Board Composition and Financial Performance

This paper attempts to analyze the impact of board structure attributes on their accounting and stock market performance. Our analyses are built on an emerging market, Turkey for the period between 1995 and 2006. We conduct our analyses through binary logistic methodology. Our findings show that, while board ownership does not have any impact on the accounting performance, it has a fairly positive influence on the stock market performance of firms during the crisis period. Similarly, the situation when the ceo of a firm is also the chairman of the board is not found to have any impact on the corporate performance of firms, although its negative impact is present during the crisis period. Moreover, board independence is found to not to have an effect on accounting performance, yet the stock market perceives board independence positively, both in general and in the crisis periods. Finally, board size has a positive impact , both on the accounting and on the stock market performance of firms, yet the impact on the corporate performance reverts to adverse during the crisis period.

The subject of corporate governance has always been of keen interest to the researchers in the area of management and finance. This paper basically concentrates on the corporate board of directors which is an internal corporate governance mechanism. Since the effectiveness of boards counts on several characteristics such as board size, board composition, leadership structure etc, therefore considering this viewpoint, the present study is based on the analysis of board size of BSE listed companies in India. This analysis broadly embraces the relationship between board size and performance as represented by various indicators such as Operating Profit Margin, Return on Assets, Return on Equity, Earnings per Share and Tobin's Q. Spearman's rho correlation, One Way ANOVA and Kruskal-Wallis tests were applied to draw the inferences. Results of the study remained robust and thus concluded that both board size and firm performance were independent of each other as board size was not found to be associated with firm performance.

This study investigates the role of CEO, board independent director as well as separate elements of corporate governance on firm performance for the listed non-financial companies in Dhaka Stock Exchange (DSE) 2008.Specific objective of this research is to examine the relationship between separation of CEO and the proportion of independent directors on firm performance as measured by return on assets (ROA) and return on equity (ROE). This paper is based on a sample of 93 listed companies and Used OLS as a method of estimation. The results suggest a positive association between ROA and separation of chief executive officer and between board independent director and ROA. The results further reveal a positive association between ROE and chief executive officer as well as board independent director. However, ownership structure is negative association with the firm performance measures (ROA and ROE) but not significant.

The paper analyses the relationship between Board Composition (proportion of non-executive directors) and Firm Performance of 145 non-financial NSE listed companies in India for a period of five years. The firm performance measures include Tobin's Q, Return on Assets, Return on Capital employed and Return on Equity. Econometric analysis is performed using Pooled OLS and Random Effect Model. The research findings reveal that Board composition has a negative and significant impact on firm performance. The results are robust for both econometric models and various performance measures used. The paper concluded that the negative impact of Board composition on firm performance is due to the fact that non-executive directors lack information about the operations of the firm which reduces their ability to function effectively hence reduces firm performance.

Corporate Governance-an International Review, 2009

Manuscript Type: EmpiricalResearch Question/Issue: This paper investigates the relationship between internal governance structures and financial performance of Indian companies. The effectiveness of boards of directors, including board composition, board size, and aspects of board leadership including duality and board busyness are addressed in the Indian context using two theories of corporate governance: agency theory and resource dependency theory.Research Findings/Insights: The study used a sample of top Indian companies taking into account the endogeneity of the relationships among corporate governance, corporate performance, and corporate capital structure. The study provides some support for aspects of agency theory as a greater proportion of outside directors on boards were associated with improved firm performance. The notion of separating leadership roles in a manner consistent with agency theory was not supported. For instance, the notion that powerful CEOs (duality role, CEO being the promoter, and CEO being the only board manager) have a detrimental effect on performance was not supported. There was some support for resource dependency theory. The findings suggest that larger board size has a positive impact on performance thus supporting the view that greater exposure to the external environment improves access to various resources and thus positively impacts on performance. The study however failed to support the resource dependency theory in terms of the association between frequency of board meetings and performance. Similarly the results showed that outside directors with multiple appointments appeared to have a negative effect on performance, suggesting that “busyness” did not add value in terms of networks and enhancement of resource accessibility.Theoretical/Academic Implications: The two theories of corporate governance, namely agency and resource dependence theory, were each only partially supported, by the findings of this study. The findings add further to the view that no single theory explains the nexus between corporate governance and performance.Practitioner/Policy Implications: This study demonstrates that corporate governance measures utilized in developed economies related to boards of directors have some synergies and relevance to emerging economies, such as India. However, the nature of business structures in India, for example the large number of family businesses, may limit the generalizability of the findings and signals the need for further investigation of these businesses. The evidence related to multiple appointments of directors suggests that there may be support for restricting the number of directorships held by any one individual in emerging economies, given that the “busyness” of directors was negatively associated with firm performance.

