Board attributes and foreign shareholdings in Malaysian listed firms

This study examines the association between foreign shareholdings and several characteristics of board of directors in the context of a developing capital market. Using data of 777 listed firms on Bursa Malaysia for the financial year 2008, the study predicts that foreign shareholdings are positively related to board independence, multiple directorships, and financial literacy of the board of directors. The study finds a strong positive relationship between multiple directorships and foreign shareholdings. Contrary to our expectation, the association between board financial literacy and foreign shareholdings is negative and significant. With regard to the link between board independence and foreign shareholdings, we find weak evidence to support our prediction that there is positive relationship between board independence and foreign shareholdings. The multivariate results also show strong positive relationships between foreign shareholdings and number of foreign directors on boards, and between foreign shareholdings and audit quality. The study also documents a significant negative association between foreign shareholdings and firm size, and between foreign shareholdings and book-to-market ratio. The findings of the study supports the view that multiple directorships is an important asset to firms in emerging markets partly due to limited pool of potential talents and experts which in turn could signal reputational capital and quality of directors. Since there is a mandated presence of finance and accounting qualified director on the audit committee, foreign shareholders can somewhat rely on the oversight of audit committee instead of depending entirely on the board of directors for the quality of financial statements and financial reporting oversight. Finally, the presence of foreign directors on a board of directors may signal a firm’s commitment to adopt good corporate governance practices. It is also possible that foreign investors can influence corporate governance through their participation on the board of directors.     

《萨班斯法案》对美国公司董事会影响的分析

2002年度美国出台的《萨班斯法案》全方位地对安然等事件暴露出来的问题作出相应的调整性规定,必将对公司治理产生深切的影响。《萨班斯法案》对审计委员会提出了修正性和提高性要求,本文选择外部董事、女性董事、财务专家、CEO兼任董事会主席、CEO在提名委员会任职等指标进行分析。实证分析结果说明:《萨班斯法案》有效消除了董事会和管理层任人唯亲的现象,董事会的独立性和专业性均有所提高。其实,《萨班斯法案》颁布之前就有加强公司治理的要求,公司治理就有改进的趋势,但《萨班斯法案》关于审计委员会方面的明文规定加速了公司董事会的变化,使得公司治理改革超越了法律的既定要求。     

All on board? New evidence on board gender diversity from a large panel of European firms

Using a unique database of over 20 million firms over two decades, we examine industry sector and national institution drivers of the prevalence of women directors on supervisory and management boards in both public and private firms across 41 advanced and emerging European economies. We demonstrate that gender board diversity has generally increased, yet women remain rare in both boards of firms in Europe: approximately 70% have no women directors on their supervisory boards, and 60% have no women directors on management boards. We leverage institutional and resource dependency theoretical frameworks to demonstrate that few systematic factors are associated with greater gender diversity for both supervisory and management boards among both private and public firms: the same factor may exhibit a positive correlation to a management board, and a negative correlation to a supervisory board, or vice versa. We interpret these findings as evidence that country-level gender equality and cultural institutions exhibit differentiated correlations with the presence of women directors in management and supervisory boards. We also find little evidence that sector-level competition and innovativeness are systematically associated with the presence of women on either board in either group of firms.     

The causes of gender diversity in Malaysian large firms

The issue of women’s representation at the decision-making level in Malaysia has received special attention from the Government since 2004, the year in which it adopted a policy requiring that 30 % of the posts at the decision-making level in the public sector be filled by women. In 2011, the policy was extended to the private sector where 30 % of listed firms’ board seats are to be allocated to women with 2016 being the deadline for compliance. To this end, this paper aims at examining the factors that determine the appointment of women to the boards of Malaysian large firms. Large firms were chosen in this study because they have the resources and the capacity to adopt the policy more readily than smaller firms. The results reveal that gender diversity is positively associated with board size and the presence of family on the board. That is, the larger the board, the more likely it is that women sit on it. The fact that the presence of women on the board is associated with the presence of one or more family members on the board means that the appointment of women to the board is very much influenced by family ties rather than commercial reasons. The results also reveal a positive association between board independence and the proportion of women directors. Further, it is found that board independence is associated positively with the presence of independent women directors. Finally, the results show that firm performance is negatively associated with gender diversity. That is, firms with low financial performance are more likely to have women on their boards. Hence, taken altogether, the evidence suggests that the appointment of women to the board is very much driven by tokenism and family connection rather than by the business case.     

