This document discusses a study on changes in board characteristics before and after the 2007-2008 financial crisis.
The study finds that average board size increased marginally after the crisis, rising from 9.66 members before to 9.8 members after. This suggests shareholders attempted to gain more control by increasing board influence. The study also found boards had more financial expertise after the crisis.
The document then examines the relationship between pre-crisis board size and firm performance during the crisis. It uses Tobin's Q and return on assets to measure performance for 2007-2008. This will help determine if larger or smaller boards beforehand correlated with better financial outcomes when the crisis hit.
Aloke Ghosh Speaks at Fox Business School, Temple University, PhiladelphiaProfessorAlokeGhosh
- The document examines the relationship between accounting losses/profits and CEO turnover.
- Using a sample of S&P 1500 firms from 1997-2007, it finds losses significantly increase the likelihood of CEO turnover within two years, with the probability increasing further based on the magnitude of the loss.
- Notably, it finds that accounting performance measures are no longer important predictors of turnover once an indicator for losses is included, suggesting losses dominate as a metric for judging managerial competence.
Firm Headquarter Location and Management Team Reputation_TW_20131031_20140113Gavin Yeh
1. This study examines the relationship between a firm's headquarter location characteristics and its management team size and reputation (MS&R) using data from Taiwanese firms from 2006-2012.
2. The results show that firms located farther from urban centers, major transportation hubs like railway stations and airports, have smaller management teams and poorer reputations, as measured by the percentage of corporate and non-profit boards that managers sit on.
3. The study also finds that firms located in bigger cities have an advantage over those in northern cities in attracting general managers, but the opposite is true for high-reputation managers.
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.
This document summarizes seven commonly held myths about boards of directors that are not supported by empirical evidence. The myths discussed include: 1) an independent chairman always provides better oversight; 2) staggered boards always harm shareholders; 3) directors meeting independence standards are truly independent; 4) interlocked directorships reduce governance quality; 5) CEOs make the best directors; 6) directors face significant liability risks; and 7) company failure is always the board's fault. The document reviews relevant research studies for each myth and finds mixed or inconclusive evidence regarding their impact. It concludes that more attention should be paid to the board process rather than just its structural features in evaluating governance quality.
This document discusses alternative models of corporate governance beyond traditional public companies. It examines the governance features of family-controlled businesses, venture-backed companies, private equity-owned firms, and nonprofit organizations. For each model, it provides statistics on ownership structure, boards of directors, executive compensation, and impact on firm performance. Overall, the document finds that while alternative models face different issues than public firms regarding ownership and control, they can positively or negatively impact companies depending on specific circumstances.
NEW GLOBAL OPEN WEB E BANKING MARKET HANDLING INTERNATIONAL GREEK CHARGES GR0112005674 Name und Anschrift des Leistenden Name/Unternehmen E.D.GOUTOS SA Postleitzahl 21300 Ort PORTOCHELI GREECE Staat Vereinigte Staaten von Amerika Steuernummer/USt-IdNr. 93172860596 Sitz des Geldinstitutes GREECE Bankleitzahl (Sortcode) 20122262 Bank Identification Code (BIC) HRB68648
Staggered Boards
Authors: Professor David F. Larcker and Brian Tayan,
Researcher, Corporate Governance Research Initiative
Stanford Graduate School of Business
This Research Spotlight provides a summary of the academic literature on how staggered boards impact shareholder value by insulating management from the pressures of capital markets.
It reviews the evidence of:
-Staggered board provisions in IPO charters
-The impact of staggered boards on merger activity
-The relation between staggered boards and market value
-Shareholder reaction to a decision to (de)stagger a board
-Firm outcomes following a decision to (de)stagger a board
This Research Spotlight expands upon issues introduced in the Quick Guide “The Market for Corporate Control.”
For an expanded discussion, see Corporate Governance Matters: A Closer Look at Organizational Choices and Their Consequences (Second Edition) by David Larcker and Brian Tayan (2015): http://www.gsb.stanford.edu/faculty-research/books/corporate-governance-matters-closer-look-organizational-choices
Buy This Book: http://www.ftpress.com/store/corporate-governance-matters-a-closer-look-at-organizational-9780134031569
For permissions to use this material, please contact: E: corpgovernance@gsb.stanford.edu
Aloke Ghosh Speaks at Fox Business School, Temple University, PhiladelphiaProfessorAlokeGhosh
- The document examines the relationship between accounting losses/profits and CEO turnover.
- Using a sample of S&P 1500 firms from 1997-2007, it finds losses significantly increase the likelihood of CEO turnover within two years, with the probability increasing further based on the magnitude of the loss.
- Notably, it finds that accounting performance measures are no longer important predictors of turnover once an indicator for losses is included, suggesting losses dominate as a metric for judging managerial competence.
Firm Headquarter Location and Management Team Reputation_TW_20131031_20140113Gavin Yeh
1. This study examines the relationship between a firm's headquarter location characteristics and its management team size and reputation (MS&R) using data from Taiwanese firms from 2006-2012.
2. The results show that firms located farther from urban centers, major transportation hubs like railway stations and airports, have smaller management teams and poorer reputations, as measured by the percentage of corporate and non-profit boards that managers sit on.
3. The study also finds that firms located in bigger cities have an advantage over those in northern cities in attracting general managers, but the opposite is true for high-reputation managers.
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.
This document summarizes seven commonly held myths about boards of directors that are not supported by empirical evidence. The myths discussed include: 1) an independent chairman always provides better oversight; 2) staggered boards always harm shareholders; 3) directors meeting independence standards are truly independent; 4) interlocked directorships reduce governance quality; 5) CEOs make the best directors; 6) directors face significant liability risks; and 7) company failure is always the board's fault. The document reviews relevant research studies for each myth and finds mixed or inconclusive evidence regarding their impact. It concludes that more attention should be paid to the board process rather than just its structural features in evaluating governance quality.
This document discusses alternative models of corporate governance beyond traditional public companies. It examines the governance features of family-controlled businesses, venture-backed companies, private equity-owned firms, and nonprofit organizations. For each model, it provides statistics on ownership structure, boards of directors, executive compensation, and impact on firm performance. Overall, the document finds that while alternative models face different issues than public firms regarding ownership and control, they can positively or negatively impact companies depending on specific circumstances.
NEW GLOBAL OPEN WEB E BANKING MARKET HANDLING INTERNATIONAL GREEK CHARGES GR0112005674 Name und Anschrift des Leistenden Name/Unternehmen E.D.GOUTOS SA Postleitzahl 21300 Ort PORTOCHELI GREECE Staat Vereinigte Staaten von Amerika Steuernummer/USt-IdNr. 93172860596 Sitz des Geldinstitutes GREECE Bankleitzahl (Sortcode) 20122262 Bank Identification Code (BIC) HRB68648
Staggered Boards
Authors: Professor David F. Larcker and Brian Tayan,
Researcher, Corporate Governance Research Initiative
Stanford Graduate School of Business
This Research Spotlight provides a summary of the academic literature on how staggered boards impact shareholder value by insulating management from the pressures of capital markets.
It reviews the evidence of:
-Staggered board provisions in IPO charters
-The impact of staggered boards on merger activity
-The relation between staggered boards and market value
-Shareholder reaction to a decision to (de)stagger a board
-Firm outcomes following a decision to (de)stagger a board
This Research Spotlight expands upon issues introduced in the Quick Guide “The Market for Corporate Control.”
