Co-opted Directors and Board Effectiveness: The Impact of Director Gender

2020 ◽  
Author(s):  
Thomas Wilson
Keyword(s):  
Corporate Governance ◽  
Independent Directors ◽  
Women Directors ◽  
Board Effectiveness ◽  
Female Directors ◽  
The Impact

Independent directors are viewed as critical to effective corporate governance. However Coles et al. (2014) introduce the concept of a “co-opted” director, one appointed after the firm’s CEO took office. They argue that, although technically independent, co-opted directors’ interests are more aligned with the CEO who was instrumental in their selection than with shareholders. However, research has shown that woman directors are more conscientious about their board duties than are men. This study investigates whether director gender mitigates the impact of co-option on board effectiveness, as measured by the frequency of board meetings. The results indicate that an increase in the proportion of co-opted male directors on a board is associated with a less effective board. However, no such relation is found for co-opted female directors. Despite incentives to act otherwise, boards with higher percentages of co-opted women directors appear to continue to fulfill their duties to shareholders.

scholarly journals The Impact of Board Composition on Firm Performance with Reference to Selected Indian Companies

2020 ◽  
Vol 8 (6) ◽  
pp. 2818-2824
Keyword(s):  
Firm Performance ◽  
Significant Relationship ◽  
Financial Services ◽  
Stock Exchange ◽  
Independent Directors ◽  
Board Composition ◽  
Women Directors ◽  
Board Size ◽  
Size Number ◽  
The Impact

This study examines effects of board composition on firm performance among 24 selected companies which are listed on the National Stock Exchange. It strives to understand the influence of corporate governance by testing 3 variables of board composition namely – board size, number of independent directors and the number of female directors on a company’s profitability measured through the tool – Tobin’s Q. One-way Anova test is used to establish a relationship between each of the three variables of board composition with firm profits. The study is conducted over a period of 5 years from 2013 to 2018 and concentrates on the following sectors - Auto, Financial Services, FMCG, IT, Media, Metal, Pharma, and Realty. The results revealed a significant relationship between board size and number of independent directors with firm profits which meant a firm with a greater sized board or more independent directors also showed higher profits in comparison. While, no significant relationship was found between the number of women directors on a firms’ board and firm performance.

scholarly journals Three Essays on Corporate Governance in China

2021 ◽  
Author(s):  
◽  
Zonghao Chen
Keyword(s):  
Corporate Governance ◽  
Ownership Structure ◽  
State Ownership ◽  
Independent Directors ◽  
Women Directors ◽  
Director Compensation ◽  
Public Firms ◽  
Listed Firms ◽  
Director Characteristics ◽  
Chinese Public

<p>This thesis consists of three empirical papers on corporate governance in Chinese listed firms. The first essay examines the influence of director characteristics and ownership structure on director compensation. Over the period 2005 through 2015, we find that director compensation in Chinese listed firms is influenced by both director characteristics and ownership structure. We measure director compensation by both the propensity to be paid and the level of compensation. For independent directors, we find that director busyness, tenure, and ownership concentration positively influence and state-ownership negatively influences director compensation. For non-independent directors, we find that tenure positively influences and that both state-ownership and related directors negatively influence director compensation. Lastly, our evidence suggests that women directors in China are not underpaid.  The second essay examines the influence of rookie independent directors on board functions and firm performance in Chinese public companies from 2008 to 2014. We find that rookie independent directors attend more board meetings than seasoned independent directors. Independent directors with higher board meeting attendance are more likely to remain in the firm in the following year (lower turnover rate). This influence of board attendance on re-appointment is stronger for rookie independent directors. Further, we find that boards with more rookie independent directors tunnel less to controlling shareholders, suggesting that rookie independent directors are efficient monitors. Lastly, we find that firms with more rookie independent directors are associated with higher accounting returns.  In the third essay, we investigate the influence of board networks on directors’ career outcomes in Chinese public firms from 2005 to 2014. We find that board connections increase compensation for independent directors. We find that board connections are positively associated with director turnover for non-related directors, but negatively associated with director turnover for related directors. Further, we find that board connections lead to additional future directorships. Overall, we find that board connections both directly lead to higher compensation and indirectly through labor mobility and additional board seats.</p>

Board independence, gender diversity and CEO compensation

2017 ◽  
Vol 17 (5) ◽  
pp. 845-860 ◽  
Author(s):  
Ramzi Benkraiem ◽  
Amal Hamrouni ◽  
Faten Lakhal ◽  
Nadia Toumi
Keyword(s):  
Ceo Compensation ◽  
Gender Diversity ◽  
Joint Effect ◽  
Independent Directors ◽  
Board Independence ◽  
Women Directors ◽  
Content Type ◽  
Corporate Managers ◽  
Board Decision Making ◽  
The Impact

