This paper provides an empirical investigation into the factors influencing board monitoring function
effectiveness in Anglo Countries in West Africa using Generalized Methods of Moment and other estimation
techniques. Introducing new dimension and proxies for key board attributes ignored in prior studies, we find that
board skills, independence and size play a dominant role in improving board monitoring effectiveness in these
countries. However, no evidence was found for board gender diversity affecting board monitoring effectiveness.
Consistent with prior studies board skills and independence by far have the strongest impact on board monitoring
function effectiveness
Investigating Corporate Governance And Its Effect on Firm Performance with As...QUESTJOURNAL
ABSTRACT: Corporate governance and its effect on firm performance are investigated in this research. Research independent variables include non-bound members of board of directors, board of directors’ independence, institutional shareholders, and dependent variable includes assets return which is the index of firm’s performance. Accordingly, data of 125 accepted firms in Tehran securities exchange during 2009 to 2013 was extracted and panel data regression model was applied to test the hypotheses. Results indicate an inverse significant relationship between non-bound members of board of directors and assets return and a positive significant relationship between board of directors’ independence and firm’s performance. Also, there is a positive relationship between institutional shareholders and firm’s performance. In general, results showed that appropriate corporate governance improves firms’ performance.
Investigating Corporate Governance And Its Effect on Firm Performance with As...QUESTJOURNAL
ABSTRACT: Corporate governance and its effect on firm performance are investigated in this research. Research independent variables include non-bound members of board of directors, board of directors’ independence, institutional shareholders, and dependent variable includes assets return which is the index of firm’s performance. Accordingly, data of 125 accepted firms in Tehran securities exchange during 2009 to 2013 was extracted and panel data regression model was applied to test the hypotheses. Results indicate an inverse significant relationship between non-bound members of board of directors and assets return and a positive significant relationship between board of directors’ independence and firm’s performance. Also, there is a positive relationship between institutional shareholders and firm’s performance. In general, results showed that appropriate corporate governance improves firms’ performance.
International Journal of Business and Management Invention (IJBMI)inventionjournals
International Journal of Business and Management Invention (IJBMI) is an international journal intended for professionals and researchers in all fields of Business and Management. IJBMI publishes research articles and reviews within the whole field Business and Management, new teaching methods, assessment, validation and the impact of new technologies and it will continue to provide information on the latest trends and developments in this ever-expanding subject. The publications of papers are selected through double peer reviewed to ensure originality, relevance, and readability. The articles published in our journal can be accessed online.
The Journal will bring together leading researchers, engineers and scientists in the domain of interest from around the world. Topics of interest for submission include, but are not limited to
Leadership Behavior and Compensation on Employee Satisfaction and Performancetheijes
The International Journal of Engineering & Science is aimed at providing a platform for researchers, engineers, scientists, or educators to publish their original research results, to exchange new ideas, to disseminate information in innovative designs, engineering experiences and technological skills. It is also the Journal's objective to promote engineering and technology education. All papers submitted to the Journal will be blind peer-reviewed. Only original articles will be published.
International Journal of Business and Management Invention (IJBMI)inventionjournals
International Journal of Business and Management Invention (IJBMI) is an international journal intended for professionals and researchers in all fields of Business and Management. IJBMI publishes research articles and reviews within the whole field Business and Management, new teaching methods, assessment, validation and the impact of new technologies and it will continue to provide information on the latest trends and developments in this ever-expanding subject. The publications of papers are selected through double peer reviewed to ensure originality, relevance, and readability. The articles published in our journal can be accessed online.
This study attempts to investigate the role of Corporate Governance in mitigating agency cost. For
this purpose a sample of 100 firms selected on the basis of 100 INDEX of Karachi Stock Exchange during the
period 2007 to 2011. To do so, alternative proxies for agency costs are employing: the ratio of total sales to total
assets (asset turnover) and the ratio of selling, general & administrative expenses (SG&A) to total sales.
Multivariate fixed effect regression is used to analyze the data. The explanatory variables include director
ownership, institutional ownership, ownership Concentration, board size, CEO/Chair duality, Non Executive
Directors, Debt Ratio, remuneration structure and board independence. The analysis is controlled for the
influence of company size. The results show that higher director and institutional ownership reduces the level of
agency cost. Smaller sized boards also results in lowering agency cost. Board independence has positive
association with asset utilization ratio. The separation of the post of CEO and chairperson and higher
remuneration lower agency cost. Bank debt constitutes one of the most important Corporate Governance devices
for Pakistani Listed Companies. Also, managerial ownership, managerial compensation and ownership
concentration seem to play an important role in mitigating agency costs
Effects Of Corporate Governance On Capital Structure: Empirical Evidence From...Arfan Afzal
Effects Of Corporate Governance On Capital Structure: Empirical Evidence From Pakistan, The aim of this empirical study is to investigate whether corporate governance attributes such as board size, outside directors, ownership concentration, managerial ownership, director remuneration, and CEO duality affect capital structure choices of Pakistani firms.
Corporate Governance and Firm Performance: The Role of Transparency & Disclos...Muhammad Arslan
Purpose: This purpose of this paper is to empirically examine the relationship between transparency and disclosure and firm performance. Highlighting the importance of corporate governance in banking sector, the paper has focused in depth over its role, level and its impact on performance in banking industry of Pakistan. Design/methodology/approach: The paper access this purpose by constructing transparency and disclosure index for the past five year 2007-2011, using proxies for three sub-categories which are board and management structure disclosure, ownership structure disclosure and financial transparency disclosure. The paper also investigated structural changes of T&D Index and its effect on bank financial performance over the sample of 30 banks operating in Pakistan. Findings: Empirical analysis results by using ordinary least square regression model, reveals that financial performance is positively related to the transparency and disclosure and their sub levels except ownership structure disclosure which has negative relation with both ROA and ROE. Furthermore the average T&D level in Pakistani banking sector is above average. Practical implications: The current research paper aims for important policy implementation to reduce information asymmetry and improve corporate governance and firm performance in banking sector of Pakistan.
Board Composition and Firm Performance: Does Board Monitoring Intensity Media...Premier Publishers
The purpose of this paper is to investigate the effect of board composition on firm performance and further examine whether the effect is mediated by board monitoring intensity. This paper uses a panel data of 137 firms listed on stock exchanges in Ghana and Nigeria over a period of seven years. System Generalized Method of Moments, Baron and Kenny (1986) approach and Sobel test were adopted as estimation techniques for the study. The study reveals that board independence, skills and gender diversity is positively and statistically related to firm performance. The result of the study reveals that board size, skills and independence are positively related to board monitoring intensity. The study further reveals that relationship between board independence and board skills and firm performance is mediated by board monitoring intensity. However, board monitoring intensity partially mediates the relationship between board size and firm performance.
International Journal of Business and Management Invention (IJBMI)inventionjournals
International Journal of Business and Management Invention (IJBMI) is an international journal intended for professionals and researchers in all fields of Business and Management. IJBMI publishes research articles and reviews within the whole field Business and Management, new teaching methods, assessment, validation and the impact of new technologies and it will continue to provide information on the latest trends and developments in this ever-expanding subject. The publications of papers are selected through double peer reviewed to ensure originality, relevance, and readability. The articles published in our journal can be accessed online.
The Journal will bring together leading researchers, engineers and scientists in the domain of interest from around the world. Topics of interest for submission include, but are not limited to
Leadership Behavior and Compensation on Employee Satisfaction and Performancetheijes
The International Journal of Engineering & Science is aimed at providing a platform for researchers, engineers, scientists, or educators to publish their original research results, to exchange new ideas, to disseminate information in innovative designs, engineering experiences and technological skills. It is also the Journal's objective to promote engineering and technology education. All papers submitted to the Journal will be blind peer-reviewed. Only original articles will be published.
International Journal of Business and Management Invention (IJBMI)inventionjournals
International Journal of Business and Management Invention (IJBMI) is an international journal intended for professionals and researchers in all fields of Business and Management. IJBMI publishes research articles and reviews within the whole field Business and Management, new teaching methods, assessment, validation and the impact of new technologies and it will continue to provide information on the latest trends and developments in this ever-expanding subject. The publications of papers are selected through double peer reviewed to ensure originality, relevance, and readability. The articles published in our journal can be accessed online.