For an expanded discussion, see Corporate Governance Matters: A Closer Look at Organizational Choices and Their Consequences (Second Edition) by David Larcker and Brian Tayan (2015): http://www.gsb.stanford.edu/faculty-research/books/corporate-governance-matters-closer-look-organizational-choices
Buy This Book: http://www.ftpress.com/store/corporate-governance-matters-a-closer-look-at-organizational-9780134031569
For permissions to use this material, please contact: E: corpgovernance@gsb.stanford.edu
1) The document discusses different levels of strategy for organizations including corporate level strategy, which determines what businesses an organization will be in, and business level strategy, which determines how an organization will compete within each business.
2) It also summarizes various frameworks for classifying strategies such as Miles and Snow's four strategic types of defenders, prospectors, analyzers, and reactors.
3) Porter's three generic competitive strategies are also outlined as cost leadership, differentiation, and focus.
This document discusses corporate downsizing, which refers to reducing the number of employees in a company to decrease costs. Downsizing is commonly done to cut expenses during economic downturns or when revenue declines. Common downsizing strategies include offering early retirement, transferring employees, or conducting layoffs. While downsizing can help reduce labor costs and expenses in the short term, it can also decrease company reputation and increase unemployment and stress for remaining employees in the long run. The document also provides examples of companies that have implemented downsizing globally.
Performance changes and mgmt turnover khoranabfmresearch
This document summarizes a study examining the impact of mutual fund manager replacements on subsequent fund performance. The key findings are:
1) Funds with negative pre-replacement performance continue to underperform benchmarks post-replacement, but see improved relative performance compared to pre-replacement.
2) Replacing outperforming managers results in deteriorating post-replacement performance relative to pre-replacement.
3) Funds with poor pre-replacement performance see significantly declining asset inflows pre-replacement, providing evidence that manager replacements are important for advisors to reverse declining inflows.
The influence of corporate governance and capital structure on risk, financia...Alexander Decker
This document summarizes a study on the influence of corporate governance and capital structure on risk, financial performance, and firm value for mining companies listed on the Indonesia Stock Exchange from 2009-2012. The study finds that corporate governance has no influence on risk, but better corporate governance improves financial performance and increases firm value. Higher risk decreases financial performance, while capital structure has no influence on risk and negatively influences both financial performance and firm value. Better financial performance improves firm value. The study aims to re-examine how corporate governance, capital structure, risk, financial performance, and firm value impact each other based on previous research presenting inconsistent or inconclusive results.
Corporate governance and bank performance: Empirical evidence from Nepalese f...Rajesh Gupta
This paper examines the effects of corporate governance on bank performance in the context of Nepal. Return on assets (ROA) and return on equity (ROE) are dependent variables for bank performance, and board size, female board members, financial institutions, CEO duality, independent directors, firm size, firm age, earnings per share, and the capital adequacy ratio are independent variables for corporate governance.
Professor Aloke (Al) Ghosh Presents at HEC Business SchoolProfessorAlokeGhosh
Professor Aloke (Al) Ghosh spoke at the HEC Business School, Switzerland in 2010. During this presentation, Professor Ghosh discusses managerial exposure to losses.
This document is a thesis submitted by Athanasios Koutras to Amsterdam Business School in June 2012. It examines the impact of the likelihood of dismissal on the provision of performance-based compensation. The introduction provides background on agency theory and information asymmetry between owners and managers. It establishes the research question of how the threat of dismissal affects performance-based compensation. The literature review covers prior research on incentives and sorting, incentive compensation including bonuses and equity-based pay, and the threat of dismissal. The study aims to investigate if incentives from compensation substitute or complement those from the threat of dismissal.
Mutually Supportive Management Systems (MSM) describes how effective control systems rely on the mutual support of both formal and informal systems. The Mackenzie framework of the Seven S's provides conceptual support for MSM, identifying seven mutually supportive systems: staff, skills, strategies, structures, systems, style of leadership, and shared values. A management control system refers to the formal processes and procedures that managers use to influence members of an organization to implement its strategies, with an effective system featuring a recurring cycle of activities.
strategic factors in organisational analysisEr Sharma
This document discusses various factors that impact corporate strategy for different business functions. It outlines strengths and weaknesses for production/operations, finance, marketing, human resources, information systems, general management, and research and development. For each function, it identifies relevant factors and lists examples of potential strengths and weaknesses an organization may have.
This document discusses change management models and trends in organizational change. It describes Lewin's three-stage change management model of unfreezing, transitioning, and refreezing. It also outlines McKinsey's 7-S model and Kotter's 8-step change model. The document notes that internal and external forces can drive organizational change and lists common catalysts like crises, performance gaps, and new technologies. Finally, it discusses trends organizations often follow in changing like flattening hierarchies, decentralizing decision-making, increasing employee empowerment and adaptability.
Organizational structures differ based on factors like the nature of work, strategy, size, technology, and environment. Structures define authority, behaviors, work processes, and impact culture and performance. Strategy, such as innovation or cost minimization, affects structure. Size influences structure through layers of management and employee empowerment. Technology changes jobs and structures through automation and communication. The environment, whether stable internally or with external forces, also impacts organizational design.
This document discusses risk management in the corporate sector and the role of corporate governance. It makes three key points:
1) Corporate governance is important for managing and reducing risk in organizations, as good governance can help firms avoid risks that could damage them. Managing risk effectively allows firms to maximize profits and maintain a healthy environment.
2) There are newer and more complex risks emerging for corporate boards to oversee, such as reputational risk from a lack of transparent reporting and cybersecurity risks from increased technology usage. Boards must understand the risks companies face to make strategic decisions.
3) Effective risk management involves identifying, assessing, and prioritizing all potential risks. While eliminating all risk is impossible, corporate boards
Ch03 - Organisation theory design and change gareth jonesAnkit Kesri
The document discusses organizational environments and how organizations manage uncertainty. It defines the specific and general environments and factors like complexity, dynamism, and richness that cause uncertainty. Organizations use strategies like developing reputations, co-optation, strategic alliances, and mergers to manage dependencies with other organizations for resources. Transaction cost theory also explains how organizations minimize costs of exchanging resources externally through various linkage mechanisms or internally.
This study examines how employee participation in the job evaluation process during a compensation system implementation affects pay satisfaction. The researchers hypothesize that implementing a participatively developed compensation system will increase pay satisfaction based on prior literature showing procedural fairness and participation influence outcomes. A quasi-experimental field study was conducted at a manufacturing firm to longitudinally and between-group compare the effects of participation on pay satisfaction during implementation of a new compensation system.
11.a proposed model of balance score cards for enterprise governanceAlexander Decker
This document proposes a model for balanced scorecards for enterprise governance. It consists of two parts:
1. The conformance balanced scorecard with 5 dimensions: financial indicators, customer satisfaction, operations systems, employee factors, and compliance.
2. The performance balanced scorecard with 6 dimensions: SWOT analysis, strategy implementation, technology needs, HR decisions, mergers and acquisitions, and risk management.
The model is intended to help boards of directors evaluate enterprise governance in terms of both accountability (conformance) and value creation (performance). It draws on prior literature discussing balanced scorecards and their use in assessing strategic decision making, resource allocation, and risk management at the enterprise level.
The document summarizes research on the impact of "say on pay" votes, which allow shareholders to vote on executive compensation. Studies have found that say on pay has a limited impact. It may reduce egregious pay practices but does little to lower overall pay levels. Say on pay improves dialogue between boards and shareholders but has not been shown to consistently influence pay amounts. While it increases accountability, concerns remain that it could expose companies to activists or make it harder to attract executive talent.
American Express operates in the financial services industry providing credit cards, travel services, and risk management solutions. It targets high earning customers and charges merchants a fee on credit card transactions. The environment American Express operates in is characterized by:
1. High complexity due to operating globally in a niche premium market segment.
2. High dynamism as it seeks to expand its merchant acceptance while facing challenges from competitors offering lower fees.
