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Book part
Publication date: 2 February 2015

Frank Mullins

The funding of defined-benefit plans has garnered the attention of academicians, practitioners, and policymakers. Drawing upon agency and organizational control theories…

Abstract

The funding of defined-benefit plans has garnered the attention of academicians, practitioners, and policymakers. Drawing upon agency and organizational control theories, this study investigates the implications of board independence on changes in defined-benefit funding. Using a panel dataset of S&P 500 companies sponsoring defined-benefit plans, the author finds that corporate boards matter. Specifically, CEO duality and outside director representation are associated with year-to-year decreases in defined-benefit funding. Conversely, outside director ownership is related to year-to-year increases in defined-benefit funding. Furthermore, outside director ownership moderated the relationship between outside director representation and defined-benefit funding such that outside director representation is associated with year-to-year increases in defined-benefit plan funding when the percentage of outside director ownership is high.

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Advances in Industrial and Labor Relations
Type: Book
ISBN: 978-1-78441-380-4

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Article
Publication date: 4 July 2016

Wonsuk Cha and Michael A. Abebe

The purpose of this paper is to extend the current research on corporate philanthropy and organizational outcomes by empirically exploring two specific types of…

Abstract

Purpose

The purpose of this paper is to extend the current research on corporate philanthropy and organizational outcomes by empirically exploring two specific types of antecedents: board of director composition and industry membership.

Design/methodology/approach

A theoretical framework was developed based on the resource dependence and stakeholder theories which suggest that the extent that firms build relationship with certain stakeholders is closely tied to the personal and social background of board members, in turn influencing the allocation of resources to corporate philanthropy. Hierarchical multiple regression analysis as well as analysis of variance with post hoc comparisons was conducted using multi-year data philanthropic data from 104 US corporations.

Findings

The results provided empirical support for a positive relationship between the number of female board directors and the level of corporate philanthropy. In addition, the results showed significant inter-industry variations in the level of corporate philanthropy. This indicated that the rather aggressive role of philanthropy in mitigating reputational challenges associated with product-market dysfunctions. Contrary to the theoretical predictions, the results did not support a positive relationship between the proportion of outside directors and level of philanthropy.

Research limitations/implications

The authors believe the empirical finding on the relationship between industry membership and corporate philanthropy is a significant contribution to the philanthropy literature. Accordingly, by empirically showing the disproportionately higher level of philanthropy by some prominent industries (such as gas and oil, financial services and chemical) than their counterparts, the authors contribute to the understanding of sector-level determinants of corporate philanthropy.

Practical implications

Since board of directors have a direct involvement in reviewing and approving major corporate initiatives, the choice of these directors is more likely to influence the amount of resources committed to philanthropic causes. Consistent with other studies in the larger corporate social responsibility research, the authors found that more women directors on the board are associated with greater philanthropic spending. Hence, a major implication of the study is that shareholders and the general corporate community need to pay close attention into who is elected to serve as director of business organizations as these directors’ background and experience could shape major social responsibility initiatives such as corporate philanthropy.

Originality/value

By empirically investigating the relationship between board composition and philanthropy, this study extends the scholarly discussion to focus on the role of the board in shaping the level of firm commitment in overall CSR. In addition, this study provides empirical evidence on the role of industry context in the level of commitment in corporate philanthropic activities.

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Leadership & Organization Development Journal, vol. 37 no. 5
Type: Research Article
ISSN: 0143-7739

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Article
Publication date: 31 July 2007

Elizabeth Webb

The purpose of this paper is to apply theoretical concepts of corporate and bank boards to the Boards of Directors at Federal Reserve Banks and at US Basel II A‐IRB…

Abstract

Purpose

The purpose of this paper is to apply theoretical concepts of corporate and bank boards to the Boards of Directors at Federal Reserve Banks and at US Basel II A‐IRB adopters. The Basel II Accord set to take effect in the USA in 2009 provides direction as to board oversight in Pillar 2. Since the Federal Reserve is one agency responsible for this document, the paper proposes to investigate the governance structure at US banks, presumably adopting (or opting in) the Basel II A‐IRB framework.

Design/methodology/approach

The board structure at Federal Reserve District Banks as of 2006 is examined. Also analyzed are the board structure, executive compensation, and ownership structure at the 22 banks identified as Basel II A‐IRB adopters. These results are then compared with current views and standards of “good governance” in the literature.

Findings

It was found that there is a fairly diverse representation on the board (in terms of female directors), a large proportion of directors are CEOs (generally of other banks), and that boards comprised a majority of outside directors. Several governance characteristics are contrary to “good governance” characteristics described in the literature. Further, banks adopting A‐IRB procedures in Basel II may need to improve governance structures to be in compliance with Pillar 2 of Basel II.

Practical implications

The Federal Reserve System, in an effort to increase board oversight as part of a risk management framework, should also consider its own board structure in light of current research on private‐sector boards. Both Federal Reserve District Boards and Basel II Boards should work towards exemplary corporate governance in light of their place in the US banking system.

