Are social connections of independent directors all the same? Evidence from corporate monitoring

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Zhe Li ◽  
Emre Unlu ◽  
Julie Wu
Keyword(s):  
Firm Value ◽  
Independent Directors ◽  
Social Connections ◽  
Board Members ◽  
Corporate Boards ◽  
Cross Sectional ◽  
Content Type ◽  
Board Monitoring ◽  
Primary Focus ◽  
Monitoring Quality

PurposeStudies on corporate boards examine how social ties between the CEO and independent board members affect the effectiveness of board monitoring. Much evidence suggests that social connections between the CEO and independent directors are associated with inadequate monitoring and lower firm value (Hwang and Kim, 2009; Fracassi and Tate, 2012). In this study, the authors note that social connections of the independent directors are of different nature and thus should not be treated as a homogeneous group; that is, the nature of connections among directors can be quite different from that between the CEO and directors, which is the primary focus of previous studies.Design/methodology/approachThe authors classify independent directors into four mutually exclusive groups based on their social connections to the CEO and other independent board members and examine what role each type of connection plays in corporate monitoring using panel data and cross-sectional fixed effect regressions.FindingsThe authors find that Only_CEO%, the proportion of independent directors who are connected only to the CEO, is negatively associated with monitoring intensity. Specifically, firms with higher Only_CEO% have larger CEO compensation, lower likelihood of dismissing the CEO, more co-opted board and worse firm performance. In contrast, No_CEO_Ind%, the proportion of independent directors who have no connection to either the CEO or other independent directors is associated with more effective monitoring. These findings suggest that independent directors with different degrees of social connections exhibit different monitoring qualities.Practical implicationsWhen more independent directors, who are connected exclusively to the CEO, are on the board, they consistently deliver low monitoring quality. However, when more independent directors with no connections to either the CEO or any independent directors are on the board, they enhance monitoring quality. These findings can be used to construct board structures with more effective monitoring ability.Originality/valueThis paper extends the literature on social networks in corporate finance. The authors show that independent directors with exclusive connections to other independent directors do not have a significant effect on board monitoring, but those truly independent directors are associated with better monitoring quality. These findings suggest that different types of social connections of independent directors play a different role in board monitoring and help extend our understanding of the function of social connections of independent directors in corporate governance.

Remuneration committee and corporate failure

2015 ◽  
Vol 15 (5) ◽  
pp. 623-640 ◽  
Author(s):  
Kingsley Opoku Appiah ◽  
Amon Chizema
Keyword(s):  
Design Methodology ◽  
Corporate Boards ◽  
Cross Sectional ◽  
Content Type ◽  
Corporate Failure ◽  
Financial Firms ◽  
Fixed And Random Effects ◽  
Board Monitoring ◽  
The Uk ◽  
Practical Implications

Purpose – This study aims to examine the role the structure of corporate boards plays in the failure of the firm. Specifically, it examines whether the remuneration committee is related to corporate failure in the UK. Design/methodology/approach – The study uses 1,835 firm-year observations for 98 failed and 269 non-failed UK-listed non-financial firms between the periods of 1994 and 2011. This study used pooled cross-sectional, fixed and random effects LOGIT models to estimate whether corporate failure is related to remuneration committee in the UK. Findings – The findings indicate that corporate failure is negatively related to the independence of the remuneration committee chairman and remuneration committee’s effectiveness but not remuneration committee’s presence, size and meetings. However, a positive and significant relationship was observed between corporate failure and remuneration committee independence. Practical implications – The findings of the study provide support for the appropriateness of agency theory as analytical lens through which to study the efficacy of remuneration committee, especially the independence of the remuneration committee chairperson, as a board monitoring device, in the context of corporate failure. Originality/value – The paper adds to existing literature on corporate governance by establishing the likely causes of corporate failure in the UK.

scholarly journals The impact of boardroom internationalisation on online disclosures of S&P 500

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Esam Shehadeh ◽  
Doaa Aly ◽  
Ibrahim Yousef
Keyword(s):  
Firm Value ◽  
Scoring System ◽  
Positive Impact ◽  
Ordinary Least Squares ◽  
The Body ◽  
Board Members ◽  
Cross Sectional ◽  
Content Type ◽  
The Impact ◽  
First Time

