Effect of Board Diversity, Promoter’s Presence and Multiple Directorships on Firm Performance

2019 ◽  
Vol 12 (2) ◽  
pp. 169-186
Author(s):  
Nailesh Limbasiya ◽  
Hitesh Shukla
Keyword(s):  
Financial Performance ◽  
Negative Relationship ◽  
Mediation Effect ◽  
Independent Directors ◽  
Hierarchical Regression ◽  
Board Diversity ◽  
Return On Equity ◽  
Net Worth ◽  
Multiple Directorships ◽  
Age Diversity

Purpose: This article analyses the effect of board diversity on the financial performance of non-financial firms listed in the Nifty Index. Specifically, it examines the mediation effect of the promoter’s presence and multiple directorships on the financial performance of the firm, that is, return on net worth (RONW), return on equity (ROE) and its sales growth. Methodology: The article uses the hierarchical regression model to analyse the effect of board diversity on financial performance. The presence of the promoters on the board and multiple directorships are taken as the control variables. Findings: Empirical results show the significant effect of the promoter’s presence on the board on the firm’s earnings and a significant positive effect of firm age, board size, age diversity and experience diversity on the financial performance. However, we do not find any statistically significant relationship between firm size and financial performance in any model. The results also show that the age and experience of the female directors are significantly less compared to the male directors. However, the age and experience of the non-executive directors and independent directors are found to be higher among the other positions held by the directors. We also find a negative relationship between multiple directorships in other firms and the financial performance of the firm. Value: The article proposes that there should be a greater number of independent directors in a firm that has its promoter on the board. One recommendation for the board is to reduce the number of directorships held in other boards to ensure more constructive contribution towards the firm’s financial performance. The article studies the effect of the promoter’s presence on the board and multiple directorships held by board members on the financial performance of the firm.

scholarly journals Empirical Research Towards the Factors Influencing Corporate Financial Performance on the Bucharest Stock Exchange

2014 ◽  
Vol 61 (2) ◽  
pp. 219-233 ◽  
Author(s):  
Georgeta Vintilă ◽  
Elena Alexandra Nenu ◽  
Ştefan Cristian Gherghina
Keyword(s):  
Financial Performance ◽  
Stock Exchange ◽  
Social Performance ◽  
Negative Relationship ◽  
Positive Influence ◽  
Corporate Financial Performance ◽  
Return On Equity ◽  
Equity Ratio ◽  
Potential Factors ◽  
Corporate Social

Abstract This study aims to investigate the potential factors of influence on corporate financial performance, by using the panel data regression analysis. The research was employed for a sample consisting of 40 companies listed on the Bucharest Stock Exchange, over the period 2010-2012. Corporate financial performance considered as the dependent variable was proxied through return on assets, return on equity, and Tobin’s Q ratio. There were selected the following factors that could influence corporate financial performance: capital structure, firm size, and corporate social responsibility involvement. Likewise, several control variables have been introduced: structure of the ownership and institutional investors. The results show a strong negative relationship between corporate financial performance and debt to equity ratio. Also, there has been revealed a positive influence of the company size on performance, although weak. Furthermore, the relationship between financial performance and social performance has been statistically validated, both using accounting and market ratios.

scholarly journals Corporate Governance Independence in the Board of Directors and The Firms Financial Performance: Empirical Analysis of Cement Sector Firms Listed on Pakistan Stock Exchange (PSX)

2021 ◽  
Vol 09 (01) ◽  
pp. 01-24
Author(s):  
Muhammad Noman Ansari ◽  
◽  
Dr. Sayed Fayaz Ahmed
Keyword(s):  
Corporate Governance ◽  
Financial Performance ◽  
Board Of Directors ◽  
Stock Exchange ◽  
Agency Cost ◽  
Independent Directors ◽  
Return On Assets ◽  
Return On Equity ◽  
Board Committees ◽  
The Board Of Directors