This study attempts to investigate the role of Corporate Governance in mitigating agency cost. For
this purpose a sample of 100 firms selected on the basis of 100 INDEX of Karachi Stock Exchange during the
period 2007 to 2011. To do so, alternative proxies for agency costs are employing: the ratio of total sales to total
assets (asset turnover) and the ratio of selling, general & administrative expenses (SG&A) to total sales.
Multivariate fixed effect regression is used to analyze the data. The explanatory variables include director
ownership, institutional ownership, ownership Concentration, board size, CEO/Chair duality, Non Executive
Directors, Debt Ratio, remuneration structure and board independence. The analysis is controlled for the
influence of company size. The results show that higher director and institutional ownership reduces the level of
agency cost. Smaller sized boards also results in lowering agency cost. Board independence has positive
association with asset utilization ratio. The separation of the post of CEO and chairperson and higher
remuneration lower agency cost. Bank debt constitutes one of the most important Corporate Governance devices
for Pakistani Listed Companies. Also, managerial ownership, managerial compensation and ownership
concentration seem to play an important role in mitigating agency costs
Effects Of Corporate Governance On Capital Structure: Empirical Evidence From...Arfan Afzal
Effects Of Corporate Governance On Capital Structure: Empirical Evidence From Pakistan, The aim of this empirical study is to investigate whether corporate governance attributes such as board size, outside directors, ownership concentration, managerial ownership, director remuneration, and CEO duality affect capital structure choices of Pakistani firms.
Corporate Governance and Firm Performance: The Role of Transparency & Disclos...Muhammad Arslan
Purpose: This purpose of this paper is to empirically examine the relationship between transparency and disclosure and firm performance. Highlighting the importance of corporate governance in banking sector, the paper has focused in depth over its role, level and its impact on performance in banking industry of Pakistan. Design/methodology/approach: The paper access this purpose by constructing transparency and disclosure index for the past five year 2007-2011, using proxies for three sub-categories which are board and management structure disclosure, ownership structure disclosure and financial transparency disclosure. The paper also investigated structural changes of T&D Index and its effect on bank financial performance over the sample of 30 banks operating in Pakistan. Findings: Empirical analysis results by using ordinary least square regression model, reveals that financial performance is positively related to the transparency and disclosure and their sub levels except ownership structure disclosure which has negative relation with both ROA and ROE. Furthermore the average T&D level in Pakistani banking sector is above average. Practical implications: The current research paper aims for important policy implementation to reduce information asymmetry and improve corporate governance and firm performance in banking sector of Pakistan.
Board Composition and Firm Performance: Does Board Monitoring Intensity Media...Premier Publishers
The purpose of this paper is to investigate the effect of board composition on firm performance and further examine whether the effect is mediated by board monitoring intensity. This paper uses a panel data of 137 firms listed on stock exchanges in Ghana and Nigeria over a period of seven years. System Generalized Method of Moments, Baron and Kenny (1986) approach and Sobel test were adopted as estimation techniques for the study. The study reveals that board independence, skills and gender diversity is positively and statistically related to firm performance. The result of the study reveals that board size, skills and independence are positively related to board monitoring intensity. The study further reveals that relationship between board independence and board skills and firm performance is mediated by board monitoring intensity. However, board monitoring intensity partially mediates the relationship between board size and firm performance.
Impact of Corporate Governance on Organizational PerformanceJenıstön Delımä
Citation: Delima, V. J., & Ragel, V. R. (2017). Impact of corporate governance on organizational performance. International Journal of Engineering Research and General Science, 5(5).
Abstract- This study examined whether corporate governance has impact on organizational performance in Financial Institutions as research problem. This research was carried out with objective to measure association between Corporate Governance and Financial Institution’s Performance in Batticaloa district. Conceptual framework has been developed to measure linkages between Corporate Governance and Financial Institution’s Performance. Board Size, Corporate Governance Mechanism, Communication Strategies, and Code of Conduct are considered as the measurement variables of Corporate Governance which was derived from Changezi & Saeed (2013) and Customer Satisfaction, Employee Commitment and Corporate Reputation are considered as the measurement variable of Organizational Performance which was derived from Bayoud (2012) and Carton (2004). Questionnaires were used to collect data for this study. 115 Management Respondents and 115 Customers from whole Financial Institutions in Batticaloa district have been selected for this study. Data were analyzed and evaluated by Univariate and Bivariate techniques. In Univariate analysis, Descriptive statistic has been used for the analysis. In Bivariate analysis, Correlation and multiple regressions have been used for the analysis. Findings have shown the Corporate Governance and Organizational Performance are at high level. Moreover, it also found that there is a strong positive relationship between Corporate Governance and Organizational Performance. Corporate Governance significantly impacts Organizational Performance of Financial Institutions. These findings would be useful to consider more on Corporate Governance practices to avoid the Corporate Collapses and to achieve successful Organizational Performance
Audit Committee Characteristics and Financial Performance of Deposit Money Ba...AkashSharma618775
The purpose of this study was to assess the predictive power of audit committee features on the financial
performance of listed Deposit Money Banks (DMBs) in Nigeria between 2009 and 2018. Thirteen (13) banks were
used over 10 years making a total of 130 firm year observation. The independent variable was audit committee
size, while the dependent variable was DMB financial performance measured by return on capital employed
(ROCE). The study used an ex-post factor research approach to address the research questions and the nature of
the study data. The study used the panel fixed effect approach (and the estimates were obtained using E-views 9).
The results show that audit committee size does not significantly predict ROCE nor does audit committee financial
skill and frequency of audit committee meetings. None of the independent variables have significant predictive
power on the performance of Deposit Money Banks in Nigeria. Thus, instead of DMBs focusing on expanding the
members of Audit committee, they should instead consider other things that can be done to have an effective audit
committee, such as gender, religion, region, ownership, etc that could possibly influence the performance of banks
in Nigeria.
This study examined the influence of the characteristics of the audit committee on Palestinian firms’ value. The research explores precisely the effect on the Audit Committee characteristics’ efficiency, namely, independence, expertise, evaluating the relationship among dependent and independent variables. Secondary data collected from a list of companies were registered in the Palestine Stock Exchange from 2011 to 2018. Individual variables considered are the independence & expertise of the audit committee, whereas the ROA is employed as the dependent variable as an indicator of a firm’s value. The results showed that the Audit Committee’s independence & expertise substantially positive with ROA. The study concluded that the audit committee’s characteristics are enhancing firm performance. The implications of this study’s findings can be used by decisions and policymakers, the firm’s management, and other stockholders’ interests to create reliable ties between agents and the principals.
Corporate Governance, Firm Size, and Earning Management: Evidence in Indonesi...IOSR Journals
Purpose –Thepurpose of this paper is to evaluate the impact of the corporate governance regulationsimplementation and firm size onthe earning management for food and beverages companies in Indonesian Stock Exchange. Design/methodology/approach –The multiple regression is utilized to test this relationship at 95% confidence.Corporate governance was proxied by board of director, audit quality, and board independence. Firm size was represented by natural logarithm of total assets. Earning management was measured by Jones model withdiscretionary accruals. Findings – Using data from the year 2005 annual reports of 51 food and beverages listed companies,including the composite index, the results showed that twoof the corporate governance variables, namely board of director and audit quality, as well as firm size are statistically significant in explaining earning management measured bydiscretionary accruals. Research limitations/implications – The regulations on corporate governance were implementedin 2005, but not all of food and beverages listed companies implemented the regulations in 2005. Practical implications – An implication of this finding is that regulatory efforts initiated after the1997 financial crisis to enhance corporate transparency and accountability did not appear to result on better corporate performance. Originality/value – This is one of the few studies which investigates the impact of regulatory actionson corporate governance on earning management immediately after its implementation.
Best Management Techniques and Practices for Institutional Growthpaperpublications3
Abstract: This study has been conducted in order to investigate whether different management techniques and practices can influence the firm growth or not. The study has used major three management types such as operations management, human capital management and performance management as well. The question has been asked from the mangers of the firm about these three management types. This study is exploratory in nature. It uses the sample of 30 managers in order to take their view point regarding the importance of management techniques and their impact on firm growth. It was difficult for the researcher to take whole population due to time and cost constraints as well. They all has been asked almost similar questions from the managers included in the sample. Managers tried to explain in their respective interviews that in these management practices the technology has great importance, which cannot be ignored. Open-ended questions have been asked from the managers to ask about management practices. This study is qualitative therefore it can be concluded from the manager’s response that management practices have great impact on the firm growth. The utilization of resources with best management techniques provides best performance to the organizations.