Purpose The purpose of this study is to analyse the level of online disclosure of firms in the USA and to evaluate the impact of diversity in terms of director nationality (boardroom internationalisation) on online disclosure. Design/methodology/approach The authors apply, for the first time, a new modified scoring system to measure online disclosure levels by securing more detailed information on each of the items in the voluntary disclosure index. Regarding the percentage of foreign board members, unlike in previous research, the authors calculate two additional proxies to more accurately specify the level of international diversity on the board: the Blau Index and the Shannon Index. Moreover, the authors use a cross-sectional model for the sampled non-financial S&P500 firms using both ordinary least squares (OLS) and heteroskedasticity-corrected estimates to analyse the impact of boardroom internationalisation on the level of online disclosure. Findings The findings reveal that the average online disclosure level for the sample in question is 64% for the 0–1 index and 57% for the 0–4 index. In addition, the results of the regression analysis confirm the study’s proposed hypothesis, which is that the presence of international board members correlates with an improvement in the level of online disclosure. This can be attributed to the fact that foreign directors bring unique skills and knowledge from their home countries and thus, increase board discussion, creativity and innovation, which has a positive impact on the level of online disclosure. Research limitations/implications Financial firms are subject to capital requirement regulations; consequently, disclosure practices can be influenced. Therefore, these firms were excluded from the sample of the study. Originality/value This research contributes to the body of literature on nationality diversity of firm boards and corporate online disclosure in several respects. Firstly, the study adds an international dimension to the existing literature. Secondly, this study provides new evidence that foreign diversity on the board can improve firm value, insofar as the corresponding enhancement of online disclosure leading to positive capital market implications. Thirdly, the authors use, for the first time, a new scoring system approach to measure the level of online disclosure. Finally, it contributes to the corporate governance literature by basing its analysis on a multi-theoretical approach.

Board independence and managerial authority

2018 ◽  
Vol 25 (3) ◽  
pp. 838-853 ◽  
Author(s):  
Mustafa Dah ◽  
Mohammad Jizi ◽  
Sadim Sbeity
Keyword(s):  
Positive Association ◽  
Managerial Compensation ◽  
Independent Directors ◽  
Board Independence ◽  
Board Structure ◽  
Corporate Boards ◽  
Content Type ◽  
Sarbanes Oxley ◽  
Managerial Authority ◽  
Board Monitoring

Purpose The imposition of the Sarbanes Oxley (SOX) Act and the NYSE/NASDAQ regulations boosted the proportion of independent directors serving on corporate boards. For certain firms, increasing the number of independent directors may impose costs that exceed the benefits. The purpose of this paper is to examine the implications of increased independence following SOX, relative to the pre-SOX board independence benchmark, on managerial authority and entrenchment within the firm. Design/methodology/approach Data are collected from COMPUSTAT, ExecuComp, and RiskMetrics. Data are divided into two periods, pre-SOX (1996-2001) and post-SOX (2002-2006). The focus is on the sub-group of firms who were not complying with the board independence requirement prior to SOX and became compliant afterwards. Various regressions are employed to assess the implications of increased independence following SOX on managerial authority and entrenchment. Findings The appreciation in board independence post-SOX significantly inflates both managerial compensation and the likelihood of CEO duality. Also, there is a positive association between board independence and managerial entrenchment during both the pre- and post-SOX periods. Imposed board composition requirements diminished board monitoring efficiency and boosted the CEO dominance and control over the firm. Originality/value This research adds to the extant literature investigating the implications of SOX on internal monitoring and governance. The results are based on an off-equilibrium phenomenon in which companies were obliged to alter their endogenously determined board structure. Thus, regulations to improve governance could backfire as the CEO might abuse them to extract private benefits.