Board age and corporate financial fraud: An interactionist view

Unlike past studies which have focused on either executives or boards of directors, this study takes an interactionist view to investigate the determinants of corporate financial fraud. We propose that CEOs evaluate the opportunities for financial fraud according to both situational stimuli and their own personal characteristics. As older directors are often more experienced and have more to lose if they fail in their monitoring duties, we expect them to be more capable and to have stronger motivation for monitoring CEOs closely. As such, we propose that a CEO is less likely to engage in corporate financial fraud when the average age of the board of directors increases (i.e., board age). However, when the CEO is older than the board, the CEO may attach less importance to board age when deciding whether to commit fraud. Therefore, we further propose that the CEO–board directional age difference can weaken the effect of board age. Our empirical analyses provide strong support for these hypotheses. Our study contributes to the literature on corporate governance by highlighting the often neglected roles of board age and CEO–board directional age difference in deterring corporate financial fraud.     

Internal audit function quality and financial reporting: results of a survey on German listed companies

Most prior studies on internal audit function (IAF) quality and financial reporting have focused on the US setting and have found a positive association between IAF quality proxies and both financial reporting quality and audit efficiency. In this study, we apply the German setting that is characterized by a two-tier board system of corporate governance and different prerequisites for the serving-two-masters problem. This might weaken the IAF’s ability to monitor financial reporting-related processes. To analyze this, we use survey data to measure IAF quality in the German setting and run multiple regressions to examine the association of several IAF quality characteristics and a self-developed IAF quality score with financial reporting quality and audit efficiency. The results show that also in a two-tier system, a high-quality IAF is able to contribute to both financial reporting quality and audit efficiency. Our findings support the notion that the IAF serves as an essential element of effective corporate governance and plays an important role in financial reporting. Moreover, as a practical implication of interest to regulators and managers, we identify that the external certification of the IAF and internal audit-related certifications of IAF employees may contribute to higher financial reporting quality and lower audit fees.     

Corporate governance and accounting irregularities: Canadian evidence

This study examines the extent to which corporate governance acts as an efficient means of protecting investors against accounting irregularities. It is grounded in the literatures on public enforcement of securities laws by market authorities, governance, and fraudulent financial statements. A unique feature of the Canadian tracking and enforcement system for reporting issuers in default is used to refine the definitions of accounting irregularities or fraudulent financial statements used in other studies. We test and find that the governance mechanisms of firms found in default of financial reporting regulations during the first 5 years of existence of the Canadian system are weak compared to a sample of no-default firms. For instance, they have fewer independent and financial expert directors on their boards and audit committees, are more prone to have recently changed auditor and to having their CEO as chair of the board. They also appear to fulfill their financing requirements through private rather than public funds, which is consistent with the fact that default firms are less likely to be in a position to return to the public market to fulfill their needs. This study offers evidence relevant to policy makers and others who are concerned with the potential role of market authorities and governance in protecting investors against accounting irregularities.     

Females and Precarious Board Positions: Further Evidence of the Glass Cliff

The ‘glass cliff’ posits that when women achieve high profile roles, these are at firms in precarious positions. Previous research analysed appointments (male/female), estimated the precariousness of firms involved and drew inferences about the glass cliff. This study is different as it directly tests the relationship between a precarious situation and changes in board gender diversity. The sample is companies listed on the UK stock exchange reporting an initial loss in the years 2004–2006. A matched control sample is used in a difference‐in‐differences analysis to avoid inadvertently attributing improvements arising from societal/regulatory changes in gender diversity to the loss event. Findings suggest that when the loss is ‘big’ there is a difference in the increase in gender diversity versus both the control and the ‘small’ loss subsamples, i.e. compelling evidence of the glass cliff. In the context of ongoing political and social debates about women on boards our work (i) identifies continuing structural barriers for women ascending to board level in that women are more likely to be over‐represented on boards of companies that are more precarious and (ii) sounds a note of caution about celebrating increased gender diversity on boards without considering the precariousness of the company involved.     

