Year

2004

2015

2016
2012

2014
2011
 Related Research
Title

The Governance of cooperatives and mutual associations: a paradox perspective

IMPACT OF CORPORATE BOARD SIZE ON CORPORATE PERFORMANCE: EVIDENCE FROM SRI LANKA

Board of Diretor Education and Firm Performance: A Dynamic Approach

The Impact of board characteristics on Firm Performance: Evidence from Nonfinancial Listed Companies in Kuwaiti S
Exchange

Board Characteristics and Firm Performance: Evidence from New Zealand

Examining the Impact of Board Tenure on Firm Performance
How age diversity on the Board of Directors affects Firm Performance
 Data
Authors Country Type of Data

Chris Cornforth United Kingdom

M.C.A.NAZAR, RUZITA ABDUL RAHIM Malaysia Cross Section

Hung Phan Finland Panel Data

Ebrahim Mohammed Al-Matari
Abdullah Kaid Al-Swidi Malaysia Panel Data
Faudziah Hanim Bt Fadzil

Hanoku Bathula New Zealand Panel Data

: Joshua Livnat, Gavin Smith, Kate Suslava, Martin Tarlie New York
Spakur Dagsson, Emil Larsson Sweden
Data Independent Variables
Year(s) Covers Variables

2013 Board Size

Doctorate
MBA
1999 to 2013 Prestigious
LogBsize
INDEP
 CEO duality
CEO Tenure
Audit Committee Size
2009 Board Size
Board Composition
(Control Variable)
Firm Size
Leverage

Director Ownership
CEO Duality
Gender diversity
Educational Qualification
2004-2007 Board Meetings
Board Size
Firm Size
Firm Age
 Board Tenure
2005-2009 Age Diversity
pendent Variables
Measurement/Proxies

no. of directors on the board

Doctorate: Percentage of Director with Doctoral degree on the board.

( For doctoral degree classification, directors who earned a doctorate
are assigned value equal to 1 in the dummy variable Doctorate, and 0
otherwise)
MBA: Percentage of director with an MBA degree on the board
(Directors who earned a Master in Business Administration are
assigned value equal to 1 in the dummy variable MBA, and 0 otherwise)
Prestigious: Percentage of director who attended a prestigious university
(Directors who attended a prestigious university are assigned value
equal to 1 in the dummy variable prestigious, and 0 otherwise.)
LogBsize: Natural logarithm of the number of directors on the board
INDEP: The proportion of outside (non-executive) director
CEO Duality (0/1)-Dummy variable equal to "1" if the CEO is also the
chair of the board, and "0" otherwise
CEO Tenure (year)-The period of CEO's serving in the company
Audit Committee Size (number)-Number of members serving on the
audit committee
Board Size (number)-Total number of directors serving on the board of
directors
Board Composition (%)-The ratio of independence directors to the total
number of directors
Firm Size (number)-The natural log of total assets
Leverage (%)-The ratio of total liabilities to total assets

Director ownership-Proportion of stock owned by directors in net

common stock; natural logarithm is taken to the ratio of director
ownership.
CEO duality-Coded ‘1’ if CEO also holds the position of board chair or ‘0’
if both positions are separated.
Women members-Number of women present on the board; natural
logarithm is taken after adding 1 to all firms to meet
statistical requirement of normal distribution.
Members with PhDs-Number of members with PhD present on the
board; natural logarithm is taken after adding 1 to all firms to meet the
statistical requirements of normal distribution.
Board meetings-Number of board meetings held per year
Board size-Number of directors on the board; natural logarithm is taken.
Firm Size-Amount of sales revenue per year.
9 Firm Age-Number of years since incorporation
Standard Deviation
 Dependent Variable(s)
Variable(s)

Return on Asset, Return on Equity

Return on Assets (ROA)

ROA

ROA
firm value, as proxied by market-to-book;
ROA
 Dependent Variable(s)
Measurement/Proxies

ROA= Net Income / Total Assets ROE=Net Income / Shareholders Fund

operating income before depreciation, divided by fiscal year-end total assets value.
Earnings before tax divided by total assets of the company.

Return on assets (ROA) Ratio of EBIT/Total Assets.

