Does board independence influence asset redeployability? Evidence from a quasi-natural experiment

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Chaiyuth Padungsaksawasdi ◽  
Sirimon Treepongkaruna ◽  
Pornsit Jiraporn ◽  
Ali Uyar
Keyword(s):  
Natural Experiment ◽  
Board Independence ◽  
Board Governance ◽  
Difference In Difference ◽  
Content Type ◽  
Instrumental Variable Analysis ◽  
Managerial Myopia ◽  
The Difference ◽  
Coefficient Stability ◽  
Variable Analysis

Purpose Exploiting an exogenous regulatory shock and a novel measure of asset redeployability, this paper aims to explore the effect of independent directors on asset redeployability. In particular, the authors use an innovative measure of asset redeployability recently developed by Kim and Kung (2016). This novel index has been rapidly adopted in recent literature. Design/methodology/approach Relying on a quasi-natural experiment, the authors execute a difference-in-difference analysis based on an exogenous regulatory shock to board independence. To mitigate endogeneity and demonstrate causation, the authors also perform propensity score matching, instrumental-variable analysis and Oster’s (2019) approach for testing coefficient stability. Findings The difference-in-difference estimates show that firms forced to raise board independence have significantly fewer redeployable assets after the shock than those not required to change board composition. This is consistent with the managerial myopia hypothesis. Subject to more intense monitoring, managers behave more myopically, focusing more on assets that are currently useful to the firm and less on redeployability in the future. Originality/value The study makes key contributions to the literature. First, the study is the first to examine the effect of board governance on asset redeployability. Second, the authors exploit an innovative index of asset redeployability that has been recently constructed in the literature. Third, by using a natural experiment, the results are much more likely to reflect causality than merely an association.

Exploring how independent directors view CSR inequality using a quasi-natural experiment

2020 ◽  
Vol 20 (6) ◽  
pp. 1159-1172 ◽  
Author(s):  
Viput Ongsakul ◽  
Napatsorn Jiraporn ◽  
Pornsit Jiraporn
Keyword(s):  
Natural Experiment ◽  
Causal Effect ◽  
Principal Component ◽  
Independent Directors ◽  
Board Independence ◽  
Content Type ◽  
Instrumental Variable Analysis ◽  
Sarbanes Oxley ◽  
The Difference ◽  
Corporate Social

Purpose The purpose of this paper is to explore corporate social responsibility (CSR) inequality, which is the inequality across different CSR categories. Higher inequality suggests a less balanced CSR policy. To determine if CSR inequality is beneficial or harmful, this paper investigates how independent directors view CSR inequality, using an exogenous regulatory shock introduced by the passage of the Sarbanes–Oxley Act. Design/methodology/approach To draw causality, this study relies on a quasi-natural experiment based on an exogenous regulatory shock that forced certain firms to raise board independence. This approach is significantly less vulnerable to endogeneity and is much more likely to show a causal effect. The results using propensity score matching, principal component analysis and instrumental-variable analysis are confirmed. Findings The difference-in-difference estimates show that independent directors view CSR inequality unfavorably. Specifically, board independence diminishes CSR inequality by approximately 34%-43%. Because the empirical strategy is based on a quasi-natural experiment, the results are more likely to show causality. The results also imply that CSR inequality is a crucially important aspect of CSR. Originality/value Although a substantial volume of research has examined CSR, one vital aspect of CSR has been largely unexplored. Filling this void in the literature, the CSR inequality is investigated. The study is the first to explore how independent directors view CSR inequality using a quasi-natural experiment.

scholarly journals Board governance quality and risk disclosure compliance among financial institutions in Uganda

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Geofrey Nkuutu ◽  
Joseph Mpeera Ntayi ◽  
Isaac Nabeeta Nkote ◽  
John Munene ◽  
Will Kaberuka
Keyword(s):  
Financial Institutions ◽  
Partial Least Square ◽  
Equation Modeling ◽  
Board Independence ◽  
Board Governance ◽  
Risk Disclosure ◽  
Policy Makers ◽  
Content Type ◽  
Governance Quality ◽  
The Impact

PurposeThis paper aims to examine the impact of board governance quality (BGQ) and its mechanisms, namely board activity, board independence, board communication and board expertise, on the level of risk disclosure compliance (RDC) among financial institutions (FIs) in Uganda.Design/methodology/approachThe study adopts a cross-sectional design where data are collected through a questionnaire survey and audited financial statements of 83 FIs. The authors employ partial least square structural equation modeling (SmartPLS32.7) to test hypotheses.FindingsThe authors find that the level of RDC in Ugandan FIs is low. Further, the study finds the positive relation between BGQ and RDC. Moreover, the authors find that RDC is positively and significantly related with board activity, board independence, board communication and board expertise. Furthermore, the authors find that the level of RDC is positively and significantly related to ownership type, firm size and board size, respectively. Nevertheless, industry type, number of branches and firm age are insignificantly related to RDC.Practical implicationsThe study provides relevant insights into regulators and policy makers with early symptoms of potential problems regarding weak board governance in FIs. Policy makers may also use these findings as a guideline tool for improving existing board governance frameworks in place and development of new disclosure policies. In addition, the study provides an input into the review and amendments of existing corporate governance codes for the regulators.Originality/valueThis study offers the empirical evidence on the nexus between BGQ and RDC of FIs in Uganda. Moreover, the study also offers evidence on how BGQ mechanisms impact RDC. The study also further adds theoretical foundations to the RDC literature.