3. High richness with opportunities to capture more corporate travel customers and transactions.
The multiple forces American Express must deal with across different environments and its goal of market expansion results in a highly uncertain operating environment.
This document discusses organizational environments and how organizations manage dependencies and uncertainties. It covers the specific and general environments that organizations operate in, as well as sources of uncertainty like complexity, dynamism, and resource scarcity. Theories discussed include resource dependence theory, which holds that organizations aim to minimize dependence on others for resources, and transaction cost theory, which proposes that organizations seek to minimize costs of exchanging resources. Strategies for managing dependencies with other organizations like suppliers and competitors are analyzed, such as developing reputations, strategic alliances, mergers, and regulatory bodies.
Este documento discute los factores a considerar al seleccionar materiales educativos, incluyendo el contenido y objetivos de aprendizaje, el tipo de aprendizaje, las características de los estudiantes, las funciones de los materiales, los recursos requeridos, y las condiciones del ambiente y tiempo disponible. Se enfatiza la importancia de elegir materiales apropiados para la edad, nivel y estilo de aprendizaje de los estudiantes, y que cumplan con los objetivos de la lección dentro de las limitaciones de tiempo, costo
El documento describe una nueva aplicación para comparar precios de productos tecnológicos en diferentes cadenas minoristas y ahorrar tiempo y dinero. La aplicación permitiría a los usuarios comparar precios y evaluar la calidad de productos tecnológicos para encontrar las mejores opciones de manera más eficiente. El objetivo general es diseñar una aplicación que facilite la comparación de precios para ayudar a los consumidores a economizar.
1) The document discusses different levels of strategy for organizations including corporate level strategy, which determines what businesses an organization will be in, and business level strategy, which determines how an organization will compete within each business.
2) It also summarizes various frameworks for classifying strategies such as Miles and Snow's four strategic types of defenders, prospectors, analyzers, and reactors.
3) Porter's three generic competitive strategies are also outlined as cost leadership, differentiation, and focus.
This document discusses corporate downsizing, which refers to reducing the number of employees in a company to decrease costs. Downsizing is commonly done to cut expenses during economic downturns or when revenue declines. Common downsizing strategies include offering early retirement, transferring employees, or conducting layoffs. While downsizing can help reduce labor costs and expenses in the short term, it can also decrease company reputation and increase unemployment and stress for remaining employees in the long run. The document also provides examples of companies that have implemented downsizing globally.
Performance changes and mgmt turnover khoranabfmresearch
This document summarizes a study examining the impact of mutual fund manager replacements on subsequent fund performance. The key findings are:
1) Funds with negative pre-replacement performance continue to underperform benchmarks post-replacement, but see improved relative performance compared to pre-replacement.
2) Replacing outperforming managers results in deteriorating post-replacement performance relative to pre-replacement.
3) Funds with poor pre-replacement performance see significantly declining asset inflows pre-replacement, providing evidence that manager replacements are important for advisors to reverse declining inflows.
The influence of corporate governance and capital structure on risk, financia...Alexander Decker
This document summarizes a study on the influence of corporate governance and capital structure on risk, financial performance, and firm value for mining companies listed on the Indonesia Stock Exchange from 2009-2012. The study finds that corporate governance has no influence on risk, but better corporate governance improves financial performance and increases firm value. Higher risk decreases financial performance, while capital structure has no influence on risk and negatively influences both financial performance and firm value. Better financial performance improves firm value. The study aims to re-examine how corporate governance, capital structure, risk, financial performance, and firm value impact each other based on previous research presenting inconsistent or inconclusive results.
Corporate governance and bank performance: Empirical evidence from Nepalese f...Rajesh Gupta
This paper examines the effects of corporate governance on bank performance in the context of Nepal. Return on assets (ROA) and return on equity (ROE) are dependent variables for bank performance, and board size, female board members, financial institutions, CEO duality, independent directors, firm size, firm age, earnings per share, and the capital adequacy ratio are independent variables for corporate governance.
Professor Aloke (Al) Ghosh Presents at HEC Business SchoolProfessorAlokeGhosh
Professor Aloke (Al) Ghosh spoke at the HEC Business School, Switzerland in 2010. During this presentation, Professor Ghosh discusses managerial exposure to losses.
This document is a thesis submitted by Athanasios Koutras to Amsterdam Business School in June 2012. It examines the impact of the likelihood of dismissal on the provision of performance-based compensation. The introduction provides background on agency theory and information asymmetry between owners and managers. It establishes the research question of how the threat of dismissal affects performance-based compensation. The literature review covers prior research on incentives and sorting, incentive compensation including bonuses and equity-based pay, and the threat of dismissal. The study aims to investigate if incentives from compensation substitute or complement those from the threat of dismissal.
Mutually Supportive Management Systems (MSM) describes how effective control systems rely on the mutual support of both formal and informal systems. The Mackenzie framework of the Seven S's provides conceptual support for MSM, identifying seven mutually supportive systems: staff, skills, strategies, structures, systems, style of leadership, and shared values. A management control system refers to the formal processes and procedures that managers use to influence members of an organization to implement its strategies, with an effective system featuring a recurring cycle of activities.
strategic factors in organisational analysisEr Sharma
This document discusses various factors that impact corporate strategy for different business functions. It outlines strengths and weaknesses for production/operations, finance, marketing, human resources, information systems, general management, and research and development. For each function, it identifies relevant factors and lists examples of potential strengths and weaknesses an organization may have.
This document discusses change management models and trends in organizational change. It describes Lewin's three-stage change management model of unfreezing, transitioning, and refreezing. It also outlines McKinsey's 7-S model and Kotter's 8-step change model. The document notes that internal and external forces can drive organizational change and lists common catalysts like crises, performance gaps, and new technologies. Finally, it discusses trends organizations often follow in changing like flattening hierarchies, decentralizing decision-making, increasing employee empowerment and adaptability.
Organizational structures differ based on factors like the nature of work, strategy, size, technology, and environment. Structures define authority, behaviors, work processes, and impact culture and performance. Strategy, such as innovation or cost minimization, affects structure. Size influences structure through layers of management and employee empowerment. Technology changes jobs and structures through automation and communication. The environment, whether stable internally or with external forces, also impacts organizational design.
This document discusses risk management in the corporate sector and the role of corporate governance. It makes three key points:
1) Corporate governance is important for managing and reducing risk in organizations, as good governance can help firms avoid risks that could damage them. Managing risk effectively allows firms to maximize profits and maintain a healthy environment.
2) There are newer and more complex risks emerging for corporate boards to oversee, such as reputational risk from a lack of transparent reporting and cybersecurity risks from increased technology usage. Boards must understand the risks companies face to make strategic decisions.
3) Effective risk management involves identifying, assessing, and prioritizing all potential risks. While eliminating all risk is impossible, corporate boards
Ch03 - Organisation theory design and change gareth jonesAnkit Kesri
The document discusses organizational environments and how organizations manage uncertainty. It defines the specific and general environments and factors like complexity, dynamism, and richness that cause uncertainty. Organizations use strategies like developing reputations, co-optation, strategic alliances, and mergers to manage dependencies with other organizations for resources. Transaction cost theory also explains how organizations minimize costs of exchanging resources externally through various linkage mechanisms or internally.
This study examines how employee participation in the job evaluation process during a compensation system implementation affects pay satisfaction. The researchers hypothesize that implementing a participatively developed compensation system will increase pay satisfaction based on prior literature showing procedural fairness and participation influence outcomes. A quasi-experimental field study was conducted at a manufacturing firm to longitudinally and between-group compare the effects of participation on pay satisfaction during implementation of a new compensation system.