Corporate Governance and Earnings Quality of Listed Banks in Rivers Stateinventionjournals
This study investigated the relationship between corporate governance and earnings quality of listed banks in Rivers State. It examined the relationship between Board size and accrual quality; Audit committee independence and value relevance; and directors’ independence and accrual quality of listed banks in Rivers State. It adopted the quantitative approach in investigating the assumed relationships. Using regression analysis and Pearson product moment correlation coefficient, the result indicated a positive relationship between corporate governance and earnings quality. It revealed positive association between board size, independent directors and accrual quality. No relationship was established between independent audit committee and accrual quality. It is recommended that the existing board size should be maintained to sustain bank performance. In addition, quality and independent directors should be hired for earnings and accrual management. Finally, further study is recommended for other sectors using different research to correct the limitation of the research method and tools
Although performance appraisal is concerned with the evaluation of workers job performance, it at the same time serves to highlight the specific objectives of an organization. As the employee is being evaluated the organization is also evaluating itself by comparing objectives and standards of performance, reviews the whole appraisal framework and design as well as organizational values and culture. Performance appraisal is a veritable tool for organizations to evaluate and increase the quality of education and training of their workforce with a view to developing lifelong learning patterns and strategies to sustain productivity throughout longer working periods. Motivation as it relates to employee productivity is often behind the drive for performance and self-actualization and provides opportunities for higher productivity. Productivity is an important measure of goal achievement because getting more done with less resources increases organizational profitability. Using the exploratory research design and 109 participants the result of the study indicates a strong positive correlation between performance appraisal and employee productivity. It suggests that the issue of performance appraisal in charitable organizations should be addressed. In view of the result of the study, the paper recommends that performance appraisal should carefully review employee’s strengths and weaknesses against requirements for possible future higher responsibilities.
The integration between innovation and business is a key factor in competitiveness between organizations. That is, innovation applied to a business makes no sense if not considered as an integral tool for the processes of the organization. Companies should therefore adopt a policy where innovation plays a strategic role in the design of business models to become lean, effective and competitive entities (Moraleda, 2004). The objective of this paper is to show the importance of innovation within companies, identifying the concept, the various models that different entities might adopt in order to develop better processes of innovation, as well as indicators that represent innovation at global and national levels in order to develop strategies that lead to an increase in competitiveness. For this work the method used was a bibliographical review of relevant articles from a range of authors was conducted.
The practitioners and academicians in the business arena are highly concern about the enhancement of employee performance in this competitive age for achievement of business goals. Considering the issue, this study aimed to measure the influence of Human Resource Management (HRM) practices on the performance of employees. The data of this study have been collected from 392 on-the-job operational level employees using survey method who are working at different garment factories in Bangladesh. The collected data are analyzed through structural equation modeling to partial least square method. The study empirically proves that employee training and development, promotion opportunity, and job security has significant influence on the employees’ performance. Theoretically, this study proves that training and development, job security and promotion opportunity together influence on the performance of employees in the developing economy. The practitioners and policy makers of the organizations are expected to make necessary adjustments in their existing HRM practices based on the findings of this study in the context of Bangladesh for enhancing the employees’ performance level so that their whole-hearted efforts can be gained for the achievement of business goals.
Child labor is one of the issues receiving much attention from researchers and scholars around the world. Child labor still occurs in most countries around the world. Viet Nam is also one of the countries with relatively high child labor and increasing trend. This article is based on critical discourse analysis and data from the General Statistics Office of Vietnam to analyze some fundamental issues of child labor in Vietnam, thereby giving policy suggestions to the Vietnam government in minimizing the current child labor situation.
The rapid trend of changes and social issues in managing the global workforce has forced organizations to look for innovative ways of enhancing the job satisfaction of employees. Among these innovative approaches is the provision of Flexible Working Arrangements (FWAs). The purpose of this exploratory research was to identify the effects of FWAs, i.e., flextime schedule, compressed workweek, and telecommuting on job satisfaction from the perspective of the Ethiopian national employees of the United Nations Economic Commission for Africa (ECA) in Addis Ababa. To achieve this objective both descriptive and inferential statistics were conducted. The total population of the study was 250; out of which, 71% of responses were collected. A primary data collection method was implemented using a structured questionnaire. The analysis showed that there is significant positive effect of flextime schedule (R = .39, R2 = .264, p = .001) and compressed workweek (R = .39, R2 = .159, p = .039). This means that increase in the use of flextime schedules and compressed workweek enhances job satisfaction for employees of the ECA in Addis Ababa. The independent variables reported R = .39 and R2 = .15 which means that 15% of corresponding variations in employee job satisfaction can be explained by flexible working arrangements. Nevertheless, this study found out that there are no significant relationship of telecommuting (R = .39, R2 = .065, p = .398) on job satisfaction. Therefore, since the provision of FWAs is at the nascent stage, further studies on the effect of telecommuting on job satisfaction from Ethiopian employees context are highly recommended.
This study evaluates the impacts of urban road investment and operation in China, especially the spillover effect attributable to the investment of urban road projects. Using the synthetic control method and difference-in-differences technique and taking the opening of Jiaozhou Bay Bridge and its Subsea Tunnel in China on 30 June 2011 as a natural experiment, this paper investigates the causal effect between urban road investment and its economic impacts. Results show that the project has a positive externality in terms of its contribution to the output and employment: taken the industrial relative output as outcome variable, no matter whether the covariates are controlled or not, the parameters of the interactive terms are positive; taken the industrial relative employment rate as outcome variable, the gap between the treated unit and its counterpart indicates a direct program effect for the treated city as well as a spillover effect across the cities within the sample province. Furthermore, the permutation test ascertains that the probability of achieving a spillover effect as large as the treated city is around 5.88 per cent. Overall, the investment and operation of urban road transportation infrastructure has a noticeable spillover effect. Our results are robust across a series of placebo tests.
Poor public management defined by corruption and lack of prudence in public life continues to hold Nigeria hostage and makes good governance difficult. Since the 1980s government has been using many methods including the processes of privatization and commercialization as means of re-engineering the public sector for total quality management, and to increase the share of the public sector’s contribution to the gross domestic product. The experiment never achieved the desired level of success partly due to lack of political will on the part of government to wedge a total war against corruption, and also partly because the public sector is a large scale administration that has many entry and revolving doors which government finds difficult to close. These limitations provide the incentives for widespread public corruption that is recognized as one of the greatest challenges of government in carrying out its mandate. 110 respondents participated in this study conducted through the exploratory research design. The participants provided useful data that were triangulated with data from secondary sources for the purpose of the study. To achieve the objective of the investigation, data were analyzed through statistical techniques and the result showed significant positive correlation between good governance and good management. It was recommended that appointments in the public sector should feature a combination of people from private and public sectors of the economy to enhance competence with the aim of reducing public sector corruption. Further study should examine the reasons behind rising budget deficits as a way of reducing cost of governance in Nigeria.
In this article, we analyze in the Malian context the link between the structure of the shareholding and the sustainability of companies based on data from the census of industrial enterprises of the Ministry of Trade and Industry, 2015. The results show that Mali’s economic opening option in the 1980s, strengthened in the 1990s following the implementation of the Structural Adjustment Programs, resulting in the state’s withdrawal from the management of enterprises, have enabled the emergence of private enterprises in almost all sectors of economic activity. However, shareholding in industrial enterprises has suffered from poor governance. It also shows that the number of women entrepreneurs is close to that of men. Between 2010 and 2014, the majority of shareholders are in the agri-food sector. The majority of the investment is in the metal and metallurgical sector.
This paper’s objective is to present the importance of the strategic planning in business management. Speaking of strategic planning is always speaking in general terms and how to fix paths of behavior will necessarily affect deeply and significantly in the future evolution of the company or organization that adopts it. Today we think of the organization as part of an environment and in terms of options or choices based on what you have, of its surroundings and the opportunities or pathways that can lead to achieving the objective, (Garrido, 2009). For this work the method used was a bibliographical review of relevant articles from a range of authors was conducted. The conclusions were that the be properly analyzed and adapted to the precise conditions and characteristics of the small business or, more generally, to any type of business for which the planning is intended. Strategic planning brings multiple benefits (which exceed its disadvantages) if applied in the right way, however, there are inherent risks, which can be overcome with proper monitoring and control.
