The Impact of Board Structure on Firm Performance: Evidence from the Nonfinancial Companies Listed on Ghana Stock Exchange

The authors are thankful to the National Science Foundation of China (71371087) for the financial support. Abstract The fundamental aim of this study is to examine the relationship that exit between board structure and firm performance of non-financial Ghanaian listed companies. In order to achieve the objectives of the study, unique data were collected from a sample of 28 non-financial  companies covering five financial year periods 2012-2017 was used and thereafter analysis done within panel data framework/multiple linear regression framework. The variables such as CEO duality, CEO tenure, board size, board composition and its independence were considered as predictors of the firm performance that was measured employing accounting based performance measures such as the return on assets (ROA), return on equity (ROE) and EPS. I found board size to have a positively significant relationship with firm performance. Keywords: Corporate governance, Board composition, Block holder, CEO-duality, Firm performance DOI: 10.7176/RJFA/10-6-12 Publication date:March 31st 201

CEO horizon problem and characteristics of board of directors and compensation committee

Extant research finds inconclusive evidence about the CEO horizon problem. One possible explanation is that board of directors, especially compensation committees, intervene to mitigate the CEO horizon problem. In this study, we examine whether the characteristics of board of directors and compensation committee affect their effectiveness in mitigating the CEO horizon problem. We find that retiring CEOs are more likely to reduce R&D expenditures when CEOs have more power, and director tenure is longer; retiring CEOs in firms with large board of directors and compensation committee are less likely to manage accruals.Peer Reviewedhttp://deepblue.lib.umich.edu/bitstream/2027.42/163492/1/jcaf22446.pdfhttp://deepblue.lib.umich.edu/bitstream/2027.42/163492/2/jcaf22446_am.pd

Audit quality and earnings management by listed firms in Nigeria

PURPOSE: We herein investigate the effect of quality of audit on management of earnings in Nigerian listed firms by (i) ascertaining the effect of audit quality on discretionary accruals, (ii) determining the effect of audit quality on earnings smoothing, as well as (iii) establishing the effect of audit quality on earnings per share.METHODOLOGY: The study follows an ex-post facto research design. It draws data from the annual reports of 10 firms. These consisted of five financial and five non-financial firms, purposively selected for a period of 10 years (2010-2019). Descriptive and inferential analyses were employed in data analyses.FINDINGS: The findings indicate that audit quality significantly affected earnings smoothing. Moreover, audit quality did not significantly affect discretionary accruals and earnings per share. Furthermore, it is recommended that management of firms should put in place policies for predicting earnings (in profit) to help forecast future earnings, which can be achieved by audit quality.ORIGINALITY/VALUE: This study is meant to raise awareness on the need to improve the financial statement/reporting practices of publicly listed companies with respect to earnings management; discretionary accrual, earnings smoothing and earnings per share. It is hoped that the forwarded recommendations support the competent authorities in addressing the identified existing issues, thus enabling them to enhance the financial reporting practices and render them improved vehicles for development in publicly listed companies.peer-reviewe

Two’s a Crowd? Implications of Economic Geography for Corporate Governance

Although literature on corporate governance and economic geography often explores similar constructs, theories, and other matters, little work has been done examining their joint effects. This two-essay dissertation integrates these literatures in order to partially fill this gap by asking the following research questions: 1.) Do geographic proximity and multiple directorships function as substitutes or complements? 2.) How is the governance of highly innovative firms affected by the presence of Marshallian externalities? While some scholars suggest that multiple directorships lead to board members neglecting their advisory and monitoring obligations, others have embraced the idea that holding multiple board seats can benefit both the firm and the director. The nature of the relationship between multiple directorships and a variety of firm outcomes has remained the subject of theoretical debates, and findings are often contradictory. Essay 1 offers a possible explanation for these issues by incorporating the geographically bounded nature of multiple directorships in an analysis of their effects on firm acquisition activity. Results offer support for a positive contribution to acquisition performance, with that relationship becoming stronger as geographic distance between the target and acquirer increases. My findings suggest that multiple directorships and geographic distance are complements, but substitutes when they overlap with one another. Essay 2 reexamines the relationship between corporate governance at the board level and innovation, examining whether and how agglomeration economies influence these relationships. Using a sample drawn from the semiconductor industry, I demonstrate that while firms within an agglomeration configure their governance in a manner consistent with agency theoretic predictions, more remote firms do the opposite. Thus, this essay extends prior research by incorporating agglomeration theory into governance, and specifically exploring the ways in which Marshallian externalities affect intra-firm safeguards against opportunism

