam Wahba

This paper aims to investigate the joint effect of board characteristics on financial performance. Most of the existing literature implicitly assumes that the relationship…

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Abstract

Purpose

This paper aims to investigate the joint effect of board characteristics on financial performance. Most of the existing literature implicitly assumes that the relationship between either board composition, or board leadership structure and financial performance is direct.

Design/methodology/approach

The generalized least squares method was performed as a panel data analysis on a sample of 40 Egyptian listed firms during the period from 2008 to 2010.

Findings

The results demonstrated that under board leadership structure that assigns the duties of the CEO and chairman to the same person, increasing the proportion of non-executive members to the total number of directors has a negative impact on firm financial performance.

Practical implications

First, corporate governance structures do not operate in a vacuum, and therefore, corporate governance mechanisms must be considered and assessed altogether. Second, failure to understand the underlying interdependency among corporate governance mechanisms may result in arguments that blame some corporate governance designs for poor financial performance. Third, there is no single board governance mechanism that can be considered ideal, but there are combinations of these mechanisms that are preferred.

Originality/value

The paper adds to the corporate governance literature by providing empirical evidence from the emerging market of Egypt. The evidence shows that the relationship between board characteristics and financial performance is not a monotonic relationship. Consequently, these findings imply that existing evidence explaining the relationship between board characteristics and financial performance needs to be interpreted with some caution.

Details

Review of Accounting and Finance, vol. 14 no. 1
Type: Research Article
ISSN: 1475-7702

Keywords

Article
Publication date: 9 January 2020

Chaminda Wijethilake and Athula Ekanayake

This study aims to draw on the resource dependence theory to synthesize the conflicting arguments as well as commonalities of the agency and stewardship perspectives on…

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Abstract

Purpose

This study aims to draw on the resource dependence theory to synthesize the conflicting arguments as well as commonalities of the agency and stewardship perspectives on the relationship between CEO duality and firm performance.

Design/methodology/approach

Multiple regression analysis is used to analyze the data collected from a sample of 212 large-scale publicly listed companies representing 20 sectors in the Colombo Stock Exchange in Sri Lanka.

Findings

The research results based on all of 212 publicly listed companies in Sri Lanka show, in support of the agency theory, that CEO duality exerts a negative effect on firm performance when the CEO is equipped with additional informal power. Conversely, CEO duality exhibits a positive effect on firm performance when board involvements are high, a finding that supports the commonalities of the agency and stewardship theoretical perspectives.

Practical implications

By examining the governance practices and concepts in an Asian developing economy, this study provides insight into the power dynamics between the CEO and the board of directors in managerial contexts that are largely different from those in western countries.

Originality/value

This study expands the theoretical underpinning of corporate governance research by identifying the performance implications of CEO duality within the broad context of the resource provision of the board of directors and the informal power of CEOs.

Details

Social Responsibility Journal, vol. 16 no. 8
Type: Research Article
ISSN: 1747-1117

Keywords

Article
Publication date: 18 October 2019

Mengge Li and Jinxin Yang

As the primary decision makers, chief executive officers (CEOs) play pivotal roles in firm innovation. However, little is known regarding how CEOs influence the…

Abstract

Purpose

As the primary decision makers, chief executive officers (CEOs) play pivotal roles in firm innovation. However, little is known regarding how CEOs influence the exploitation and exploration paradox. To advance theory and research, the purpose of this paper is to investigate the joint effects of CEO tenure and CEO–chair duality on a firm’s shifting emphasis between exploitative and exploratory innovation.

Design/methodology/approach

This paper takes the approach of a longitudinal sample of 81 US pharmaceutical firms.

Findings

As CEOs’ tenure advance, their firms’ percentage of exploitative innovation increases. Furthermore, non-duality (separation of board chair and CEO) further strengthens the positive relationship between CEO tenure and the percentage of exploitative innovation.

Research limitations/implications

This study integrates upper echelons theory and behavioral agency theory to juxtapose the effects of CEOs on technological innovation. This study extends knowledge of strategic leadership and innovation by showing that CEOs influence the balance between exploitative and exploratory innovation. Furthermore, this study also contributes to the corporate governance literature by demonstrating that monitoring vigilance could inhibit capable CEOs from pursuing more exploratory innovation.