The study examined the relationship between non-financial incentives and workers’ motivation in Akwa Ibom State Civil Service exploring five key variables of continuing professional development, performance feedback, employee employment, employee participation in decision-making and task autonomy. Survey research design was adopted involving the use of questionnaire to gather data from 392 respondents drawn from a population of 20465 civil servants in state using Taro Yamene Sample Size Determination Table. The sample was drawn across all ministries and departments through stratified and convenience sampling techniques. Data collected were analysed using descriptive and inferential statistics. Hypotheses were tested at 0.05 level of significance. The five dimensions of non-financial incentives were positively correlated with workers’ motivation from the results of the analysis. Continuing Professional Development (CPD) had the highest correlation value (r = 0.33, P<0.01). Also, the five null hypotheses were rejected implying that the variables of study influence workers’ motivation in Akwa Ibom State Civil Service, Nigeria with beta coefficients and t-values of CPD (0.29;4.313); PF (0.117; 3.500); EE (0.2.141); PDM (0.182; 2.935), and TA (0.231;2.817). It was concluded that since workers’ motivation is a vital tool to organizational effectiveness and growth, employers should explore more of non-financial incentives in formulating and implementing employee benefits related policies.
This literature review is organized in five sections. Firstly, we begin with general ideas and continue with the origin of the fraudulent. Secondly, we discuss the struggle of the phenomena, insisting on the available mechanisms. Finally, we’ll discuss the link between audit and fraud.
Accounting function aims at providing accurate and sufficient accounting information to facilitate proper financial reporting and management performance. Accounting information is usually in the form of periodic or annual financial statements which are products of costing, financial and management accounting prepared for the benefit of a number of external interest groups. Accounting has its roots in the stewardship approach and as a management performance tool to guide the agent and the principal over the exact status of the going concern. Accounting function also involves financial statement analysis, interpreting the accounts by computing and evaluating ratios which relate pairs of financial information or items with one another. This analysis of ratios can be cross-sectional comparing the results of one company with another or trend. In doing so close attention is usually paid to profitability ratio to help keep pace with effective management performance. The exploratory research design was adopted for the study and result showed positive correlation between accounting function and management performance. The study was not exhaustive, therefore, further study should examine the relationship between audit failure and business failure as a matter of finding a solution to the problem. It was recommended that management should always carefully study audit reports to enhance decision making and management performance.
This study examines the effect of the trademark on consumer behavior of consumers of air conditioners in Sudan, in order to know the dimensions of the trademark that affect consumer behavior in Sudan, and provide information to companies on the dimensions of the trademark that affect the purchasing decision of the customer and contribute to customer satisfaction. The study adopted descriptive analytical method using a sample of 230 individuals who consume air conditioners in Sudan. The results showed that there is a positive significant relationship between the trademark of air conditioning and consumer behavior as well as a positive significant relationship between the trademark name of air conditioning and consumer behavior and finally there is a positive significant relationship between the trademark logo and consumer behavior.
In recent years, retired workers eligible for social security receive their emoluments from the appropriate regulatory agency and this provides more realistic evidence on the better living standard of the aged (retirees) under the scheme. Empirically, this paper examines the impact of social security on economic growth in Ghana using time series secondary (monthly) data ranging from 2000 – 2018. The author answers in two questions: 1) how significant are pensioners benefit payments dependent on economic growth and also, 2) how business environmental policy is contributing to economic performance as far as pensioners well-being are concerned. Using STATA analytical software, the findings show a positive significant relationship between social security and economic growth. The study concludes by outlining appropriate policy measures to help strengthen the current social security scheme in Ghana.
This research begins by showing the different meanings attributed to the term cluster by different currents and authors, which suggests definitions that are found around its spatial framework. Next, the factors that intervene in the competitiveness of a region and its growth are shown, for the development of these, Porter’s model of competitiveness which was taken as reference, and the contexts: geographical and economic. Therefore, the methodology was used based on a qualitative design, with descriptive and correlational scope since it will analyze differences of each cluster, with respect to the factors of dimensions, establishments, growth, economic impact and policies. To do this, the information-gathering tool was two semi-structured interviews with cluster leaders in both countries, because the approach is based on data collection methods that are not completely standardized or predetermined. And finally, the results of the comparison of the Mexican Bajío automotive cluster with the German cluster located in Baden-Württemberg are presented.
This research aims at identifying the impact of excellence in drawing up the following four marketing mix strategies (Product, Pricing, Promotion and Distribution) of the small and medium enterprises in Jordan, in terms of their marketing performance in its dimensions (Sales Growth, Profit Growth, Customer Attraction and Customer Retention).In order to reach the results of this study, A total of (187) valid questionnaire surveys were collected from companies belong to the SME Association in Jordan. The Statistical Package for the Social Sciences (SPSS) approach was used to analyze the collected data. The empirical results indicated there is a significant relationship between the building of marketing strategies of the marketing mix elements in the Jordanian SME and their marketing performance, by (sales growth, profit growth, customer attraction, and customer retention) dimensions. Consequently, decision makers in small and medium organizations need to choose strategies based on their target market to the positive impact on the mind of the consumer, which in turn could improve modern scientific methods in SME to divide their markets into sub-market sectors.
The study investigates the impact of team building on organisational productivity. The objective of this study is to evaluate the impact of team building among the members of the selected case study and to assess the effect of training and retraining of team members on organisational productivity. The study also x-rayed the absence of team building in a workplace which led to low levels of turnover and productivity. the total population of the study was 750 while researcher employed Yaro Yamane sampling technique to select sample size of 261 because of the large population and hypothesis were tested using Pearson correlation. The finding revealed that if members of the team can work in synergy without considering the differences in the likes of level of educational background and others, the expected productivity will be very high. It was also observed that capabilities of team leader in carrying out the assigned task determined its output especially if the team leader understands the technical knowhow of job and he is friendly with co-team members with a lot of motivation, that this would definitely enhance employees’ efficiencies and productivities. The study recommends that team members should trust, support and respect one another individual differences in order to accomplish group common goals and tasks.
Compared with general commercial reverse logistics operators, the recovery and treatment of expired drugs and medical waste is a complex and highly technically difficult project. The qualifications required by the relevant service providers are also more stringent. For medical institutions, the selection of reverse logistics operators is always a critical issue. On the perspective of sustainability, this paper aims to investigate and explore the critical factors of selecting a medical reverse logistics service provider. Through the process of the Delphi method, the experts’ assessments were collected, and 24 factors affecting the selection of medical reverse logistics service provider were screened and summarized. Then, Decision-Making Trial and Evaluation Laboratory (DEMATEL) was employed to calculate the total influence values and net influence values between factors that could be used to draw the visual causal map. Referring the causal map, “Green process operation level” and “Recycling process greening degree” are significantly higher than other factors in terms of total influence value and net influence value. Therefore, they can be regarded as crucial factors. This finding implies that medical reverse logistics providers must have the ability to improve the greening of facilities, as well as equipment, integrating existing processes to make it greener and environmentally friendly.
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Determinants of Board Monitoring Effectiveness in Anglo Countries in West Africa: An Empirical Investigation
1. Business, Management and Economics
Research
ISSN(e): 2412-1770, ISSN(p): 2413-855X
Vol. 3, No. 9, pp: 159-169, 2017
URL: http://arpgweb.com/?ic=journal&journal=8&info=aims
159
Academic Research Publishing Group
Determinants of Board Monitoring Effectiveness in Anglo
Countries in West Africa: An Empirical Investigation
Ebenezer Agyemang Badu Department of Business Administration, Presbyterian University College, Ghana
K. O. Appiah Department of Accounting and Finance, KNUST Business School, Kwame Nkrumah University of
Science and Technology, Ghana
1. Introduction
Corporate boards are regarded as one of the most important corporate governance mechanism involve in
monitoring managers to reduce the agency conflict created as a result of separation of ownership and management.
