Corporate board and board committee independence,firm performance,and family ownership concentration: An analysis based on Hong Kong firms

This study examines whether the relationship between corporate board and board committee independence and firm performance is moderated by the concentration of family ownership. Based on a sample of Hong Kong firms, we find no significant association between the independence of corporate boards or board committees and firm performance in family firms, whereas board independence is positively associated with firm performance in non-family firms. Additionally, our findings show that the proportion of independent directors on the corporate boards of family firms is lower than that of non-family firms, but we find no significant difference in the representation of independent directors on the key committees of corporate boards between family and non-family firms. Overall, these results suggest that the “one size fits all” approach required by the regulatory authorities for appointing independent directors on corporate boards may not necessarily enhance firm performance, especially for family firms. Thus, the requirement to appoint independent directors to the corporate boards of family firms needs to be reconsidered.     

Do investors find carbon information useful? Evidence from Italian firms

The usefulness of carbon disclosures has been questioned in the literature because they do not truly reflect firm’s carbon performance, suggesting that they may not be useful for risk evaluation and investment decisions. This study empirically tests the usefulness of carbon information voluntarily disclosed by the Italian firms. Our results based on the price model show that there is a positive association between the stock price and carbon disclosures, suggesting that investors find carbon information useful for their investment decisions. We find similar results based on the market valuation model. Additionally, the results reveal that the positive association is especially strong for firms that have established environmental committees on a voluntary basis and also for firms from the highly polluting industries defined by the EU_ETS program, confirming that investors’ positive response is especially strong to carbon disclosures by firms from the highly polluting industries. We also find that the market reacts positively to carbon disclosures by firms with a higher percentage of independent directors on their corporate boards, but the positive association is marginally significant.     

The impact of family-firm structure and board composition on corporate transparency: Evidence based on segment disclosures in Malaysia

The aim of this study is to contribute to the growing literature on the quality of accounting disclosures by family firms by investigating whether the alignment (entrenchment) effect leads to high (low) corporate transparency. Unlike previous studies, this study also examines the relationship between board composition and corporate transparency by distinguishing between the two types of nonexecutive directors, namely independent and affiliated directors. Using the enhanced segment disclosures by Malaysian firms in 2001/2002 as a proxy of corporate transparency, the results indicate that family firms are more inclined to disclose all the required items for the primary basis of segment reporting, consistent with Ali, Chen, and Radhakrishnan (2007) and Wang (2006). The result also indicates that firms with higher proportion of affiliated directors are more likely to make greater segment disclosures. However, no evidence is found to support the contention that independent directors and institutional investors promote corporate transparency, consistent with previous Malaysian studies.     

Social Concentration on Boards,Corporate Information Environment and Cost of Capital

Prior evidence on the relationship between demographic diversity in corporate boards and firm performance is mixed. Some studies have found that the relationship between board attributes and firm performance is driven by a firm's information environment. This study examines whether corporate transparency also impacts the relationship between gender and ethnic diversity of directors and firm performance. To test this hypothesis, I use a Herfindahl Index based on directors’ gender and ethnicity to measure board diversity, and an opacity index based on analyst following, analyst forecast error, bid‐ask spread, and share turnover to measure corporate transparency. I find that the cost of capital is positively associated with social concentration on corporate boards and that this premium is larger for highly opaque firms. In further analysis, I find that the interaction of corporate information environment and social concentration on boards is more important for operationally complex firms. Compared with simple firms, operationally complex firms pay a greater premium on their capital if they have a socially concentrated board and an opaque information environment.     

Female tainted directors,financial reporting quality and audit fees

This paper examines the association between the presence of female tainted directors on corporate boards and audit committees and (1) financial reporting quality and (2) audit fees. Female tainted directors are defined as female directors who have been directors of the firms that have previously been involved in financial failures and integrity indiscretions. Using real earnings management and audit fees as proxies for effective governance and board reputation, we find that firms with female tainted directors have higher real earnings management and higher audit fees. However, since prior literature has demonstrated that audit fees are higher for firms with female directors because female directors demand better auditing, we corroborate a supply-side effect of auditors charging higher audit fees when female tainted directors exist. We demonstrate this by showing that while there is an association between audit fee and real earnings management, this association is higher for firms with female tainted directors. Arguably, the governance and reputational benefits of female directors on boards are negated if such directors have tarnished professional reputations.     

European firms’ corporate biodiversity disclosures and board gender diversity from 2002 to 2016

We examine how board gender diversity is associated with biodiversity disclosures of a firm, and whether the Global Reporting Initiative (GRI) and the EU biodiversity strategy reinforce this relationship. Using institutional theory and resource dependency theory, our sample comprises 4013 firm-year observations from European corporations covering data from 2002 to 2016. We use panel regressions with country, time and industry dummy variables to analyse the disclosure of biodiversity initiatives (DBI) and logit regressions to explain biodiversity impact assessment (BIA). We find that board gender diversity is positively associated with the DBI and BIA of a firm, and that the GRI framework and the EU biodiversity strategy positively moderate this relationship. Moreover, the GRI framework and the EU strategic plan show positive relationship with the DBI, rather than BIA. Altogether, our evidence suggests that corporate boards with a higher proportion of female directors are more sensitive to the concerns of institutional pressures and respond to those concerns by increasing corporate biodiversity disclosures. Overall, we find that firms tend to comply with the GRI framework and the EU 2020 strategy by undertaking symbolic biodiversity disclosures, rather than providing a comprehensive disclosure of their impacts on biodiversity.     

