Corporate Reputation: Do Board Characteristics Matter?

Our study draws on institutional and signalling theories to postulate relationships between board characteristics and corporate reputation. Based on a sample of 324 firms featured in Fortune's list of most admired corporations in the USA, our findings indicate that board characteristics significantly influence the assessment of firm reputation by the business community. Specifically, we found that firms with a greater proportion of outside directors and those with larger boards exhibited better reputation than those with smaller boards and a higher proportion of insiders. In addition, we observed an inverted‐U relationship between the average tenure of outside directors and corporate reputation. However, contrary to expectations, our findings indicate a negative association between independent leadership structure (i.e. absence of duality) and corporate reputation.     

Female board appointments and firm valuation: short and long-term effects

The presence of women on boards of directors has become a high profile issue in recent years. Several studies, based largely on data from countries with Anglo-Saxon corporate governance systems, have investigated the influence of female board appointments on firm performance. This study focuses on the impact of female directors in Spain, where debate about this topic has been intense for two reasons: the recommendation in 2006 by Spain’s Unified Good Governance Code of positive discrimination in favour of female board appointments and the passing in 2007 of a Gender Equality Act by the Spanish parliament. Our paper analyses the short and long term effect of the appointment of female directors prior to these events. We use an event study to analyze the short term stock market reaction to the appointment of female directors and a multiple regression approach, using the system GMM estimation procedure, to assess the long term influence on firm value of female boardroom appointments. We find that the stock market reacts positively in the short term to the announcement of female board appointments, suggesting that investors on average believe that female directors add value. This belief appears to be confirmed by our regression results which show that female board appointments are positively associated with firm value over a sustained period. These results suggest that the legislative changes in Spain make economic sense as well as advancing the cause of women in Spanish boardrooms.     

What’s in a name? Decomposing corporate reputation to assess the relative impact of temporal, firm and industry level factors

While the perceptual nature of corporate reputation is rarely contested, the role of governance and firm financial performance does not have the same consensus. As reputation is an embedded capability that cannot be distinctly valued or traded, the ambiguity in reputation generation clouds researchers’ attempts to understand the relative importance of the underlying causal factors, particularly firm-specific attributes like board characteristics, governance and ownership—independent of the firm’s financial performance over time. Utilizing a resource—based view, we develop a theoretically grounded framework that enables us to deconstruct corporate reputation and parse out the impact at multiple levels and the factors therein. We decompose reputation into time, firm and industry level factors, offer hypotheses on the relative importance of the factors at each level, and thereafter we simultaneously assess within and across the temporal, firm and industry levels to quantify the impact of the causal factors. We find that 49.65 % of the variation in corporate reputation is firm-specific, independent of financial performance, while industry-specific variables account for just 5.04 %. The temporal factors including the multi-level interaction terms explain 46.06 % of reputational variation, of which financial performance accounts for only 18.53 % and the “halo effect” of prior financial performance is short-lived. Furthermore, the commonly accepted factors explain only 26.44 % of the total variation in corporate reputation, and some of the governance and ownership indicators contradict generally accepted agency expectations.     

Board size and firm value: evidence from Australia

We study the effect of board size on firm value in Australia. Using a large sample of Australian firms over the period 2001–2011, we find strong evidence of a negative relationship. We show that firms with a large board are associated with CEO compensation that is sensitive to firm size, but not to firm performance. This incentive to accumulate assets is congruent with the fact that firms with a large board also exhibit lower operating performance and higher operating costs. Furthermore, we find that the effect of board size is stronger in small firms. This result might explain why earlier studies, which focused on large Australian firms, found board size to have little impact on firm value.     

Firm reputation and investment decisions: The contingency role of securities analysts' recommendations

Moving beyond resource-based consequences of a firm's reputation, we develop a behavioral perspective on the impact of corporate reputation. Although there has been extensive discussion in previous studies of the benefits of reputation in terms of gaining resource advantages, we apply theory on self-regulatory focus to suggest that highly reputable firms may tend to have a prevention focus rather than a promotion focus in their investment strategies. This tendency will lead the firm to opt for low-risk investments rather than high-risk investments. Furthermore, we develop a contingency model and argue that the main effect of reputation on the investment decisions of the firm is further strengthened by the negative recommendations of securities analysts. We find support for our hypotheses. In doing so, we address emerging theories about the potential negative consequences of a firm's reputation and provide important insights for our theoretical understanding of the behavior of highly reputable firms.     

