The connection between gender diversity and firm performance: Evidence from Taiwan

This paper examines the factors influencing female board membership in Taiwan over the period from 1996 through 2017 and the potential impact of female board representation on firm performance. With 16,477 firm-year observations, our findings show that Taiwanese firms with higher board independence and institutional ownership tend to have lower female board representation. In examining performance implications, the results suggest that board gender diversity is positively associated with firm performance overall. This positive relationship is even stronger in small firms, where female directors may have more influence. In subsample analysis based on lowest and highest ultimate control ownership, we document that the positive impact of board gender diversity is mainly driven by firms that have high ultimate control ownership. Our findings suggest that, in environments with weak corporate governance, female board members may act as effective monitors, especially in smaller firms. Regulators and firms in developing economies with weak corporate governance environment should encourage gender diversity on boards.     

Board diversity and stock price crash risk

We show how board diversity influences stock price crash risk. By classifying board diversity into relation-oriented diversity (gender and age) and task-oriented diversity (tenure and education), we find that greater diversity on board can lower the risk of future stock crash. Additional analyses show that the effect of board diversity on future crash risk is stronger for firms with high information opacity and low institutional ownership. Overall, our findings provide new insights and suggest for more diverse boards to improve corporate governance practices.     

A note on board characteristics,ownership structure and default risk in Taiwan

This study applies dynamic generalized method of moments estimation to examine the influences of ownership structure and board characteristics on default risk for a full samples and two subsamples (high‐tech and conventional) of publicly listed firms in Taiwan. Our findings reveal that certain characteristics of corporate governance have explanatory power for default probability, but the impact is not straightforward. In particular, the impact of internal and external governance structures on default risk is industry dependent. Accordingly, governance proposals that encourage higher ownership among directors and large block shareholdings in high‐tech firms or reduce managerial ownership in conventional companies can have a counterproductive effect on corporate governance and result in higher bankruptcy possibility.     

Does board gender diversity improve the informativeness of stock prices?

We show that stock prices of firms with gender-diverse boards reflect more firm-specific information after controlling for corporate governance, earnings quality, institutional ownership and acquisition activity. Further, we show that the relationship is stronger for firms with weak corporate governance suggesting that gender-diverse boards could act as a substitute mechanism for corporate governance that would be otherwise weak. The results are robust to alternative specifications of informativeness and gender diversity and to sensitivity tests controlling for time-invariant firm characteristics and alternative measures of stock price informativeness. We also find that gender diversity improves stock price informativeness through the mechanism of increased public disclosure in large firms and by encouraging private information collection in small firms.     

Determinants of corporate ownership and board structure: evidence from Singapore

This study examines the determinants and interrelationships among corporate ownership and board structure characteristics using a sample of Singapore listed firms. The institutional environment in Singapore differs from that in many developed Western economies in several important respects, including a weak market for corporate control, more concentrated stock ownership, and significant government ownership in many private sector firms.Three characteristics—board composition, board leadership structure and board size—are used to capture the monitoring ability of the board. These board characteristics are assumed to be endogenously determined, together with two ownership characteristics, managerial ownership and blockholder ownership. We use two-stage least squares regression to estimate the determinants of board and ownership characteristics. Our findings indicate that corporate ownership and board structures are related, and that there are significant interrelationships among board structure characteristics. The proportion of outside directors is negatively related to managerial ownership, board size and government ownership. The use of a dual leadership structure is positively related to blockholder ownership, and negatively related to regulation and to CEO tenure.     

Does board gender diversity affect corporate cash holdings?

This paper examines whether board gender diversity affects corporate cash holdings using S&P 1500 index firms in the US for the period 2006–2015. We document a significantly negative relationship between board gender diversity and cash holdings. We also find a strong negative effect of female independent directors consistent with monitoring function. Moreover, in accordance with the critical mass theory, we find a negative effect of female directors’ presence and voice on cash holdings. Our findings are robust to alternative econometric specifications, alternative measures of cash holdings and corporate governance, difference‐in‐differences, propensity score matching, and two‐stage least squares. This study offers useful insights into the current global debate on gender diversity and its implications for firms.     

Corporate Governance and Mergers and Acquisitions Performance in Banks: Evidence under the Special Regulatory Environment in Taiwan

In this study, we focus on the relation between bank governance and bank merger results under Taiwan’s special regulatory environment in 2000. Adopting governance variables (executive remuneration, managerial ownership, and board diversity), we find that managerial ownership is positively related to bank merger results and that board size is negatively correlated with bank mergers’ performance. This study supports sound governance mechanisms to prevent banks from pursuing a value-loss merger and acquisition (M&A). Our results offer the insight that internal bank governance structures have a bigger impact on the value effects from bank mergers. Thus, regulators may elevate the performance of bank M&As by enhancing corporate governance codes.     