Women on boards and greenhouse gas emission disclosures

We apply institutional and board capital theory to examine whether women on boards are associated with disclosure and quality of corporate greenhouse gas (GHG) emissions related reporting. We examine the research problem in Australia in a period when no requirements existed for listed companies to appoint female directors or to report GHG emissions. This environment allows us to examine the association between women on boards and GHG emissions related disclosure in annual and sustainability reports in a voluntary setting. We find that companies with multiple female directors make GHG emissions related disclosures that are of higher quality.     

The effect of stock-based incentives and governance mechanisms on voluntary disclosure of intangibles

The purpose of this study is to investigate the role of stock-based incentives in encouraging more voluntary disclosures about firm-specific intangibles. I also examine whether corporate governance, previously found to be related to voluntary disclosures, is a complement to or substitute for stock-based incentives. Using content analysis of annual reports of a sample of high-tech firms, I find that stock-based incentives are positively associated with firms' voluntary disclosures about intangibles. With regard to the effect of governance mechanisms, I find that corporate governance does not have a relationship with disclosures when stock-based incentives are low. On the other hand, better governance will strengthen the positive effect of stock-based incentives on disclosures, suggesting that governance and incentives mechanisms are complements instead of substitutes. The results also show that this complementary effect primarily results from the internal monitoring provided by the board of directors.     

Do Board Characteristics Influence Impression Management through Graph Selectivity Around CEO Changes?

Research has shown evidence of impression management through the selective use of graphs in financial reports of Australian firms changing chief executive officer. This paper examines whether boards with characteristics associated with strong corporate governance constrain impression management in the financial reports of Australian firms that change CEOs. Our tests of graph selectivity find that boards with a higher proportion of independent directors appear to be more effective in curbing any potentially opportunistic impression management by new CEOs in the period of their appointment.     

The effects of board gender diversity on a firm's risk strategies

We study whether board gender diversity (BGD) affects corporate risk strategies. Specifically, we investigate the association between BGD and firms’ reputation risk and financial risk. Using S&P data from 1997 to 2013, we find that BGD is negatively associated with tax avoidance, suggesting firms with gender‐diverse boards are more cautious about potential reputation risks associated with aggressive tax strategies. However, we find that BGD is positively associated with firms’ financial risk. The combined findings illustrate that BGD aligns a firm's risk exposure closer to risk‐neutral shareholders’ preferences by reducing reputation risk exposure while enabling necessary financial risk exposure.     

Board structure and corporate risk taking in the UK financial sector

This paper examines the relationship between board structure and corporate risk taking in the UK financial sector. We show how the board size, board independence and combining the role of CEO and chairperson in boards may affect corporate risk taking in financial firms. Our sample is based on a panel dataset of all publicly listed firms in the UK financial sector, which includes banks, insurance, real estate and financial services companies over a ten year period (2003 − 2012). After controlling for the effects of endogeneity through the application of the dynamic panel generalized method of moments estimator, the findings of this study suggest that the presence of non-executive directors and powerful CEOs in corporate boards reduces corporate risk taking practices in financial firms. The negative relationship can be explained within the agency theory context, where managers are regarded as more risk averse because of the reputational and employment risk. An increased power concentration is therefore expected to enhance the risk aversion behaviour of directors. The findings however, do not show any significant effect of board size on corporate risk taking in financial firms. As this study covers recommendations of the UK Corporate Governance Code on the role of corporate boards in managing firms' risk, the empirical evidence could be useful for corporate governance regulation and policy making.     

Do co-opted boards increase insider profitability?

Using a sample of U.S. firms over the period 1996–2014, this paper examines whether insider trading profitability increases with high board co-option. Indeed, we find that firms with a higher level of co-opted directors exhibit higher insider trading profitability, largely due to a lower level of managerial ability and analyst coverage. Co-opted boards are also unlikely to implement self-imposed insider trading restrictions, exacerbating this relationship. This positive association is mitigated by a higher level of external monitoring by institutional investors and if the CEO receives more performance-based incentives. Overall, co-opted directors demonstrate aligned interests with CEOs and corporate insiders rather than performing their role as monitors. As a result, a more co-opted board is positively associated with exploitative behaviour of insiders.     

Boards,ownership structure,and involuntary delisting from the New York Stock Exchange

This study examines whether the likelihood of becoming involuntarily delisted from NYSE is associated with a firm’s board of directors and ownership characteristics. To this end we compare 161 firms that were delisted from NYSE between 1998 and 2004 to a set of industry and size-matched control firms. Consistent with our expectations, we find that the likelihood of delisting is related to a firm’s governance characteristics. Our results on the importance of the board of directors are new to this setting and add to a large body of evidence linking corporate boards and ownership characteristics to corporate performance.     