CEO and Chairperson characteristics and firm performance

This paper focuses on the relationship between Chief Executive Officer (CEO) and Chairperson characteristics and firm performance. Specifically, the study examines the association between the characteristics of the CEO and the Chairperson of the board and firm performance. Using a sample of S&P 500 firms, the evidence found suggests that demographic and experience-related characteristics may be associated with the market valuation and financial performance of the firm. In particular, the reported results indicate a positive relationship between the presence of female CEOs or Chairs and firm performance, thus suggesting that gender-based differences may affect the CEO’s/Chairperson’s success. Moreover, the findings concerning the age of the CEO or Chair are mixed, while their experience and quality appear positively related to firm performance. Interestingly, a CEO or Chairperson holding multiple board seats is negatively associated with firm performance, whereas CEO duality has a positive relationship with Tobin’s Q and the return on assets (ROA) of the firm.     

Does the presence of independent and female directors impact firm performance? A multi-country study of board diversity

This study empirically analyzes whether gender diversity enhances boards of directors’ independence and efficiency. Using data from 3,876 public firms in 47 countries and controlling for a wide set of corporate governance mechanisms, we find that firms with more female directors have higher firm performance by market (Tobin’s Q) and accounting (return on assets) measures. The results also suggest that external independent directors do not contribute to firm performance unless the board is gender diversified. These results hold with respect to different estimation models and robustness tests. Overall, our findings provide evidence that the female directors enhance boards of directors’ effectiveness. Finally, we find that firms that are concerned with board independence, and that firms in more complex environments are more likely to have gender-balanced boards.     

Monitoring the monitor: Enabling strategic change when the former CEO stays on the board

Firms often retain their former CEOs on the board after succession to benefit from the former CEOs’ firm-specific expertise. However, their presence can inhibit successor CEOs from implementing meaningful strategic change, as the former CEOs seek to preserve their personal legacy and may see the strategic landscape differently, especially when the successor CEO is hired from outside the firm. Using a strategic leadership interface perspective, we propose that board members can alleviate this potential tension and enable strategic change. To test our theory, we focus on a subsample of succession events: when the former CEO stays on board as chair and the successor CEO is an outsider. This scenario is likely to result in strategic tension and cognitive differences between these two organizational leaders. We find that in such situations, boards with a higher proportion of outside directors experience greater post-succession strategic change; we find no effect in other succession scenarios. We isolate legacy conservation as a motivating factor by showing that the effect manifests for divestitures but not for acquisitions.     

The Impact of Corporate Reputation on Firm Risk: A Panel Data Analysis of Spanish Quoted Firms

Researchers have traditionally addressed the influence of corporate reputation on firm performance, but have not considered the influence of corporate reputation on firm risk. This research develops hypotheses regarding the opposing influence of corporate reputation on a firm's systematic risk, unsystematic risk and total risk, as well as the moderation effect of firm size and industry concentration. Using a panel data method, these relationships are analysed, controlling for the effects of endogeneity, for a sample of Spanish quoted firms in the period 2001–2007. Specifically, two complementary analyses are performed. The first distinguishes firms included and not included in the MERCO index of the most reputable firms. The second analyses the impact of corporate reputation for the sub‐sample of most reputable firms. Being reputable reduces a firm's unsystematic risk and total risk, but increases systematic risk. In addition, firm size weakens these influences of corporate reputation on firm risk. However, among the most reputable firms, differences in reputation score have a lower effect on risk. Specifically, the corporate reputation level only influences firm unsystematic risk. It seems that what matters is not the degree of corporate reputation, but whether being or not being reputable is the question in terms of risk.     

When are acquisitions a viable catch-up strategy? Some empirical evidence from China

How emerging-market firms can catch up with forerunners from advanced economies is a key issue in the economic and technology literature. Research has suggested that acquisitions are a viable tool for firms in emerging markets to reduce the productivity gap with global leaders, but the empirical evidence on this matter is still far from conclusive. Contributing to this debate, this paper examines the impact of cross-border vs. domestic acquisitions on the labor productivity of firms across different sectoral environments. Studying the acquisitions pursued by Chinese listed firms over one decade, we find that cross-border acquisitions are positively associated with firms' labor productivity and that this effect is particularly strong in high-tech sectors and among leading firms. We also find that domestic acquisitions are positively associated with firms’ labor productivity and that this effect is particularly strong in low-tech sectors and among laggards. We further investigate the mechanisms underlying the acquisition–productivity link and contend that “technological innovation” is the primary mechanism by which acquisitions enhance firm productivity in high-tech sectors, whereas “enhancing operating efficiency” is the primary mechanism by which acquisitions enhance firm productivity in low-tech sectors.     