11.a proposed model of balance score cards for enterprise governanceAlexander Decker
This document proposes a model for balanced scorecards for enterprise governance. It consists of two parts:
1. The conformance balanced scorecard with 5 dimensions: financial indicators, customer satisfaction, operations systems, employee factors, and compliance.
2. The performance balanced scorecard with 6 dimensions: SWOT analysis, strategy implementation, technology needs, HR decisions, mergers and acquisitions, and risk management.
The model is intended to help boards of directors evaluate enterprise governance in terms of both accountability (conformance) and value creation (performance). It draws on prior literature discussing balanced scorecards and their use in assessing strategic decision making, resource allocation, and risk management at the enterprise level.
The document summarizes research on the impact of "say on pay" votes, which allow shareholders to vote on executive compensation. Studies have found that say on pay has a limited impact. It may reduce egregious pay practices but does little to lower overall pay levels. Say on pay improves dialogue between boards and shareholders but has not been shown to consistently influence pay amounts. While it increases accountability, concerns remain that it could expose companies to activists or make it harder to attract executive talent.
American Express operates in the financial services industry providing credit cards, travel services, and risk management solutions. It targets high earning customers and charges merchants a fee on credit card transactions. The environment American Express operates in is characterized by:
1. High complexity due to operating globally in a niche premium market segment.
2. High dynamism as it seeks to expand its merchant acceptance while facing challenges from competitors offering lower fees.
3. High richness with opportunities to capture more corporate travel customers and transactions.
The multiple forces American Express must deal with across different environments and its goal of market expansion results in a highly uncertain operating environment.
This document discusses organizational environments and how organizations manage dependencies and uncertainties. It covers the specific and general environments that organizations operate in, as well as sources of uncertainty like complexity, dynamism, and resource scarcity. Theories discussed include resource dependence theory, which holds that organizations aim to minimize dependence on others for resources, and transaction cost theory, which proposes that organizations seek to minimize costs of exchanging resources. Strategies for managing dependencies with other organizations like suppliers and competitors are analyzed, such as developing reputations, strategic alliances, mergers, and regulatory bodies.
Este documento discute los factores a considerar al seleccionar materiales educativos, incluyendo el contenido y objetivos de aprendizaje, el tipo de aprendizaje, las características de los estudiantes, las funciones de los materiales, los recursos requeridos, y las condiciones del ambiente y tiempo disponible. Se enfatiza la importancia de elegir materiales apropiados para la edad, nivel y estilo de aprendizaje de los estudiantes, y que cumplan con los objetivos de la lección dentro de las limitaciones de tiempo, costo
El documento describe una nueva aplicación para comparar precios de productos tecnológicos en diferentes cadenas minoristas y ahorrar tiempo y dinero. La aplicación permitiría a los usuarios comparar precios y evaluar la calidad de productos tecnológicos para encontrar las mejores opciones de manera más eficiente. El objetivo general es diseñar una aplicación que facilite la comparación de precios para ayudar a los consumidores a economizar.
This document provides a case study of creative writing in Brazil. It discusses the history and current state of creative writing education at PUCRS University in Porto Alegre, Brazil. PUCRS was the first university in Brazil to offer degrees in creative writing, including an undergraduate course launched in 2016. While creative writing education is growing, it still faces challenges such as attracting students, growing readership, consolidating new programs, and ensuring financial sustainability during Brazil's current economic crisis.
Desde DeustoKabi, el Vivero de Nuevas Empresas de Base Tecnológica (NEBTs) de la Universidad de Deusto,y dentro del programa de concienciación y fomento del espíritu emprendedor de la Fundación Deusto, el próximo jueves, día 3 de diciembre de 2009, a las 17:30 se celebrará en la Sala de Videoconferencias de la Facultad de Ingeniería ESIDE un Foro de Encuentro, donde se contará con la participación de ex alumnos de la Facultad de ESIDE que han creado su propia Empresa de Base Tecnológica.
Los objetivos que persigue este encuentro son los siguientes:
Fomentar el espíritu emprendedor entre la comunidad universitaria a través de la difusión de casos de éxito y de las nuevas oportunidades en sectores emergentes.
Generar sinergias y colaboraciones entre las empresas NEBTS participantes ya constituidas y las del proyecto DeustoKabi; así como interrelacionar a los diversos promotores-investigadores para el conocimiento mutuo de sus actividades y la aportación de valor entre los mismos.
Los problemas de las empresas con sus webs. Evento Cloud de Microsoft y SoftengSOFTENG
El documento describe Softeng Portal Builder, una solución en la nube que puede ayudar a las empresas a tener sitios web rentables que generen negocio. Portal Builder ofrece autonomía para gestionar el aspecto, contenido y estructura del sitio, así como productividad mediante funciones como editar contenido directamente en el sitio, componer páginas visualmente y traducción simultánea. Incrementa la productividad de una empresa y su negocio a través de mejoras en SEO, análisis del comportamiento de visitantes, y permitiendo que el departamento de
El Papa Benedicto le pide al chofer que le deje conducir la limusina. A pesar de las reservas del chofer, el Papa se sienta al volante y acelera a gran velocidad, asustando al chofer. Un policía los detiene por exceso de velocidad, pero cuando ve que el conductor es el Papa mismo, llama a su jefe sin saber qué hacer. Finalmente le dice a su jefe que cree que el conductor es Dios, ya que es el Papa quien va de chofer.
Este documento explica qué son los patrones de diseño, para qué sirven y por qué son útiles. Los patrones de diseño permiten resolver problemas de forma predefinida y garantizada después de haberse usado con éxito miles de veces. Sirven para resolver problemas de una manera probada y hacer el código fácil de entender y mantener. Usar patrones de diseño trae beneficios como reutilizar código, ahorrar tiempo y dinero, y poder centrarse en tareas más importantes.
The document discusses the religious protections guaranteed by the First Amendment and how countries may change if they adopted different state religions. It provides background on countries with official state religions, the concept of a theocracy where government is run by religious rules, and details about the Spanish Inquisition where the Catholic church ruled Spain and persecuted those who did not conform to Catholic doctrine.
The document discusses a competition experiment involving groups of students. It asks students to volunteer to be part of a group that cannot talk and a group that can talk. It also discusses a widget that students can bid up to $1 on. The document then asks students to consider questions about who benefits from competition using business examples, who suffers from competition using examples, and why pricing power depends on the number of firms in the market.
The effects of corporate governance on company performance evidence from sri ...Alexander Decker
This document examines the relationship between corporate governance and company performance in Sri Lanka's financial services industry from 2008-2011. It reviews literature showing mixed results on relationships between governance factors like board size/composition and performance measures like return on assets/equity. The study analyzes 20 randomly selected banks/insurers, finding no significant relationships between governance variables and performance. This is consistent with prior Sri Lankan research finding corporate governance does not affect financial performance metrics.
Eyes on Hands off, The Ambiguous Role of Non-Executive Directors in Corporate...Ken Low
This paper investigates the relationship between non-executive directors (NEDs) and firm performance in top Malaysian companies. The study examines the relationship between firm performance and several corporate governance factors, including board size, proportion of NEDs, and NED remuneration. However, the study did not find significant correlations between these governance structures and firm performance. The inconclusive results suggest more analysis is needed to understand how corporate governance impacts performance in developing countries.
1. Corporate Governance-Assessment of the Determinants of the Effectiveness o...cpamutui
The document discusses factors that determine the effectiveness of corporate boards of directors. It reviews theories of board effectiveness, including agency theory, stewardship theory, and stakeholder theory. Structural factors like board size and composition, as well as non-structural factors like decision-making processes, board cohesiveness, and cognitive conflict are examined. The literature finds that decision-making quality and board cohesiveness positively influence board effectiveness in fulfilling its roles of control, service, and strategy. However, accurately assessing individual director characteristics and board processes remains challenging.