The role of corporate governance and dividend policy as an alignment mechanisms to CEO compensation and firm's performance

Public perception of CEO compensation is evidently unfair as inefficient compensation structures that violate the rights of shareholders result in principal-agent problems. In order to mitigate this issue, theorists argued that executive compensation should be aligned with firm performance. Owing to the prevalence of agency conflicts in Pakistan, this study investigated the effect of firm performance and characteristics on CEO compensation in the capital market of Pakistan. Furthermore, consistent with prior theoretical arguments, this study examined the role of dividend policy and corporate governance as moderators to ensure their effect on pay-performance link. After data cleaning, this study utilized 284 Pakistani- listed companies (PSX) over the period 2010 to 2014. The findings from Multiple Linear regression showed that CEO compensation is positively aligned to operating performance, market performance, firm size and market share, however, no empirical evidence was found regarding the effect of growth opportunities on CEO compensation. The findings also indicated that family owners align their CEO‘s compensation with operating performance, institutional owners with market performance and firm size, and foreign investors with market share. Thus, these ownership structures play vital roles in mitigating agency conflicts in an organization. It was also revealed that optimal board size could strengthen the pay-performance link. On the other hand, CEO duality and dividend policy could distort the pay-performance link. Contrary to theoretical arguments, dividend policy cannot act as a substitute control device in the absence of strong corporate governance. The role of independent directors as an alignment mechanism to operating performance and CEO compensation is evident but due to their lower level of representation on the board, they have no influence over other accounting and market- based performance metrics. The study provides various theoretical and practical implications to improve corporate governance and compensation practices especially in the perspective of Pakistan

Reputation Capital of Directorships and Demand for Audit Quality

This study examines whether boards of directors use external auditing to protect their reputation capital. We hypothesize and find that audit quality increases with the level of directors’ reputation capital. More specifically, using ten-year panel data on Finnish listed companies, we find that our measures of reputation capital based on the number of directorships that directors possess and their compensation are positively associated with various proxies for audit quality. We also find that the observed reputation effect on audit fees is stronger in companies with an audit committee, and that reputation capital matters in auditor choice in those companies in particular. In combination, our results add to the literature on the reputation capital of those in charge of corporate governance.</p

Hallituksen sukupuolijakauman ja riippumattomuuden yhteys verosuunnittelun aggressiivisuuteen

Osakeyhtiön on lain mukaan tarkoitus tuottaa omistajilleen voittoa. Verotuksella on merkittävä vaikutus yrityksen tulokseen ja tätä kautta omistajien varallisuuteen. Toisaalta myös yrityksen käyttämät kannustinjärjestelmät voivat vaikuttaa verotusta koskevaan päätöksentekoon. Tämän tutkimuksen tavoitteena oli tutkia onko hallituksen sukupuolijakaumalla tai riippumattomuudella vaikutusta yrityksen verosuunnittelun aggressiivisuuteen. Verosuunnittelun aggressiivisuutta mitattiin vertaamalla yrityksen maksamia veroja teoreettiseen yhteisöveron luomaan maksimaaliseen verorasitukseen. Tutkimuksen otoksena oli 85 S&P 500 -yritystä. Havaintoja kerättiin vuosilta 2011 – 2014 ja niitä kertyi yhteensä 340. Tutkimuksen teoriaosuudessa esiteltiin aiempaa kirjallisuutta koskien verosuunnittelua sekä sukupuolten ominaispiirteiden ja riippumattomuuden vaikutusta yrityselämässä. Teorian perusteella luotiin testattavat hypoteesit, joiden mukaan sekä naisten suhteellisen osuuden lisääntymisellä hallituksessa että hallituksen riippumattomuudella on verosuunnittelun aggressiivisuutta alentava vaikutus. Tutkimus suoritettiin regressioanalyysia hyväksi käyttäen. Analyysin perusteella voidaan todeta sekä naisten että riippumattomien jäsenten suhteellisen osuuden kasvun hallituksessa vähentävän yritysten veroaggressiivisuutta. Tulokset tukevat aiempaa kirjallisuutta. Eräs tutkimuksen keskeisistä havainnoista liittyi sukupuolijakauman ja riippumattomuuden erilaiseen vaikutustasoon. Tutkimuksen perusteella naisten suhteellisella osuudella hallituksessa on noin kaksinkertainen verosuunnittelun aggressiivisuutta alentava vaikutus verrattuna hallituksen riippumattomuuteen. Tuloksiin on kuitenkin syytä suhtautua varauksella. Vaikka tässä tutkimuksessa hypoteeseille saatiin vahvistusta, voi tulosten luotettavuuteen liittyä muun muassa otokseen liittyvää epävarmuutta.fi=Opinnäytetyö kokotekstinä PDF-muodossa.|en=Thesis fulltext in PDF format.|sv=Lärdomsprov tillgängligt som fulltext i PDF-format

