Moderating role of Shariah committee quality on relationship between board of directors effectiveness and the performance of Malaysian Takaful

Purpose The purpose of this study is to examine the effect of Board of Directors Effectiveness (BODE) on the performance of Malaysian Takaful companies licensed by the Central Bank of Malaysia. In addition, the study investigates the moderating effect of Shariah Committee Quality (SCQ) on the relationship between BODE and companies’ performance. Design/methodology/approach This study uses a sample of 11 Malaysian Takaful companies during the period of 2010-2017. While BDE and SCQ are measured using indices, performance is proxied using ROA and ROE. A panel fixed effect regression analysis is used to test the impact of the BDE on the financial performance of Malaysian Takaful companies and the moderator role of SCQ. Findings The main finding of this study shows a positive association between BDE and performance. More specifically, boards with a high presence of independent, Muslim and female directors positively contribute to the performance of Malaysian Takaful companies. Another interesting finding is related to the positive moderating effect of SCQ on the relationship between BDE and performance. This result indicates that a high level of SCQ combined with a high level of board effectiveness improve performance. Practical implications The finding is of great importance to stakeholders and policymakers to improve their board effectiveness and the quality of the Shariah committee to reduce agency costs and to improve the performance of Malaysian Takaful companies. Originality/value This study adds to the prior literature by investigating for the first time the relationship between BDE and performance and the interaction effect of SCQ on the performance of Malaysian Takaful companies.

Does one size fit all? A configurational approach to board effectiveness in limiting the excess cash

Purpose The study, by focusing on a context dominated by firms with a concentrated ownership, in which type-II agency problems (principal-principal conflicts) may occur, aims to depict which board configurations may be effective in protecting minority shareholders by mitigating the risk of controlling shareholders' expropriation via cash holdings.Design/methodology/approach The research adopts a configurational approach and empirically conducts a fuzzy set/qualitative comparative analysis on a sample of 268 Italian listed companies.Findings The analysis depicts three combinations of board configurations and ownership structures that can be considered effective, namely Active Independent Control, Female Active Control and Double Internal Control.Originality/value The study revisits the topic of the risk of expropriation via cash holdings in a type-II agency problem framework and delineates the meaning of board effectiveness in a mature context ruled by family firms, like Italy. Furthermore, by drawing on a configurational approach, it overcomes the causality relationship between each board characteristic and cash holdings policies and reasons from a “bundle” perspective.

The board effectiveness index and stock price crash risk

PurposeThe main purpose of this study is to use a new broad board effectiveness index, which has been created from several internal attributes of board of directors and to investigate the association of the overall index regarding stock price crash risk.Design/methodology/approachThe authors create a new board effectiveness index from a comprehensive set of board attributes, including the number of board meetings, the number of board attendances, the expertise of the directors, the size of the board and the number of independent directors, in order to test with the stock price crash risk by using panel regression models with fixed effects. The two-stage least squared regression ensures endogeneity issues.FindingsAn increase in board effectiveness index lowers firm-specific crash risk. Moreover, female directors enhance the board effectiveness.Originality/valueWith a new broad board effectiveness index, this paper is unique from other studies as the authors focus on the overall index rather than on a single dimension of board attributes.

Corporate governance mechanisms and firm performance: empirical evidence from medium and large-scale manufacturing firms in Ethiopia