January 23rd, 2012
What Is CEO Talent Worth?
By Professor, David F. Larcker and Brian Tayan, Researcher, Corporate Governance Research Program, Stanford Graduate School of Business
January 24, 2012
The topic of executive compensation elicits strong emotions among corporate stakeholders and practitioners. On the one hand are those who believe that chief executive officers in the United States are overpaid. On the other hand are those who believe that CEOs are simply paid the going fair-market rate.
Much less effort, however, is put into determining whether total compensation is commensurate with the value of services rendered.
We examine the issue and explain how such a calculation might be performed. We ask:
* How much value creation should be attributable to the efforts of the CEO?
* What percentage of this value should be fairly offered as compensation?
* Can the board actually perform this calculation? If not, how does it make rational decisions about pay levels?
Read the attached Closer Look and let us know what you think!
Does firm volatility affect managerial influenceAlexander Decker
This document discusses how firm volatility may affect managerial influence on firm performance. It develops a theoretical framework drawing from existing literature on group decision-making. The hypothesis is that the effect of managerial ability on firm value differs according to a firm's characteristics like risk and volatility. An empirical analysis tests this hypothesis using data on Korean firms from 1999-2008. Managerial ability is controlled by focusing on those who graduated from top universities. The analysis finds the influence of such managers on Tobin's Q (a measure of firm value) varies interactively with a firm's volatility, market risk, and return variability.
Influence of board size and independence iim reportBFSICM
This document examines the relationship between board size, independence, and firm performance in Indian companies. It summarizes previous research that has produced mixed results on this topic. The study analyzed data from 164 Indian companies over 6 years. The main findings were:
1) There was an inverse relationship between board size and firm performance, with smaller boards being more efficient.
2) Different levels of board independence had different impacts on firm performance, with independence between 50-60% correlating most strongly with better performance.
3) Independent directors did not effectively perform their monitoring role and improve firm performance.
4) Factors like cross-board membership and lack of training may have hindered independent directors' effectiveness.
This document is a dissertation submitted by Mohit Kumar to Leeds University Business School in partial fulfillment of an MSc in Finance and Investment. The dissertation examines the impact of managerial ownership on firm performance during a financial crisis using a sample of 180 UK firms from 2009-2011. The dissertation includes an abstract, acknowledgements, table of contents, literature review on the relationship between ownership structure and firm performance, research methods and methodology, findings and conclusions.
This study examines the relationship between corporate governance and financial performance of pharmaceutical firms in Pakistan. The study uses data from annual reports of 20 multinational and 90 national pharmaceutical firms from 2003-2013. Regression analysis is used to analyze the impact of various corporate governance mechanisms (board composition, board size, board education, board experience) and CEO duality on financial performance measured by return on assets and return on sales. The results indicate that board composition, size, education and experience are positively associated with financial performance, while CEO duality is negatively associated with performance. Thus, better corporate governance through greater board independence and separation of CEO/chairperson roles can enhance pharmaceutical firm performance in Pakistan.
The Relationship between Board Tenure and Financial Performance. The Allegian...IJMREMJournal
PURPOSE: The purpose of this paper was to examine the relationship between the tenure of the board and
financial distress of listed firms in Kenya.
DESIGN/METHODOLOGY: The research design used in this study was exploratory design. The study employed
panel regression analysis and simultaneously used pooled regression and random effects on sample size of 57
listed firms in Kenya during the period of 2007-2016.
FINDINGS: The study found that board tenure was found to be negatively and significantly related to financial
performance (β=-0.091; p<0.01).
THEORETICAL IMPLICATIONS: This study adds value to theory by studying the effect of tenure on
financial performance by updating empirical literature from a developing country.
ORIGINALITY: The paper fills an important gap in academic literature by providing insights into the role of
board tenure in performance of firms particularly in developing economies. In addition, given the increasing
collapsing of companies in developing nations, this paper provides policy makers with evidence on the
implications of board composition on financial distress.
This document is a thesis submitted by Basim Abdullah in partial fulfillment of the requirements for a Master of Science in Accounting and Finance from the University of Surrey in September 2016. The thesis examines how corporate governance mechanisms can impact and improve accounting quality within firms. It analyzes a sample of 92 FTSE-350 firms from 2000 to 2011 to test the relationship between accounting quality and factors like independent directors, board structure, executive compensation, and ownership structure. The results found that strong corporate governance is positively related to accounting quality and lower agency costs.
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
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Purpose: The basic standard of this article is to find out the outcome of corporate governance on firm’s profitability in textile sector of listed companies in Pakistan. Methodology: The data are collected from respective textile sector annual reports from 2005 to 2014.The results of different variables arise by using different techniques like descriptive, correlation and regression in using software of E-views in this study. Findings: These results of study explain that corporate governance and firm’s financial performance shows positive relationship between each other. This indicates that in textile sectors adopting corporate governance and plays a significant role in textile sectors. Research limitations: This study restricts by fewer digit of determinantslinked corporategovernance and data gathered from 2005 to 2014 were addressed, which restrictions the overview of the result. Further research can be conduct by using more variables and more years for finding more in future. Originality: This study shows that the firm’s performance has increased by using corporate governance in textile sector firms.
Impact of Corporate Governance on Firms’ Financial Performance: Textile Secto...inventionjournals
Purpose: The basic standard of this article is to find out the outcome of corporate governance on firm’s profitability in textile sector of listed companies in Pakistan. Methodology: The data are collected from respective textile sector annual reports from 2005 to 2014.The results of different variables arise by using different techniques like descriptive, correlation and regression in using software of E-views in this study. Findings: These results of study explain that corporate governance and firm’s financial performance shows positive relationship between each other. This indicates that in textile sectors adopting corporate governance and plays a significant role in textile sectors. Research limitations: This study restricts by fewer digit of determinantslinked corporategovernance and data gathered from 2005 to 2014 were addressed, which restrictions the overview of the result. Further research can be conduct by using more variables and more years for finding more in future. Originality: This study shows that the firm’s performance has increased by using corporate governance in textile sector firms.
A proposed model of balance score cards for enterprise governanceAlexander Decker
This document proposes a model for a balanced scorecard approach to enterprise governance. It begins by defining enterprise governance and discussing existing governance frameworks. It then reviews balanced scorecards, which use financial and non-financial metrics across four perspectives - financial, customer, internal processes, and learning and growth. The document suggests that a balanced scorecard could provide a framework to evaluate an enterprise's governance across conformance with standards and policies, as well as performance and strategic objectives. It proposes testing a model that applies the balanced scorecard approach to comprehensively assess an enterprise's governance arrangements and outcomes.
This study examines the relationship between corporate governance, institutional ownership, and financial performance using a sample of 105 US equity real estate investment trusts from 2007 to 2012. The author constructs a corporate governance index and finds that better corporate governance, as measured by this index, is positively associated with higher returns on assets. Specifically, the inclusion of women on the board of directors has a statistically significant positive impact on performance. The study also finds that institutional ownership levels between 30-50% are positively related to higher returns on assets and returns on equity. Overall, the results suggest that stronger corporate governance and moderate institutional ownership can enhance the financial performance of REITs.
Board size, composition and the performance of private sector banks 2IAEME Publication
This document analyzes the relationship between board size, composition, and performance of private sector banks in India. It first provides background on corporate governance in Indian banks and reviews prior literature on the relationship between board structure and firm performance. The document then outlines the objectives, methodology, and variables of the study. Specifically, the study examines the relationship between board size and composition, meetings, and various performance metrics including return on assets, net profit margin, and interest spread for 8 major private sector banks over a 10-year period. The results of the analysis found a significant relationship between board composition and certain performance indicators in private banks, suggesting board composition impacts bank performance. The private banks were also found to utilize their asset and equity bases more efficiently
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.