Practical implications

Boards of directors should allow CEOs to have greater discretion over innovation, and vigilant monitoring and control may force CEOs to focus less on exploration.

Originality/value

This is one of the few studies that explicitly investigate how CEO influences a firm’s emphasis on exploitative innovation and exploratory innovation.

Details

Journal of Strategy and Management, vol. 12 no. 4
Type: Research Article
ISSN: 1755-425X

Keywords

Article
Publication date: 6 January 2006

Shahul Hameed Mohamed Ibrahim, A.H. Fatima and Sheila Nu Nu Htay

This study examines whether Shari’ah approved companies with majority Muslim directors adopt better corporate governance (CG) than non‐Shari’ah approved companies with…

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Abstract

This study examines whether Shari’ah approved companies with majority Muslim directors adopt better corporate governance (CG) than non‐Shari’ah approved companies with majority non‐Muslim directors and whether the performance of the former is better than that of the latter. The objective of this study is to determine whether religious factor has an influence in adopting corporate governance mechanisms and in performance. Performance of the companies is measured in relation to three perspectives, namely, Shari’ah compliance, environmental performance, and social performance. This study used secondary data and the leading 50 firms were selected from each group based on their market capitalization for the year 2002. The proxies for good corporate governance are CEO non‐duality, the proportion of non‐executive directors on the board, and the proportion of independent non‐executive directors on the board. The proxies used to measure Shari’ah compliance are the ratio of prohibited income to total income and the ratio of prohibited expenses to total expenses. The variables used to measure the environmental and social performance are certification of ISO 14001 and OHsas 18001, respectively. The results generally showed that there is little significant difference between the CG and performance of Shari’ah approved companies with majority Muslim directors and non‐Shari’ah approved companies with majority non‐Muslim directors, although the former is marginally better for both, in a few instances.

Details

Journal of Financial Reporting and Accounting, vol. 4 no. 1
Type: Research Article
ISSN: 1985-2517

Keywords

Article
Publication date: 12 October 2012

Lu Zhang

Drawing on agency theory and resource dependence theory, the study aims to link board demographic diversity and independence to corporate social performance.

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Abstract

Purpose

Drawing on agency theory and resource dependence theory, the study aims to link board demographic diversity and independence to corporate social performance.

Design/methodology/approach

Data were collected from various sources for a sample of 475 publicly traded Fortune 500 companies between the years 2007 and 2008.

Findings

It is found that board gender diversity is positively related to institutional and technical strength ratings, while board racial diversity is positively related to institutional strength rating only. Both the proportion of outside directors and CEO non‐duality were negatively associated with institutional and technical weakness ratings.

Research limitations/implications

The sample was predominantly large, publicly traded national and international corporations, which might limit the generalizability of the findings.

Practical implications

Management personnel should be cognizant of how board configurations and leadership structure may influence their corporate reputation for social responsibility. Efforts should be made to foster a group dynamic that is conducive to effective board functioning.

Originality/value

Few empirical studies have examined the relationship between board characteristics and corporate social performance. This study contributes to the literature by examining such associations.

Details

Corporate Governance: The international journal of business in society, vol. 12 no. 5
Type: Research Article
ISSN: 1472-0701

Keywords

Article
Publication date: 28 March 2019

Alessandro Merendino and Rob Melville

This study aims to reconcile some of the conflicting results in prior studies of the board structure–firm performance relationship and to evaluate the effectiveness and…

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Abstract

Purpose

This study aims to reconcile some of the conflicting results in prior studies of the board structure–firm performance relationship and to evaluate the effectiveness and applicability of agency theory in the specific context of Italian corporate governance practice.

Design/methodology/approach

This research applies a dynamic generalised method of moments on a sample of Italian listed companies over the period 2003-2015. Proxies for corporate governance mechanisms are the board size, the level of board independence, ownership structure, shareholder agreements and CEO–chairman leadership.