Corporate social responsibility,board of directors,and firm performance: an analysis of their relationships

This paper aims to contribute to the empirical evidence relating corporate social responsibility (CSR), board composition, and firm performance. Using a sample of Spanish listed firms included in the IBEX 35 over the period 2005–2010 the results show that the percentage of independent directors affect firm CSR activities, and that this effect is moderated by the resources available to the firm (measured by return on assets). Also, the CSR has a mediating role on the relation between the independence of the board of directors and firm value. These results hold for other board characteristics (board size and women as directors).     

Lies in the Sky: Effects of Employee Dishonesty on Organizational Reputation in the Airline Industry

Conventional wisdom suggests that dishonesty on the part of an organization's employees has a negative effect on the organization's reputation. However, many organizations condone (or even require) dishonesty under certain circumstances. In this research of 128 airline passengers, we examine situations in which employees are perceived to be dishonest within one such industry, the international airlines, and examine the impact of this dishonesty on organizational reputation and customer satisfaction. We found that the reputation of the firm was most damaged when the lie benefited the company or the employee, rather than the passenger. In addition, the view of the airline significantly decreased when the lie caused a high amount of harm (compared with a low amount) to the passenger.     

Board of directors structure and firm financial performance: A qualitative comparative analysis

Previous research about the effects of board structure and process on the firm financial performance is based on conflicting theoretical perspectives, and empirical results, mostly based on regression analysis, are inconclusive. Building from Complexity Theory and configurational analysis, this study offers clarity to inconclusive previous empirical results about the link among several board features and firm financial performance. From a sample of 295 non-financial firms from Southern Europe for the period 2001–2010, and by using fuzzy set qualitative comparative analysis, findings of this study show that firm financial performance depends on a complex configuration of several board features (board size, board independence, leadership structure and board activity) and several corporate characteristics (firm size, firm leverage and firm age). This paper has implications for academics. Despite different theoretical arguments and inconclusive results of the wide empirical literature addressing the effect of board characteristics on the firm performance, building from Complexity Theory this paper adds to our knowledge because it empirically explores under which circumstances different board features should contribute positively or negatively to firm performance. The results of this study have also implications for policy makers and practitioners by providing some useful hints to the controversial relationship between corporate governance and financial performance. In this sense, general corporate governance recommendations must be rethought.     

董事会非正式层级与高管薪酬契约有效性

董事会治理是影响高管薪酬契约有效性的关键,已有研究主要从董事会结构层面展开,缺乏对董事会内部运作机制与高管薪酬契约有效性关系的具体分析。基于董事权威不平衡性的治理效应视角,系统考察了董事会非正式层级与高管薪酬契约有效性的逻辑关系及其作用机理,得出了一些具有重要价值的结论,主要包括:1.董事会非正式层级对高管薪酬业绩敏感性具有显著的负向调节作用,且主要体现在业绩下滑的样本公司中,表明董事会非正式层级对高管薪酬契约的影响主要体现在公平性和风险匹配性方面。2.只有当最高层级董事身份为独立董事时,董事会非正式层级对高管薪酬业绩敏感性具有显著的负向调节效应。3.董事会非正式层级增强了高管薪酬的行业和地区薪酬敏感性,进一步验证了董事会非正式层级的社会公平效应。论文的研究为从微观运作层面理解董事会治理和高管薪酬契约有效性提供一种新的视角和结论,对于优化董事会治理和提高高管薪酬契约有效性等均具有重要借鉴意义。     

Reputation for Quality

We propose a model of firm reputation in which a firm can invest or disinvest in product quality and the firm's reputation is defined as the market's belief about this quality. We analyze the relationship between a firm's reputation and its investment incentives, and derive implications for reputational dynamics. Reputational incentives depend on the specification of market learning. When consumers learn about quality through perfect good news signals, incentives decrease in reputation and there is a unique work–shirk equilibrium with ergodic dynamics. When learning is through perfect bad news signals, incentives increase in reputation and there is a continuum of shirk–work equilibria with path‐dependent dynamics. For a class of imperfect Poisson learning processes and low investment costs, we show that there exists a work–shirk equilibrium with ergodic dynamics. For a subclass of these learning processes, any equilibrium must feature working at all low and intermediate levels of reputation and shirking at the top.     