The corporate governance measures emphasize on presence of independence of the board of directors to bring objectivity and reducing the agency cost; whereas the institutions have the ability, skills and time to supervise the activities of the management and channelize it to better financial performance. The objective of this study is to explore the effect of independence of the board of directors on the financial performance of the firms. The independence was gauged by number of independent directors and non-executive directors, chairing of board committees by independent directors, institutional holding in the firm, and presence of institutional directors on the board. The financial performance of the firm is gauged using the return on equity (ROE) and return on assets (ROA). The corporate governance and financial performance data comprising of 75 firm years from 2014 to 2018 of the firms listed in the cement sector of the Pakistan Stock Exchange (PSX) were selected. GLM regression was performed to study the relationship between the variables. The results suggest that the majority of independence on the board of directors do not affect the financial performance of the firm; the independence in the board committees negatively affects the financial performance, whereas the presence of institutional holding and director in the firm does not have any effect on the performance of the firm. The study will provide a basis for future studies to find the association that independence can bring objectivity, reduce agency cost, and affect the performance of the firm.

Financial performance and risk behavior of gender-diversified boards in the Chinese automotive industry

2017 ◽  
Vol 46 (4) ◽  
pp. 847-866 ◽  
Author(s):  
Sven Horak ◽  
Jingjing Cui
Keyword(s):  
Financial Performance ◽  
Risk Behavior ◽  
Automotive Industry ◽  
Chinese Government ◽  
Corporate Boards ◽  
Corporate Board ◽  
Board Diversity ◽  
Content Type ◽  
Return On Equity ◽  
Women's Participation

Purpose Recent legislation in Europe and North America encourages women’s participation in corporate boards based on the belief that gender-diversified boards contribute positively to firm performance and increased competitiveness. Contrary to the West, the women’s participation rate in business has been traditionally high in China. The purpose of this paper is to find out whether gender-diverse corporate boards of Chinese automotive firms perform better financially than gender-homogeneous boards. Design/methodology/approach By drawing on data from the Chinese Government and Bloomberg, the authors compare and analyze the differences in financial performance (return on equity, asset growth, sales growth) and risk behavior (debt risk, R&D expenditure) of Chinese automotive firms with and without women on their corporate board. Findings There is significant evidence that firms with women on the board perform better across all three categories, with the exception of return on equity, for which they found no significant differences among the analyzed firms. Practical implications While women’s participation in corporate boards in China is low, the results of this study suggest to policy makers and firms alike to implement measures that support gender-diversified boards in order to take advantage of their potential to increase corporate performance. Originality/value So far, the performance of corporate boards of countries with a traditionally high share of female participation in the workforce has rarely been analyzed. Research focusing on the Chinese automotive industry is new and underrepresented, although China is the largest automotive market worldwide and a key industry of the domestic economy. This investigation contributes to the literature stream on board diversity in as well as to industry-related studies. With the example of the Chinese automotive industry, it provides empirical evidence of better performance of firms with gender-diversified boards within the categories tested.

Effect Of Debt Financing On Financial Performance Of Listed Non-Financial Firms In Kenya

2020 ◽  
Vol 8 (7) ◽  
pp. 485-496
Author(s):  
Philip Njau Kibunja ◽  
Olanrewaju Isola Fatoki
Keyword(s):  
Financial Performance ◽  
Negative Relationship ◽  
Debt Financing ◽  
Medium Term ◽  
Short Term ◽  
Return On Equity ◽  
Financial Firms ◽  
Panel Data Regression ◽  
Study Results

This study sought to examine the effect of debt financing on the financial performance of non-financial firms listed on the Nairobi Securities Exchange in the five-year period 2013 to 2017. Using a sample of 23 listed non-financial firms data was collected from published financial statements of the sampled firms and analysed statistical using the panel data regression method. The independent variables were short-term, medium term and long-term debt while the explained variable was return on equity. Three control variables, firm size, sales growth and growth opportunities, were included and considered as having an effect on the relationship between the independent and dependent variables.  The study results observed that medium-term debt had a negative and statistical significant relationship with return on equity. Long-term debt had a positive but statistically insignificant relationship while short-term debt had a negative relationship with return on equity.