The aim of this study was to determine the link between multiple directorships (MDs) and cash holdings. This study used the source from the firm’s annual report, as these studies were secondary data. Smart PLS 3.0 was used to verify the secondary data collected. This study shows that the number of people holding MDs inside the institution is growing, and this has a great effect on the organization’s interests. In addition, the findings support the first theory, which promotes chief executive officers to hold varied directorships because they contain desired elements from the companies. This study is unique because it is the first in the Sultanate of Oman to investigate financial enterprise at the Muscat Stock Exchange with the goal of achieving certainty. It evaluates whether having executives with one or numerous directorships is advantageous for the organization and its stakeholders
There is a large disconnect between public perception and corporate directors' views on CEO pay. While most of the public believes CEO pay is too high, directors believe it is appropriate. There is also disagreement on how to measure corporate performance and determine CEO contributions. Directors believe CEOs are responsible for 40% of company performance, but studies show it may be much lower. No standard model exists for determining the appropriate value sharing between CEO pay and shareholder returns. This lack of agreement means controversy over CEO compensation will likely continue.
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
Corporate Governance and Earnings Quality of Listed Banks in Rivers State
WriteUp.docx
1. Assignment 3: Empirical study: Boards
Characteristics: Have They Changed?
Seminar supervisor: Dr. Marc Gabarro
Lubomir Rashev 435593
Konstantinos Sfitsoris 431167
Vincent Donovan 425303
Nr. of characters: 12,106/14,399 (no spacing/spacing)
Nr. of words: 2,325
Erasmus School of Economics
FEM11001115
2. 1. Introduction
2. Literature review
3. Board size
3.1 Methodology
3.2 Results
4. Board size and financial performance
4.1 Methodology
4.2 Results
5. Conclusion
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3. 1. Introduction
The existence of boards is one of the mandatory prerequisites for incorporations; however
the regulation on this matter is fairly lenient, leading to diversity in terms of board size,
structure, compensation etc. This endogenous governing body has the power to employ,
dismiss and compensate upper management along with the responsibility of handling
disagreements among upper management and shareholders. As with most governance
practises there are heated debates into which structure is optimal in terms of firm market
valuation, shareholder return and agency costs. This paper analyzes if there is a change in
board size after the crisis and attempts to determine if pre-crisis board size correlates with
post crisis financial success.
The 2007/08 financial crisis is the worst economic event to take place since the Great
Depression. The overall effect of the financial downturn was a decline in consumer wealth
and a decrease in economic activity, leading to a global recession. Consequently this
economic catastrophe exposed several flaws in firms corporate governance which were not
able to provide the necessary monitoring in order for the business to operate smoothly.
2. Literature review
The negative correlation between board size and financial performance (Yermack 1998),
would suggest that there will be a decrease in board members during the crisis because of
an extra incentive to cut costs and operate at a financial maximising level. Hermalin &
Weisbach (2001), further this view, in that larger boards are less responsive to poor
performance signals, again justifying why a decrease in board members after the crisis would
be expected. An increase in the amount of independent directors could have both positive
and negative effects for the firm. New skills, diversity and a clear separation of ownership
could be factors which are included along with the chance of the aggravating the free rider
problem (Harris and Raviv 2008).
Fama (1980) demonstrates that outsider directors have an easier time challenging CEO’s that
gray or internal directors. However these independent board members do not have access
to the same amount of information as insiders, this reduces the optimality of firm
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4. monitoring. (Jensen 1993; Raheja 2005; Adams and Ferriera 2007; Harris and Raviv 2008;
Masulis and Mobbs 2011). Independent directors also typically hold small equity stakes in
firms in which they are board members, limiting their financial incentives to be vigilant
monitors (Perry 1999).
It should be mentioned that it is difficult to establish a clear relationship between
governance decisions and firm performance due to issues of reverse causality. Since boards
are fundamentally endogenous, their composition and characteristics might be based on the
observed firm performance by the shareholders and reflect their expectations. Therefore,
board structure decisions might be taken on the basis of unobserved factors, correlating
with the error terms of the performed regressions (Hermalin and Weisbach, 2001).
A generalizing conflict is that between the CEO and directors. As a results, the amount of
bargaining power between the two effects how the board evolves over time along with CEO
turnover, firm performance and changes in the ownership. Board size level has a negative
correlation with firm’s performance and the basic argument behind this conclusion, derived
from the fact that an increase in size causes a simultaneous augment in agency problems,
therefore board tend to be more symbolic than a really effective part of the management
process.
Yermack (1996) enhance this theory choosing Tobin’s q as indicator and examined its
correlation with the board size on a representative sample of large U.S. firms. Yermack’s
(1996) results suggest that there is a significant negative correlation between board size and
Tobin’s Q. Furthermore, Wu (2000) noticed a decrease of board size between 1991-1995
which was normally explained because of the willingness of active investors who suppose
that small boards are superior in terms of monitoring than their larger counterparts.
On the other hand, although board composition is not correlated to a firm’s performance, its
member’s actions are correlated with its characteristics. More accurately firms with bigger
proportion of outside directors tend to make better decisions which are of paramount
importance e.g. executive composition, poison pills, acquisitions and CEO replacement.
Besides, there is a both statistically and economically significant increase in stock prices
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5. while outside directors added to the board, contrary to insiders, where no definite effect can
be implied.
Yermack (1996) observed that the correlation among pay-performance and the board size
inclined to decrease because small boards provide CEOs better incentives and force them
to bear more risk than large boards do. This evidence propose that CEOs’ effect over their
boards lead in higher pay.
3. Board size
3.1 Methodology:
In order to assess whether there is a change in the board size we have collected board-size
data from 2002-2006 and from 2010-2014, and performed a T-test to establish a significant
difference in the means of the board size for both periods. The period of the financial crisis
as an exogenous factor is assumed to take place during 2007, 2008 and 2009.
An independent group t-test was used to test if the mean values of number of directors
differ before and after the crisis. All firms which were included in the analysis have data for
board size for the years from 2002 to 2014. Financial institutions were omitted due to
regulation purposes, which affect the business's’ financial performance and governance
history. The crisis is assumed to run from 2007 – 2009 and an equal amount of observations
is taken pre/post.
3.2 Results
The t-test shows that the average amount of directors has increased marginally post-crisis.
The t- statistic is -2.19 with 4538 degrees of freedom, this relates to a two-tailed p value of
0.029 which in turn tells us that the variance in means is different from 0. As seen from the
diff = mean(0) – mean(1), the mean(1) is larger and shows that the difference is negatively
correlated. (<0)
Figure 1 demonstrates the information portrayed in the t-test, an increase in the mean
(green) amount of directors post crisis. This can be explained by shareholders attempting to
gain more control by increasing the influence on the board. One of the main deficiencies
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6. that came to light during and post crisis was that the boards did not monitoring accordingly
(Cameira, 2003), therefore directors were not able to prevent the company from damaging
itself before the consequences were irreversible. In order to increase the monitoring role of
the board an increase in the amount of independent directors was enforced post crisis. The
positives involved with an addition of independent directors include increase in specialist
skills, diversity of board and a clear separation of ownership and control leading to a more
efficient governance and monitoring system.
Before the crisis (2002-2006) mean board size (reflected in the DIRECTOR variable) is 9.66
and the average board consist of 75% independent members. After the crisis (2010-2014)
the average board size has grown to 9.8 (2.04 standard deviation), while the composition
has remained the same.