Purpose This paper aims to investigate the joint effect of board independence and gender diversity on the effectiveness of boards in monitoring CEO compensation in a continental European context, i.e. France. Design/methodology/approach Fixed-effect regressions are used to study the impact of board independence, gender diversity and their interaction, i.e. the proportion of female independent directors on the different components of CEO compensation (total, fixed and variable). Findings The authors observe that both the proportions of independent directors and women sitting on the boards positively influence the various components of CEO compensation. However, the interaction of these factors, i.e. the proportion of female independent directors, is negatively associated with CEO compensation. These results suggest that independent women directors improve board effectiveness in monitoring CEO compensation, especially its fixed component. Originality/value The results of this research help to elucidate the importance of women being appointed to boards as independent directors to properly monitor managerial pay. These results provide support to the approach of the French Cope-Zimmerman law of January 2011, which promotes female representation on boards as independent directors to enhance board decision-making. Thus, evidence presented and discussed in this paper should provide useful insights for academics, corporate managers and regulators.

The impact of VC backing on the corporate governance of Chinese IPOs

2017 ◽  
Vol 29 (3) ◽  
pp. 330-355 ◽  
Author(s):  
Qing (Sophie) Wang ◽  
Hamish D. Anderson ◽  
Jing Chi
Keyword(s):  
Corporate Governance ◽  
Firm Performance ◽  
Independent Directors ◽  
Board Independence ◽  
Board Size ◽  
Content Type ◽  
Shareholder Protection ◽  
Political Ties ◽  
The Impact ◽  
Industry Experience

Purpose The purpose of this paper is to investigate how venture capital (VC) backing influences the board size and independence and how VC backing and board structure impact firm performance in China. Design/methodology/approach Using hand-collected data from 924 initial public offering (IPO) prospectuses covering the period from January 2004 to December 2012, the authors investigate the impact of VC backing on board size, board independence and firm market performance through regression analysis. A two-stage approach is also used to address the endogeneity issue. Findings The authors find robust evidence that VC-backed IPOs have more independent boards, after controlling for CEO and firm characteristics, and the potential endogeneity concerns. Furthermore, firms backed by VCs with management political ties (PTs) have more independent directors with industry relevant expertise than other firms. While no significant relationship is found between board independence and firm performance, the authors present some evidence that IPOs which have a larger percentage of independent directors with industry relevant expertise exhibit higher long-term stock returns, and VCs with management PTs also improve IPO long-run stock performance. Research limitations/implications Although VC is new in China and the Chinese capital market has relative poor corporate governance and weak minority shareholder protection, the authors find support in this paper that VC backing is valuable to IPO firms in China not only through providing funding but also by providing political ties and industry experience. However, Chinese regulatory and institutional settings have strong impact on test results and they change rapidly, so the results may not apply to other period in Chinese markets. Originality/value This paper sheds lights on the influences of VC backing on corporate governance and firm performance in a transitional and emerging economy. It discovers the value of VC investors in a transitional economy as of providing political ties and industry experience. The new definition of independent directors suggested by Suchard (2009) is first used by our paper in the Chinese context.

Sustainable corporate governance and non-financial disclosure in Europe: does the gender diversity matter?

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Giuseppe Nicolò ◽  
Giovanni Zampone ◽  
Giuseppe Sannino ◽  
Serena De Iorio
Keyword(s):  
Decision Making ◽  
Corporate Governance ◽  
Board Of Directors ◽  
Financial Reporting ◽  
Gender Diversity ◽  
Women Directors ◽  
Theoretical Understanding ◽  
Content Type ◽  
Reporting Practices ◽  
The Impact

PurposeRecent regulatory changes in Europe have promoted non-financial reporting practices (e.g., Directive, 2014/95/EU) and gender diversity in decision-making positions. Special attention is devoted to promoting the gender balance on corporate boards as a key mechanism to enhance corporate governance effectiveness and better address multiple stakeholders' needs. With this in mind, this study intends to examine the impact of boardroom gender diversity on Environmental Social Governance (ESG) disclosure practices in the European listed firms' context.Design/methodology/approachThe study applies different panel data models on an extended sample of 1,392 firms from 21 European Union (EU) countries for six years (2014–2019).FindingsFindings allow to spotlight the positive role exerted by the presence of women directors on the boards in enhancing ESG disclosure, both at the overall and specific (individual ESG scores) level.Research limitations/implicationsPolicymakers and regulators might consider the study's evidence as a stimulus to continue in promoting strategic actions and reforms that foster gender equality and balance in corporate decision-making positions.Practical implicationsCreating a heterogeneous and diversified board of directors may support implementing a “sustainable corporate governance” recently claimed by the EC.Originality/valueThe study contributes to the literature by disentangling the links between gender diversity and ESG disclosure over a period that covers a long season of European regulations and measures that affected both non-financial reporting practices and the board of directors' composition. Accordingly, it can contribute to enhancing the practical and theoretical understanding of the pivotal role that gender diversity may exert in strengthening corporate governance and, in turn, corporate transparency and accountability behaviours about non-financial issues.

