Investor reaction to women directors

Existing studies on women directorships present equivocal results on the association between appointing women directors and firm performance. These studies tend to focus on western countries and largely ignore investors' reactions to such appointments. This paper applies the financial event study method and finds that investors generally respond positively to the appointment of women directors in Singaporean firms. Regression analyses also reveal that investors are most receptive when the women are independent directors and are least receptive when the directors assume the CEO role. This study not only tests the theory of gender diversity in an Asian context but also examines whether investors react systematically to the different positions that women directors hold on corporate boards, a question that has received little attention in prior studies.     

Good directors and bad behavior

Because financial frauds are not uncommon, and CEOs and/or CFOs are most often directly involved in them, directors of public corporations should be constantly concerned with monitoring their officers’ legal and ethical behavior. This is the case for three primary reasons. First, due to a variety of organizational pressures and decision making missteps, even people who wish to be ‘good’—as most corporate officers presumably do—often make serious ethical mistakes. Second, top corporate officers are particularly susceptible to making several of these errors. And third, for various psychological reasons, corporate directors often find it difficult to adequately police those officers. This installment of Business Law & Ethics Corner explores the issue of good directors and bad behavior.     

Boards of directors and stakeholder orientation

Based on a survey of 2,361 directors in 291 of the largest companies of the Southeast States, this study empirically examined boards of directors' stakeholder orientations. The results indicate that (1) there exist distinct stakeholder groups perceived by directors, (2) directors have high stakeholder orientations, (3) directors view some stakeholders differently depending on their occupation (CEO directors v. non-CEO directors) and type (inside directors vs. outside directors).Jia Wang is an Associate Professor of Strategic Management at the California State University at Fresno. His current research interests include corporate governance and corporate social performance.H. Dudley Dewhirst is a Professor of Strategic Management and Director of the Strategic Management Program at the University of Tennessee, Knoxville. His current research interests include corporate governance and technology management.     

Marketing planning and Britain's disoriented directors

The author describes the predicament of directors who operated successfully during the 1960s and early 1970s and who now are facing a new dynamic and competitive environment in which tried and tested solutions no longer work. He suggests that successful directors and companies of the future will have to move towards a greater strategic emphasis if a balance between strategic and operational planning is to be achieved. It is concluded that those companies who choose to undertake this transformation will find it a traumatic experience.     

The ethics of Australian executive remuneration packages

This article raises the issue of growing inequalities in remuneration in Australia at a time of severe economic recession. The salary packages of the CEOs and senior managers of large Australian companies have been increased substantially in recent years often in spite of poor performance of the companies. At the same time real wages have either stagnated or, according to some researchers, have fallen in the same period. In addition unemployment has risen to unprecedented high levels (above 11%).The ethics of such growing differentials are rarely addressed in the literature on compensation. It is mooted that the lack of ethical scrutiny affects staff morale and performance by non-managerial employees adversely. It tends to make a mockery of the philosophy of performance-based pay and the concept of appointment and promotion on the basis of merit. Without suggesting a widespread breakdown in norms and standards in Australia this article does question the quality of Australian management and raises the issue of appropriate corrections. Studies about the need for a new direction in management education and into the role of the Boards of Directors, their competence and functions have been conducted and others are in train. These suggest a preference for piecemeal reforms while, perhaps, more drastic measures are required.Dr. Klaas Woldring is a Senior Lecturer in Management at the Southern Cross University, Lismore, Australia. He taught at the University of Zambia in the early 1980s and edited a bookZambia's Development Predicament (1984). Since returning to Australia he has concentrated his research on Australia's management problems, management education, HRM and business ethics. At present he is editing two Readers, one on business ethics and another on managerial integrity and competence.     

Female directors and impression management in sustainability reporting

This study proposes a new research approach to examine the relationship between board diversity, in terms of gender differences, and the quality of sustainability reporting, measured by several aspects: balance, conciseness, clarity, comparability and reliability of information. In addition, this study examines the moderating role that institutional factors exert on this relationship through the stakeholder orientation of the country of origin. The research questions are examined using an international sample of 273 firm-year observations from 2006 to 2014, applying several regression models for panel data. Our evidence is consistent with the existence of positive externalities associated with the presence of women in supervisory and senior management positions. That is, we evidence how boards with greater female representation decrease the risk of impression management strategies on sustainability disclosure. Female directors are positively associated with more balanced, comparable and reliable information; although, they are also associated with less precise and clear information, given their narrative character. Moreover, evidence reports that these effects are greater in firms located in more stakeholder-oriented countries. Results are robust for alternative gender diversity measures.     

