Financially Linked Independent Directors and Bankruptcy Reemergence: The Role of Director Effort

2016 ◽  
Vol 44 (7) ◽  
pp. 2665-2689 ◽  
Author(s):  
Punit Arora
Keyword(s):  
Corporate Governance ◽  
Instrumental Variables ◽  
Resource Provisioning ◽  
Financial Resources ◽  
Independent Directors ◽  
Organizational Crisis ◽  
Best Effort ◽  
Research And Practice ◽  
Improve Access

This study examines if the effort of financially linked independent (FLI) directors enable firms to reemerge from bankruptcy, a major organizational crisis. Using a sample of 307 bankrupt U.S. firms with instrumental variables regression methodology, I find that the efforts of these directors are critical for firm reemergence. FLI directors’ efforts increase the likelihood of reemergence as well as improve access to financial resources. In contrast, I do not find any evidence that non-FLI directors’ efforts are associated with reemergence. I also find that resourceful but uninvolved directors are not helpful for firms trying to navigate their way out of bankruptcy. My study highlights (a) the changing nature of roles played by directors in various lifecycle stages, (b) the greater importance of resource provisioning over monitoring during reemergence, and (c) that efforts of FLI directors, and not others director categories, matter for reemergence. Overall, my study extends research that suggests directors’ motivation may cause differential firm outcomes and provides evidence that directors do not always put in their best effort on behalf of their firms. This, I suggest, has profound implications for corporate governance research and practice.

scholarly journals Limiting role of resource dependence: an examination of director interlocks, board meetings and family ownership

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Vidya Sukumara Panicker ◽  
Rajesh Srinivas Upadhyayula
Keyword(s):  
Board Of Directors ◽  
Resource Dependence ◽  
Family Firms ◽  
Emerging Market ◽  
Resource Provisioning ◽  
Independent Directors ◽  
Family Ownership ◽  
Independent Director ◽  
Content Type

PurposeThis paper attempts to examine the activity and involvement of board of directors in internationalization activities of firms in emerging markets, by evaluating the resource provisioning roles of interlocks provided by board of directors, and the frequency of board meetings. We demonstrate that the effectiveness of board involvement is contingent upon the levels of family ownership in firms since family ownership could impact the firm’s ability to utilize the presence of different types of board members.Design/methodology/approachThe authors test our hypotheses on a sample of listed Indian companies, extracted from the Prowess database published by the Centre for Monitoring Indian Economy (CMIE), a database of the financial performance of Indian companies. On a panel of 3,133 firm years of 605 unique Indian firms with foreign investments, over a time period of 2006–2017, the authors apply different estimation techniques.FindingsThe results demonstrate that both board meeting frequency and director interlocks are instrumental in supporting internationalization activities in emerging market firms. However, family ownership moderates the role of insider and independent interlocks on internationalization investments in different ways; the authors find that interlocks provided by independent directors support internationalization activities in family firms, whereas those provided by insider directors do not. Further, the study also finds that board meetings are less effective in internationalization of family firms.Practical implicationsThe authors conclude that family firms aiming at international diversification require to develop more connected and networked independent directors to enable internationalization in firms. While independent director interlocks enhance the international investments, it is also useful to know that board meetings are ineffective in utilizing the resources in family firms. This points to the possibility that family firms should device mechanisms to integrate family meetings with board meetings so that they can utilize the within-family processes to aid in their internationalization decisions.Originality/valueThe study contributes to resource dependence theory by understanding its limiting role in family firms. Theoretically, it helps delineate the limiting resource provision role of the insider directors vis-à-vis independent directors. The authors argue that the resource provision role of insider director interlocks does not effectively help in internationalization in comparison to independent director interlocks in family-dominated firms. Consequently, the study shows the limiting role of resource provision and utilization by family-owned firms in comparison to non-family-owned firms.

scholarly journals Corporate Governance in Family Businesses: The Role of the Non-Executive and Independent Directors