The purpose of the study was to identify the significance of selected components of corporate governance over performance of companies listed in Bursa Malaysia. In this study the most important components of corporate governance; including board independence, board size, board expertise, audit committee size, audit committee independence, and audit committee expertise have been examined as the independent variables that influence the financial performance of companies listed in Bursa Malaysia. This study has been carried out over a sample of 150 best non-financial listed companies of Malaysia. The study is different from previous studies, as in previous studies either the board characteristics are observed or the audit committee characteristics are observed, but in this study the combined effect of both have been analysed in relation to return on equity. The study is based on cross sectional analysis and the year 2014 has been analysed. Regression analysis was conducted using Statistical Package for Social Science Version 22 (SPSS 22). The outcomes of this study identified that all the variables have a significant positive impact over performance of financial performance of the companies. The study ended up with certain suggestions on the basis of limitations that have been faced while conducting this study.

Indian Journal of Corporate Governance, 2016

This study takes into account the National Stock Exchange (NSE)-listed Indian companies, which constitute the CNX Nifty Index, for the period from 1 April 2009 to 31 March 2013. Tobin’s Q, market value added, cash earnings per share and return on capital employed have been used as the corporate performance variables in the study; the first two being market-based and the last two being accounting-based measures. Board size (BS), board composition, ownership structure, multiplicity of directorship, chief executive officer (CEO) duality, CEO tenure and executive remuneration have been used as corporate governance surrogates from different dimensions along with other widely used independent variables to see their effect on corporate performance in a panel-data-based regression. BS and foreign promoters’ (FPs’) shareholdings have been identified to have a positive impact on more than one corporate performance variable. Among the remaining independent variables, assets turnover is positiv...

2011

Corporate governance (CG) is a popular topic that gets more concerns today, especially in fast developing countries. Numbers of projects and studies relating to CG and their effects on financial performance of companies have been done in many countries, but still this kind of topic is quite new in Vietnam. This paper tries to find out if there is any relationship between board size & composition, board activity, and ownership concentration and firm performances. Based on collecting information of listed companies in Vietnam, I use statistical analysis and quantitative method to get the paper's objectives. Based on CG theory and the role of CG structures such as board of directors, ownership structure, and this paper also make a review on the compliance of listed companies with CG rules at Vietnamese market recently. Our empirical findings show that independent directors enhanced firm performance; inversely, the dual position of CEO and Chairman has a positive relation with firm value. Besides, age of director and the number of directors meeting play important roles in firm value. However, no significant impact of board size, board gender diversity, top ten shareholders concentration and levels of state ownership on firm performance. Lastly, regression model of market performance shows that the duality of CEO and Chairman and the number of independent directors are significant impact on firm value.

Journal of Management Information and Decision Sciences, 2019

This study aims to investigate the impact of board of directors' characteristics on firm performance in Jordan by focusing on the following characteristics: ownership concentration, number of board meetings, CEO duality, board size, and board independence. On the other hand, Tobin's Q was used as a proxy to measure company performance. It is believed that current study contributes significantly to the limited literature on this topic in relation to developing countries by providing evidence about the effect of corporate governance on firm performance in a developing nation. For this purpose, An empirical analysis of a dataset of all publicly traded manufacturing firms listed on the Amman Stock Exchange for the period 2011-2014 was conducted by applying least squares regression analyses. This research found that ownership concentration, board meetings, and CEO duality have a significant impact on firm performance. However, the study did not find any significant effect for board size and board independence. Moreover, firm size and firm leverage as control variables were not found to have any effect on firm performance. The findings seem to suggest that for Jordanian manufacturing firms to succeed and improve their performance, they need to have a smaller sized board, more frequent board meetings and a higher percentage of board ownership and as well as CEO duality. However, the findings also indicate that board independence does not affect firm performance.

related to independent directors, nonetheless, there are many good reasons to believe that outside directors will exhibit some checks on the top management.