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Board Independence (board + independence)

Distribution by Scientific Domains

Business, Economics, Finance and Accounting	100%

Distribution within Business, Economics, Finance and Accounting

General & Introductory Finance & Investments	20%
General & Introductory Accounting	13%

Selected Abstracts

The Effect of Board Independence on Target Shareholder Wealth

AUSTRALIAN ACCOUNTING REVIEW, Issue 2 2008
Peter M. Clarkson
We seek insights into whether, and if so how, an independent board enhances the bid premiums offered to target firm shareholders during a takeover. The results indicate that the presence of an independent board enhances the initial bid premium by, on average, 21.1%. However, the results of more refined analysis suggest that the enhanced bid premium is in fact driven by independent boards comprising non-executive directors who have reputation capital at stake. We also find that independent boards that resist takeovers or include voluntary independent expert reports in target statements, increase the bid premium revision by, on average, 15.6% and 16.2%, respectively. [source]

The Impact of Board Independence and CEO Duality on Firm Performance: A Quantile Regression Analysis for Indonesia, Malaysia, South Korea and Thailand

BRITISH JOURNAL OF MANAGEMENT, Issue 3 2010
Dendi Ramdani
We study the effect of board independence and CEO duality on firm performance for a sample of stock-listed enterprises from Indonesia, Malaysia, South Korea and Thailand, applying quantile regression. Quantile regression is more powerful than classical linear regression since quantile regression can produce estimates for all conditional quantiles of the distribution of a response variable, whereas classical linear regression only estimates the conditional mean effects of a response variable. Moreover, quantile regression is better able to handle violations of the basic assumptions in classical linear regression. Our empirical evidence shows that the effect of board independence and CEO duality on firm performance is different across the conditional quantiles of the distribution of firm performance, something classical linear regression would leave unidentified. This finding suggests that estimating the quantile effect of a response variable can well be more insightful than estimating only the mean effect of the response variable. Additionally, we find a negative moderating effect of board size on the positive relationship between CEO duality and firm performance. [source]

The Importance of Board Quality in the Event of a CEO Death

FINANCIAL REVIEW, Issue 3 2006
Kenneth A. Borokhovich
G34 Abstract We examine board quality and executive replacement decisions around deaths of senior executives. Stock price reactions to executive deaths are positively related to board independence. Controlling for such factors as the deceased's stockholdings, outside blockholdings, board size, and whether the deceased was a founder, board independence is the most significant factor explaining abnormal returns. Board independence is particularly important when there is no apparent successor and firm performance is poor. The results are consistent with independent boards being reluctant to discipline poorly performing incumbent managers, but nevertheless using the opportunity of an executive death to improve the quality of management. [source]

Board Characteristics and Audit Fees,

CONTEMPORARY ACCOUNTING RESEARCH, Issue 3 2002
Joseph V. Carcello
Abstract This paper examines the relations between three board characteristics (independence, diligence, and expertise) and Big 6 audit fees for Fortune 1000 companies. To protect its reputation capital, avoid legal liability, and promote shareholder interests, a more independent, diligent, and expert board may demand differentially higher audit quality (greater assurance, which requires more audit work) than the Big 6 audit firms normally provide. The audit fee increases as the auditor's additional costs are passed on to the client, such that we expect positive relations between audit fees and the board characteristics examined. We find significant positive relations between audit fees and board independence, diligence, and expertise. The results persist when similar measures of audit committee "quality" are included in the model. The results add to the growing body of literature documenting relations between corporate governance mechanisms and various facets of the financial reporting and audit processes, as well as to our understanding of the determinants of audit fees. [source]

Board Monitoring, Regulation, and Performance in the Banking Industry: Evidence from the Market for Corporate Control

CORPORATE GOVERNANCE, Issue 5 2010
Jens Hagendorff
ABSTRACT Manuscript Type: Empirical Research Question/Issue: The specific monitoring effect of boards of directors versus industry regulation is unclear. In this paper, we examine how the interaction between bank-level monitoring and regulatory regimes influences the announcement period returns of acquiring banks in the US and twelve European economies. Research Findings/Insights: We study three board monitoring mechanisms , independence, CEO-chair duality, and diversity , and analyze their effectiveness in preventing underperforming merger strategies under bank regulators of varying strictness. Only under strict banking regulation regimes, do board independence and diversity improve acquisition performance. In less strict regulatory environments, corporate governance is virtually irrelevant in improving the performance outcomes of merger activities. Theoretical/Academic Implications: Our results indicate a complementary role between monitoring by boards and bank regulation. This study is the first to report evidence consistent with complementarity by investigating the effectiveness (rather than the prevalence) of governance arrangements across regulatory regimes. Practitioner/Policy Implications: Our work offers insights to policymakers charged with improving the quality of decision-making at financial institutions. Attempts to improve the ability of bank boards to critically assess managerial initiatives are most likely to be successful if internal governance is accompanied by strict industry regulation. [source]