Originality/value

The paper investigates the governance structures of banks.

Details

Journal of Financial Regulation and Compliance, vol. 15 no. 3
Type: Research Article
ISSN: 1358-1988

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Article
Publication date: 9 March 2015

Kader Şahin, Seyfettin Artan and Seda Tuysuz

– This paper aims to investigate the moderating effects of a board of directors on foreign direct investment (FDI)’s international diversification in Turkey.

Abstract

Purpose

This paper aims to investigate the moderating effects of a board of directors on foreign direct investment (FDI)’s international diversification in Turkey.

Design/methodology/approach

A sample of Turkish multinational firms with FDI was used. Two different aspects of international diversification were considered: the relationship between international diversification and financial performance and the moderating effect of board composition on the relationship between international diversification and the firm’s financial performance. Firm-level data were obtained from the Istanbul Stock Exchange in Turkey.

Findings

The findings reveal that international diversification leads to better financial performance according to market-based measures. On the other hand, this study indicates that the board characteristics have a moderating effect on international diversification and financial performance.

Research limitations/implications

The study is based on a sample of publicly listed firms in Turkey, and this restriction limits the generalizability of the findings.

Practical implications

The internalization efforts of Turkish FDI have led to better financial performance in terms of market-based measures. The results have stated that the interest of independent outside directors is aligned with lower-risk investment decisions. Independence of independent outside directors in Turkey is interrogated by practitioners or the Capital Markets Board of Turkey. The larger board size which a moderator variable is provided, the wider shareholder value in Turkey is.

Social implications

One can understand that the development of market-supporting institutions provides the support for entry to an emerging economy which is inefficient or incomplete markets and highly concentrated family ownership.

Originality/value

These findings provide important implications for corporate governance and highlight the need for further research on the role of governance in firm internationalization. This study not only helps to understand how board characteristics affect the choice of international diversification decisions, but the results also allow to assess the performance implications of these choices for a particular period.

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International Journal of Organizational Analysis, vol. 23 no. 1
Type: Research Article
ISSN: 1934-8835

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Article
Publication date: 15 June 2010

Rongbing Huang and James G. Tompkins

The purpose of this paper is to study the role of corporate governance in abnormal returns around announcements of seasoned equity offerings (SEOs) by publicly traded US…

Abstract

Purpose

The purpose of this paper is to study the role of corporate governance in abnormal returns around announcements of seasoned equity offerings (SEOs) by publicly traded US firms from 2001 to 2004.

Design/methodology/approach

Cross‐sectional regression analysis was used to determine which variables are important to the market's reaction to the SEO, with a particular focus on corporate governance variables.

Findings

It was found that investors react more positively for firms in which different people hold the CEO and board chairman positions. Limited evidence was found that investor reaction is more positive when the board has a greater representation of outside directors, the CEO has less ownership, and the board is not too large. These findings suggest that investors react more favorably to SEOs by firms with stronger corporate governance mechanisms that reduce adverse selection or agency problems.

Practical implications

This paper's findings are evidence that stronger boards can reduce a firm's cost of raising additional equity capital. Originality/value – There is not believed to be any other published paper that examines the impact of corporate governance mechanisms on the reaction to SEOs with such a comprehensive sample or in post‐Enron periods.

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Managerial Finance, vol. 36 no. 7
Type: Research Article
ISSN: 0307-4358

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Article
Publication date: 18 November 2013

Glenn Boyle and Xu Ji

The purpose of this paper is to uncover the stylised facts about NZ corporate boards and identify unanswered questions about their composition, activity and incentives…

Abstract

Purpose

The purpose of this paper is to uncover the stylised facts about NZ corporate boards and identify unanswered questions about their composition, activity and incentives during the 16-year period between 1995 and 2010.

Design/methodology/approach

The paper uses annual report data to document the evolution of 22 NZ board characteristics. The paper also informally compares these trends with those occurring in other countries.

Findings

Unsurprisingly, the representation of non-executive, independent and female directors on NZ boards rose during the period, as did real chair and director fees and the importance of board committees, while average board size fell. Perhaps more surprisingly, much of this movement occurred before NZX governance reforms in 2003. Moreover, there are some intriguing differences between New Zealand and other, mainly larger, countries.

Research limitations/implications

The analysis is largely descriptive and focuses on identifying questions rather than answering them.

Originality/value

The paper fills an obvious gap in the governance literature, which largely ignores small, open economies, and hence provides little clue as to the overall state and evolution of NZ boards. The paper also identifies a number of questions for further research.

Details

Pacific Accounting Review, vol. 25 no. 3
Type: Research Article
ISSN: 0114-0582

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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.

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.