Aktiiviset omistajat, yhteiset hallitusten jäsenet ja yritysten hallinto

Board interlocks, i.e. shared board members, are a widely researched phenomenon in the study of inter-organisational connections. Board interlocks have been shown to influence, among other things, the spread of organisational practices, M&A behaviour, and alliance formation. However, despite the academic attention, board interlocks have been treated as an exogenous phenomenon, without considering their antecedents. This study hypothesises that board interlocks that are associated with active owners, i.e. owners with a long investment horizon and a high portfolio concentration, are more likely to influence corporate governance. This is because active owners are hypothesised to use the board of directors as a device to exert power over the company, and hence be an important antecedent to the formation of board interlocks that induce changes in corporate governance. The hypotheses are tested using a unique dyadic data set of S&P 1500 companies in the years 2003-2008, applying modern causal mediation methodology. The results show that, as hypothesised, a statistically significant indirect effect from active owners to changes in corporate governance exists, through board interlocks. This highlights the importance of considering the antecedents of board interlocks when studying their consequences. Additionally, mixed evidence of strong direct effects from active owners to changes in corporate governance is found in some factors of corporate governance, which calls for further research. This study contributes to the fields of active ownership, board interlocks, and corporate governance in three ways. First, it is the first empirical study to incorporate antecedents to the model when considering the consequences of board interlocks. Second, it employs a unique, wide data set, and modern, robust causal mediation methodology, previously unused in board interlock research. Finally, it bridges theoretical gaps between the fields of active ownership, board interlock, and corporate governance research by empirically showing that significant causal links exist between them.Yhteisillä hallituksen jäsenillä tarkoitetaan kahden tai useamman yrityksen hallituksissa istuvaa henkilöä, jotka näin luovat yhteyden kyseisten yrityksien välille. Ilmiötä on tutkittu laajalti yritystenvälisten suhteiden tutkimuksessa, ja yhteisten hallitusten jäsenten on näytetty vaikuttavan, muun muassa, hallintotapojen leviämiseen, yrityskauppakäyttäytymiseen sekä allianssien muodostumiseen. Tästä laajasta akateemisesta huomiosta huolimatta yhteisiä hallituksen jäseniä on käsitelty eksogeenisena ilmiönä, huomioimatta niiden syntyyn vaikuttavia tekijöitä. Työn hypoteesissa esitellään teoria, jonka mukaan aktiiviset omistajat, eli omistajat joilla on pitkän aikavälin sijoitusstrategia sekä keskitetty sijoitusportfolio, saavat aikaan yhteisiä hallituksen jäseniä, jotka vaikuttavat yritysten hallintoon. Hypoteesin taustalla on oletus siitä, että aktiiviset omistajat hyödyntävät hallitusta vallankäytön välineenä, ja näin luovat yrityksen hallintoon vaikuttavia yhteyksiä hallitusten välille. Hypoteeseja testattiin käyttämällä ainutlaatuista dyadista tietokantaa S&P 1500 -yrityksistä vuosina 2003 - 2008, soveltamalla siihen modernin kausaalisen mediaatioanalyysin metodologiaa. Analyysin tulokset tukevat hypoteeseja; niistä löytyy kautta linjan tilastollisesti merkittävä epäsuora vaikutus aktiivisista omistajista yhteisten hallitusten jäsenten kautta muutoksiin yrityksen hallinnossa. Tämä korostaa yhteisten hallituksen jäsenten muodostumiseen vaikuttavien tekijöiden sisällyttämisen tärkeyttä vastaavissa analyyseissä. Lisäksi tuloksista löytyy osittaisia todisteita voimakkaasta suorasta vaikutuksesta aktiivisista omistajista yritysten hallintoon, mikä vaatii lisätutkimusta. Tämä tutkimus edistää aktiivisen omistajuuden, yhteisten hallituksen jäsenten sekä yritysten hallinnon tutkimusaloja kolmella tavalla. Ensinnä, se on ensimmäinen empiirinen tutkimus, joka yhdistää yhteisten hallituksen jäsenten muodostumiseen vaikuttavat tekijät niiden vaikutuksia tutkivaan malliin. Toiseksi, se käyttää ainutlaatuista, laajaa tietokantaa sekä modernia kausaalisen mediaatioanalyysin metodologiaa, joita ei ole aiemmin käytetty vastaavassa tutkimuksessa. Kolmanneksi, se kuroo umpeen teoreettista kuilua tutkimiensa kenttien välillä näyttämällä, että niiden välillä vallitsee merkittäviä kausaalisia yhteyksiä

