Search results

This paper aims to investigate the impact of the revised Code of Corporate Governance 2017 (CCG-2017) clauses pertaining to board independence, mandatory inclusion of female directors, audit committee (AC) chair independence and directors’ expertise on earnings manipulation.

Using an unbalanced panel of 323 listed companies from 2015 to 2019, this study uses panel data regression models with a robust methodology called difference-in-differences to tackle the potential endogeneity.

This study’s findings show that, as compared to the pre-CCG-2017 period, board- and AC-related variables increased significantly in the post-CCG-2017 period. Furthermore, financial experts on the board and board independence have a negative effect on discretionary accruals (DAs), whereas female directors and DAs are positively related, as is real activity manipulation. The AC-related variables, such as AC independence, expertise in AC, and AC chair independence, are significantly different from the preperiod to the postperiod, whereas their relationship is not according to the hypotheses of the study. Moreover, these results are robust to additional analysis of the alternative proxies for female directorship and the endogeneity problem.

The findings of this study have implications for regulators and practitioners who are concerned with the functions of the board of directors (BOD). The findings of this research study show that earnings management (EM) may be reduced by independent and expert directors. However, board gender diversity is not reducing the EM. Therefore, the decision to appoint female directors to the board should be based on their business and professional attributes rather than simply filling quotas or blindly adhering to regulations. Moreover, the findings of this research may assist the regulator in encouraging listed firms to enhance board governance via independence, diversity and competency, which are useful for effective monitoring.

This study fills a gap in the literature by providing the first evidence of country-specific regulation (CCG-2017), concerning the BOD and AC-related clauses on EM in Pakistan, which is missing in the relevant literature general and in Pakistan in particular.

This study aims to provide an understanding of how directors perceive the relationship between board independence and corporate social responsibility (CSR) performance which has remained under-researched.

The qualitative data were collected through semi-structured interviews of 19 directors from 14 organisations operating in Australia. Data were analysed following the six-phase process of thematic analysis.

The findings indicate that independent directors contribute to board CSR decisions in two major ways: they bring an outsider view to the board, and they monitor managers in taking decisions that consider the interests of the broader stakeholder groups.

The in-depth analysis of director independence and CSR highlights the structural and behavioural aspects of director independence and CSR playing out in board rooms. Propositions are offered which can be tested to advance the research in this arena.

The findings suggest that efforts are required at organisational policy level to ensure the effectiveness of director independence for CSR.

This study provides insights into the “black box” of boardroom dynamics highlighting important contextual factors influencing director independence and CSR decisions previously under-explored.

The extant literature reports mixed and inconclusive findings concerning the relationship between corporate governance mechanisms and firm performance. To provide incremental insight, this paper aims to investigate whether the bi-directional relationships among managerial ownership, board independence and firm performance are determined.

This paper uses a data set consisting of 9,302 firm-year observations of Australian listed companies during 2005-2015 and a three-stage least squares simultaneous equation model to test the bi-directional relationships.

The results indicate that both managerial ownership and board independence inversely affect firm performance and vice versa. In addition, board independence is negatively correlated with managerial ownership and vice versa.

The convergence-of-interests hypothesis can be achieved by manipulating managerial ownership through making contingent payments. Board independence, as a voluntary regime in Australia, can provide additional flexibility to corporate decision makers.

This study provides additional evidence by using the convergence-of-interests hypothesis vis-à-vis the entrenchment hypothesis to examine the relationship between managerial ownership and firm performance, and tests the association of board independence and firm performance using the explanation of agency theory vis-à-vis stewardship theory.

This paper aims to investigate the effects of board model and board independence on corporate social responsibility (CSR) disclosure of multinational corporations (MNCs).

The authors developed an empirical model in which CSR disclosure is the dependent variable and board model (two-tier vs one-tier), board independence (a proportion of independent directors on a board) and the interaction variable of board model and board independence together with several variables conventionally used as control variables are independent variables. The authors collated the panel dataset of 244 Fortune World’s Most Admired (FWMA) corporations from 2005 to 2011 of which 117 MNCs use the one-tier board model, and 127 MNCs use the two-tier board model from 20 countries. They used the random-effect regression method to estimate the empirical models with the data they collated and also ran regressions on the alternative models for robustness check.

The authors found a significantly positive effect of a board model on CSR disclosure by MNCs. Two-tier MNCs tend to reveal more CSR information than one-tier MNCs. The results also confirm the significant moderating impact of board model on the effect of board independence on CSR disclosure. The effect of board independence on CSR disclosure in the two-tier board MNCs tends to be higher than that in the one-tier board MNCs. The results do not support the effect of board independence on CSR disclosure in general for all types of firms (one-tier and two-tier board). The impact of board independence on CSR disclosure is only significant in two-tier board MNCs and insignificant in one-tier board MNCs.

The authors advise the MNCs who wish to improve CSR reporting and transparency to consider the usage of two-tier board model and use a higher number of outside directors on board. They note that once a firm uses one-tier model, number of IDs on a board does not matter to the level of CSR disclosure. They advise regulators to enforce an application of two-tier board model to improve CSR reporting and transparency in MNCs. The authors also recommend regulators to continue mandating publicly traded companies to include more external members on their boards, especially for the two-tier board MNCs.

This paper is the first that investigates the role of board model on CSR disclosure of MNCs.

This study aims to examine the significance of the non-linear relationship of board size and board independence on the financial performance of listed non-financial firms in India.

The study draws the sample of the listed non-financial firm in the Indian market from the year 2011–2018 and applied panel least squares regression with and without industry fixed effects on the model with quadratic equation. Quantile regression is also used to test the robustness of the results. The financial performance is measured through one accounting measure (i.e. return on assets [ROA]) and one market-based measure (i.e. Tobin’s Q). The empirical model also controls firm-specific variables which are expected to have an impact on financial performance.