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

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Article
Publication date: 8 March 2013

Nadeem Ahmed Sheikh, Zongjun Wang and Shoaib Khan

The purpose of this paper is to investigate whether internal attributes of corporate governance such as board size, outside directors, CEO duality, managerial ownership…

Abstract

Purpose

The purpose of this paper is to investigate whether internal attributes of corporate governance such as board size, outside directors, CEO duality, managerial ownership, and ownership concentration affect the performance of Pakistani firms.

Design/methodology/approach

Panel econometric technique namely pooled ordinary least squares is used to estimate the relationship between internal governance mechanisms and performance measures (i.e., return on assets, return on equity, earnings per share, and market‐to‐book ratio) using the data of non‐financial firms listed on the Karachi stock exchange Pakistan during 2004‐2008.

Findings

The empirical results indicate that board size is positively, whereas outside directors and managerial ownership are negatively related to the return on assets, earnings per share, and market‐to‐book ratio. Ownership concentration is positively related to all measures of performance used in this study. CEO duality is positively related to earnings per share only. As far as control variables are concerned, leverage is negatively related to the return on assets, return on equity, and earnings per share. Alternatively, firm size is positively related to all measures of performance. In sum, empirical results indicate that internal governance mechanisms have material effects on firm performance.

Practical implications

Empirical results provide support to managers to understand how internal governance mechanisms affect the firm performance. Moreover, results provide support to regulatory authorities for enacting laws to make internal governance mechanisms work more effectively in the country.

Originality/value

This paper contributes to the literature by exploring the effects of internal governance mechanisms on firm performance using the data of Pakistani firms. Moreover, empirical findings somehow proceed to confirm that theories of corporate governance surely provide some support to explain the relationship between internal governance mechanisms and firm performance.

Details

International Journal of Commerce and Management, vol. 23 no. 1
Type: Research Article
ISSN: 1056-9219

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Article
Publication date: 1 December 2004

Shamsul Nahar Abdullah

This study investigates the roles of board independence and CEO duality on a firm’s performance relying on financial ratios, namely ROA, ROE, EPS and profit margin. This…

Abstract

This study investigates the roles of board independence and CEO duality on a firm’s performance relying on financial ratios, namely ROA, ROE, EPS and profit margin. This paper argues that if boards and leadership structure are well in place and conform to the practices in other developed countries, the long‐term shareholder value is expected to increase and shareholder interests are also well protected. To test the roles of board independence and CEO duality, data from the KLSE Main Board companies for the 1994‐1996 financial years were used. The 1994‐1996 financial years were chosen because, during this period, the issue of corporate governance in Malaysia was not as prominent as it was during, and after, the 1997/1998 financial crisis. Thus, this period could be considered as the period during which guidelines on the structure of the board of directors were not yet available in Malaysia. The findings, generally, suggest that neither board independence, leadership structure nor the joint effects of these two showed any relations with firm performance. Findings of this study, nonetheless, showed that Malaysian companies’ boards were generally dominated by outside directors and the majority of the companies in the study practiced non‐dual leadership structures. Thus, this evidence suggests that the structure of the boards of directors in Malaysia is largely independent of management and the absence of any dominant personality.

Details

Corporate Governance: The international journal of business in society, vol. 4 no. 4
Type: Research Article
ISSN: 1472-0701

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Article
Publication date: 3 June 2019

Chen Zheng (Jerry) and Henry Tsai

This study aims to empirically examine the relationship between industrial diversification and firm performance and the moderating effects exerted on that relationship by…

Abstract

Purpose

This study aims to empirically examine the relationship between industrial diversification and firm performance and the moderating effects exerted on that relationship by board size and family representation on the board.

Design/methodology/approach

Secondary financial data were collected for hotel firms listed on the Hong Kong Stock Exchange during the period 2005-2016. Subsequently, a bivariate correlation and a fixed-effects panel regression analysis were performed on the data.

Findings

The empirical results showed that diversification positively influenced firm performance until firms reached an optimal level of diversification (0.34); beyond that level, the effect was negative. In addition, firms with a larger board tended to show better performance when the level of diversification increased from medium to high, and firms with lower family representation on the board tended to exhibit better performance when the level of diversification increased from low to medium.

Practical implications

Theoretical and managerial implications are suggested in terms of balancing the size of a firm’s board and with regard to family representation on a board from the perspectives of resource dependence theory (RDT) and socioemotional wealth (SEW), the diversification of hotel firms and future research.

Originality/value

A limited number of studies have considered diversification as a corporate-level strategy in the hospitality field and in the unique context in which a service-oriented economy is dominant, such as in Hong Kong. The role of board composition on the diversification–performance relation has rarely been investigated theoretically and empirically. Apart from providing managerial implications for corporate governance, this study also offers theoretical generalizability, from the perspectives of RDT and SEW, to examine the moderating roles of board size and family representation on the diversification–firm performance relation.

Details

International Journal of Contemporary Hospitality Management, vol. 31 no. 8
Type: Research Article
ISSN: 0959-6119

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