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"BOARD OF DIRECTORS"
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Structural equality at the top of the corporation: Mandated quotas for women directors
We propose a concept of structural equality as a compromise between competing policy preferences of equality and individual liberty to address a stunning property of the governance of corporations, namely, the paucity of female directors on corporate boards. An argument for imposing a quota for women directors on boards is the need to disrupt structural impediments to permit endogenous mechanisms to sustain female recruitment beyond a critical mass. Using estimates from the Norwegian experiment, we apply an agent-based model to American board data to show that modest numerical quotas generate well-connected networks of women directors who attain equality in their centrality and influence. The analysis demonstrates the utility of computational social science for identifying policies that generate alternative and possible worlds of greater structural equality.
Journal Article
Non-linear relationship between board size and performance of Indian companies
Several authors have stated that the board of directors serve as the most crucial internal mechanism for improving a company’s performance. On the other hand, prior studies argue that the board did not serve its purpose of safeguarding the stakeholders’ interests equally and improving the performance of companies. It has piqued the interest of regulatory organisations all around the world, including in India. However, out of the several reforms introduced in India, board size is one of the most significant. As a result, the present study scrutinises the non-linear influence of board size on the performance of 213 Indian companies for 2001–2019. Tobin’s Q and Return on Equity (ROE) are the study’s performance metrics. The fixed effect panel regression findings depict that board size has an inverted U-shaped non-linear impact, i.e., initially, the performance improves, but after board size reaches a particular point, it diminishes. Thus, this study supports the recent changes made by the regulatory bodies about board size.
Journal Article
Board of directors effect on environmental, social and governance performance in publicly traded non-financial firms
Purpose
This study aims to examine the effect of the board of directors (BoD) structure on environmental, social and governance (ESG) performance in publicly traded non-financial firms from the perspective of agency theory, with investors as the principal, the management team as the agent, the BoD as an information system that reduces information asymmetries between them and ESG performance as a shareholder’s expectation.
Design/methodology/approach
Sample data is cross-sectional as of January 2023 and includes 1,695 non-financial firms listed in 59 stock markets across 54 countries. Data were sourced from the FactSet Research Systems database. The generalized least squares method was used to run quadratic and exponential models to assess the research hypotheses.
Findings
Results revealed that board size, independence, age, gender diversity and participation on other corporate boards have a nonlinear relationship with ESG performance. Board tenure is the only BoD attribute for which a nonlinear association is not found. This study found that firms with larger boards and more female board members tend to exhibit a stronger commitment to ESG performance. In contrast, companies with a board of directors consisting of independent members, advanced age, service on other corporate boards and CEO duality may struggle to prioritize positive ESG outcomes.
Originality/value
This study contributes to the academic discussion on BoD–ESG by examining nonlinear relationships among a large sample of publicly traded firms; providing results that could be applied internationally; using ESG data that is based on the Sustainability Accounting Standards Board's materiality framework, which identifies key ESG factors for investors; emphasizing the significance of diversity and inclusion within the decision-making bodies of public companies, thereby improving their ESG performance; and supporting the agency theory perspective and suggesting that the effect of board structure on ESG may reflect the board's focus on investors’ best interests.
Journal Article
Board Gender Diversity and Banks Profitability for Business Viability: Evidence from Serbia
As an important topic in the field of corporate governance, the influence of the board of directors’ characteristics on the profitability of corporations is examined here. This paper examines the influence of the board of directors’ and chief executive officers’ (CEO) characteristics on the profitability of banks in Serbia. In this study, the characteristics of boards of directors were examined in terms of size and the participation of women, and the characteristics of CEOs were examined similarly in terms of women’s participation. The research was conducted on a sample of 23 commercial banks from Serbia in the period from 2017 to 2021. Profitability was measured by the rate of return on operating assets (ROA) and the rate of return on equity (ROE). The results of the panel regression analysis indicate that the size of the board of directors had a positive impact on bank profitability during the COVID-19 pandemic period, while this impact was not statistically significant before the pandemic. The participation of women on the board of directors did not have a statistically significant impact on bank profitability before or during the COVID-19 pandemic. It has been found that the participation of women as CEOs had a negative impact on bank profitability before and during the COVID-19 pandemic.