Top management team (TMT) tenure diversity and firm performance

2016 ◽  
Vol 24 (3) ◽  
pp. 454-470 ◽  
Author(s):  
Tomohiko Tanikawa ◽  
Yuhee Jung
Keyword(s):  
Firm Performance ◽  
Top Management Team ◽  
Negative Relationship ◽  
Management Team ◽  
Hierarchical Regression ◽  
Top Management ◽  
Content Type ◽  
Return On Equity ◽  
Firm Financial Performance ◽  
Age Related

Purpose The purpose of this paper is twofold: first, to investigate the effect of top management team (TMT) tenure diversity and firm financial performance (return on equity [ROE], return on assets [ROA]), and, second, to examine the moderating effect of TMT average age between TMT tenure diversity and firm performance. Design/methodology/approach The paper presented results from a quantitative study of 744 TMTs in Japanese manufacturing firms. The multiple hierarchical regression analysis was used to test the hypotheses. Findings The results show that TMT tenure diversity had a negative and significant main effect on ROE but not ROA. Furthermore, the results also indicated that the negative relationship between TMT tenure diversity and firm performance was attenuated by having older TMTs. Originality/value First, this paper expands scope of research on TMT diversity, which has hitherto primarily on non-individualistic variables (such as industry setting) by examining the moderating role of an individualistic variable (TMT average age). Second, this paper extended the attempts to apply the age-related theory by considering the role from the viewpoint of group level, namely, TMT average age.

scholarly journals The relationship between measures of operations efficiency and financial success of truckload motor carriers: An empirical analysis

2010 ◽  
Vol 21 (3) ◽  
pp. 7-17 ◽  
Author(s):  
Ahren Johnston
Keyword(s):  
Financial Performance ◽  
Average Length ◽  
Negative Relationship ◽  
Publicly Traded ◽  
Return On Assets ◽  
Return On Equity ◽  
Motor Carrier ◽  
Motor Carriers ◽  
Motor Carrier Industry ◽  
The Relationship

This research paper examines the statistical relationship between clay to day performance and effi­ ciency measures and financial performance in the motor carrier industry. Key findings are that carriers with more miles per tractor per year, a larger average length of haul, more revenue per mile, and more revenue per tractor per week tend to perform better financially as measured in three separate models by operating ratio, return on assets, or return on equity. Unexpectedly, for the eight publicly traded carriers included in the analysis, there was a negative relationship between empty mile percentage and financial performance, indicating that carriers with a higher empty mile percentage have better financial perfor­ mance. Possible explanations for these counterintuitive results could be due to a focus on better cus­ tomer service or driver satisfaction causing slight increases in empty miles. Therefore the increased costs resulting from empty miles could be offset by higher revenue or decreased costs in other aspects of the operation. These results suggest that managers should focus not on minimizing empty miles but rather on keeping them within an acceptable range.

scholarly journals Relationship of board diversity with firm’s financial performance: The case of publicly listed companies in China

2021 ◽  
Vol 19 (1, special issue) ◽  
pp. 229-240
Author(s):  
David Qian ◽  
Wahed Waheduzzaman ◽  
Sarod Khandaker
Keyword(s):  
Financial Performance ◽  
Stock Exchange ◽  
Listed Companies ◽  
Hierarchical Regression ◽  
Measurement Tool ◽  
Tobin’S Q ◽  
Tobin's Q ◽  
Board Diversity ◽  
Value Measurement ◽  
The Impact

This study examines the impact of board diversity including the gender, nationality, and independence of board members on the financial performance of publicly listed companies in China. This study uses a sample of 206 publicly listed companies on the Shanghai Stock Exchange and the Shenzhen Stock Exchange in China to measure the impact of board diversity on their financial performance. Organizational financial performance is measured with the widely-used accounting-based measurement tool return on asset (ROA), and the market value measurement tool Tobin’s Q. After applying a hierarchical regression analysis this study finds that women on the board impact positively on firm’s financial performance while measures by ROA, but not by Tobin’s Q. The study also finds that the nationality of directors and independent board membership is found to have no significant influence on firms’ financial performance. This study has implications on the business firms to develop the strategic guidelines of board composition to ensure the effectiveness and profitability of their companies

scholarly journals BOARD DIVERSITY AND FINANCIAL PERFORMANCE IN INDONESIA

2021 ◽  
Vol 2 (2) ◽  
pp. 86-95
Author(s):  
Werner Ria Murhadi ◽  
Deliana Azaria ◽  
Bertha Silvia Sutedjo
Keyword(s):  
Financial Performance ◽  
Board Of Directors ◽  
Firm Value ◽  
Independent Directors ◽  
Board Independence ◽  
Board Diversity ◽  
Company Value ◽  
Large Size ◽  
The Board Of Directors ◽  
The Relationship