LGBT-supportive corporate policies, risk aversion and mitigation and economic policy uncertainty

2022 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Chaiyuth Padungsaksawasdi ◽  
Sirimon Treepongkaruna ◽  
Pornsit Jiraporn
Keyword(s):  
Economic Policy ◽  
Risk Mitigation ◽  
Policy Uncertainty ◽  
Corporate Policies ◽  
Content Type ◽  
Instrumental Variable Analysis ◽  
Economic Policy Uncertainty ◽  
The Media ◽  
Corporate Social ◽  
Variable Analysis

PurposeThe paper aims to investigate the effect of uncertain times on LGBT-supportive corporate policies, exploiting a novel text-based measure of economic policy uncertainty (EPU) that was recently constructed by Baker et al. (2016). LGBT-supportive policies have attracted a great deal of attention in the media lately. There is also a rapidly growing area of the literature that addresses LGBT-supportive policies specifically.Design/methodology/approachThe authors execute a regression analysis and several other robustness checks including propensity score matching (PSM) and an instrumental-variable analysis to mitigate endogeneity.FindingsThe authors' results show that companies significantly raise their investments in LGBT-supportive policies in times of greater uncertainty, reinforcing the risk mitigation view where LGBT-supportive policies create moral capital with an insurance-like effect that mitigates adverse consequences during uncertain times. The effect of EPU on LGBT-supportive policies is above and beyond its effect on corporate social responsibility (CSR) in general.Originality/valueThe authors' study is the first to explore the effect of uncertain times on LGBT-supportive corporate policies. The authors contribute to a crucial area of the literature that examines how firms respond to EPU. In addition, the authors enrich the literature on LGBT-friendly policies by showing that EPU is one of the significant determinants of LGBT-friendly policies.

Does board independence substitute for external audit quality? Evidence from an exogenous regulatory shock

2017 ◽  
Vol 43 (1) ◽  
pp. 27-41 ◽  
Author(s):  
Pornsit Jiraporn ◽  
Pandej Chintrakarn ◽  
Shenghui Tong ◽  
Sirimon Treepongkaruna
Keyword(s):  
Natural Experiment ◽  
Audit Quality ◽  
Causal Effect ◽  
Board Independence ◽  
Difference In Difference ◽  
External Audit ◽  
Effective Governance ◽  
Sarbanes Oxley ◽  
Big 4 ◽  
Quality Evidence

Exploiting the passage of the Sarbanes–Oxley Act (SOX) as an exogenous regulatory shock, we investigate whether board independence substitutes for external audit quality. Based on over 14,000 observations across 18 years, our difference-in-difference estimates show that firms forced to raise board independence are far less likely to employ a Big 4 auditor. In particular, board independence lowers the propensity to use a Big 4 auditor by approximately 38%. Firms with stronger board independence enjoy more effective governance and therefore do not need as much external audit quality as those with less effective governance do. Based on a natural experiment, our empirical strategy is far less vulnerable to endogeneity and is thus considerably more likely to show a causal effect, rather than merely an association.

Does Board Composition Matter to Institutional Investors?

2019 ◽  
Vol 18 (2_suppl) ◽  
pp. S238-S266
Author(s):  
Shashank Bansal ◽  
M. Thenmozhi
Keyword(s):  
Institutional Investors ◽  
Natural Experiment ◽  
Stock Exchange ◽  
Agency Cost ◽  
Resource Dependency ◽  
Board Composition ◽  
Board Independence ◽  
Jel Codes ◽  
The Difference

This study examines the resource dependency and signalling role of independent directors from the perspective of institutional investor’s and also investigates if the presence of large blockholder moderates the signalling effect. This study uses the quasi-natural experiment to examine this relationship. The difference-in-difference (DiD) analysis of 5,298 firm observations covering 618 National Stock Exchange (NSE) listed Indian firms for the period 2001–2011 provides empirical evidence that board composition does matter to institutional investors. We find that non-compliant firms who adopted the board independence requirement experience a significant increase in institutional ownership relative to previously compliant firms. We also find that institutional investors have invested more in family-owned firms during post-mandate period compared to government-, private- and foreign-owned firms. Overall, this study contributes to the existing literature on resource dependency theory and signalling theory and shows that the board independence acts as a signal to institutional investors and decreases the agency cost and cost of monitoring. JEL Codes: G3, G11, G34, G38, G23