Business Group Affiliation, Firm Governance, and Firm Performance: Evidence from China and India

CORPORATE GOVERNANCE, Issue 4 2009
Deeksha A. Singh
ABSTRACT Manuscript Type: Empirical Research Question/Issue: This study seeks to understand how business group affiliation, within firm governance and external governance environment affect firm performance in emerging economies. We examine two aspects of within firm governance , ownership concentration and board independence. Research Findings/Insights: Using archival data on the top 500 Indian and Chinese firms from multiple data sources for 2007, we found that group affiliated firms performed worse than unaffiliated firms, and the negative relationship was stronger in the case of Indian firms than for Chinese firms. We also found that ownership concentration had a positive effect on firm performance, while board independence had a negative effect on firm performance. Further, we found that group affiliation , firm performance relationship in a given country context was moderated by ownership concentration. Theoretical/Academic Implications: This study utilizes an integration of agency theory with an institutional perspective, providing a more comprehensive framework to analyze the CG problems, particularly in the emerging economy firms. Empirically, our findings support, as well as contradict, some of the conventional wisdom, and suggest useful avenues for future research. Practitioner/Policy Implications: This study shows that reforms in general and CG reforms in particular are effective in emerging economies, which is an encouraging sign for policy makers. However, our research also suggests that it may be time for India and China to stop the encouragement for the empire building through group formation in the corporate world. For practioners, our findings suggest that firms need to balance the need for oversight with the need for advice, while selecting independent directors. [source]

The Effect of National Governance Codes on Firm Disclosure Practices: Evidence from Analyst Earnings Forecasts

CORPORATE GOVERNANCE, Issue 6 2008
John Nowland
ABSTRACT Manuscript Type: Empirical Research Question: This study examines whether voluntary national governance codes have a significant effect on company disclosure practices. Two direct effects of the codes are expected: 1) an overall improvement in company disclosure practices, which is greater when the codes have a greater emphasis on disclosure; and 2) a leveling out of disclosure practices across companies (i.e., larger improvements in companies that were previously poorer disclosers) due to the codes new comply-or-explain requirements. The codes are also expected to have an indirect effect on disclosure practices through their effect on company governance practices. Research Findings/Results: The results show that the introduction of the codes in eight East Asian countries has been associated with lower analyst forecast error and a leveling out of disclosure practices across companies. The codes are also found to have an indirect effect on company disclosure practices through their effect on board independence. Practical Implications: This study shows that a regulatory approach to improving disclosure practices is not always necessary. Voluntary national governance codes are found to have both a significant direct effect and a significant indirect effect on company disclosure practices. In addition, the results indicate that analysts in Asia do react to changes in disclosure practices, so there is an incentive for small companies and family-owned companies to further improve their disclosure practices. [source]

The Proportion and Social Capital of Outside Directors and Their Impacts on Firm Value: evidence from Korea

CORPORATE GOVERNANCE, Issue 6 2007
Yangmin Kim
This study examines the effects of outside directors' proportion and their social capital on firm value using a sample of 473 large, publicly traded Korean companies from 1998 through 2003. Outside director proportion, which is defined as the ratio of outside directors to the total number of directors of a company, is regarded as a proxy of board independence. Outside director social capital, which is defined as the degree to which outside board members have outside contacts in the external environment, is regarded as a proxy of board's ability to extract valuable resources or information from the environment. It is hypothesised that both the proportion of outside directors to the total directors and outside director social capital will be positively associated with firm value. This study reports strong GLS evidence of the relationship between outside director social capital and firm value but no significant relationship between outside director proportion and firm value. [source]

The Importance of Board Quality in the Event of a CEO Death

Role of corporate governance in mitigating the selective disclosure of executive stock option information