Publishing quantitative careers research: challenges and recommendations

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Bert Schreurs ◽  
Angus Duff ◽  
Pascale M. Le Blanc ◽  
Thomas H. Stone
Keyword(s):  
Design Methodology ◽  
Team Member ◽  
Research Question ◽  
Editorial Team ◽  
Board Members ◽  
Decision Making Process ◽  
Cross Sectional ◽  
Content Type ◽  
Insight Into

Purpose This article aims to provide prospective authors guidelines that will hopefully enable them to submit more competitive manuscripts to journals publishing careers research.Design/methodology/approach Based on their experience as an author, reviewer and editorial team member, the authors identify the main criteria that a quantitative study must meet to be considered for publication in international peer-reviewed journals covering career-related topics. They emphasize the importance of contributing to the careers literature and of designing the study in accordance with the research question.Findings Manuscripts are rejected because they are insufficiently innovative, and/or because sample, instruments and design are not appropriate to answer the research question at hand. Cross-sectional designs cannot be used to answer questions of mediation but should not be discarded automatically since they can be used to address other types of questions, including questions about nesting, clustering of individuals into subgroups, and to some extent, even causality.Originality/value The manuscript provides an insight into the decision-making process of reviewers and editorial board members and includes recommendations on the use of cross-sectional data.

scholarly journals Play and play occupation: a survey of paediatric occupational therapy practice in Ireland

2018 ◽  
Vol 46 (1) ◽  
pp. 59-72 ◽  
Author(s):  
Alice Moore ◽  
Helen Lynch
Keyword(s):  
Occupational Therapy ◽  
Online Survey ◽  
Qualitative Content Analysis ◽  
Occupational Therapists ◽  
Assessment Practices ◽  
Skills Acquisition ◽  
Cross Sectional ◽  
Content Type ◽  
Childhood Play ◽  
Primary Focus

Purpose Play occupation has been identified as an essential part of children’s lives, and it subsequently features in paediatric occupational therapy. However, few studies address the current place of play and play occupation in occupational therapy practice. This study aims to address this gap in knowledge by exploring paediatric occupational therapists’ perspectives on the place of play and play occupation in occupational therapy practice in Ireland. Design/methodology/approach A cross-sectional online survey was conducted to gather data about the current use of play in the occupational therapy for children under 12 years. Convenience sampling and snowball recruitment techniques were used to recruit paediatric occupational therapists. Data were analysed using descriptive statistics and qualitative content analysis. Findings In total, 65 therapists responded to the survey (estimated response rate, 32%). Results are organised into four sections: demographics and practice context, play assessment practices, use of play in practice and perceived barriers to play-centred practice. Respondents reported that they valued play as a childhood occupation. However, the survey findings identified that the primary focus was on play as a means to an end. Lack of education on play (research, theory and interventions) and pressures in the workplace have been identified as barriers to play-centred practice. Research limitations/implications Findings indicate that there is a mismatch between therapists valuing play as an occupation and how play is used in occupational therapy practice. Unless clarifications are made about play occupation as being different to skills acquisition in childhood, play occupation will continue to get overlooked as an authentic concern of occupation-centred practice. Thus, play as occupation deserves further attention from educators, researchers and practitioners as a means of strengthening occupation-centred practice, in particular play-centred practice in the paediatric context. Originality/value Play has been described as an important occupation in childhood, and consequently, it features in paediatric occupational therapy. However, little is known about the current place of play in occupational therapy practice. This study addresses this gap by considering the current place of play in occupational therapy practice in Ireland.

Are independent directors’ political connections valuable?

2020 ◽  
Vol 11 (2) ◽  
pp. 299-315 ◽  
Author(s):  
Yanyu Chen ◽  
Wenzhe Zheng ◽  
Yimiao Huang
Keyword(s):  
Firm Value ◽  
Negative Impact ◽  
Listed Companies ◽  
Political Connections ◽  
Independent Directors ◽  
The Political ◽  
Political Connection ◽  
Exogenous Shock ◽  
Content Type ◽  
Negative Effect