The Interrelationship Between Managerial Ownership and Board Structure

Abstract:  The paper tests the hypothesis that high managerial ownership entrenches managers by allowing the CEO to create a board that is unlikely to monitor. The results show a strong negative relationship between the level of managerial ownership and corporate governance factors, such as, the split of the roles of the CEO and the Chairman, the proportion of non-executive directors, and the appointment of a non-executive director as a Chairman. I also find that companies with low managerial ownership are more likely to change their board structure to comply with the Cadbury (1992) recommendations. The results suggest that managers, through their high ownership, choose a board that is unlikely to monitor. Overall, the findings cast doubt on the effectiveness of the board as an internal corporate governance mechanism when managerial ownership is high.     

Do gender diverse boards enhance managerial ability?

We examine the link between board gender diversity and managerial ability to transform corporate resources into revenue. Drawing on a sample of U.S firms during the period 2001–2016, we find a positive and economically meaningful association between female directors on boards and managerial ability, particularly when female directors are in monitoring roles on the board. The documented effect is stronger when using a tenure weighted measure of female representation on boards; and more pronounced for firms that have three or more women on the board of directors, in line with the critical mass hypothesis. We uncover that critical mass of female directors in monitoring roles is particularly conducive to enhancing managerial ability. Our channel analysis tests further reveal a distinctive tendency of firms with more gender diverse boards to shape the human capital of the firm by promoting managers with more generalist managerial skills. We find consistent results when we employ propensity score matching estimates and difference-in-differences using sudden deaths of female directors as a potential shock to address endogeneity concerns. We discuss implications for theory and policy.     

The role of managerial incentives in corporate acquisitions: the 1990s evidence

This paper examines the relationship between the likelihood a firm is acquired and the governance and financial characteristics of the firm. Given many of the developments in the corporate control market in the late 1980s, I suspect that the process governing takeover likelihood may have changed in the 1990s. I examine a sample of 342 NYSE/AMEX firms that were acquired during the 1990–1997 period and compare them to a matched sample of nonacquired firms. I find that firms that were acquired over this period can be characterized as having lower managerial ownership and higher ownership by outsiders, particularly higher ownership by nonmanagement blockholders with board representation. The fact that managerial ownership is negatively related to takeover likelihood is consistent with studies using data from 1970s and 1980s. This suggests that managerial ownership helps managers maintain control, or alternatively that ownership proxies for how much managers care about control.     

公司治理、管理者动机与衍生金融工具使用

基于中国上市公司2007~2013年财务数据,研究公司治理对管理者使用衍生金融工具的影响,并结合中国制度背景,深入分析和检验企业产权、政策监管对公司治理效应的影响。实证结果表明,公司治理对管理者使用衍生金融工具的动机存在重要影响,公司治理水平越高,管理者越倾向于利用衍生金融工具避免财务困境风险;相反,管理者越倾向于利用衍生金融工具规避薪酬风险。研究还发现,公司治理的作用机制会受到所有权性质的影响,国有控制属性会弱化公司治理效应,对衍生金融工具交易的政策监管差异是重要原因。     

CEO Ownership,Stock Market Performance,and Managerial Discretion

We examine the relationship between CEO ownership and stock market performance. A strategy based on public information about managerial ownership delivers annual abnormal returns of 4% to 10%. The effect is strongest among firms with weak external governance, weak product market competition, and large managerial discretion, suggesting that CEO ownership can reverse the negative impact of weak governance. Furthermore, owner‐CEOs are value increasing: they reduce empire building and run their firms more efficiently. Overall, our findings indicate that the market does not correctly price the incentive effects of managerial ownership, suggesting interesting feedback effects between corporate finance and asset pricing.     

Managerial incentives and corporate leverage: evidence from the United Kingdom

This paper investigates the effect of managerial incentives and corporate governance on capital structure using a large sample of UK firms during the period 1999–2004. The analysis revolves around the view that managerial incentives are important in determining a firm's leverage. However, we argue that the exact impact of these incentives on leverage is likely to be determined by firm‐specific governance characteristics. To conduct our investigation, we construct a simple corporate governance measure using detailed ownership and governance information. We present evidence of a significant non‐monotonic relationship between executive ownership and leverage. There is also strong evidence suggesting that corporate governance practices have a significant impact on leverage. More importantly, the results reveal that the nature of the relation between executive ownership and leverage depends on the firm's corporate governance structure.     