Journal Article
Ownership structures, board characteristics and the extent of accounting conservatism in vietnamese listed firms
The paper investigates the influence of ownership structures and board of directors’ characteristics on the extent of conservative accounting practiced by listed companies in Vietnam covering 558 firms with 2,161 observations in the period of 2011–2022. The authors rely on the quantitative method and multivariate regression analyses to verify the proposed hypotheses. Concerning the influence of ownership variables, the findings explore that state ownership (SO) and foreign ownership (FO) demonstrate a significant negative association with firms’ conservatism level, whereas large ownership (LO) indicates a significant positive association with firms’ conservatism degree. No association between management ownership (MO) and firm’s conservatives was found in this study. With regard to board of directors’ characteristic variables, the study results show that size of the board (BS), independence of the board (BI), and women on the board (GD) positively associated with firms’ conservatism report, while duality (DUAL) demonstrates a significant negative association with firms’ conservatism level. The research suggests some implications and recommendations for regulatory agencies, listed firms, investors, and other stakeholders to have appropriate behavioral decisions related to ownership structures and board characteristics of listed firms to ensure high level of accounting conservatism in a frontier market as Vietnam.
Journal Article
Board of directors’ attributes and aspects of cybersecurity disclosure
As cybersecurity is a critical risk issue for organizations, cybersecurity disclosure is important for financial regulators, financial analysts, shareholders, and other stakeholders. Organizations face challenges when deciding whether, what, and when cybersecurity-related information should be disclosed. Prior studies have contributed few insights regarding the potential determinants of cybersecurity disclosure. Furthermore, their findings are based on a general or narrow measurement of this disclosure. This study draws on upper echelons and signaling theories to examine the association between various board of directors’ characteristics and extent of overall cybersecurity disclosure and its individual aspects. Extent of cybersecurity disclosure is measured based on a content analysis of annual financial regulatory filings of the 250 companies listed on the S&P/TSX Composite Index, using a scoring grid of 40 items grouped into seven categories representing different aspects of cybersecurity disclosure. This expanded disclosure measurement provides original insights for firms and their stakeholders. The main findings indicate that the presence of a committee responsible for cybersecurity on the board of directors is key to increasing cybersecurity disclosure. With or without such a committee, board IT expertise, board tenure, board independence, women directors, and board age are associated with the extent of total cybersecurity disclosure or some of its specific aspects, particularly cybersecurity risk mitigation. These findings contribute to the cybersecurity literature by examining which board of directors’ characteristics influence the extent of specific aspects of cybersecurity disclosure. They also complement results from upper echelons-based studies on corporate reporting determinants and prior IT governance studies.
Journal Article
The board of directors and firm performance: empirical evidence from listed companies
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.
Journal Article
Corporate Governance as a Key Driver of Corporate Sustainability in France: The Role of Board Members and Investor Relations
This paper examines the relationships between corporate governance and corporate sustainability by focusing on two main components of companies' governance structure: boards of directors (BoDs) and investor relations officers (IROs). We propose an original empirical strategy based on the 120 biggest French capitalizations for the year 2013, allowing us to measure boards of directors' independence and expertise, as well as investor relations officers' convictions and communication on corporate sustainability. Our results show that corporate governance has an ambiguous impact on corporate sustainability because of opposing forces: internal, external and intermediate forces. On the one hand, the higher the proportion of inside directors, the higher the company's environmental and governance performance, while the higher the proportion of general experts in the board room, the lower the company's governance performance. On the other hand, investor relations officers' beliefs that corporate sustainability is primarily driven by investors' ethical values appear negatively related to companies' governance performance. In sum, corporate sustainability appears positively related to internal forces (inside directors) and negatively related to external forces (general expert directors and investor activist engagement). The results of this study demonstrate the need to carry out efforts to train BoDs (specifically inside directors) and IROs to respond to corporate sustainability and to take more of a leadership role in this area.
Journal Article