The role of directors, in recent times, has received significant attention by researchers following many corporate
scandals that have been hitting the business environment since the past decade. For instance, corporate boards are
partly responsible for various financial crisis and fraud resulting in billions of dollars losses to global economy
(Adams and Ferreira, 2009; Brickley et al., 2003) and threatened the survival of the financial markets and
economics (Claessens et al., 2010). Considering the role of board failure in Eron and Worldcom cases, it is evident
that there is a link between board characteristics and firms performance outcomes. Boards are charged with the
responsibilities of hiring and firing managers, determining managers’ compensation, and approving important
decisions (Grinstein and Tolkowsky, 2004). Boards also perform advisory role on proposed strategies and monitor
the progress of major decisions of managers (Boone et al., 2007; Coles et al., 2008; Linck et al., 2008).
Despite the significance of board monitoring function in improving the corporate governance system, no single
consensus has emerged on what factors influence effective board monitoring function. Moreover, recent evidence
from governance studies and for that matter, corporate boards have centered on board effectiveness (Brown et al.,
2011; Larcker et al., 2007; Roberts, 2012) However, findings have been inconclusive and fragmented ( see Bhagat
and Black (2000)). This is due to lack of well developed theory on the complex and multi- dimensional nature of
corporate governance (Larcker et al., 2007), examination of board characteristics from an ex-post perspective and
considering one or two attributes at a time resulting in difficulty in establishing whether the presence or absence of
one or more attributes will substantially affect board effectiveness.
Another interesting limitation of extant literature is the assumption that there are key attributes that make board
functions effective. It is worth arguing that board performs several functions such as monitoring, service and
resource. Therefore effective board is expected to perform well in adequate proportions in all these functions.
Though boards do not treat these functions as mutually exclusive, and possible overlap in attributes is implied ‘all
attributes fit all function’ model as seen in prior studies prevent adequate representation of board specific function
attributes on corporate board and prevents a holistic understanding of board effectiveness. Reasoning from this
perspective, though it is an empirical question, we do not expect attributes that make board monitoring function
effective will be the same as resource and service functions. Therefore the importance of establishing the
determinants of board monitoring function effectiveness cannot be overemphasized. Though monitoring is not the
only function of corporate board, the monitoring function is clearly a vital one for boards to play and more salient
following the wake of recent corporate scandals and legislation.
The aim of this paper is to address some of these concerns in extant literature. We employ System Generalized
Method of Moment and logistic regression to estimate key determinants of board monitoring effectiveness and
augment our model with board skills and board gender diversity which have been ignored by similar previous studies
Abstract: This paper provides an empirical investigation into the factors influencing board monitoring function
effectiveness in Anglo Countries in West Africa using Generalized Methods of Moment and other estimation
techniques. Introducing new dimension and proxies for key board attributes ignored in prior studies, we find that
board skills, independence and size play a dominant role in improving board monitoring effectiveness in these
countries. However, no evidence was found for board gender diversity affecting board monitoring effectiveness.
Consistent with prior studies board skills and independence by far have the strongest impact on board monitoring
function effectiveness.
Keywords: Board monitirng; Agency theory; Board composion; AAnglo; Determinants.
2. Business, Management and Economics Research, 2017, 3(9): 159-169
160
(see Bilimoria (2000); Ramirez (2003); Sellers (2007)), though their importance in improving board monitoring and
diversifying boards is implied. (see Andres (2008); Finegold et al. (2007); Dalton et al. (1999); Kiel and
Nicholson (2003); Bilimoria (2000)). Generally, board attributes considered in this study are those relevant to board
monitoring function.
Moreover, existing studies concentrates on developed markets in Asia, America and Europe with well
developed governance and financial structures and findings may not be valid in other countries in Africa. Few once
in Africa have been country specific not providing holistic model for improving corporate governance and
development of stock market in Anglo counties in West Africa. The case of these countries is an interesting one.
Stock market capitalization and number of listed firms in these countries are small and laws and regulations to
protect shareholders relatively ineffective. It is therefore tempting for one to conclude that the absence of
monitoring mechanism to resolve agency conflict has affected investor’s confidence and might have played a role in
the underdevelopment of stock market in these countries.
The major contribution of this paper is to develop and test through various estimation test conceptual model of
the key board attributes that are critical for board monitoring effectiveness. Our conceptual framework considers
attributes from accounting and finance literature and other attributes from other discipline focus are intentional
excluded. We find that board skills, independence and size play a dominant role in improving board monitoring
effectiveness in these countries. However, no evidence was found for board gender diversity affecting board
monitoring effectiveness.
The rest of this paper proceeds as follows. Section 2 discuses the theories and other empirical studies as well as
development of hypothesis. Methodology is captured in section 3 and section 4 reports on empirical results. Section
5 concludes the paper.
2. Theoretical Framework, Related Studies and Hypotheses
2.1. Agency Theory and Board Monitoring Function
Baysinger and Hoskisson (1990) believe that managers seek personal interest at the expense of shareholders.
Agency theorist therefore advocates for effective control mechanism to realign the interest of managers and mitigate
agency conflict (Eisenhardt, 1989). Agency theorist proposes several mechanisms to reduce manager’s moral
hazards and reduce agency problem. Some of these mechanisms include incentives, and strong managers’
monitoring mechanisms (Combs et al., 2007; Jensen and Meckling, 1976). These duties first fall on the board and
therefore for the board to effectively perform these duties, the composition, structure, process and characteristic are
very crucial. For this reason the scope of the study is limited to board of director’s attributes. More importantly, we
propose that for boards monitoring function to be effective; the composition of the board is essential.
2.2. Board Composition and Board Monitoring Effectiveness
In this section we present how board composition improves board monitoring function. The discussions are
limited to board size, board independence, board gender diversity and board skills.
2.2.1. Board Size: Large or Small
Fairly recent literature on board effectiveness has centered on the size of the board (Eisenberg et al., 1998;
Jensen, 1993; Yermack, 1996). Board size is a critical component of a well composed board and can affect the
effectiveness of board monitoring and control function. Board size depicts the ability of the board to resist the
control exercise by managers (Eisenberg et al., 1998). This is expected to reduce the level of agency conflict and to
improve performance. A lot of studies exist on the role of the size of the board in relation to aspects of the
organization. Boone et al. (2007) find that board size and independence increase as firms grow and diversify the
board over time. Previous studies have investigated the impact of board size on setting managers compensation and
enhancing the firm’s value. Board size is expected to play a key role in terms of the quality of the board in terms of
supervision and monitoring the management of the company and thus affecting the quality of the internal control
(Jensen, 1993; Lipton and Lorsch, 1992). Studies such as observe a non-monotonic relationship in estimating the
optimal number of directors. Related studies have tried to approximate the optimal board size. Jensen (1993) for
instance, suggests that the optimal board size is between seven and eight members.
Studies on board size argue that smaller boards are more effective because directors enjoy better
communications and interactions among themselves. (Ozkan, 2011; Yermack, 1996). Yermack (1996) observe that
small boards of directors are more effective, and that companies with small board size achieve higher market value.
Yermack (1996) further supports this assertion by establishing direct relationship between the value of the firm and
board size. Fischer and Pollock (2004) obtain evidence to support the effectiveness of smaller boards in monitoring
CEO, resulting in reduced coordination and free-rider problems (Yermack (1996) ; Chancharat et al. (2012)).
Contrary, the effectiveness of smaller board size, other studies assume that larger boards are supposed to
provide their firms with better monitoring as they generally have more time and experience than smaller boards.
Klein (2002) support this proposition indicating that board monitoring is directly associated with larger boards as a
result of their ability to share work load over a greater number of directors. Large volumes of literature supported by
much empirical evidence; find that larger boards are strongly related to lower levels of earnings management
(Bedard et al., 2004; Peasnell et al., 2006; Xie et al., 2003).
3. Business, Management and Economics Research, 2017, 3(9): 159-169
161
In sum, evidence on the relationship between board size and board monitoring effectiveness is mixed and
inconclusive. However, small board size is easily manipulated by senior managers from managers’ perspective.
Following this, the ability of the board to monitor and control managers becomes ineffective thereby increasing the
level of agency problem. In the context of board monitoring and agency theory, board size depicts the level of board
control over management (Pearce and Zahra, 1991). Larger boards have experience, time to monitor managers
(Klein, 2002). Therefore effective board monitoring is associated with larger board. Accordingly,
H1: There is a positive relationship between the board size and board monitoring function effectiveness.