Purpose The purpose of this paper is to use difference-in-difference method (DID) to study the influences of independent directors’ political connection on firm value. Design/methodology/approach File No. 18 by the Organization Department of the Communist Party of China Central Committee requires that the leading cadres in party and government offices are not allowed to act as independent directors; this restriction applies to retired officials as well. As a result, many listed companies lose the political connections of officers as independent directors. This paper takes it as an exogenous shock to evaluate the influence of the political connection of independent directors on firm value, effectively alleviating the endogeneity problem existing in previous studies. Findings The research finds the following: under the policy of compelled resignation, the loss of political connection of independent directors has a prominent negative impact on firm value; and compared to state-owned enterprises, the firm value of private enterprises receives a greater negative impact. However, the political advantage of state-owned enterprises is not obviously influenced. In the regions with worse external market environments, due to a greater reliance on resources brought about by political connection, the policy has a much greater influence on their listed companies. Research limitations/implications The study faces several limitations, each of which represents a potential research direction. First, our analysis is based on the policy effects on the firm’s current Tobin’s Q and finds a negative effect of losing political connections. However, the long-term effects are still unclear, as some studies find a negative effect of political connections. Second, the paper focuses on one channel in which political connections may affect firm value. Other channels, such as subsidies and loans from state-owned banks, which need more granular data, should be explored in the future. Practical implications The use of DID model can better objectively evaluate the implementation effects of ban policies and alleviate endogenous problems, which is also enlightening for further perfection of the system of independent directors in the A-share market. Social implications It enriches existing researches of the value of independent directors from the perspective of political connection, which is conducive to understanding the influence and channel on the firm value after the loss of political connection and the value of independent directors in the corporate governance in a more comprehensive and accurate manner. Originality/value This paper extends the relevant research on the value of the political connection of independent directors from the perspective of political connection and enlightens the evaluation of the effect of ban policies.

Independent directors and firm value of group-affiliated firms

2017 ◽  
Vol 25 (2) ◽  
pp. 217-236 ◽  
Author(s):  
Amrinder Khosa
Keyword(s):  
Ownership Structure ◽  
Firm Value ◽  
Value Relevance ◽  
Institutional Setting ◽  
Independent Directors ◽  
Board Independence ◽  
Outside Directors ◽  
Content Type ◽  
Listed Firms ◽  
Indian Setting

Purpose This study aims to examine the effect of board independence on firm valuation of group-affiliated firms in distinct Indian setting. Design/methodology/approach This study uses a sample of 317 listed firms comprising 1,350 firm-year observations for the period 2008-2012. The value-relevance model is used to examine the effect of board independence on market value of equity. Findings The distinct finding of an inverse relationship between board independence and firm value of group-affiliated firms in India illustrates that effective monitoring by outside directors is largely influenced by the institutional setting and ownership structure. This study does not find any evidence of different valuation when comparing non-family CEOs and family CEOs. Practical implications Independent directors play an important role to stop abusive use of related-party transactions in an environment where principal–principal conflict exists. The study’s findings will prove useful in determining whether one should rely merely on the independent status of outside directors or the influence of institutional setting on effective governance. Originality/value This paper contributes to the existing literature in the following ways: it helps to gain a better understanding of business groups which are characterised by unique governance structures and the dominance of controlling families on the board, which makes the external governance mechanisms (i.e. independent directors and non-family CEOs) ineffective and it illustrates that effective monitoring by outside directors is largely influenced by the institutional setting and ownership structure.

Does gender diversity on boards reduce information asymmetry problems? Empirical evidence from the French market

2019 ◽  
Vol 10 (2) ◽  
pp. 144-166
Author(s):  
Nadia Loukil ◽  
Ouidad Yousfi ◽  
Raissa Wend-kuuni Yerbanga
Keyword(s):  
Asymmetric Information ◽  
Stock Market ◽  
Gender Diversity ◽  
Market Liquidity ◽  
Idiosyncratic Volatility ◽  
Independent Directors ◽  
Corporate Boards ◽  
Content Type ◽  
Bid Ask Spread ◽  
The Impact