Bankers on boards as corporate governance mechanism: evidence from Poland

This paper examines whether a bank exercises a monitoring role when a banker is represented on a firm’s board. Bank monitoring reduces information asymmetries, and hence lessens firm’s financial constraints—phenomenon frequently measured by investment-cash flow sensitivity in the sample of all non-financial companies listed during 1999–2002 on the Polish stock exchange. I find that firms with a banker on the board rely more heavily on bank loans than on internal capital in their investment activities. In contrast, firms with no banker on the board finance to a larger extent their investment with internal capital than with credit. However, firms with the bank-lender representation on the board are almost as much financially constrained as firms without a bank-lender representative on the board. Hence, the presence of bankers on boards is not associated with bank monitoring. They rather promote their employer’s business. The findings show that investment of firms with a banker on the board is less sensitive to cash flow than investment of firms without bank representatives on the board. This result suggests that bankers on the board provide financial expertise that help those firm to reduce financial constraints.     

Board attributes and shareholder wealth in mergers and acquisitions: a survey of the literature

The question of whether a “good” corporate board structure can optimize performance and minimize conflicts between managers and shareholders has been widely debated. Because mergers and acquisitions represent major managerial investment decisions that are subject to board scrutiny, the effectiveness of a board’s structure is especially visible in the context of corporate acquisitions. With that in mind, in this paper, we examine the abundant literature in the fields of strategic management, economics, and finance in order to identify which board attributes contribute to the ability of corporate boards to create value through mergers and acquisitions. In particular, we discuss the impact of four board attributes: (1) board independence, (2) board size and director-specific attributes, (3) board ownership and compensation, (4) multiple directorships. As a result of our analysis, we conclude that the impact of board attributes on shareholder wealth in mergers and acquisitions is specific to each firm. Therefore, board regulations that do not reflect a firm’s specific needs may in fact hinder the creation of a board that is capable of responding effectively to the firm’s unique needs and circumstances.     

Making Boards Effective: An Empirical Examination of Board Task Performance

Despite the increasing attention of management scholars to boards of directors, there is still scant evidence on the antecedents of board task performance. The lack of significant results seems to be due to some theoretical and methodological choices followed by scholars, i.e. the almost exclusive reliance on agency theory and the use of demographic data. Following the call for dismantling the fortresses dominating past studies, this paper contributes to opening the 'black box' of boards of directors, developing a conceptual model that considers the impact of board members' diversity, commitment and critical debate on board task effectiveness in performing its service and control tasks. We collected primary data through a questionnaire survey, and we tested the model controlling for board, firm and industry characteristics. Our findings suggest that (i) the predictors we identified, and particularly the board members' commitment, are far more important than board demographics to predict board task performance; (ii) firm and industry contexts exert a significant influence on board task performance; (iii) predictors have a different impact on specific sets of tasks. Thus, our findings support the idea that several board characteristics and contingencies at both industry and firm level must be acknowledged in board design.     

Firm size and board diversity

This study seeks to understand the relation between firm size and supervisory board composition. Specifically, we ask if and how firm size influences occupational and international background diversity in supervisory boards. Relying on resource dependence theory and theories of organizational behavior, we hypothesize that board diversity with respect to directors’ occupational background will increase with firm size, while the relation between firm size and board diversity with respect to directors’ international background will be concave. Using archival data for supervisory board members of 151 German firms listed in the German stock exchange indices DAX, MDAX, SDAX and TecDAX for the business year 2005, we find empirical support for our hypotheses: Both, occupational and international background diversity increase with increasing firm size, but international background diversity does so at decreasing rates.     

The Board Value Protection Function in Young,Mature and Family Firms

Next to value creation, the value protection function of the Board of Directors is a widely accepted fact. Nevertheless, the current literature struggles to show a positive impact of the Board Value Protection (BVP) on firm performance. We use the decision rights model of board functions and argue the difference between board member roles (insider vs independent) and functions, to isolate the BVP from other director functions. By using the German context as a natural setting, we can isolate the BVP and show how it evolves with the firm lifecycle and owner motivations. Based on a sample of 446 initial public offerings (IPOs) from 1995 to 2015, our results show that the importance of BVP in young firms decreases with age, increases in mature firms and that this effect is stronger in family firms.