The information acquired during this t-test is similar to that from a Moody’s survey. Which
found that there was a 14% increase in outside directors post crisis. Most of these outside
directors had financial background, they hoped that this would enable them to realize poor
internal and external environments before the consequences were irreversible. (Reuters :
Bank boards' financial expertise improves -Moody's, 2010)
4. Board size and financial performance
4.1 Methodology
In order to test the relationship between board size prior to the financial crisis and the firm
performance during the crisis, we calculate a mean board size per company for the period
from 2002 until 2006. We combine this data with performance indicators, namely Tobin’s Q
[TQ] and Return on Assets [ROA], for the period during the crisis. In regards to the time
frame of the crisis we select the period from 2007 to 2008. This differs from our assumptions
for the previous question due to the nature of the data we are using. Here we assume that
board size changes are slower and are reflected over a further period of time (2007-2009),
while performance data is taken into account faster. In relation to this the crisis period can
be delimited to two years.
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7. Companies utilize key performance indicators in an attempt to accurately measure firm
performance. The proxies used to regress board size with performance are Tobin’s Q and
Return on Assets [ROA].
Return on Assets is an accounting calculation which analyses a firm's profitability compared
to the total assets. This gives an indication into the efficiency of the management team, and
their ability to generate earnings-returns to ordinary shareholders given the total assets of
the firm.
Tobin’s Q is a valuation ratio, its main benefit is the incorporation of current market
expectations. (Chan-Lee, 1986) In the last 50 years it has been the essential key in the
theory of investments. Recently, it has been applied in financial economics in an attempt to
capture the anticipated return, and therefore represents the measure of risk. (Richard Roll
and J. Fred Weston December 3, 2008).
Our main hypothesis is that companies with larger boards perform worse during periods of
sharp downturn. Our sample consists of publicly traded U.S. companies with available data
for the years between 2002 and 2014. We exclude financial services companies, due to the
disproportionate effect of the exogenous shock on their performance. We perform and
Ordinary Least Squares (OLS) regression to test for the relationship between the average TQ
and average ROA, and the average board size. In our first regression regression we use our
entire sample of companies with available board size and financial data. For our regression
we focus only on S&P 500 companies, due to their similarities in size and performance.
Tobin’s Q = (Total Market Value Fiscal year + Total Liabilities) / Total Assets
ROA = Net Income / Total Assets
Furthermore, we use board composition characteristics and board member characteristics to
attempt to explain the difference in TQ and ROA.
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8. 4.2 Results
The mean board size for companies for the the entire period 2002-2014 is 9.36 with a
standard deviation of 2.46. The smallest and biggest boards consist of 3 and 34 members
respectively. Mean age is 61 years with a standard deviation of 8.55.
Multicollinearity is the adverse situation in which the variables used in the model have high
correlations, which misleadingly affects the standard errors. In turn this will affect the
significance values of independent values because of the collinearity between dependent
variables. The Variance Inflation Test measures the extent that the variance of the estimated
components increases over the case of no correlation among mean amount of directors and
the percent of which are independent. Ideally the VIF Factors should be under 10, in this
case (Table 4, 6, 8, 9) the values are 1 indicating that there is negligible collinearity between
the variables.
Figures 2 and 4 show the correlation between Mean Tobin's Q and the Mean amount of
directors in both the standard and the S&P 500 delimited samples. There is a slight negative
gradient with a fairly weak correlation of -0.043 which is significant at a 5% level (Table 5).
The negative correlation could be attributed to some of the companies with smaller boards
having Tobin's q values of higher than 4, which is not present for companies with > 11
directors. Similar effects can be observed in the S&P 500 sample (Table 8), where the
coefficient is -0.059. Regarding the independent variable for independent board member
percentage we find no significant relationship to the dependent variable in both samples.
The R-squared value of both regressions is low (1.3% and 2.3% respectively). The R-squared
indicates how close the observations are to the regression line. This value in the regression
run shows that the model hardly explains any of the variability of the data around its mean.
Tables 6 and 9 show the results for the same model in both samples, where the dependent
variable is Return on Assets. The relationship between board size and ROA is statistically
significant in the full sample of firms, but economically negligible in both samples (coefficient
of 0.004 and 0.001 respectively). The R-squared is low in both samples (0.15% and 0.017%).
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9. 5. Conclusion
The relationship between the size and structure of the board of directors and the financial
performance of firms is one which could be argued either way. This paper attempted to
address the empirical evidence which for change in board size from pre-post crisis, as well as
if the pre-crisis board size affected how well the firm coped during the economic downturn.
In the first part of the paper we find that the average amount of directors/firm increases
after the crisis. An additional number of board members post-crisis could be explained by
the Harris and Raviv (2008) paper in conjunction with the Reuters article. Both sources
mention an increase in the amount of independent directors. Firms could choose to do this
in the hope that new skills, structure and expert knowledge might help the company
monitor future downturns and react quicker to the problem.
In the second part of the paper we explore the effect of board size on the firm's’ abilities to
cope with exogenous shocks. The OLS regression demonstrates a fairly negligible
relationship between pre crisis board size and how well the firm fared during the crisis, in
terms of both Tobin’s Q and Return on Assets (ROA). All regressions that were run had a
considerably low R-squared values, this indicates that the models hardly explain any of the
variability of the data around the mean. This does not necessarily mean that the models are
wrong, it could indicate that no two firms are identical and that the real world problems
have no clear correlations. There is also the issue of endogeneity due to the nature of the
board structure. This means that board structure decisions might be taken on the basis of
unobserved factors, which correlate with the error terms of the performed regressions
(Hermalin and Weisbach, 2001). There is no reason to assume that there is no reverse
causality for the choice of board composition and size in relation to the firm’s performance.
As seen in the data, boards will continually evolve in an attempt to optimally deal with the
internal and external environments.
Bibliography
Adams, Renee B., Heitor Almeida, and Daniel Ferreira. “Powerful CEOs And Their Impact on
8 of 28
10. Corporate Performance.” SSRN Electronic Journal SSRN Journaln. pag. Web.
Chan-Lee, James, and Helen Sutch. “Profits And Rates of Return in OECD Countries.” OECD
Economics Department Working Papers(1985): n. pag. Web.
Chan-Lee, James H. Pure Profit Rates and Tobin's q in Nine OECD Countries. Paris:
Organisation for Economic Co-operation and Development, 1986. Print.
Fama, Eugene F. The Disciplining of Corporate Managers. Chicago: Graduate School of
Business, University of Chicago, 1980. Print.
Harris, M., and A. Raviv. “A Theory Of Board Control and Size.” Review of Financial Studies
21.4 (2006): 1797–1832. Web.
Hermalin, Benjamin E., and Michael S. Weisbach. Boards Of Directors as an Endogenously
Determined Institution: a Survey of the Economic Literature. Cambridge, MA.: National
Bureau of Economic Research, 2001. Print.
Jensen, Michael C. “The Modern Industrial Revolution, Exit, And the Failure of Internal
Control Systems.” The Journal of Finance48.3 (1993): 831–880. Web.
Masulis, Ronald W., and Shawn Mobbs. “Are All Inside Directors The Same? Evidence from
the External Directorship Market.” The Journal of Finance66.3 (2011): 823–872. Web.
Perry, Tod Tod. “Incentive Compensation For Outside Directors and CEO Turnover.” SSRN
Electronic Journal SSRN Journaln. pag. Web.
Raheja, Charu G. “Determinants Of Board Size and Composition: A Theory of Corporate
Boards.” SSRN Electronic Journal SSRN Journaln. pag. Web.
Yermack, David. “Higher Market Valuation of Companies with a Small Board of Directors.”
