Do board characteristics drive firm performance? An international perspective
- PDF / 663,714 Bytes
- 47 Pages / 439.37 x 666.142 pts Page_size
- 29 Downloads / 199 Views
Do board characteristics drive firm performance? An international perspective María Consuelo Pucheta‑Martínez1 · Isabel Gallego‑Álvarez2 Received: 15 May 2018 / Accepted: 6 February 2019 © Springer-Verlag GmbH Germany, part of Springer Nature 2019
Abstract The aim of our research is to analyze how board characteristics influence firm performance. In this paper, we specifically examine how board size, board independence, CEO duality, female directors and board compensation affect firm performance in a sample of international firms. The final panel data sample is composed of 10,314 firm-year observations belonging to 34 countries that have been grouped into six geographic zones: Africa, Asia, Europe, Latin America, North America and Oceania. Drawing on agency theory and dependence resource theory, we posit five hypotheses. The results show that some board characteristics, such as board size, board independence and having a female director, are positively associated with firm performance, whereas CEO duality, contrary to our expectations, also impacts positively on firm performance. Moreover, board compensation is not associated with firm performance. Tobin’s Q was used to measure firm performance, although an accounting measure was also employed for robustness analyses and to provide more validity to our results. Keywords Board size · Board independence · CEO duality · Female director · Board compensation · Corporate performance · International companies JEL Classification M14 · G38
* María Consuelo Pucheta‑Martínez [email protected] Isabel Gallego‑Álvarez [email protected] 1
Departamento de Finanzas y Contabilidad, Universidad Jaume I, Campus del Riu Sec, s/n, 12071 Castellón, Spain
2
Department of Business Administration, Multidisciplinary Institute for Enterprise (IME), University of Salamanca, Campus Miguel de Unamuno, Edificio FES, 37007 Salamanca, Spain
13
Vol.:(0123456789)
M. C. Pucheta‑Martínez, I. Gallego‑Álvarez
1 Introduction Corporate governance refers to the procedures and processes according to which organizations are directed and controlled by their CEO, board of directors and senior management. The literature highlights the fact that the board of directors is an important and highly effective internal mechanism of corporate governance and fulfills two important functions in companies: supervision of executive management in representation of the shareholders and providing business resources and assessment. In their supervisory role, the boards use their time and resources to monitor firm performance and the behavior of the executive managers. The theoretical basis of the supervisory function of the board is derived from agency theory, which highlights the possible conflicts of interest that may arise from the separation of ownership and control in companies (Jensen and Meckling 1976). According to Fama and Jensen (1983), agency theory views the board of directors as an essential element of the control mechanism to ensure that the problems resulting from the principal and agent relationsh
Data Loading...