Corporate governance and capital allocations of diversified firms

We examine how various aspects of corporate governance structures affect the capital allocation inefficiency that drives the value discounts of diversified firms. Diversified firms with more effective internal or external governance mechanisms experience more efficient investment allocations at both the firm and segment levels and show less of a diversification discount. The efficiency of the investment allocation process is better for diversified firms with high board independence, low board busyness, high institutional ownership, high outside director ownership, high CEO equity-based pay, high audit quality, and strong shareholder rights. The results hold after controlling for other potential influences. Our evidence suggests that corporate governance considerations are important in assessing the relation between investment efficiency and firm value for diversified firms.     

The Impact of Managerial Entrenchment on Agency Costs: An Empirical Investigation Using UK Panel Data

This paper empirically investigates the relationship between managerial entrenchment and agency costs for a large sample of UK firms over the period 1999–2005. To measure managerial entrenchment, we use detailed information on ownership and board structures and managerial compensation. We develop a managerial entrenchment index, which captures the extent to which managers have the ability and incentives to expropriate wealth from shareholders. Our findings, which are based on a dynamic panel data analysis, show that there is a strong negative relationship between managerial entrenchment and our inverse proxy for agency costs, namely asset turnover ratio. There is also evidence that short‐term debt and dividend payments work as effective corporate governance devices for UK firms. Finally, our findings reveal that agency costs are persistent over time. The results are robust to a number of alternative specifications, including varying measures of managerial entrenchment and agency costs.     

Managerial Discretion and Corporate Governance in Publicly Traded Firms: Evidence From the Property–Liability Insurance Industry

We study the incremental impact of corporate governance in mitigating managerial discretion, controlling for incentive alignment of managerial ownership. We extend the managerial discretion hypothesis to predict that for firms with the same set of governance tools, those that utilize governance tools more stringently to control agency costs will command greater contracting cost advantages, leading them to specialize in business with greater managerial discretion. Using 72 publicly traded insurers from 1994 to 2006, we find evidence supporting our hypothesis. Our findings complement the finance literature that focuses on the role of financing policies in mitigating agency costs of managerial discretion.     

Corporate governance and the spinoff decision

Using a sample of 102 spinoffs in the period 1981 to 1997, we investigate the relation between corporate governance and the spinoff decision. Diversified firms conducting a spinoff have characteristics previously hypothesized to be associated with more effective corporate governance, such as greater ownership by outside board members, more heterogeneous boards, and fewer board members, in comparison to a set of peer firms. Post spinoff, relative valuation measures increase a significantly greater extent than for peer firms. These findings are consistent with the view that agency problems are a contributing factor in firms maintaining value destroying diversification strategies.     

Board of director characteristics and earnings quality surrounding implementation of a corporate governance code in Mexico

Mexico recently enacted a corporate governance code. One objective of the code is to improve board of director oversight and to reveal more transparent information to shareholders by including detailed information regarding the structure of the board and its functions. Research in the U.S. has documented improvement in earnings quality associated with board characteristics. Whether or not board characteristics are associated with improved earnings quality in Mexico is questionable given the business environment in which firms operate, characterized by controlling family ownership and weak legal protection of property rights. The purpose of this study is to investigate whether or not board characteristics other than compliance with board independence (board composition disclosure, family concentrated ownership and shared-directors) are associated with the improvement in earnings quality found in previous research. Earnings quality is measured using income smoothing, timely loss recognition and conditional accruals. We find firms that do not have concentrated family ownership or share directors have greater increases in earnings quality than firms that have concentrated family ownership or share directors. We conclude that applying board-level corporate governance reforms, without considering cultural and legal environments, may limit the desired effects of the change.     

Operating performance changes associated with corporate mergers and the role of corporate governance

We find that corporate governance characteristics of acquiring firms (board ownership, board size, and block-holder control) have an economically and statistically significant impact on operating performance changes following mergers. We also show that dispersion of intra-board ownership stakes is an important but heretofore overlooked factor when judging the influence of ownership on the outcomes of corporate choices. Finally, we present evidence that suggests the market sometimes under- or overreacts to merger news when initially revaluing merger partners but corrects any miscalculation following the consummation of the merger.     

Monitoring mechanisms,managerial incentives,investment distortion costs,and derivatives usage

We relate derivatives usage to the level of corporate governance/monitoring mechanisms, managerial incentives and investment decisions of UK firms. We find evidence to suggest that the monitoring environment, e.g., board size, influences both currency and interest rate derivatives usage. Managerial compensation plans also influence derivatives usage. Investment decisions are affected by the governance and managerial compensation plans of firms, which in turn impact on derivatives usage. We find a strong tendency for UK firms to reduce derivatives usage in situations where derivatives usage should be increased. There is limited evidence that firms use hedging substitutes to avoid monitoring from external capital markets.