2016 ◽  
Vol 04 (01) ◽  
pp. 14-35
Author(s):  
Alfred Sarbah ◽  
Isaac Quaye ◽  
Emmanuel Affum-Osei
Keyword(s):  
Corporate Governance ◽  
Family Businesses ◽  
Independent Directors

scholarly journals The influence of cultural values on the board of directors: Lessons from five corporations

2012 ◽  
Vol 9 (4-2) ◽  
pp. 221-229 ◽  
Author(s):  
Elsa Satkunasingam ◽  
Aaron Yong ◽  
Sern Cherk
Keyword(s):  
Corporate Governance ◽  
Cultural Values ◽  
Board Of Directors ◽  
Senior Management ◽  
Independent Directors ◽  
Board Members ◽  
Differences Of Opinion ◽  
The Board Of Directors ◽  
Code Of Corporate Governance

The Malaysian Code of Corporate Governance 2000 emphasises the monitoring role of the Board of Directors, especially that of independent directors. It has not however taken into account the cultural values in Malaysia which do not encourage differences of opinion or criticisms and has failed to provide sufficient safeguards for directors to exercise their role effectively. As a result, it is relatively easy for dominant Chairmen or CEOs especially in government-linked companies or CEO dominated companies to control the Board or senior management with very little opposition. This paper will discuss several incidences of financial mismanagement in companies caused by dominant directors with very little opposition from the rest of the board. It will highlight that the law has to take cultural values more seriously in order to equip the Board and especially independent directors with the ability to challenge dominant Board members.

Directors' Role and Responsibilities under the Light of New Amendment Act of Company Law

2017 ◽  
pp. 160-177
Author(s):  
Saroja V. B. N. H. Achanta ◽  
Radhika Raavi
Keyword(s):  
Corporate Governance ◽  
Company Law ◽  
Independent Directors ◽  
Independent Director ◽  
The Government ◽  
First Time

The chapter focuses on the key changes the roles and duties of Directors and Independent Directors under the light of New Amendment Act, 2013 of the Companies Act, 1956. This chapter analyzes the role of Directors / Independent Director by comparing the two major Companies Act 1956 and Companies Act 2013. Company Act 2013, is an initiation for better corporate governance, increasing levels of transparency and enhance the corporate and auditor's accountability. New Amendment Act of 2013 is a good legislative attempt by the Government. The following points are focused for the first time in this New Act, 2013. Duties of Directors are defined and Role of Independent Directors is defined. The Board has to take the precautions to implement proper systems and to ensure that all the compliance with the provisions of all the applicable laws which were adequate and operating effectively. As per the provisions of the New Act, 2013 the maximum number of Directors can be appointed are 15 with a special resolution, can be increased more than 15. Made provision for women Director.

Tools for improving the efficiency of corporate governance at enterprises of rocket and space engineering

2021 ◽  
pp. 14-20
Author(s):  
М.С. Абрашкин ◽  
Н.С. Хорошавина ◽  
М.С. Гусаков
Keyword(s):  
Corporate Governance ◽  
Goal Setting ◽  
Boards Of Directors ◽  
Equity Capital ◽  
Independent Directors ◽  
State Participation ◽  
Legal Forms

Сложившиеся условия развития предприятий ракетно-космического машиностроения требуют переосмысления эффективности их корпоративного управления, подходов к формированию советов директоров и обоснованию привлечения независимых директоров в их составах. Специфика отрасли требует трансформации функции целеполагания, усиления роли экономических результатов над общественными, которые при условии превалирования участия государства в акционерных капиталах выступают доминирующими. По результатам исследования 62 предприятий отрасли удалось установить изменение их организационно-правовых форм в сторону нарастания акционерных обществ, а анализ выборочной совокупности из них позволил установить закономерности в корпоративном управлении и концептуализировать предложения по его совершенствованию. The current conditions for the development of rocket and space engineering enterprises require a rethinking of the effectiveness of their corporate governance, approaches to the formation of Boards of Directors and the rationale for attracting independent directors in their composition. The specifics of the industry require the transformation of the goal-setting function, the strengthening of the role of economic results over public ones, which, given the prevalence of state participation in equity capital, are dominant. According to the results of the study of 62 enterprises in the industry, it was possible to establish a change in their organizational and legal forms towards the growth of joint-stock companies, and the analysis of a sample of them made it possible to establish patterns in corporate governance and conceptualize proposals for its improvement.