The value of independent directors: Evidence from China

This paper comprehensively investigates the contribution of independent directors to Chinese listed enterprises through a unique natural experiment. Our results show that in China, independent directors who are incumbent or retired government officials can promote the performance of privately controlled listed enterprises, while other independent directors make little contribution to Chinese listed enterprises. In fact, Chinese independent directors cannot play monitoring and advising roles effectively and even exacerbate the agency problem in listed enterprises. Among them, government official independent directors, however, enable privately controlled listed enterprises to access public resources to enhance firm performance. It can be concluded that Chinese independent directors act as “vases for decoration” on boards. Even worse, government official independent directors play important roles in firms' rent-seeking activities. Our findings provide sufficient new evidence for the classic theory of independent directors and may shed light on corporate governance in other emerging economies.     

Resignation of officials as independent directors and firm performance

In 2013, the Chinese government implemented Rule No. 18, which suspended the directorships of incumbent government officials and precluded those who retired within the past three years from serving as independent directors for listed firms. The surprise implementation of Rule No. 18 triggered a wave of resignations among official independent directors (OIDs). The event provided a unique opportunity to examine the impacts of the political connections of board members on firm performance. We applied a difference-in-difference technique to empirically investigate the effect of OID resignations on firm performance from the perspectives of resource dependence theory and social capital theory. The results indicate that the resignation of OIDs had a significantly negative effect on firm performance, as measured by Tobin’s Q and firm leverage. This also confirmed the importance of independent directors’ political connection on firm performance, as discovered in prior research. However, this influence varied across OIDs’ heterogeneity, external environment and firm ownership. The results indicate that political connections may not be necessary channels for firms to achieve success.     

Corporate governance,female directors and quality of financial information

The aim of this study is to examine whether gender diversity on audit committees (hereinafter, ACs) influences financial reporting quality by using panel data of Spanish listed firms. The financial reporting quality of firms is measured by the type of opinion received in the audit report. We estimate various panel data models of audit opinions and control for factors that are traditionally found to impact audit opinions. This study provides evidence to support the hypotheses that the percentage of females on ACs reduces the probability of qualifications due to errors, non‐compliance or the omission of information. Furthermore, the results also find that the percentage of female directors on ACs, the percentage of independent female directors on ACs and ACs chaired by females increase the likelihood of further transparency by disclosing audit reports with uncertainties and scope limitation qualifications.     

Boards of directors in family firms: a generational perspective

The purpose of this study is to advance the understanding of boards of directors in family firms. Building on generational changes in family attributes, we argue that firms in a different generational phase have different governance needs and characteristics. With regard to board task needs, the empirical results indicate a convex generational evolution in the need for board advice, and a rise over the generations in the need for board control. With regard to board composition, we find that the likelihood of having an outside director on the board has a convex generational trend. This relationship seems to be fully mediated by the firm’s board task needs. Furthermore, the number of family directors seems to increase over the generations. This study demonstrates that it is important to consider the generational phase of the family firm in order to understand its governance system.

Strategy and the board of directors in venture capital-backed firms

The results of this research demonstrate that boards of directors in venture-capital backed companies are more involved in both strategy formation and evaluation than are boards where members do not have large ownership stakes. These same results are demonstrated even when industry, board size, level of diversification, and insider board representation are held constant. Agency theory and institutional theory are advanced as reasons for this higher level of involvement.Venture capitalists are generally seen as value-added investors who have played a significant role in the development of many entrepreneurial businesses (Bygrave and Timmons 1992). This success has lead students of industrial competitiveness like Thurow (1992) to argue that the venture capitalist should serve as an example for directors of all types of organizations. One of the most significant value-added activities of the venture capitalist is involvement with strategy [Fried and Hisrich 1995] , [MacMillan, Kulow, and Khoylian 1988] , Sapienza 1989, [Sapienza et al. 1996] and [Rosenstein, Bruno, Bygrave, and Taylor 1993] . Implicit in the writings extolling directors who act like venture capitalists Porter 1992a, Porter 1992b, [Bhide 1994] and [Thurow 1992] is the belief that they will be more active than traditional board members. However, little empirical work has been done to directly compare the level of strategic involvement of the two types of boards.Building on the work of Judge and Zeithaml (1992), this study compares the level of board involvement with strategy by the boards of venture capital-backed companies with the boards of other types of organizations. After establishing different levels of involvement, it then examines why there is a difference. Finally, this study provides additional empirical evidence on the relationship between board involvement and performance (Zahra and Pearce 1989).     

Diversity, outside directors and firm valuation: Korean evidence

This paper examines the relationship between the diversity of independent outside directors and the valuation of Korean firms after Korea's 1998 corporate-governance reforms. First, the study finds consistent positive relationships between firm valuation and the proportion of independent outside directors with government experience, but finds negative relationships between firm valuation and the proportion of independent outside directors who are accountants. Second, the study finds that the diversity of independent outside directors' academic majors or age has consistently positive effects on firm valuation. This result implies that not only the quantity but also the quality of independent outside directors affects the valuation of Korean companies.