scholarly journals Influence of Board Size and Independence on Firm Performance: A Study of Indian Companies

2007 ◽  
Vol 32 (3) ◽  
pp. 39-60 ◽  
Author(s):  
Ajay Kumars Garg
Keyword(s):  
Corporate Governance ◽  
Firm Performance ◽  
Good Deal ◽  
Independent Directors ◽  
Board Composition ◽  
Board Independence ◽  
Inverse Association ◽  
Board Size ◽  
Minimum Number ◽  
The Impact

Corporate governance issues have attracted a good deal of public interest because of their apparent importance for the economic health of corporations and society in general, especially after the plethora of corporate scams and debacles in recent times. Corporate governance issues flow from the concept of accountability and governance and assume greater significance and magnitude in the case of corporate form of organization where the ownership and management of organizations are distanced. And, it is in this context that the pivotal role played by the board of directors in maintaining an effective organization assumes much importance. A major part of the debate on corporate governance centres around board composition especially board size and independence. Various committees have mandated a minimum number of independent directors and have given guidelines on board composition. However, the relationship of board characteristics such as composition, size, and independence with performance has not yet been established. This paper addresses this question: Does the board size and independence really matter in terms of influencing firm's performance? The findings suggest that: There is an inverse association between board size and firm performance. Different proportions of board independence have dissimilar impact on firm performance. The impact of board independence on firm performance is more when the board independence is between 50 and 60 per cent. Smaller boards are more efficient than the larger ones, the board size limit of six suggested as the ideal. Independent directors have so far failed to perform their monitoring role effectively and improve the performance of the firm. The guidelines on corporate governance should take into account the ‘cross-board’ phenomenon while defining the criteria for eligibility for appointment as an independent director. Lack of training to function as independent directors and ignorance of the procedures, tasks, and responsibilities expected of them could be reasons for the independent directors' non-performance. A bad performance leads to an increase in board size, which in turn, hampers performance. Guidelines are provided for future studies to include different variables to see which board composition is suitable for different companies at different stages of life cycle.

scholarly journals Corporate governance and sustainability reporting in the Australian resources industry: an empirical analysis

2018 ◽  
Vol 16 (1) ◽  
pp. 1-14 ◽  
Author(s):  
Tricia Ong ◽  
Hadrian Geri Djajadikerta
Keyword(s):  
Corporate Governance ◽  
Design Methodology ◽  
Sustainability Reporting ◽  
Independent Directors ◽  
Content Type ◽  
Sustainability Performance ◽  
Multiple Directorships ◽  
Corporate Governance Mechanisms ◽  
Positive Correlations ◽  
The Impact

Purpose This study aims to evaluate the impact of corporate governance on sustainability reporting by investigating companies operating in the Australian resources industry. Design/methodology/approach This study investigates the relationships between the total sustainability disclosures and, separately, the three aspects of sustainability disclosures – economic, environmental and social – and corporate governance mechanisms proxy by various attributes of board composition. The sustainability disclosures were scored using Ong et al.’s (2016) index. Findings Significant positive correlations were found between the extent of sustainability disclosures and the proportion of independent directors, multiple directorships and female directors on the board. Originality/value Unlike traditional content analysis methods, this study adopts a newly developed Global Reporting Initiatives-based reporting index that identifies companies with good sustainability performance by aligning companies’ disclosures to their sustainability performance.

scholarly journals Corporate Governance and Firm’s Profitability: An Emerging Economy-based Investigation

2019 ◽  
Vol 12 (1) ◽  
pp. 71-93 ◽  
Author(s):  
Mohammad Rajon Meah ◽  
Nasir Uddin Chaudhory
Keyword(s):  
Corporate Governance ◽  
Stock Exchange ◽  
Manufacturing Firms ◽  
Least Square ◽  
The Other ◽  
Board Size ◽  
Ordinary Least Square ◽  
Female Directors ◽  
Director Ownership ◽  
The Impact