2.2.2. Board Independence
Board independence explains the presence and participation of outside directors without any
substantial business relationship with the focal firm, also known as independent directors on the corporate board. It
is therefore recommended that the presence of independent directors on the board ensures board to be independent
from the management, as it clearly separates the management and control tasks. In addition, independent directors
can solve disagreements among the internal managers or between the internal managers and residual claimants.
Boards made up independent directors will provide a counter balance to prevent insiders take advantage of their
position and sacrifice the shareholders’ wealth.
Baysinger and Hoskisson (1990) report that firms with more independent board members realize higher return
on equity. Several other researchers have also reported a positive relationship between independent director
representation and firm performance (Pearce and Zahra, 1992; Rosenstein and Wyatt, 1990). Independent directors
are desirable because of their breadth of knowledge and experience, as well as their independence from corporate
management (see Farinha (2003)). Ghosh et al. (2006) argue that the viability of the board might be enhanced by the
inclusion of outside directors and the separation between the roles of chairman and CEO.
Dependent directors on the other hand, has also been found to have better knowledge about the company and
the industry where the company operates, therefore their experience can impact positively on the performance of the
firm (Baysinger and Hoskisson, 1990; Bhagat and Black, 1998). Rosenstein and Wyatt (1997) show that an addition
of insider director to an outsider-dominated board improves shareholder wealth. There is also an intermediate
position taken by some authors (see Hermalin and Weisbach (1991)) but do not find any conclusive evidence.
In conclusion, empirical evidence regarding the relationship between board independence and board monitoring
function is mixed. However, in Ghana and Nigeria the issue of independent directors on the board is
comprehensively addressed by their corporate governance Codes. This therefore places the issue of independent
directors as an important issue. In Ghana, for instance, the Code clearly recommends that seventy- five percent of
the board should be made up of outside directors. Consistent with Pfeffer and Salancik (1978) perspective, the code
suggest that independent directors offer expertise, control to enhance the board monitoring function and reduce
agency conflict. Agency theory recommends that independent directors monitor the CEO‘s agenda to protect
shareholders rights (Fama and Jensen, 1983). It is expected that independent outsider dominated boards will
positively affect the effectiveness of board control Johnson et al. (1996). Accordingly, we hypothesized that:
H2. There is a positive relationship between board independence and board monitoring function effectiveness.
2.2.3. Board Gender Diversity: Female or Male dominated?
Major board reforms, especially that of Europe recommends that certain proportion of the board be made up of
females. In UK, the government requires a minimum of a quarter of the board to be made up of female directors (see
Sealy and Vinnicombe (2012)). Consistent with this other countries such as Norway and Spain laws require 40 per
cent of the board be made up of women on all corporate boards (Adams and Ferreira, 2009; Rose, 2007). This
shows the importance of female representation on corporate board. Boards are responsible for monitoring which
may include: representing shareholders, monitoring proper use of corporate wealth, reacting to takeover threats and
employing, remunerating and monitoring top management work (Finkelstein and Hambrick, 1996). Accordingly,
Fondas (2000) argues that the presence of women on boards assist the board to perform its strategic function because
their experience is often aligned with company needs. Additional practical evidence supporting the presence of
female qualified directors is presented by Burke (2000). He observes that in general there are currently limited
directors and there are increasing rates of CEOs rejecting invitations to join boards. Men currently serving on boards
do not have the time to take on additional responsibilities. Fairly recent study from Carter and Wagner (2011)
provide evidence that gender diversity has direct impact on corporate performance because of its ability to improve
the audit function of the board. To Hillman and Dalziel (2003) the additional expertise and experience brought to the
board by female members enhance the board ability to exercise their monitoring role effectively. The characteristics
that women exhibits on corporate boards may also provide an enhanced oversight of manager’s activities, because of
the increased heterogeneity as females are appointed as directors.
Notwithstanding the above benefit of presence of female directors, critics observe that women representation on
board can potentially affect performance negatively. For instance, Adams and Ferreira (2009) observe a negative
relationship between proportion of women on the board and Tobin‘s Q. In a similar study Carter and Wagner (2011)
find no evidence to support any relationship between the board gender diversity and different measures of
performance.
From the extant literature, the relationship between board gender diversity and performance differs. This can be
partly due to the operation definition and measurement of performance. However, the relationships suggest that
4. Business, Management and Economics Research, 2017, 3(9): 159-169
162
women serve on boards to show the present generation of stakeholders (Sealy and Vinnicombe, 2012). In sum,
evidence of the relationship between board gender diversity and board monitoring effectiveness is distinctively
lacking.
This study posits that considering female representation on board in the context of board monitoring function
and agency conflict, this may offer a link between gender diversity and firm performance. Despite deliberate effort
made in Europe to include women on corporate board, this is not the case in Anglo countries in West Africa. In
Ghana, for instance, the Code of best practices states that, the board appointment should be fair and transparent. It is
expected that male dominated boards will have a positive relationship with effective board and accordingly reduce
agency conflict. Therefore,
H3. The presence of female directors on firm boards is negatively related to board monitoring function
effectiveness.
2.2.4. Board Skill: Financial Expertise
As part of the monitoring process, boards are expected to provide quality financial information by ensuring that
they monitor the financial reporting process. To be able to perform such crucial function, the board is expected to
possess accounting and financial knowledge, skills and competence. Lanfranconi and Robertson (2002) observe that
lack of knowledge on the part of the board cause the collapse of Enron and WorldCom. Empirical evidence suggest
that one key determinant of board monitoring of financial statement process is the financial expertise. For instance,
Agrawal and Chadha (2005) observe the importance of having accounting knowledgeable outside directors on the
firm board. There are different dimension of financial expertise such as financial executives, finance and accounting
professors and bank executives. The study find that the bank official appointed as director on the board benefit the
creditors but not the shareholders.
In sum, the empirical evidence reveals that directors serving on corporate board must have financial expertise.
Absence of this may affect the ability to monitor management, and hence increase the level of agency conflict.
In Ghana and Nigeria the Corporate governance codes address the issue of financial knowledge on the board.
The codes recommend that the information such as the age, qualification and experience of those to be appointed be
made available to shareholders. The codes recommend audit committee and remuneration committees of the board.
Inferring from Agrawal and Chadha (2005), the codes stipulate that the audit committee should be composed of at
least three directors of which majority should be NED. The members should be with people with background in
accounts, finance, and basic law in the area in which the firm operates. The expectation is that board with finance
and accounting will improve the financial reporting process and improve monitoring function of the board.
Accordingly,
H4. Board with financial expertise is positively related to board monitoring function.
3. Data and Methodology
3.1. Data Set
The study seeks to examine the determinants of board monitoring effectiveness. The target population for the
study includes all companies listed on the stock markets of Anglo countries in West Africa Ghana. West African sub
region is selected for this study because stock markets in these countries are less developed as compared to southern
and Eastern Africa. In the Anglo countries in West Africa, only Ghana and Nigeria Stock Exchanges are active in
terms of number of companies listed, market capitalization and corporate governance codes making it appropriate for
the study. Listed companies are chosen because ownership and management are separated demonstrating pure
agency relationship hence high tendency of agency conflict.
In all 224 companies were listed in these two stock markets as at 2013. Consistent with prior studies (see
Ahmed and Duellman (2007)) financial, insurance and mining firms are excluded from the sample as well as those
that have gone through mergers and acquisitions. Financial, mining and insurance companies are highly regulated
hence high tendency for low agency conflict.
The time horizon for the study is 2008- 2014. The reason for the selection of this period is in two folds. First,
this is to ensure adequate data is available for the study and there is uniformity of corporate governance practices.
Second, this is to ensure that the results are current and remain relevant. Therefore after deletion of outliers, a
sample of 137 was obtained resulting in 959 firm-year observations. Information on the variables is obtained from
the Nigeria and Ghana Stock Exchange libraries where annual reports submitted by the selected companies are
kept. Those that are not reported in the annual reports particularly frequency of board meetings are obtained from the
companies directly.
3.2. Measurement of Variables
The objective of this section is to describe how the variables (dependent, independent and control variables) are
measured. It also justifies why these proxies are seen to be appropriate measurement of the various variables.
In relation to board monitoring function effectiveness, various measures have been widely used in literature.