The study found that the relationship of board size and board independence with the financial performance of a firm is in a non-linear inverted U-shape. The results are qualitatively similar for both ROA and Tobin’s Q after controlling industry fixed effects.

This is the first study in India which tests the non-linear relationship of board size and board independence with the financial performance of the firm. The study contributes to the limited literature on the implications of board characteristics on the performance of the firms in India.

This paper aims to examine the relation between SEC regulations centered on board of director independence and financial reporting quality and investigates the different routes to board independence.

The sample includes 1,248 firm observations whose board composition is compared between 2001 and 2008. Each firm is categorized based on how they increase board independence. The authors test the hypotheses using ordinary least squares regression models.

Results show that firms choose between multiple routes when complying with the independence requirements, and how firms operationalize the SEC requirement impacts financial reporting quality. Specifically, firms that achieve increased board independence through increased board size are associated with higher financial reporting quality. However, there is no association between higher financial reporting quality and a subsequent increase in audit fees. Suggesting the reporting quality results from the board monitoring function and not from an increase in auditor effort.

No evidence exists on how a firm’s chosen route to increased board independence relates to financial reporting quality.

First, this study assesses firms’ efficiency of transforming intellectual capital (IC) components into firm performance. Second, this study examines (1) cubic S-curve relationship between board independence and IC efficiency and (2) how firm size moderates the cubic S-curve relationship.

This study employs a stochastic nonparametric envelopment of data (StoNED) framework to estimate IC efficiency, which is derived from the estimation process of transforming structural, relational and human capitals into accounting- and market-based performance indicators. This study conducts regression analyses on 1,104 firm-year observations of Taiwanese semiconductor firms over the period of 2011–2018.

StoNED results suggest that sample firms' IC efficiency can be relatively improved by approximately 80%. Regression results indicate that a cubic S-curve relationship between board independence and IC efficiency exists, and firm size moderates the nonlinear effects.

Overall, this study highlights the importance of examining the nonlinear effect of board independence on IC efficiency from the perspective of agency theory, and the moderating effect from firm size, which may suggest availability of resources from the resource-based view of the firm.

This study contributes to the literature through the innovative application of an efficiency-based tool for evaluating IC efficiency. The cubic S-curve relationship between board independence and IC efficiency also points to the policy concerning the appropriate number of independent directors on board.

This paper aims to examine the relationship between board independence and firm performance for publicly listed New Zealand (NZ) firms over the period 2004-2016.

To address endogeneity concerns, the relationship between firm performance and board independence is modelled using three different approaches: firm fixed-effect estimation, difference-in-difference estimation and two-stage least squares estimation, while controlling for firm and governance characteristics.

The main finding is that the mandated board independence introduced by the Best Practice Code does not improve operating or market performance for listed NZ firms.

The fact that NZ firms choose greater board independence than required is puzzling. Research examining director characteristics and connectedness, not captured by the NZX Code, may be a fruitful area for future research when disclosure allows.

Regulators may need to review reasons for mandating changes in factors affecting firm governance before implementing further regulations concerning board structure.

The findings cast doubt on the benefit of mandated board independence for NZ firms. The results imply that “good” governance practices proposed by regulators are not universal.

This paper tests the impact of mandated board independence following the adoption of the Best Practice Code in 2004 using methodologies that account for endogeneity using 13 years of data.

This study investigates the effect of board independence on private information-based trading (PIBT) events. This study also examines the interaction effects of firm's disclosure quality and the statutory and demographic roles of independent directors and board diversity attributes, respectively, on the relationship between board independence and PIBT.

This study uses panel data of 811 non-financial public listed companies in Bursa Malaysia for the sample period 2009–2017. The dynamic general method of moments (DGMM) is used for the dynamic panel data estimation and to address the potential endogeneity problem.

The results show that board independence has a negative effect on PIBT and the effect could be strengthened by firm's disclosure quality, women independent directors and board gender diversity, but attenuated by CEO duality. The overall result suggests that apart from independent audit committee, the statutory and demographic attributes of independent directors and board diversity, and firm's disclosure quality are complementary to board independence in preventing persistent PIBT.

This study augments the existing corporate governance and information-based trading literature from the perspectives of firm's disclosure quality, and the statutory and demographic roles of independent directors and board diversity attributes, by examining their effects on the relationship between board independence and PIBT.

Recently all major stock exchanges issued a requirement that listed companies have 100 percent independence on audit committees of the board of directors but now the focus has turned to compensation committees. Does 100 percent independence on compensation committees make a difference in firm performance? The paper aims to discuss these issues.

Only 1 percent of the S & P 1,500 firms are not in compliance with the new 100 percent independence requirement for compensation committees. This presents an opportunity to examine characteristics of these firms and if this noncompliance may harm firm performance. Industry-adjusted ROA and Tobin’s Q measures are collected as well as firm size, debt ratios, and the presence of a classified board.

Findings are as follows: S & P 500 firms with lower levels of debt, have classified board, but do not perform significantly worse than firms in compliance in the same industry; mid-cap firms with debt levels similar to complying firms, have classified boards, and perform significantly worse, and lastly, small-cap firms with lower levels of debt, have classified boards, and perform significantly worse.

Results imply that non-complying mid-cap and small-cap firms may be protecting under-performing management through maintaining classified boards, low levels of debt to avoid scrutiny of the debt markets, and less objectivity (i.e. overall and committee independence) on boards.

Existing corporate governance literature provides evidence that overall board independence may promote shareholder wealth maximization. The latest focus regarding independence has recently been on compensation committees. Should independence on compensation committees matter to shareholders? It is appears that noncompliance should matter in the case of small- and mid-cap firms.