Missing them yet? Investment banker directors in the 21st century

Subsequent to the stricter corporate governance listing standards adopted by the NYSE and NASDAQ in the early part of this century and the independence requirements of the Sarbanes Oxley Act of 2002 (SOX), the number of investment bankers (IB) serving on corporate boards has declined significantly. We document that the firms that lose the relationship with the investment bank after SOX become relatively more financially constrained soon after. The evidence is similar, albeit weaker, after departures of investment bankers at the advent of the financial crisis. We examine the mechanisms through which the constraints might be lowered, and observe that firms with IB directors face lower underwriting spreads when they issue equity and debt. Inconsistent with the hold-up problem associated with IB directors, the market reaction to seasoned equity offerings in firms with IB directors is less negative than comparable firms. The results point to costs associated with the increased attempts to improve board independence.     

Politically connected boards,family and business group affiliations,and cost of capital: Evidence from Indonesia

We investigate the effect of politically connected boards (both supervisory boards [SBs] and boards of directors [BODs]) on cost of debt and equity capital of listed companies in Indonesia which has established a two-tier corporate governance system. The results, based on 250 firms, suggest that companies with politically connected SBs experience lower cost of debt and equity capital, whereas politically connected BODs have no association with cost of either debt or equity. Furthermore, we find that family firms and firms belonging to business groups with politically connected SBs enjoy lower cost of debt and equity capital. Our main results are robust to alternative measures and to tests for endogeneity.     

Family control, board independence and earnings management: Evidence based on Hong Kong firms

In this study, we document that independent corporate boards of Hong Kong firms provide effective monitoring of earnings management, which suggests that despite differences in institutional environments, corporate board independence is important to ensure high-quality financial reporting. The findings also show that the monitoring effectiveness of corporate boards is moderated in family-controlled firms, either through ownership concentration or the presence of family members on corporate boards. The results based on firms reporting small earnings increases provide additional support for our finding that the monitoring effectiveness of independent corporate boards is moderated in family-controlled firms.     

An exploratory study of the effects of the European Union 8th Directive on Company Law on audit committees: Evidence from EU companies listed on the US stock exchanges

Member States in the European Union will be required to establish audit committees for all public-interest entities, according to the EU 8th Directive on Company Law. This EU 8th Directive creates a convergence of corporate oversight for both audit processes and financial reporting process and thus provides an opportunity to examine and contrast associations that exist among audit committee, board of directors characteristics with audit committee alignment, and the impact of such alignment on earnings management. Results of a logistic regression analysis suggest that firms with audit committees possessing greater financial expertise, with larger boards and more independent boards are less likely to engage in audit committee alignment while firms with audit committees possessing greater governance expertise are more likely to engage in alignment. In addition, we find that firms associated with audit committee alignment engage in less earnings management.     

Making honest men of them: Institutional investors,financial reporting,and the appointment of female directors to all-male boards

In this paper, we theorize that dedicated institutional investors are more likely than transient institutional investors to appoint female directors to investee firms with all-male boards, particularly those with high opacity. We conjecture that dedicated investors appoint female directors as a governance mechanism to improve the financial reporting quality of these investee firms. Specifically, we find that through the appointment of female directors, dedicated institutional investors trigger the release of stockpiled negative accounting information, thereby increasing the likelihood of a stock price crash risk. We also show that dedicated investors, through the appointment of female directors, improve investee firms' corporate disclosure environment by decreasing earnings management. Finally, we find that through continued service on investee firms' boards, female directors reduce the future likelihood of a stock price crash.     

Disclosure Practices by Family Firms: Evidence from Swedish Publicly Listed Firms

Abstract

I investigate the effect of family ownership on firms’ disclosure practices in their annual reports. In specific, I study Swedish publicly listed firms, which are typically characterized by controlling owners that have a strong influence in the corporate governance decisions of the firm, including corporate disclosures. To measure disclosure, I construct a comprehensive disclosure index covering information on (1) corporate governance, (2) strategic and financial targets and (3) notes to the financial statements. The results reveal that overall, family firms provide less disclosure in annual reports than non-family firms do. The finding is consistent with the premise that through their management positions, family owners can directly monitor managers and avoid costly public disclosures. Overall, the results suggest that ownership structure of firms is important to consider in understanding firms’ disclosure incentives, particularly in settings where controlling owners play a significant role in the governance of the firm.     

Better directors or distracted directors? An international analysis of busy boards

This study examines the effect of busy directors and boards on the value of a set of non-U.S. firms from 1999 to 2012. We find that busy directors and boards are a global phenomenon, but that national culture helps to explain the cross-sectional variation in director and board busyness. Firms with busy boards exhibit lower market-to-book ratios and reduced profitability, but this effect is reversed for younger firms. We conclude that the advising ability of these networked directors is most useful for younger firms. A demographic analysis shows that multiple directorships are positively associated with firm performance and education, but negatively associated with female directors.