This article aims to investigate the impact of corporate governance through board size, female directors, family duality and director ownership on firm’s profitability in Bangladesh. It’s a quantitative study on 110 manufacturing firms listed in Dhaka Stock Exchange. Multivariate pooled Ordinary Least Square (OLS) regressions are applied on 512 sample-year observations from the year 2013 to 2017 to test the hypotheses in the study. On one side, the results reveal that larger board size and female directors on board are positively associated with firm’s profitability, which in turns helps to enhance firm’s profitability. On the other side, it is also found in the results that percentage of shares held by the directors and family duality are negatively related to firm’s profitability and thus reduces firm performance. The outcomes of this study advocate the policymakers to formulate a policy by addressing the percentage of shares held by the directors to be kept at a certain level.

Women directors and IPO underpricing: evidence from Indian markets

2015 ◽  
Vol 30 (3) ◽  
pp. 186-205 ◽  
Author(s):  
Rekha Handa ◽  
Balwinder Singh
Keyword(s):  
Developing Countries ◽  
Corporate Governance ◽  
Gender Diversity ◽  
Corporate Boards ◽  
Women Directors ◽  
Ipo Underpricing ◽  
Content Type ◽  
Gender Balance ◽  
Female Directors ◽  
Gender Diverse

Purpose – This paper aims to fill the gap of the relatively under-researched impact of women directors on initial public offering (IPO) underpricing in developing countries. Gender diversity is an important emerging issue within the corporate governance literature. Recently, there has been a growing thrust on gender-diverse boards. However, their proportion on corporate boards is low worldwide. The paper examines the influence of women directors on the underpricing phenomenon pervasive in the IPO context. Design/methodology/approach – Gender diversity is an important emerging issue within the corporate governance literature. Recently, there has been a growing thrust on gender diverse boards. However, their proportion on corporate boards is low worldwide. The impact of women directors on IPO underpricing in developing countries remains relatively under-researched. This paper aims to fill this gap in research. The paper examines the influence of women directors on the underpricing phenomenon pervasive in the IPO context. Findings – The results suggest that the subscription ratio, listing delay and block holder ownership positively influence raw returns and market-adjusted excess returns. The proportion of women directors showed negative non-significant impact on both type of returns. We did not find evidence of the other explanatory variables included in the model. Research limitations/implications – The relatively low proportion of female directors may be the reason for some of the non-significant findings. Future research with a good gender balance on boards is likely to help generalising the findings. Other confounding factors also need to be included in the model for deeper explanations of the phenomenon. Practical implications – The study highlights the existence of a “glass ceiling” in Indian corporate settings, where women have to make a tough fight. This barrier must be removed to unleash the real talent of women as directors and see this talent reflected in returns. Social implications – The paper highlights both the need to better manage the gender balance in corporate board rooms and the need to incorporate women’s talents in corporate and investment decisions. Originality/value – The paper highlights the significant gender gap in IPO directorial positions in developing countries such as India. It explores female directors’ contributions in initial pricing performance, which remain unaddressed in this part of the world. Insights into this sensitive issue in an emerging economy such as India can provide important inputs.

scholarly journals The impact of corporate governance on firm performance in the Zimbabwean manufacturing sector

2015 ◽  
Vol 12 (4) ◽  
pp. 779-790
Author(s):  
Patience Siwadi ◽  
Collins Miruka ◽  
Florence Achieng Ogutu
Keyword(s):  
Corporate Governance ◽  
Regression Analysis ◽  
Firm Performance ◽  
Multivariate Regression ◽  
Manufacturing Sector ◽  
Multivariate Regression Analysis ◽  
Independent Directors ◽  
Bivariate Analysis ◽  
Board Structure ◽  
The Impact

Corporate governance studies in Zimbabwe have concentrated on existence of frameworks that control firms. This study focused on the corporate governance factors that are associated with firm performance in the Zimbabwean manufacturing sector. We investigated a sample of 88 companies which were operating at least 80% capacity from 2009 to 2012.Using Return on Assetst (ROA) as a measure of performance and the dependent variable, and 14 corporate governance proxies encompassing board structure, board composition and board procedures as the independent variables, a bivariate and multivariate regression analysis was performed. The results indicated that shareholder concentration, proportion of independent directors, board tenure and access to financial statements are positive and significant to firm performance in the bivariate analysis. On the multivariate regression analysis however, independent directors was positive but not significant. Researchers have not been able to agree on these factors and since corporate governance is largely endogenously determined it can be concluded that factors are influenced by country effects. Thus further studies focusing on similar countries need to be undertaken.

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