Board Structure Problem in Aviation Companies: The Relationship of Political Connection and Multiple Directorship on Firm Performance

This study analyzes the relationship between the political connection and multiple directorships of aviation companies’ board members and their firm performance. This research will focus on companies in the aviation sector on a broader subsector than previous studies. It will help the shareholder of the aviation companies determine board structure policies and evaluate the implementations conducted so far. This research uses descriptive statistics and regression analysis for the panel data model. Moreover, this study uses a purposive sampling technique secondary data from the aviation company’s annual reports in the Asia continent for the 2016-2020 period. The results show that the multiple directorships negatively affect firm performance in aviation companies while the board’s political connections positively affect firm performance, measured by its Return on Equity (ROE). In contrast, the multiple directorships and political connections do not impact aviation companies' firm performance measured by their Return on Assets (ROA). Overall, this study in the Asia continent asserts the previous study where the political connection positively affects the airline’s firm performance in the US. The result can support the corporate governance practice of deciding board structure in the aviation sectors in Asia in terms of political connection and multiple directorships.DOI: 10.26905/jkdp.v25i3.5892

Multiple directorships and earnings quality: Does investor protection matter?

Purpose This study aims to investigate whether higher earnings quality is related to the existence of multiple directorships among corporate boards and whether this relationship varies with the quality of investor protection. Design/methodology/approach This paper used a dynamic panel data modelling on the sample of 2,090 firm-year observations over the period from 2007 to 2016 in Malaysia. The generalized method of moments estimators were used to deal with endogeneity and other econometric problems. Findings This study finds that the accumulation of several outside directorships is negatively associated with the firm's earnings quality, as measured by the magnitude of discretionary accruals. More importantly, the findings provide evidence that multiple directors are more efficient in improving earnings quality in healthy investor protection environment. Practical implications The appointment of directors should be based on market-based and not on a relationship (i.e. financial and industry professionals). Originality/value The results highlight the importance of interaction between internal and external governance mechanisms to improve the firm's financial performance, investment and market efficiency. High-quality investor protection and law enforcement are significant for enhancing the monitoring role of multiple directorships in improving earnings quality.

New insights into the nexus between board characteristics and intellectual capital disclosure: the case of the emerging economy of Mauritius

PurposeWe investigate the association between intellectual capital disclosure (ICD) and board characteristics in the unique setting of Mauritius, a Small Island Developing State. The uniqueness of the setting stems from the country's corporate governance landscape, where most companies have female directors and a high proportion of directors with multiple directorships, director independence is symbolic and directors come from a close-knit group.Design/methodology/approachWe use 120 firm-year observations from companies listed on the Stock Exchange of Mauritius from 2014 to 2017. All data is hand collected from annual reports using content analysis method. Panel multivariate regression is used to test the hypotheses with relevant controls, including intellectual capital performance.FindingsICD is negatively associated with board independence and positively associated with gender diversity of the board. No association is found between ICD and the size of the board, multiple directorships or the average tenure of the board members.Originality/valueThis is the first study investigating the association of board gender diversity, multiple directorship and tenure of board members with ICD in annual reports. The relationships observed between board characteristics and ICD highlight the context-dependent nature of these relationships. This study also overcomes the correlated omitted variable bias likely to have affected the analyses in previous studies examining the nexus between board characteristics and ICD through its control for intellectual capital performance.

The influence of board social capital on corporate social responsibility reporting

PurposeThe main objective of this paper is to analyze the influence of multiple directorships, as a critical component of board social capital, on CSR reporting. This study also explores the moderating effect of certain board attributes on multiple directorships.Design/methodology/approachThe authors’ sample is composed of Spanish listed firms in the Madrid Stock Exchange for the period 2011–2017. A dynamic panel data model based on the Generalized Method of Moments (GMMs) is employed.FindingsRelying on a resource dependence view, the authors’ results highlight an ambiguously positive association between multiple directorships and the level of CSR reporting. In particular, this relationship is positively moderated by both board size and gender diversity.Research limitations/implicationsThese findings contribute to academic debates concerning the value of board members intellectual capital. In particular, the authors emphasize the importance of board social capital, as well as the need to consider the context in which directors make decisions.Practical implicationsThis evidence may prove helpful to firms when configuring the board of directors, and for regulators and professionals when refining their legislations and recommendations.Originality/valueTo the best of the authors' knowledge, this is the first study that empirically analyzes the impact of an important element of board social capital, such as multiple directorships, on CSR reporting, which has become crucial in financial markets.