These include existence of audit committee (Collier and Gregory, 1999; Pincus et al., 1989), frequency of board
meeting and CEO performance evaluation. To overcome potential measurement error leading to attenuation bias, we
5. Business, Management and Economics Research, 2017, 3(9): 159-169
163
follow Boone et al. (2007), adopt multiple proxies for board monitoring function namely, the frequency of board
meeting (FBM) and the existence of audit committee (ACE) as opposed to one dimensional measurement and
proxies as used in prior studies. We in turn justify their usage and define each of them.
Agency theory and consistent with other empirical studies such as (see also Conger et al. (1998)) hold that
boards that meet regularly are more likely to perform their monitoring function effectively. Empirically testing this
assertion, Vafeas (1999) find evidence to believe that following years of higher frequency of board meeting, firm’s
performance tends to improve. Consistent with Fich and Slezak (2008) measurement, frequency of board meeting is
measured by the number of formal meetings (excluding telephone meetings) held by the entity in a financial year.
Existence of audit committee is measured as a binary variable which is coded as 1 if the firm has an audit
committee otherwise 0. The effectiveness of the board’s monitoring function also depends on structure and
organization of the board. Board’s works are normally delegated to standing committees reporting directly to the
main board (Klein, 1998). The board committee responsible for financial reporting process and important in board
monitoring function is the audit committee, if one exists. The audit committee has the responsibility of the
production of financial statement and oversight responsibility over external audit.
To test hypothesis one the variable of interest is board size (BSIZ). This is measured as the number of board
members. This measure is well established in literature (see Yermack (1996); Certo et al. (2001); Coles et al.
(2008). Though the contribution of board size to improving board monitoring function remains inconclusive, there is
greater evidence that large board size are more effective to perform their control roles (Zahra and Pearce, 1989) and,
in this way, positively related to board monitoring function. To check and control for the presence and significance
of non- linearity in the relationship between board size and board monitoring function, we also include square of
board size (BSIZE2
) in the model.
To test hypothesis the two, main variable of interest is board independence. This study defines board
independence as proportion of outside directors who are independent of the management, and free from any
business or other relationship which could interfere with the exercise of independent judgment or the ability to act in
the best interest of the stakeholders. BIND is computed as the total number of outside independent directors on the
board divided by the total number of board members. This measure is widely used in literature (see Abdullah
(2006); Klein (2002); Peasnell et al. (2006); Chancharat et al. (2012)) from agency theory preposition. Agency
theory advocate for more outside independent directors to effectively perform their monitoring function.
To test hypothesis three, the variable of interest is the presence of female director on the board. (BGEN), a
measure of board gender diversity. This is a dummy variable equal to 1, if there is at least a woman on the board,
otherwise 1. This measure is widely used in many empirical studies (see Rose (2007)). The selection of this
variable is well grounded in agency theory.
To test hypothesis four, the variable of interest is board skill. Financial expertise is used to proxy board skill
(BSKIL). This is measured as the proportion of board members with qualifications or experience in accounting or
finance, including those who are members of accounting professional bodies. This measurement is consistent with
other empirical studies. It is calculated as total number of board members with financial expertise divided by the
total number of board members (Bedard et al., 2004). Consistent with other studies, this variable is selected
because board without knowledge and experience in accounting and finance is likely to impair the board monitoring
function.
Consistent with other previous empirical studies, we include control variables that may influence board
monitoring besides the board attributes. These are demographic (age and size of the firm). This section explains
their measurement and justifies their inclusion.
This is measured as natural log of age of the firm from date of incorporation. We include age of firm to explain
the level of agency conflict and therefore greater need for control. We expect that firm incorporated for a long time
may have high level of agency conflict as compared with those listed for a short period and therefore demand more
monitoring.
Size is measured as the natural logarithm of sales. Large corporations are more likely to have highly diffused
ownership structures that effectively separate ownership of residual claims from control of corporate decisions.
Greater scale of operations is normally the characteristic of large firms. There is therefore greater incentive and
opportunities for managers to shirk therefore opportunity to demand for higher monitoring is expected to be high.
3. 3. Empirical Models and Estimation Technique
The general panel equation to be estimated takes the following form:
itiitititit XBSKILLBGENBINDBSIZy 4321 ............... (1)
Where:
i = 1, 2, 3, ...., N is the cross-sectional dimension of companies , t = 1, 2, 3,....., T BSIZit is the board size, BINDit
represent board independence, BGEN
it
is board gender diversity, BSKIL
it
is board skills, Xit is the set of control
variables, λi represents the unobserved firm specific fixed effect, εit is the error term. From similar equation, the
dependent variable is board monitoring effectiveness (audit committee existence and frequency of board meeting).
In addition to the above other variables was used to control the effects of the unobserved variables. These include
firm size (FSIZE) and age (FAGE).
6. Business, Management and Economics Research, 2017, 3(9): 159-169
164
3.4. Estimation Technique
Having specified the model for the study and the variables contained in it, we then proceed to describe the
technique adopted for estimation. Prior empirical studies adopt different estimation techniques. These include pooled
mean group, Fully Modified Least Square, Two Stage Least Square and Generalized Method of Moments.
Considering the data set of the study having short time dimension (t=7) and larger firm size (N= 137) renders panel
data analysis like co-integration analysis unsuitable. Therefore co-integration techniques such as Pooled Mean Group
and Fully Modified Least Square produce inefficient estimates. This study adopts Generalized Method of Moments
and logistic regression. For robustness checks purposes, Two Stage Least Square is used to complement it.
3.4.1. System Generalized Method of Moment (GMM)
As stated earlier, this study adopts the System Generalized Method of Moment to test the hypothesis described.
This method is selected because firm governance structure is endogenously determined. For instance Hillman and
Dalziel (2003) observe that board characteristics are product of firm structure and economic environment. Therefore
the possibility of endogenenity existing among these variables cannot be ruled out. The use of system GMM is able
to account for endogeneity and improves the consistency and efficiency of the dependent and independent variables
as compared to other estimators and is capable of accounting for the problem of endogeneity which are normally
ignored by other studies. The data used in this study consists of individual firm over time as described and this
estimator offers the possibility of controlling the unobserved heterogeneity between individuals with panel data
methods. This implies that the lagged dependent variable is likely to be correlated with the error term in the model.
In such a situation, estimating the above equation using Ordinary Least Square (OLS) estimator, results in inefficient
and biased estimates. In order to treat this problem and use OLS to estimate the model, the equation is transformed
by differencing the time series means of each variable for each firm. Though differencing the time series means of
the variables eliminate the individual firm -specific effects, λi because it does not vary with time, the correlation
between iit yy 1 and iit still remains. This again renders the estimate inconsistent. Thus, in order to
deal with this problem, the first-differenced GMM is used. This estimator uses lagged level of the dependent variable
and other endogenous explanatory variables as instruments for the first-differenced equation. In the light of this, it
becomes essential to use the system GMM which provides consistent and efficient estimates. The system GMM is
derived from estimating two simultaneous equations, one in levels (with lagged first differences as instruments) and
the other in first-differences (with lagged levels as instruments).
3.4.2. Logistic Regression
Considering the dichotomous nature of the existence of audit committee as a measurement of board monitoring
effectiveness, logistic regression is adopted as an estimation technique to identify the determinants of board
monitoring effectiveness. This is because logit adopt the coefficient and combines continuous independent
variables to predict the probability of occurrence of a binary dependent variable Also, logit model produces
transformation which is nonlinear of the input data that decreases the influence of outliers suggesting reliability
and efficiency of results.
3.5. Diagnostic Test
The various models for the various estimations and data are tested for presence of autocorrelation,
mutlicollinearity and heteroskedasticity which can affect the overall results.
As it can be observed from the Pearson correlations shown in table 3.4 (see Appendix), no serious collinearity
problem exist between the variables. In addition to the correlation values, variance inflation factor (VIF) test is
performed since multicollinearity may not be necessarily be detected using correlations matrix between variables.
The VIF test ran on the independent variables also confirmed no multicollinearity problem between the independent
variables.
In addition to the above test, heteroscedasity was not a problem in the data set since the sampled firms consisted
mainly of large firm characteristics. In order to be sure, White test was conducted and the results ruled out the
presence of heteroscedasity.