Corporate governance and social norms during financial crisis: evidence from France and Saudi Arabia

The resistance to financial crisis and compliance with social norms and effectiveness of corporate governance mechanisms is considered recently as a good matter of concern. Focusing on differences between French and Saudi firms, we examine the effect of (1) board of directors, (2) audit committee, (3) compliance with Corporate Social Responsibility activities, (4) compliance with Shariah principles on financial volatility during subprime crisis of 2007. We find that larger boards, larger audit committees, independent members on boards and audit committees are related negatively to financial volatility. The result supports corporate governance theory which suggests that corporate governance variables outlined provide effective of monitoring of the management thereby enhancing firm’s resistance to financial crisis. In addition, we find that compliance with CSR alone does not explain the financial volatility. Its concert with corporate governance variables is necessary. This result supports stakeholder theory which argues that companies compliant with CSR activities in their business strategy and have larger boards and audit committees, and independent directors on boards and audit committees resist more financial downturns and any economic shock. Furthermore, we find that compliance with Shariah norms plays a significant role in protecting shareholder interests, improving functioning of corporate governance mechanisms and affect positively the resistance of Saudi firms to financial crisis.     

Breaking the boardroom gender barrier: the human capital of female corporate directors

Although there is a paucity of female corporate directors in Canada, women are slowly managing to break the gender barrier of all-male boards of directors. Using resource dependency theory a model is developed that identifies the human capital characteristics that contribute to a woman being appointed to an all-male board. The model is tested on a sample of 193 Canadian firms that appointed women to their boards of directors between 1996 and 2004. The results show that women who are appointed to all-male boards have specialized knowledge skills; either they have firm-specific knowledge as insiders, or they are support specialists with a specific financial or legal expertise.     

Editorial

In this paper we want to investigate the impact of company owners on the low percentage of women on management boards and whether they are attempting to increase this percentage. After analysing whether ownership concentration influences the number of women on management boards we distinguish between different types of owners. We find that ownership concentration has no effect on the presence of women on German management boards, we show however that institutional and individual owners have a significantly positive effect. Classifying institutional owners into national and foreign owners illustrates that foreign investors are the primary driver of the positive effect within the class of institutional owners; the presence of national investors that are strongly influenced by the national banking system does not show any effect. Our analyses are based on 15,976 management board member positions from 2000 to 2007 in approximately 600 German-listed companies.     

Ownership and corporate social responsibility: "The power of the female touch"

Using a sample of 26,029 firm-year observations over the period 2002–2017 from 4,479 firms and 44 countries, we examine the relationship between ownership concentration and corporate social responsibility by focusing on the mediating role of board gender diversity and the moderating role of family shareholding. We find that ownership concentration negatively affects corporate social responsibility, and the board gender diversity partially mediates this negative effect. Our results indicate that the mediating effect of board gender diversity leads to a 10.65 percent decrease in the impact of ownership concentration on corporate social responsibility. Furthermore, moderated path analysis indicates that family shareholding weakens the direct effect of ownership concentration on board gender diversity and its indirect effect on corporate social responsibility. In post hoc analysis, we also document that the effect of gender diversity on the board is more prevalent in high gender-egalitarian societies where women are more involved in decision-making. Our study addresses the strategic role of female board members in increasing firms’ respect for corporate social responsibility, especially in family-controlled firms. Thus, our results may provide insights to regulators and policymakers to enhance firms’ corporate social practices by encouraging women’s participation on corporate boards.     

Women on corporate boards: key influencers or tokens?

This paper investigates how the increasing ratio of women directors on corporate boards is associated with decision-making dynamics, specifically the perceived participation and influence of the women on the board. We test hypotheses using a sample of 458 women on Norwegian corporate boards where the ratio of women directors among board members ranges from 11 to 100%. Overall, we find that women perceive that they have a high level of information sharing, a low level of self-censorship, and a high level of influence across the different ratios of board membership held by women directors. These results support the notion of women directors as significant influencers. However, the results also show that women directors perceive that they do receive more information and engage in more informal social interaction when the ratio increases, and perceived influence does also increase when the ratio increases.     

The gender composition of corporate boards: A review and research agenda

In recent years, the composition of boards and, particularly, the inclusion of women on boards has attracted significant scholarly interest and public debate. In this article, I comprehensively review the academic literature on board gender composition. Using the systematic review method, I ask whether women directors really are different from men on boards, what factors shape board gender composition, how board gender composition affects organizational outcomes, and finally, why board gender quotas and other forms of regulation are introduced and what outcomes can be expected. Based on my findings, I develop a conceptual framework that clarifies the causal processes underlying both women's access to boards and the effects of women's presence on boards. Finally, I offer a research agenda designed to enrich our understanding of board gender composition.     