The effects of ownership concentration and corporate governance on corporate risk-taking

2019 ◽  
Vol 33 (1) ◽  
pp. 252-267 ◽  
Author(s):  
Seksak Jumreornvong ◽  
Sirimon Treepongkaruna ◽  
Panu Prommin ◽  
Pornsit Jiraporn
Keyword(s):  
Corporate Governance ◽  
Risk Taking ◽  
Ownership Concentration ◽  
Corporate Policies ◽  
Content Type ◽  
Instrumental Variable Analysis ◽  
Developed Economies ◽  
Concentrated Ownership ◽  
Corporate Risk ◽  
Variable Analysis

Purpose This study aims to investigate the effects of ownership concentration and corporate governance on the extent of risk-taking in an important emerging economy – Thailand. Design/methodology/approach The results are corroborated by additional analysis, including an instrumental-variable analysis and propensity score matching. Findings Large owners are under-diversified and are thus more vulnerable to the firm’s idiosyncratic risk. Therefore, they tend to advocate less risky corporate policies and strategies. Consistent with this notion, the authors find that more concentrated ownership induces firms to take significantly less risk. Originality/value Ownership in Thai firms is substantially more concentrated than that in developed economies, providing a unique opportunity to study the effect of highly concentrated ownership on risk-taking.

scholarly journals When do regulations matter for bank risk-taking? An analysis of the interaction between external regulation and board characteristics

2018 ◽  
Vol 18 (3) ◽  
pp. 440-461 ◽  
Author(s):  
Glauco De Vita ◽  
Yun Luo
Keyword(s):  
Risk Taking ◽  
Gender Diversity ◽  
Capital Requirements ◽  
Market Discipline ◽  
Bank Risk ◽  
Board Independence ◽  
Board Governance ◽  
Board Size ◽  
Content Type ◽  
External Regulation

PurposeAccording to previous international studies, the impact of external regulation on bank risk is ambiguous. The purpose of this paper is to ask the question, “When do regulations matter for bank risk-taking?” by reporting the first empirical investigation of how the relation between bank regulations (capital requirements, official supervisory power and market discipline) and bank risk-taking is moderated by board monitoring characteristics.Design/methodology/approachUsing SYS-GMM, the analysis of the interaction between bank-level boards of directors’ attributes (board size, board independence and board gender diversity) and external regulation is based on a sample of 493 banks operating in 54 countries over 2001-2015, accounting for three measures of bank risk-taking.FindingsRegulations matter for bank risk-taking conditional on board characteristics: board size, board independence and board diversity. With the exception of capital requirements, the market discipline exerted by external private monitoring and greater supervisory power are unable to mitigate the propensity to greater risk-taking by banks resulting from larger board size, higher board independence and greater gender diversity of the board.Originality/valueThe bank risk empirical literature is still silent as to the interaction between board governance and regulation for the purpose of examining banks’ risk-taking. This paper fills this gap, thus making a significant contribution by extending our knowledge of whether and how board governance moderates the relationship between external regulation and bank risk-taking.

Trade-employment linkage of FTAs in Korea

2018 ◽  
Vol 22 (4) ◽  
pp. 333-347
Author(s):  
Yong Joon Jang ◽  
Mee Jin Cho ◽  
HanSung Kim
Keyword(s):  
Trade Liberalization ◽  
Labor Productivity ◽  
Comparative Advantage ◽  
Firm Heterogeneity ◽  
Trade Agreement ◽  
Difference In Difference ◽  
Firm Level ◽  
Content Type ◽  
Positive Effects ◽  
The Difference

Purpose The purpose of this paper is to empirically examine the link between trade liberalization and employment through the export channel under Korea’s FTAs by distinguish firm heterogeneity (i.e. size) as well as sector-level international competitiveness (i.e. comparative advantage). Design/methodology/approach Using the firm-level data during 2000–2009, the authors drive the difference-in-difference-in-difference model on Wagner (2007) with the dependent variables of labor productivity and employments and the independent variables of free trade agreement, revealed comparative advantage, firm size and payroll costs. Findings The authors find that the economic benefit of FTAs in Korea is not concentrated in large enterprises or firms with comparative advantage. Accordingly, the authors conclude that FTA or trade liberalization brings positive effects to business as a whole, rather than to specific industries or group of firms. Research limitations/implications The Korean Government has continued its policy of supporting small and medium-sized enterprises (SMEs) for a long time by recognizing them as socially underprivileged. According to the results of this study, an increase in export through FTAs improves firm’s labor productivity and increases employment, especially for SMEs, which can be a practical and efficient support for them. Originality/value The paper provides the empirical evidences that how the effects of trade liberalization on labor depend on firm heterogeneity, industrial competitiveness and/or both and thus how labor is reallocated in response to trade liberalization in Korea.

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