ACCOUNTING & FINANCE, Issue 3 2010
Jodie Nelson
M40; M41 Abstract We examine the nature and extent of statutory executive stock option disclosures by Australian listed companies over the 2001,2004 period, and the influence of corporate governance mechanisms on these disclosures. Our results show a progressive increase in overall compliance from 2001 to 2004. However, despite the improved compliance, the results reveal managements' continued reluctance to disclose more sensitive executive stock option information. Factors associated with good internal governance, including board independence, audit committee independence and effectiveness, and compensation committee independence and effectiveness are found to contribute to improved compliance. Similarly, certain external governance factors are associated with improved disclosure, including external auditor quality, shareholder activism (as proxied by companies identified as poor performers by the Australian Shareholders' Association) and regulatory intervention. [source]

Voluntary Appointment of Independent Directors in Taiwan: Motives and Consequences

JOURNAL OF BUSINESS FINANCE & ACCOUNTING, Issue 9-10 2008
Chaur-Shiuh Young
Abstract:, This study explores factors that motivate firms to increase board independence in the absence of legal requirements to do so. In addition, we examine the impact of voluntary enhancement of board independence on firm performance. Using a sample of listed companies in Taiwan, we show that voluntary appointment of independent directors is associated with both economic factors and managerial power. Specifically, we find that board independence increases with the weaknesses of alternative corporate governance mechanisms and the severity of agency problems. However, board independence decreases with managerial ownership and family control. In addition, by employing a simultaneous equations model with selectivity, we provide evidence supporting the positive performance impact of voluntary appointment of independent directors in Taiwan. [source]

Endogeneity and the relationship between board structure and firm performance: a simultaneous equation analysis for the Athens Stock Exchange

MANAGERIAL AND DECISION ECONOMICS, Issue 6 2010
A. A. Drakos
The main goal of this paper is to examine the relationship between the three most important characteristics of the board of directors with firm performance. More specifically, we investigate whether the independence of the board, the leadership structure and the board size, are exogenous determinants to the firm's performance, using a simultaneous equations framework. Our database is composed of firms quoted in the ASE, starting from 146 observations in 2000 and ending with 232 firms in 2006. The findings suggest that the board independence and the leadership structure do not affect the firm performance. On the other hand, an inverse relationship between board size and firm performance is observed. Copyright © 2010 John Wiley & Sons, Ltd. [source]

CEO Power and Firm Performance: A Test of the Life-Cycle Theory,

ASIA-PACIFIC JOURNAL OF FINANCIAL STUDIES, Issue 1 2009
Maretno A. Harjoto
Abstract We examine the effects of corporate governance and monitoring mechanisms on the choice of board leadership structure and the value and performance of a firm according to the firm's life-cycle changes. Employing a large and extensive sample during the 1995,2005 period, we find that the board leadership choice is associated with governance characteristics including board independence, managerial entrenchment, and CEO abilities measured by CEO age and CEO tenure after controlling for various firm characteristics. In addition, after correcting for the endogenous treatment effect, our results show that while CEO dualities-i.e., CEO-chair of the board or CEO-nomination committee member , or CEO pluralities-i.e., CEO-chair of the board, and a chair or a member of the nomination committee-positively influences firm value and performance in firm's early stage, CEO duality or CEO pluralities adversely influences firm value and operating performance in firm's late stage. These results are supportive of the life-cycle theory, suggesting that CEO power concentration is beneficial in firms' early stage, but harmful in firm's late stage at which firms require check-and-balance as opposed to dictatorship. In addition, the impact of external monitoring by institutional ownership on firm value and performance is more effective than those of independent board and blockholders' ownership while the impact of Sarbane-Oxley Act on firm performance is not significant. [source]

Internal and External Corporate Governance: An Interface between an Organization and its Environment

BRITISH JOURNAL OF MANAGEMENT, Issue 3 2010
Igor Filatotchev
Most corporate governance research focuses on a universal link between corporate governance practices (e.g. shareholder activism, board independence) and performance outcomes, but neglects how interdependences between the organization and diverse environments lead to variations in the effectiveness of different corporate governance practices. This paper develops an organizational approach to corporate governance and focuses on two dominant streams that analyse internal and external governance mechanisms. First, we explore governance practices aimed at dealing with a complex set of problems internal to an organization, such as conflicts of interest between managers and shareholders, different types of shareholders, and block-holder opportunism. Second, we discuss the importance of formal and informal governance arrangements that organizations use in managing their relationships with external parties, such as alliance partners, overseas subsidiaries and network members. We argue that an integrated approach bringing these two streams together helps to develop a more holistic view on the effectiveness and efficiency of various corporate governance mechanisms, and suggests a number of avenues for future research. This paper also sets the scene for this thematic issue on corporate governance, scopes the field and introduces 11 papers which make significant contributions towards our understanding of corporate governance. [source]