Boards in microfinance institutions: how do stakeholders matter?

Microfinance Institutions provide financial services to poor people. Governance of these organizations is important so that they can operate efficiently and sustainably. This study analyzes the influence of stakeholders (donors, employees, customers, and creditors), on board structure (board size and CEO duality), and on organizational performance. We use a global data set of 379 microfinance institutions from 73 countries, collected from rating organizations. Supported by stakeholder theory, agency theory and resource dependence theory, we find stakeholders to be important and have various influences on microfinance institutions. We find donors to be associated with small boards, non-duality and better performance. Employees are associated with large boards, while customers are associated with duality and good financial performance. Creditors opt for duality and better social performance. Implications and areas for future research are discussed.     

Conformance and performance roles of bank boards: The connection between non-performing loans and non-performing directorships

This study evaluates how non-performing loans and different types of board turnover—which we link to performing directorship (natural turnover) and non-performing directorship (forced turnover)—impact the economic performance (ROA) of banks. The proposed model and hypotheses, based on the conformance and performance roles of boards, are tested on a rich sample that includes all banking firms operating in Costa Rica between 2000 and 2012. The results indicate that the negative effect of non-performing loans on ROA is significantly greater in banks with non-performing directorship associated with high rates of unexpected changes in the board. The findings of the study highlight that the competence of boards matters. The results also give evidence of the importance of balancing financial and non-financial goals if superior governance and economic performance are the objectives pursued by organisations.     

Increasing women's contribution on board decision making: The importance of chairperson leadership efficacy and board openness

In the last decade, the number of women on corporate boards has increased slightly, but the prevailing minority status of women directors implies that they will continue to face social barriers. While prior research has largely focused on explaining social barriers (e.g., being categorized as an out-group member) to increase diversity and its negative consequences, how boards can avoid these obstacles remains unclear. Stemming from recategorization theory, we examine whether and to what extent board chairperson leadership efficacy and board openness (as mechanisms to avoid out-group bias) enhance the influence of women when they are in the minority in board decision-making. In a sample of 146 Norwegian firms, we found a positive relationship between women minorities and women directors’ contribution to board decision-making. Moreover, we found that this positive impact increases when the board chairperson exercises leadership and the board operates in an atmosphere of openness.     

Conflict in the boardroom: a participant observation study of supervisory board dynamics

We develop a conflict-oriented model of board task performance and argue that a common framework, that is, a shared understanding of its role, helps boards to perform well. Conflict is the mediating effect through which this plays out. We posit that a common framework increases board task performance because it reduces intragroup relationship conflicts, increases task conflicts within the board, and reduces conflicts in the relationship between board and CEO. We explore the model through a comparative participant observation study of 11 supervisory boards in action. The results show that while low levels of relationship conflict are typically considered a sign of a well-functioning board, the avoidance of relationship conflict negatively impacts board task performance and may lead to ‘cognitive blindness’. Boards of directors should manage—rather than avoid—relationship conflict. Based on our findings, we suggest an extended model of conflict in boards that takes into account the negative effect of conflict avoidance.     

Board characteristics and the value relevance of fair values

This study investigates whether board characteristics affect the value relevance of fair value estimates in financial firms under International Financial Reporting Standard (IFRS) 13. Specifically, the study will focus on whether a better and more efficient monitoring of managers, after the adoption of this new regulation, has an effect on the information quality of fair values. IFRS 13 requires firms to disclose a fair value hierarchy containing three levels: Level 1 (quoted prices in active markets), Level 2 (inputs other than quoted prices that are observable either directly or indirectly) and Level 3 (unobservable inputs generated by entities). The results indicate that, in a post IFRS 13 era, board independence and gender diversity have a positive effect on the value relevance of fair value estimates (Level 3). In addition, firms with larger boards have lower information quality of firm-generated fair value estimates. Moreover, initial analysis shows that all fair values are value relevant to investors and the adoption of IFRS 13 has blurred the lines between the three levels in the fair value hierarchy. Hence, IFRS 13 has successfully reduced the information asymmetry related to fair value estimates.