In relation to autocorrelation, the tests on the models did not confirm the presence of autocorrelation. As shown
in table 2, the results are significant at 1% and 5%.
4. Empirical Results
In this section, the empirical results obtained are presented, analyzed and discussed. More importantly, the study
finds out the determinants of board monitoring effectiveness. The discussion begins with the results of the
descriptive statistics and this is followed by the GMM and 2SLS estimator results.
4.1. Descriptive Statistics
Table 1 presents the descriptive statistics of the main variables used for the study. It reveals that on average,
companies have seven (7) members as board with the maximum and minimum of 13 and 5 respectively. This
average size is consistent with the optimal board size recommended by Jensen (1993). The firms sampled had at
7. Business, Management and Economics Research, 2017, 3(9): 159-169
165
least one member of the board been an independent outside director and a maximum of five. This is relatively lower
than seventy –five percent recommended by the Ghanaian Code of Best Practice. Relating to females on firm boards,
the sampled firms had at least one female and a maximum of five. Though corporate governance codes in these
countries do not make it mandatory, this is relatively lower than what is been recommended by some European
countries such as UK, Norway and Spain (Sealy and Vinnicombe, 2012). One key characteristic of the sampled firm
is that on the average, each firm had a member with accounting and finance knowledge. This observation is in line
with many corporate governance codes. The code of best practice in Ghana recommend regular board meeting but
did not recommend the number of meetings in a year. From the sampled firms, it is observed that on the average,
four meeting are held in a year. Interestingly, it is observed that some firms in the sample do not have an audit
committee even though it is recommended for effective board function.
Table-1. Descriptive Statistics of Variables
Variable Mean Standard Dev. Minimum Maximum
BSIZ 7.522917 1.578497 5 13
BIND 1.851028 .5536594 1 5
BGEN .7260417 .4843203 0 1
BSKILL 1.442708 .6992093 1 3
FBM 3.902083 .4220164 3 5
ACE .628125 .4835572 0 1
InFAGE 26.35312 63.94694 10 46
InSIZ 8.49e+07 2.99e+08 18745 5.75e+09
4.2. Regression Results
Contained in table 2 are models which estimates the determinants of board monitoring effectiveness using
Generalized Method of Moments and Two Stage Least Square.
Table-2. Determinant of Board Monitoring Effectiveness
Model Dependent
Variable
Independent Variable
System GMM
Frequency of
Board Meeting
2SLS Logistic Regression
Frequency of
Board
Meeting
Existence of Audit
Committee
BSIZ 11.6***
(5.92)
8.651*
(4.26)
4.744
(2.95)
BSIZ 2
-10.334***
(-6.45)
-7.254**
(-5.25)
-11.450
(-7.25)
BID 9.416*
(1.87)
4.531*
(0.225)
16.841**
(0.45)
BGEN -26.12
(-0.39)
-15.45
(0.15)
-9.326
(-1.92)
BSKILL 23.211**
(1.64)
12.25**
(0.32)
6.299***
(6.24)
InFAGE 0.677***
(20.01)
0.724**
(21.01)
0.160***
(6.73)
InSIZ 0.424**
(12.75)
0.214**
(6.23)
0.260**
10.97
No. of observation 959 959 959
No of Firms 137 137 137
Test for auto
correlation
AR(1) -2.12** AR(1)-
3.12***
Sargan Test 72.4** 74.5**
No. of observations 957 957 957
Number of firms 137 137 137
***denotes significance at 1% level, ** denotes significance at 5% level, * denotes significance at 10%
level. The t-statistics are provided in parentheses. Results of the logistic regression are marginal effects
As it can be observed, GMM, 2SLS and logistic regression models provide similar results. This demonstrates
the robustness of the estimates.
Board size is by far the second most determinant of board monitoring effectiveness. There is a positive
relationship between board size and board monitoring effectiveness and significant at one percent. A percentage
point increase in board size all things been equal would increase the board monitoring effectiveness by about 11.6%
and 4.7 percent using frequency of board meeting and existence of audit committee respectively. This presupposes
that board size is important in explaining board monitoring effectiveness. This result is consistence with agency
8. Business, Management and Economics Research, 2017, 3(9): 159-169
166
theory preposition that board size depicts the level of board control over management (Pearce and Zahra, 1991).
This result is also consistent with previous empirical studies (see Peasnell et al. (2006) ; Bedard et al. (2004); Xie
et al. (2003)). This is because large boards have more time, experience and are able to share work load over a
greater number of directors making them more effective in their monitoring function.
Interestingly, there is a negative and statistically significant relationship between board monitoring and the
Square of board size. This presupposes that as board size increases, it gets to a point where it affects negatively the
effectiveness of board monitoring function. This confirms the non- monotonic relationship in estimating optimal
number of board size for effective board function. This may imply that as the size of the firm becomes larger, the
level of coordination reduces and results in free rider problem.
Expectedly, there is a statistically significant (at 1% and 5%) relationship between board independence and
board monitoring effectiveness and a theoretical positive sign. This means that board independence is a key
determinant of board monitoring effectiveness. A percentage increase in board independence resulted in 9.4% and
16.8% increase in board monitoring effectiveness in model 1 and 2 respectively. This is consistent with agency
theory and the findings by Baysinger and Hoskisson (1990). This is because independent directors are desirable
because of their breadth of knowledge and experience, as well as their independence from corporate management.
This implies that their presence on the corporate board will enhance its monitoring function.
Turning to gender diversity (BGEN), the relationship between gender diversity and board monitoring
effectiveness is negative. Though the relationship is negative and expected, it is not statistically significant. The
result is similar in all the proxies used for board monitoring effectiveness. This implies that there is no evidence to
support hypothesis three suggesting that gender diversity is not a determinant of board monitoring effectiveness.
Consistent with theoretical expectation, board skill (BSKIIL) by far is the most significant determinant of board
monitoring effectiveness using frequency of board meeting as a proxy for board monitoring effectiveness. From
table 2, there is a positive relationship between board skills and monitoring effectiveness at statistically significant at
1%and 5%. A percentage point increase in board skill resulted in 23.21% and 6.29% increase in board monitoring
effectiveness. The findings are consistent with other empirical studies (see Agrawal and Chadha (2005)). This is
because board members with financial expertise have the ability and skill to monitor the financial reports resulting in
board monitoring effectiveness.
All the control variables thus firm age and size have their expected signs and the coefficient been statistically
significant at 1%. This implies that as firm grows in terms of age of incorporation, demand for board monitoring
effectiveness also increases. This is consistent with the assertion by Dey (2008) that the level of monitoring increase
to respond the level of agency conflict. Also, as firm size increases the board monitoring effectiveness also increases
to respond to increases in the level of agency conflict.
The Sargan test results show the validity of the instruments used. This is because Sargan test are all significant
at 5% and the implication is that the instruments used for the estimation were very strong. This shows that the
variables are exogenous confirming that our results are very efficient.
5. Conclusions and Implications
This paper investigates the determinants of board monitoring effectiveness using Generalized Methods of
Moment. Employing Two Stage Least Square to check for robustness, the results confirm earlier findings and agree
with agency theory view point. The results confirmed the significance of board size, board independence and board
skills in explaining board monitoring effectiveness. The study reveals the monotonic relationship of board size in
board monitoring effectiveness. The role of the presence of independent directors is essential in ensuring the
effectiveness of board monitoring function and could be used as a way of improving the monitoring role. Given the
close and significant relationship between board monitoring effectiveness and board size any increase in the size is
expected to improve monitoring effectiveness to a particular point.
In concluding the study, the results and for that matter, findings of the study mentioned above have important
theoretical and policy implications. First, it lends support to agency theory propositions as the results provide a very
strong justification for agency theorist and various corporate governance codes for the inclusion of greater
proportion of independent outside directors and accounting and finance experts as board members.
The results of the study are by no means conclusive because of some limitations associated with the study. First,
the study uses frequency of board meetings and existence of audit committee to measure the board monitoring
effectiveness. Other measurements of monitoring effectiveness are likely to give different results. Also, the study
neglect small and medium scale enterprise and regulated firms. Therefore the findings of the study cannot be
generalized to these areas. Further studies should replicate these studies in these areas and also consider the
determinants of service and resource function effectiveness. These are expected to provide a comprehensive
understanding of the effectiveness of board function.
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