Corporate governance has attracted many researchers to examine the relationship between board characteristics and financial performance. This study aims to determine the effect of board diversity, board size, and board independence on financial performance. This research is panel data with the number of observations reaching 1,355 years of observation. Financial performance is measured using accounting-based and market-based. It was found that the presence of female directors could not provide sound financial performance, even with a woman's prudence attitude would have an impact on decreasing the company's market value. The size of the board of directors does not affect financial performance, and the large size of the board of directors will have an impact on the decline in firm value. Independent directors are also not proven to be able to improve the company's financial performance; even the tendency of companies to carelessly fulfill the provisions of the rules regarding the existence of independent directors will bring a burden to the company so that it has an impact on the decline in company value.

scholarly journals Financial Leverage and Financial Performance: Empirical Evidence From Listed Textile Industry of Pakistan

2018 ◽  
Vol 8 (4) ◽  
pp. 457
Author(s):  
Laila Javeed ◽  
Rehana Tabassam
Keyword(s):  
Financial Performance ◽  
Textile Industry ◽  
Manufacturing Industry ◽  
Negative Relationship ◽  
Financial Leverage ◽  
Organizational Capability ◽  
Return On Equity ◽  
Financial Condition ◽  
The Impact ◽  
Textile Sector

The textile sector in Pakistan is the largest manufacturing industry and recognizable model of resistance economy. Over centuries, textile sector has been the country’s backbone making available sources of occupation and export returns. Generally, financial leverage is the organizational capability of using borrowed money. It can be described as a fraction, to which a company uses fixed income securities such as debt and equity. The objective of the current study is measuring the impact of financial leverage on firm’s financial condition. It is essential to know whether a positive or negative relationship exists between two terms, financial leverage and financial performance of the textile industry; evidence from the listed firms of Pakistani textile industry from 2007-2016. Pooled regression analysis technique shows that there is positive relationship between financial leverage and financial performance (Returns on Assets, Sales Growth and Net Profit Margin). On the other hand, negative relationship exists between Return on Equity ratio. It is confirmed that the organizations have more profitability, might enhance the financial performance having more levels of financial leverage. This study also gives evidence by estimating different facts. It exposes that the main elements of the textile industry in Pakistan enhance their financial performance by employing the financial leverage strategy and can attain a sustainable future growth by making decisions about the selection of their optimum capital structure.

scholarly journals Why do Islamic Banks Concentrating Finance in Murabaha Mode? Performance and Risk Analysis (Sudan: 1997-2018)

2020 ◽  
Vol 13 (7) ◽  
pp. 208
Author(s):  
Omer Allagabo Omer Mustafa
Keyword(s):  
Risk Analysis ◽  
Credit Risk ◽  
Financial Performance ◽  
Positive Relationship ◽  
Negative Relationship ◽  
Ordinary Least Squares ◽  
Islamic Banks ◽  
Return On Equity ◽  
Risk Return ◽  
Strong Negative Relationship

During 1997-2018, Islamic Banks (IBs) in Sudan provided finance by Murabaha mode to their clients with more than 45% on average. This position raises questions of why do IBs concentrating finance in Murabaha Mode rather than other modes? is this concentration implying risk and does it have influence on the financial performance of IBs? This study aimed to discusses the reasons and answer these questions. Nonperforming loan(NPL), Murabaha to gross finance, Musharaka to gross finance, Mudabaha to gross finance and Salam to gross finance were used to indicate the credit risk. Return on Equity (ROE) was used to indicate the financial performance of IBs. Ordinary least squares technique was employed to determine the trend of relations between the variables. The main results of the study show that there is an important positive relationship between the NPL and provision finance by both Murabaha and Mudaraba modes. Whereas were a negative with both Musharaka and Salam. Moreover, it’s found that there is strong negative relationship between NPL and ROE. The main reason for the expansion granting finance by Murabaha mode is that IBs are heavy rely on collaterals and in case of clients’ failure to pay, they sell collaterals to keep their financial performance safety. The study strongly recommends IBs importance of diversify the granting finance among Islamic modes of finance to avoiding the risk of concentration the finance by Murabaha mode. Furthermore, monetary authority in Sudan need to keep IBs aware with the risk associated with Islamic modes, especially Murabaha.

Sign in / Sign up

Export Citation Format

Share Document