Information theory of firm

The article formulates the information theory of firm, introduces the concept of firm as an operating system, which controls the firm’s operation by the means of the information resources processing, in an analogy with the operating system at a microprocessor in the computing devices, represents the director as an information processing element, describes the board of directors as the electronically-scanned electronically-steered phased array radar, considers the scientific problem of strategy creation by the interlocking interconnecting overlapping directors in the boards of directors in the firms in the economic system with the induced nonlinearities. We highlight a fact that the director makes the information sensing, filtering, processing, resonant absorption, analysis, decision making, strategy creation, hence it can be empirically represented as a processing element with the Harvard or von Neumann director’s mindset architectures in line with the digital signal processing science. We think that the board of directors in corporate governance system can be theoretically represented as the electronically-scanned electronically-steered phased array radar with a certain number of electronic devices (directors can be modeled as electronic devices with the active antenna elements, filters banks, digital signal processors, memory chipsets in agreement with the microwave and digital signal processing sciences). We developed the MicroITF operating system and software programs, 1) to control the firm operation by the means of the information resources processing; 2) to accurately characterize the director’s performance by means of a) the filtering of the generated/transmitted/received information by the director into the separate virtual channels, depending on the information content, and b) the measurement of the levels of signals in every virtual channel with the generated/transmitted/received information by the director, in the overlapping interconnecting interlocking directors networks in the boards of directors in the firms during the Quality of Service (QofS) measurements process, and 3) to create the winning virtuous business strategies by the interlocking interconnecting directors in the boards of directors in the firms, using the patented recursive artificial intelligence algorithm

Information theory of firm

The article formulates the information theory of firm, introduces the concept of firm as an operating system, which controls the firm’s operation by the means of the information resources processing, in an analogy with the operating system at a microprocessor in the computing devices, represents the director as an information processing element, describes the board of directors as the electronically-scanned electronically-steered phased array radar, considers the scientific problem of strategy creation by the interlocking interconnecting overlapping directors in the boards of directors in the firms in the economic system with the induced nonlinearities. We highlight a fact that the director makes the information sensing, filtering, processing, resonant absorption, analysis, decision making, strategy creation, hence it can be empirically represented as a processing element with the Harvard or von Neumann director’s mindset architectures in line with the digital signal processing science. We think that the board of directors in corporate governance system can be theoretically represented as the electronically-scanned electronically-steered phased array radar with a certain number of electronic devices (directors can be modeled as electronic devices with the active antenna elements, filters banks, digital signal processors, memory chipsets in agreement with the microwave and digital signal processing sciences). We developed the MicroITF operating system and software programs, 1) to control the firm operation by the means of the information resources processing; 2) to accurately characterize the director’s performance by means of a) the filtering of the generated/transmitted/received information by the director into the separate virtual channels, depending on the information content, and b) the measurement of the levels of signals in every virtual channel with the generated/transmitted/received information by the director, in the overlapping interconnecting interlocking directors networks in the boards of directors in the firms during the Quality of Service (QofS) measurements process, and 3) to create the winning virtuous business strategies by the interlocking interconnecting directors in the boards of directors in the firms, using the patented recursive artificial intelligence algorithm