Purpose This study aims to examine the impact of corporate governance mechanisms on financial and non-financial aspects of firm performance in medium and large-scale manufacturing firms in Ethiopia. Design/methodology/approach The cross-sectional survey and simple random sampling methods are adopted while the data collection is through a questionnaire that covers five corporate governance indicators consisting of the board independence, board effectiveness, shareholders role, internal audit effectiveness (IAE) and disclosure and transparency. The dimensions of firm performance were indicated by six firm performance indicators of customer and market (CM), internal process (IP), differentiation, efficiency, competitive position (CP) and financial (organizational) performance (OP). The covariance-based structural equation modeling (SEM) with the maximum likelihood parameter estimation technique was used to perform the data analysis. Findings A significant positive relationship has been found between the independence of the board of directors and firm performance (especially with respect to differentiation, OP, CP and IP). However, the board of directors’ effectiveness showed an unexpected result, significant negative effect on differentiation, OP, CP, CM and IP. The study also indicates a positive significant effect of disclosure and transparency on differentiation, CP and OP. However, the coefficient on the CM construct of firm performance is negative and significant. A significant negative linkage has also been revealed between IAE and two constructs of performance: differentiation and CP. One of the important findings of the study is that shareholders’ role has a significant positive impact on both board characteristics (board independence and board effectiveness) and firm performance (differentiation, efficiency, CP and OP). Research limitations/implications The study has two potential limitations. First, in comparison to prior studies, this study is based on a small sample size which limits the generalizability of the findings. Different scholars have suggested (Anderson and Gerbing, 1984, 1988; Iacobucci, 2010; Hair et al., 2019) that SEM requires a large sample size to test the hypothetical model. Thus, future research can further investigate the link between corporate governance and firm performance by using a larger sample size to achieve more reliable results. Second, the current study used a quantitative approach only, but prior studies (e.g. Ahrens and Khalifa, 2013) suggest a qualitative approach to more investigate and reach a very conclusive idea on corporate governance. The approach is currently receiving growing popularity in the literature. Practical implications The findings of the study would have measurable implications for different stakeholders who are in the position of supporting or regulating manufacturing firms. First, the findings give a clue about how a firm can design a good corporate governance system. Second, managers of the firm can get a hint or tip from the result that might help as input for designing strategies. Finally, it might help policymakers to understand and think about the very crucial role of active participation of shareholders in curtailing/reducing agency cost and enhancing firm performance apart from (beyond) the conventional corporate governance mechanisms (board of directors, internal audit, disclosure and transparency). Originality/value This study seeks to extend and contribute to the current literature in several ways. First, in contrast to previous studies, this study used both financial and non-financial performance measures and thereby providing new empirical insights relating to the non-financial performance measures. Second, this study provides a new result that the role of shareholders has a direct significant positive impact on board characteristics (i.e. board independence and board effectiveness) and firm performance. Finally, this study has come with a new insight that disclosure and transparency is a major driver of firm performance.

Corporate Governance and Firm Performance in State-Owned Enterprises (SOEs) in Zambia: A Systematic Review

The research systematically documented and described the corporate governance practices and financial performance in State-Owned Enterprises (SOEs) in Zambia from 2006 to 2017. The research design that was adopted was the descriptive research design to systematically describe the corporate governance practices and financial performance of SOEs in Zambia. The corporate governance attributes for SOEs such as board size, board appointing authorities and board membership have been found to be prescribed by a diversity of Acts of Parliament for different SOEs. This finding suggests that the governance of these entities could be a challenge insofar as the uniformity of the legal framework for the governance of the entities was concerned. In addition to this, board membership which are designated by specific government positions rather than merit based, compromises board effectiveness. The study has further shown that failure to produce and publish, for public scrutiny, audited financial statements on a timely basis leads to lack of transparency and accountability. The financial performance has been found to have been poor as the SOEs on average produced negative returns on total assets and the SOEs were highly geared based on operating gearing and financing gearing. Lastly, financial performance of SOEs and the corporate governance practices differed significantly across different industries under which the SOEs operated.

Effective local government council leadership: reassessing the facilitative model of leadership

PurposeThis paper utilizes Svara's facilitative leadership model to examine local government council/board effectiveness in Michigan, United States.Design/methodology/approachThis study performs a binary logistic regression to assess the influence of four independent variables–consensus building, cooperative relationship, clarity of responsibility and existence of factions/partisanship on five measures of council/board effectiveness (long-term goal setting, administrative, financial, addressing citizen expectations and overall performance), while controlling for other variables.FindingsOverall, the findings of this study have serious theoretical and practical implications. Specifically, the findings revealed that cooperative relationships, clarity of responsibility, discussion of public issues and partnership influence council/board effectiveness. The findings further support Svara's (2003) model on facilitative leadership and the model's usefulness in understanding local government leadership, i.e. council/board leadership effectiveness.Research limitations/implicationsFirst, survey data contains desirability bias which can affect the results presented in this study. Second, the data does not include socio-demographic variables of the respondents.Originality/valueThe study is original because it utilizes a data set that is not commonly used in understanding local government council/board effectiveness. Furthermore, the study also shows the usefulness of Svara's facilitative leadership in local government.