Findings

While directors elected by minority shareholders are not able to impact performance, independent directors do have a non-linear effect on performance. Board size has a positive effect on firm performance for lower levels of board size. Ownership structure per se and shareholder agreements do not affect firm performance.

Research limitations/implications

This paper contributes to the literature on agency theory by reconciling some of the conflicting results inherent in the board structure–performance relationship. Firm performance is not necessarily improved by having a high number of independent directors on the board. Ownership structure and composition do not affect firm performance; therefore, greater monitoring provided by concentrated ownership does not necessarily lead to stronger firm performance.

Practical implications

This paper suggests that Italian corporate governance law should improve the rules and effectiveness of minority directors by analysing whether they are able to impede the main shareholders to expropriate private benefits on the expenses of the minority. The legislator should not impose any restrictive regulations with regard to CEO duality, as the influence of CEO duality on performance may vary with respect to the unique characteristics of each company.

Originality/value

The results enrich the understanding of the applicability of agency theory in listed companies, especially in Italy. Additionally, this paper provides a comprehensive synthesis of research evidence of agency theory studies.

Details

Corporate Governance: The International Journal of Business in Society, vol. 19 no. 3
Type: Research Article
ISSN: 1472-0701

Keywords

Article
Publication date: 3 May 2022

Sadi Boğaç Kanadlı, Asma Alawadi, Nada Kakabadse and Pingying Zhang

Using the attention-based view, this paper aims to examine whether and how board composition might influence the allocation of board attention to corporate sustainability.

Abstract

Purpose

Using the attention-based view, this paper aims to examine whether and how board composition might influence the allocation of board attention to corporate sustainability.

Design/methodology/approach

This is a conceptual paper that uses a theoretical perspective pointing to the importance of generating a board composition that might benefit both business case framing and paradoxical framing, a typology introduced in managerial cognition literature to explain managerial decision-making.

Findings

The conclusions emerging from the reviewed literature suggest that boards that have realized an independence of perspective focus on shareholder profit maximization at the expense of considerations of corporate sustainability. It emerges that women directors who have adopted paradoxical framing can enable boards to consider not only economic but also environmental and social issues of sustainability during board decision-making. Further, it is noted that the effect of gender diversity on allocation of board attention to corporate sustainability is contingent upon contextual (board openness) and structural (chairperson leadership) factors that facilitate social interactions inside boardrooms.

Originality/value

By considering alternative cognitive frames as well as social interactions, the propositions contribute to a better understanding of the allocation of board attention regarding ambiguous sustainability issues.

Details

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

Keywords

Article
Publication date: 25 October 2021

Cong Duc Tran, Tin Trung Nguyen and Jo-Yu Wang

Corporate governance plays a critical role in solving agency problems. However, previous findings on how governance mechanisms lead to high firm performance are…

Abstract

Purpose

Corporate governance plays a critical role in solving agency problems. However, previous findings on how governance mechanisms lead to high firm performance are inconclusive. Additionally, this relationship has not been well addressed in the context of transitional countries where governance systems and mechanisms are weak, leaving a gap for research. Hence, this study aims to shed light on the effects of four key governance components, namely, ownership concentration, chief executive officer duality, board size and gender diversity, on firm performance.

Design/methodology/approach

This study reports on the econometric panel data analysis and fuzzy-set qualitative comparative analysis (fsQCA) of 1,424 firm-year observations from listed companies in Vietnam covering the period of 2010–2017.

Findings

The econometric panel data analysis confirmed the net effects of single solitary governance components. FsQCA revealed equifinal configurations of components that explain high firm market- and accounting-based performance.

Practical implications

These findings are relevant for firms in transitional and emerging markets, aiming to adopt the most suitable internal mechanisms to pursue their performance objectives and for regulators interested in enhancing the advantages of the capital market.

Originality/value

This study provides empirical evidence that firm performance can be improved when the appropriate corporate governance mechanisms are selected. As there are equifinal paths leading to the desired outcome of high performance, firms from different industrial and national contexts should mindfully apply any uniform corporate governance code.

Details

Journal of Enterprising Communities: People and Places in the Global Economy, vol. 16 no. 1
Type: Research Article
ISSN: 1750-6204

Keywords

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