: Tobin's Q
Tobin's Q
 Methodology

A cross - sectional ordinary least square regression model

GMM estimator
OLS regression
Multiple Regression

GLS Regression
Regression Analysis
 Findings

Examined how existing theories of corporate governance can be extended

to help understand the governance of co-operatives and mutual organisations, but
argued that by themselves each theory is too one-dimensional only highlighting a
particular aspect of the board’s role

As a number of governance scholars have recently noted we need to find new ways of thinking
aboutgovernance that move beyond narrow theoretical frameworks

The paper argued that a paradox perspective, which draws upon multiple theoretical perspectives, is one
promising approach, which helps to explain some of the difficult tensions and ambiguities that boards’
face

The study predicts that board size is significantly negatively associated with corporate performance. This
study also finds that, CEO duality is significantly negatively associated with ROA. Further, board
independence and leverage are not significantly associated with both measures of corporate
performance. Finally, firm specific variables such as firm size and dividend yield are consistently and
significantly linked to corporate performance

One key argument in this paper is that present board and firm characteristics are strongly correlated with
past performance. I find that MBA and Prestigious variables are significantly positively correlated with
Return on Asset in the earlier year, while Doctorate are negatively related to past performance measure
at 1% significance level. This suggests that firm usually reinforce their board of director with better
educated directors after years with negative result, with focus on people with industrial and
management expertise. Furthermore, current board size and independence level, as well as current
measures of director’s education, is significantly positively related to past firm size, which suggest that as
firm gets larger, it will have larger board with better educated directors and higher level of board
independence
CEO duality was found to have a positive significant effect on ROA, the firm performance, at the 0.05
level of significance (β=0.164, t value=2.018, p<0.05). This finding supports the first hypothesis (H1) that
there is a relationship between CEO duality and firm performance. It is shown that the CEO tenure has a
significant negative impact on ROA at the 0.01 of significance (β=-0.620, t value=-9.413, p<0.01). This
result indicates that the longer period the CEO spends in his position, the more decreasing the firm
performance is. The audit committee size has a positive significant impact on the ROA at the 0.01 level of
significance (β=0.312, t value=2.769, p<0.01). This finding implies that the higher audit committee size in
number, the higher the firm performance measured by ROA is. The results with regards to the effect of
board size on firm performance was found to be a negative but not significant (β= -0.145, t value=-1.293,
p>0.1) indicating that the hypothesis (H4)regarding this relationship was not supported. The results
pertaining to the effect of the board composition on the ROA showed that it is negative insignificant (β=
-0.116, t value=-1.346, p>0.1). This result shows that the hypothesis (H5) postulating this relationship
was not supported. With regards to the company size and leverage, the results obtained showed that
while leverage was found to have a negative and significant effect on ROA, firm size was found to have
positive but not significant effect on ROA.

Director ownership was found to be negatively related to related firm performance

contradicting the hypothesis that it would benefit the firm by aligning the interests of both
shareholders and directors. CEO duality was found to be positively associated with firm performance.
With respect to gender diversity, I found support to the view that gender diversity leads to superior firm
performance. With respect to number of PhD qualified members of board, I found that their presence is
negatively associated with firm performance. With respect to board meetings, surprisingly I found a
negative effect on firm performance. I found that board size is significantly and positively associated with
firm performance.
We find considerable support for the notion that longer board tenure is positively related to stock returns, as well as contemp
We found that age diversity significantly affects firm performance as measured by ROA, but not as measured by Tob
rns, as well as contemporaneous and future firm value. The market rewards firms with stable boards with a ‘stability’ premium. However, o
t as measured by Tobin’s Q. We further found that the effects are only evident when the company belongs to the small-cap cate
with a ‘stability’ premium. However, over time, the effectiveness of two primary board functions – monitoring management and technologi
pany belongs to the small-cap category with a market cap below EUR 150 million. The size of the effect differs depending on wh
nitoring management and technological advice – deteriorates. The deterioration in monitoring is due to long-tenured board members beco
the effect differs depending on what measurement years are included in the analysis, and how long the time delay is between t
to long-tenured board members becoming less vigilant, and the deterioration in technological advice is due to board members not keeping
w long the time delay is between the measurement of age diversity and firm performance. We found that the effect of age dive
 is due to board members not keeping pace with the technical changes in the company’s business. Effectiveness peaks at tenures of about n
We found that the effect of age diversity is slightly lower for ROA measured during the same year, compared to ROA measured tw
ectiveness peaks at tenures of about nine years, at which point long-tenured board members begin to become a drag on the company valu
ear, compared to ROA measured two years later. Finally, our data did not support conclusions either way as to diminishing return
become a drag on the company valuation relative to the nine year tenure. This reduction in effectiveness is especially pronounced for high
either way as to diminishing returns occuring in situations of extremely high age diversity, as too few such firms were found in t
ness is especially pronounced for high-growth firms for which up-to-date technical knowledge is especially important for the company’s su
too few such firms were found in the sample. In light of these findings, age diversity should be given equal weight to other cons
cially important for the company’s success.
e given equal weight to other considerations when composing a successful corporate board in small firms.