Journal of Financial Economics40.2 (1996): 185–211. Web.
Wu, Y. 2000. “Honey, I Shrunk the Board.”
University of Chicago working paper
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11. APPENDIX A - Tables and figures
Table 1 - Descriptive statistics 2002-2014; source: h3.dta
reg1a.dta
Table 2 - Descriptive statistics by period: pre crisis (2002-2006) and post crisis (2010-2014);
source: reg1a.dta
10 of 28
12. Table 3 - T-test of board size grouped by periods: pre crisis (2002-2006) and post crisis
(2010-2014); source: reg1a.dta
Figure 1 - Line plot of average board size; source: reg1a.dta
11 of 28
13. Table 4 - Descriptive statistics for mean board size and mean board composition for
2002-2006, and mean Tobin’s Q and ROA for 2007-2008; source: LAST5.dta
Table 5 - Linear regression: Dependent variable - Mean Tobin’s Q (2007-2008); Independent
variables - Mean Board size (2002-2006), Mean Percentage of independent board members
(2002-2006); source: LAST5.dta
12 of 28
14. Figure 2 - Scatter plot of Mean Board size (2002-2006) and Mean Tobin’s Q (2007-2008);
source: LAST5.dta
13 of 28
15. ROA REGRESSIONS
Table 6 - Linear regression: Dependent variable - Mean ROA (2007-2008); Independent
variables - Mean Board size (2002-2006), Mean Percentage of independent board members
(2002-2006); source: LAST5.dta
14 of 28
16. Figure 3 - Scatter plot of Mean Board size (2002-2006) and Mean ROA (2007-2008); source:
LAST5.dta
Table 7 - Descriptive statistics for mean board size and mean board composition for
2002-2006, and mean Tobin’s Q and ROA for 2007-2008, S&P 500 companies; source:
LAST6.dta
15 of 28
17. Table 8 - Linear regression for S&P 500 Companies: Dependent variable - Mean Tobin’s Q
(2007-2008); Independent variables - Mean Board size (2002-2006), Mean Percentage of
independent board members (2002-2006); source: LAST6.dta
16 of 28
18. Figure 4 - Scatter plot of Mean Board size (2002-2006) and Mean Tobin’s Q (2007-2008), S&P
500 Companies; source: LAST6.dta
17 of 28
19. Table 9 - Linear regression for S&P 500 Companies: Dependent variable - Mean ROA
(2007-2008); Independent variables - Mean Board size (2002-2006), Mean Percentage of
independent board members (2002-2006); source: LAST6.dta
18 of 28
20. Figure 3 - Scatter plot of Mean Board size (2002-2006) and Mean ROA (2007-2008), S&P 500
Companies; source: LAST6.dta
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21. APPENDIX B - Stata Commands
cd "C:UsersWildHostageGoogle DriveESESeminar ACFGassignment 3stata"
use b
format %ty year
format %3.1g age
format %20s name
format %20s fullname
format %2.1g female
format %2.1g attend_less75_pct
format %2.1g employment_ceo
format %2.1g employment_cfo
format %2.1g employment_chairman
format %ty year_term_ends
format %ty dirsince
gen cusip2=substr(cusip,1,6)
replace cusip=cusip2
drop cusip2
save e
use d
append using e, force
save g
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22. use c
format %20s county
format %20s conm
ren fyear year
gen cusip2=substr(cusip,1,6)
replace cusip=cusip2
drop cusip2
save f
merge m:m cusip year using g, force
save h1
use h1
so cusip year at
keep if _merge==3
encode cusip, gen(cusip2)
drop cusip
ren cusip2 cusip
keep if cusip>0
so cusip year
by cusip year: gen id=[_n]
egen CUSIPYEAR = concat(cusip year), decode p("")
encode CUSIPYEAR, gen(CUSIPYEAR2)
drop CUSIPYEAR
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23. ren CUSIPYEAR2 CUSIPYEAR
by cusip year: gen DIRECTOR=[_N]
keep if id==1
drop id
keep if cusip != .
save h3
import excel "C:UsersWildHostageGoogle DriveESESeminar ACFGassignment
3stataregression1.xlsx", sheet("Sheet1") firstrow clear
save extra
use extra
encode CUSIPYEAR, gen(CUSIPYEAR2)
drop CUSIPYEAR
ren CUSIPYEAR2 CUSIPYEAR
save extra, replace
use h3
gen CRISIS = (year>=2007)
ttest DIRECTOR, by(CRISIS)
drop if year==2007
drop if year==2008
drop if year==2009
ttest DIRECTOR, by(CRISIS)
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24. drop _merge
merge m:m CUSIPYEAR using extra, force
keep if _merge==3
so cusip
by cusip: gen id=[_N]
drop if id<10
ttest DIRECTOR, by(CRISIS)
save reg1
use reg1
encode sic, gen(sic2)
drop sic
ren sic2 sic
so sic
drop if sic in 4001/4690
ttest DIRECTOR, by(CRISIS)
save reg1a
use h3
gen CRISIS = (year>=2007)
drop _merge
merge m:m CUSIPYEAR using extra2, force
keep if _merge==3
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25. drop if year>2009
gen ROA= ni/ at
gen TQ=( mkvalt+ lt)/ at
keep if TQ>=0
keep if at!=.
keep if TQ!=.
keep if ROA!=.
save reg3, replace
encode sic, gen(sic2)
drop sic
ren sic2 sic
so sic
drop if sic in 6559/7063
ttest DIRECTOR, by(CRISIS)
save reg3a
so cusip
so cusip year
so cusip
by cusip: gen id=[_N]
drop if id<8
drop id
save reg3b
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26. egen meanteq = mean(teq), by (cusip CRISIS)
egen meanava = mean(ava), by (cusip CRISIS)
egen meanpci = mean(pci), by (cusip CRISIS)
egen meanpce = mean(pce), by (cusip CRISIS)
egen meanpcl = mean(pcl), by (cusip CRISIS)
egen meantq = mean(TQ), by (cusip CRISIS)
egen meand = mean(DIRECTOR), by (cusip CRISIS)
egen meanroa = mean(ROA), by (cusip CRISIS)
egen meanmvl = mean(mkvalt), by (cusip CRISIS)
egen meanat = mean(at), by (cusip CRISIS)
gen logmeanat=log(meanat)
gen logmeanmvl=log(meanmvl)
gen meanPCI=meanpci*100
gen meanPCE=meanpce*100
gen meanPCL=meanpcl*100
so cusip CRISIS
by cusip CRISIS: gen id=[_n]
keep if id==1
drop id
save reg3d
use reg3d
drop if CRISIS==1
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27. save reg3e, replace
use reg3d
drop if CRISIS==0
save reg3f, replace
use reg3e
drop _merge
save reg3e, replace
use reg3f
drop _merge
save reg3f, replace
use reg3e
gen meanroa2 = meanroa
gen meantq2 = meantq
drop TQ meantq meanteq meanroa meanmvl meanat logmeanat logmeanmvl
save reg3e, replace
use reg3f
drop meand DIRECTOR meanpci meanava meanpce meanpcl meanPCI meanPCE meanPCL
save reg3f, replace
use reg3e
merge m:m cusip using reg3f
save reg3g
gen meanTQ = meantq-meantq2
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28. gen meanROA = meanroa-meanroa2
save LAST2, replace
drop _merge
merge m:m cusip using jesus, force
keep if _merge==3
ren meantq MEANTQ
ren meanroa MEANROA
ren meand MEANDIRECTOR
ren meanPCI PERCINDEPENDENT
ren meanava MEANAGE
gen MEANAGESQ=MEANAGE*MEANAGE
save LAST5
drop if SNP==0
save LAST6
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