Reflecting Inward and Looking Outward

2013 ◽  
Vol 2 (2) ◽  
pp. 115-146
Author(s):  
E. Eugene Clark
Keyword(s):  
Corporate Governance ◽  
Growth And Development ◽  
Sustainable Growth ◽  
Evidence Based ◽  
Future Trends ◽  
Research And Practice ◽  
Institutional Frameworks ◽  
Impact Of Technology ◽  
The Impact

This article surveys future trends impacting corporate governance research and practice. These trends, which will impact all countries, but to varying degrees, include a movement towards unifying the diverse theories, models and language deployed in corporate governance research so that we can have a sounder epistemological base from which to advance our knowledge. Also discussed are the impact of technology on corporate governance research; the move to more inclusive and interdisciplinary models; a greater emphasis on Asian models of corporate governance; the impact of soft law; continued emphasis on the role of corporate governance in achieving sustainable growth and development; corporate governance within the context of new forms of capitalism and new institutional frameworks; a greater focus on comparative law and transnational models; and finally, an increased demand for evidence- based outcomes.

scholarly journals How Does Corporate Governance Affect Bank Performance? The Mediating Role of Risk Governance

2018 ◽  
Vol 13 (10) ◽  
pp. 212
Author(s):  
Paola Leone ◽  
Carmen Gallucci ◽  
Rosalia Santulli
Keyword(s):  
Corporate Governance ◽  
Boards Of Directors ◽  
Governance Structure ◽  
Independent Directors ◽  
Risk Governance ◽  
Bank Performance ◽  
Board Size ◽  
Mediating Role ◽  
Risk Committee

This paper aims to investigate how bank governance (board size, board composition, ownership structure) affects performance (ROA), by considering the mediating role of risk governance (presence of a risk committee, the number of meetings of the risk committee in one year, the risk committee size, the percentage of independent directors in the risk committee, and the presence of a chief risk officer). A sample of 31 Italian listed banks is examined over a ten-year period (2008-2017), in order to delineate the changes in corporate governance structure and to catch the effects of the current national and European regulations followed to the financial crisis. Hypotheses are tested by applying a mediation analysis according to the causal steps procedure. The main findings suggest that risk governance fully mediates the corporate governance-bank performance relationship. Specifically, we find that the board size is positively related to the presence of a risk committee and to the number of meetings. The percentage of independent directors on board is positively related to the percentage of independent directors in the risky committee and, in turn, has a positive effect on performance. Finally, the presence of institutional owners is positively related to the presence of a chief risk officer and, thus, to bank performance. Summing up, banks with wider and more heterogeneous boards of directors have better risk management-related corporate governance mechanisms and reach higher performance levels.

scholarly journals Emerging policies and the effectiveness of corporate governance mechanisms on earning quality

2020 ◽  
Vol 9 (3) ◽  
pp. 157-164
Author(s):  
Mohammed Mahdi Obaid ◽  
Muneer Rajab Amrah
Keyword(s):  
Corporate Governance ◽  
Audit Committee ◽  
Gulf Cooperation Council ◽  
Independent Directors ◽  
Board Independence ◽  
Governance Mechanisms ◽  
Corporate Governance Mechanisms ◽  
Earning Quality ◽  
The Relationship

Current study review extant empirical researches on the relationship between CG and EQ. However, the scope of the reviewed studies was shown to vary, most studies on CG and EQ are specific in focus, with different studies focusing on specific aspects or measures of CG. This study evaluates the role of emerging policies and the effectiveness of corporate governance mechanisms on earning quality within a conceptual framework for the Gulf cooperation council. This study concludes that the majority of companies with big board size, higher board independence, and more frequent meetings have improved EQ. Also, the result indicates companies with big audit committee size, a larger number of independent directors, more audit committee meetings and more experts tend to have an increase in EQ. Finally, this review emerged as a framework suitable for assessing the level of EQ disclosed and the relationship between CG and EQ base on GCC policies.

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