Purpose The purpose of this paper is to investigate the effect of female members in boards of directors on asymmetric information in the French stock market. Design/methodology/approach The authors use two proxies for asymmetric information: the idiosyncratic volatility and the bid-ask spread. This study is conducted on all listed firms in the SBF 120 index between 2002 and 2012. Findings Results show that gender diversity in boardrooms has a negative effect on the level of private information in stock markets and reduces the bid-ask spread. However, these effects are significant in family-controlled firms: female inside directors significantly increase the idiosyncratic volatility and the bid-ask spread, while female independent directors decrease both proxies for stock market liquidity. Research limitations/implications Our empirical findings contribute to the current debate on the benefits of gender diversity on corporate boards from the market perspective. It shows that, under specific conditions, financial markets could be receptive to the presence of female directors in boardrooms. Practical implications Practitioners and policymakers advocate the benefits of gender diversity on corporate boards. This paper shows that when the protection of minority shareholders is poor, the stock market is receptive to the presence of women independent directors, only in family controlled firms. This is a further argument that could help women to overcome glass-ceiling barriers they usually face to achieve top management positions. Originality/value This paper provides support for the increased attention paid to gender-diverse boards. It addresses the market sensitivity toward the presence of women members in French boardrooms and their positions. This is the first paper, to the best of our knowledge, to address how appointing women to different positions in the boardroom could provide signals to investors in the presence of asymmetric information. French firms are mostly family controlled. Thus, the findings bring valuable information of the impact of board diversity on the stock market considering family and nonfamily firms.

scholarly journals Institutional characteristics, signaling variables and IPO initial returns

2019 ◽  
Vol 3 (1) ◽  
pp. 29-49 ◽  
Author(s):  
Sheela Devi D. Sundarasen
Keyword(s):  
Initial Public Offering ◽  
Firm Value ◽  
Civil Law ◽  
Oecd Countries ◽  
Legal Framework ◽  
Least Square ◽  
Institutional Characteristics ◽  
Cross Sectional ◽  
Content Type ◽  
Public Offering

Purpose This paper aims to provide empirical evidence on the extent of alteration institutional characteristics, i.e. legal origin and corruption levels, may have on the signaling effects of auditors’ reputation, underwriters’ reputation and ownership retention on initial public offering (IPO) initial returns in OECD countries. Design/methodology/approach Cross-sectional data composed of 6,182 IPOs from 30 OECD countries are used for 2003-2012. Ordinary least square with multiple linear regressions is used to test the hypotheses. Findings The findings indicate that the legal framework and corruption level of a country alters the signaling effects of underwriters’ reputation, auditors’ reputation and ownership retention in an IPO environment. These three variables mitigate information asymmetry, signal firm value to potential investors and ultimately decrease IPO initial returns. This relationship is more significant in the civil law countries. Corruption levels negatively moderate the relationship in the common law and Scandinavian civil law countries but have no significance in the German and French civil law countries, indicating the importance of the signaling variables in these two civil law countries. Originality/value This study examines the extent of the alterations that the legal framework and the corruption levels cause to the signaling relationship between auditors’ reputation, underwriters’ reputation and ownership retention on IPO initial returns in selected OECD countries.

Firm web visibility and its business value

2014 ◽  
Vol 24 (3) ◽  
pp. 292-312 ◽  
Author(s):  
Fang Wang ◽  
Liwen Vaughan
Keyword(s):  
Significant Relationship ◽  
Firm Value ◽  
Shareholder Value ◽  
Convincing Evidence ◽  
Business Value ◽  
Cross Sectional ◽  
Content Type ◽  
Web Visibility ◽  
Advertising Efficiency

Purpose – The purpose of this paper is to theoretically analyze and empirically test the business value of firm web visibility, including its relationship to advertising efficiency and long-term financial performance (i.e. shareholder value). Design/methodology/approach – A conceptual framework is established to analyze firm value of web visibility through its market effects. Hypotheses on the associations between firm web visibility and advertising efficiency and shareholder value are tested by cross-sectional analysis of 1,331 firms in six industries and four industry sectors. The authors control for several firm- and industry-level factors. Findings – The results consistently support the two hypotheses, i.e., first, a positive and significant relationship between firm web visibility and advertising efficiency; and second, a positive and significant relationship between firm web visibility and shareholder value. Practical implications – In addition to increasing web traffic, firm web visibility has business value and helps to enhance advertising efficiency and shareholder value. Managers can use the web references as a valuable tool for marketing success when the use of traditional advertising reaches saturation. Managers should actively monitor and use web visibility as a web management measure in practice. Originality/value – This research provides convincing evidence to support both short-term and long-term business value of web visibility and suggests that web visibility be recognized and managed as a market-based asset.

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