Board busyness and firm productivity

PurposePrior studies provide mixed evidence on the association of board busyness and firm productivity. Thus, this paper empirically analyzes how board busyness affects firm productivity.Design/methodology/approachTo measure board busyness, this paper computes the percentage of directors on a board who sit on three or more boards. Furthermore, to calculate firm productivity, the paper employs data envelopment analysis.FindingsFindings demonstrate that the association of board busyness and firm productivity (association) is generally negative and statistically significant but economically insignificant. In this respect, the findings reveal that the association is negative (positive) and both statistically and economically significant for firms having higher monitoring (advising) needs. Moreover, the findings demonstrate that regulatory oversight (1) weakens the general negative association; (2) changes the direction of association from negative to positive, for firms having higher monitoring needs; and (3) does not influence the association, for firms having higher advising needs.Originality/valueTaken together, the findings indicate that the association of board busyness and firm productivity is conditional to monitoring/advising needs and regulatory oversight. As such, the findings enrich the current debates on the association. Furthermore, the findings offer novel perspectives to enrich the regulatory frameworks of countries which are constraining multiple directorships.

Comprehensive Corporate Governance Mechanism and Disclosure Quality: Evidence from the United Kingdom

Our study empirically examines the relationship between corporate governance and disclosure quality from the context of the United Kingdom. While studies on corporate governance and disclosure quality are extensive, we argue that only limited studies have utilised analyst forecast accuracy as a proxy for disclosure quality. We concentrateon the analyst forecast accuracy since we value the credibility of financial analysts in forecasting the firm’s earnings. Analyst are the expert users of the firm’s information and they rely on their analysis to predict firm’s earnings as well as to make a recommendation. We derived our sample from the analyst perception on the firms with high quality of disclosure that is the Investor Relation (IR) Magazine Award. Specifically we used 127 match-paired sample (i.e., winners and non-winners) of IR Magazine Award during the year 2005-2008. We measure corporate governance using board characteristics, audit committee characteristics, chairman and audit committee multiple directorships, chairman tenure and institutional ownership. Our findings report that multiple directorship by audit committee consistently increases disclosure quality. This suggest that the multiple directorships held by audit committee in other firms potentially improve their knowledge and experience in improving the quality of disclosure.Moreover, the result also shows a negative association between audit committee financial expertiseand board independent on the extent of quality of disclosure. These findings imply that the appointment of audit committee with financial expertise as well as an independent directors are merely a ticking the box activities, thus it appears in the letter form, but not in spirit. Our results are robust across various estimation, alternative measurement as well as endogeneity test that we have conducted.

Gender diversity on board of directors: comprehensive analysis of female directorate networks and the linkage between busyness and performance

Purpose Drawing from social capital theory, this study aims to investigate the manifested critical barriers in deriving and implementing gender diversity policies, paying particular attention to the role multiple directorships play in shaping the directors’ behavior and the dynamic of the board of directors. The study comprehends social capital as a multi-dimensional concept and uses combinations of interconnected internal, external, expressive and instrumental networks. Design/methodology/approach The study uses a mixed-method approach through which the quantitative approach is supplemented by a qualitative research method to comprehensively examine the development and impact of female directors’ networks in Australia. To do so, a large data set consisting of 2,527 observations of all Australian firms and data emerged from semi-structured interviews with female directors were brought together and analyzed. Findings The findings reveal an inverted U-shaped relationship between the size of women’s directorate networks and firm performance. The study additionally explicates the key moderating factors influencing the optimal number of multiple directorships. The key power-based and psychological well-being-related benefits of the inter- and intra-organizational interactions and “open” directorate networks for individual directors are further discussed. The findings also elucidate the status quo vis-à-vis labyrinth metaphor and excessive numbers of directorships. Social implications The study should be of interest to those interested in effective gender diversity management. The findings would assist in enabling tangible outcomes for women through advanced processes and systematic investment in and institutionalization of well-structured, equitable opportunities provided via gender-responsive policies dedicated to the education and training of future female directors. Originality/value Calling for social dialogues and discussions on non-financial factors, this study adds to the scarce literature on influential factors related to diversity management policies and practices on the board of directors.