Corporate Governance: An International Review

Publisher:: Wiley
Publication date:: 2021-02-01

ISBN:: 0964-8410

Issue Number

Latest documents

Gender diversity and the spillover effects of women on boards
Research Question/Issue This study seeks to understand the circumstances under which board behavior is affected by gender diversity. The “reasoned action approach” is used as a lens through which to assess the extent that the behavior of the board varies with its gender diversity. Research Findings/Insights The study uses archival data from a panel sample of 80,395 directorships observed between 1998 and 2012. Boardroom gender diversity is significantly related to director personal responsibility (board attendance), CEO accountability, and risk taking. Our findings highlight the key importance of the exposure of male directors to women directors on boards beyond the focal board. This suggests a positive externality or a spillover effect. Theoretical/Academic Implications The empirical findings of this study highlight the importance of allowing for the operation of social norms when studying boardroom decision making. Experience gained by male directors of working with women directors on other boards, beyond the focal board, is shown to enable women directors to contribute more effectively. Practitioner/Policy Implications This study offers encouragement to policy makers' intent on increasing the presence of women on corporate boards. These results point to a spillover effect: there is an observed impact of women on boards that acts not only directly on the board on which they sit but also through the network of boards on which their male counterparts sit. Video Abstract https://youtu.be/ZlADhUUdZrA
CEO education and the ability to raise capital
Research Question/Issue Using a unique hand‐collected dataset, this study examines the role of chief executive officer (CEO) educational attainments in relation to newly public firms. Theoretical/Academic Implications Using human capital, institutional and upper echelon theories, we hypothesize and demonstrate that CEO educational attainments do not unambiguously affect investors' perceptions of a firm's future prospects. Instead, their influence depends on the quality of CEO education as well as on the degree of uncertainty regarding the firm's future performance and the level of information asymmetry between issuers and prospective investors. To our knowledge, this is the first study that provides a comprehensive treatment of the role of CEO education in the IPO context. Research Findings/Insights We find that initial public offering (IPO) firms led by CEOs with superior educational credentials—in terms of level and quality—are associated with lower levels of IPO underpricing. This association is mainly driven by CEOs that hold advanced degrees. Notably, a difference‐in‐differences approach based on two quasi‐natural experiments indicates that the impact of CEO education on IPO underpricing is more pronounced within environments characterized by lower information transparency. The baseline results also hold in the longer term, thereby confirming the value of signaling prestigious academic awards at the time of the IPO. Practitioner/Policy Implications Our evidence on the importance of CEO education, and especially that CEOs with varying levels and quality of educational training might differentially affect newly listed firms, is useful to providers of financial capital and boards of directors interested in assessing the viability of new ventures. The implication of our study for IPO investors is that it is worth paying more to take an equity position in firms run by better educated CEOs.
Do supervisory enforcement actions affect board composition?
Research Question/Issue Do enforcement actions impact banks' board composition? Based on a unique sample of sanctions imposed on Italian banks by the country's banking supervisory authority from 2009 to 2015, we investigate whether supervisory enforcement actions affect changes at the board level. Moreover, we examine whether changes at the board level after a sanction are effective in reducing the probability of further sanctions in the future. Research Findings/Insights The findings reveal that sanctioned banks change their board composition following a supervisory sanction. We further test whether these changes improve bank governance and find that, under certain conditions, they may reduce the probability that the board is sanctioned again. Robustness tests confirm the results. Theoretical/Academic Implications This study provides empirical evidence that supports the role of supervisory enforcement actions in inducing banks to adopt changes at the board level. Given that the relationship between supervisory sanctions and changes in board characteristics is still neglected, we contend that our results may increase the understanding of the effectiveness of enforcement actions in improving board characteristics. Practitioner/Policy Implications We believe that our results have policy implications by making a clear and concrete contribution to the ongoing debate on the revision of the principles for enhancing corporate governance and banking supervision.
CEO outside directorships and managerial efficiency: The role of host board capital
Research Question/Issue Do CEO outside board directorships improve or reduce CEO managerial efficiency? What is the role of host board capital in this relationship? Research Findings/Insights We explore the value of CEO outside directorships on managerial efficiency by identifying a unique empirical setting where a CEO's number of outside board seats is exogenously decreased by a merger that eliminates the board of a host firm the CEO is serving on. Using this event as our empirical instrument, we find that outside directorships decrease a CEO's managerial efficiency while host board capital reduces this effect. Theoretical/Academic Implications Proponents view outside board service as a valuable leadership development tool to mentor the CEO while others promulgating an agency view argue that outside board service detracts from the CEO's ability to improve the efficiency of the home firm as it leads to busyness of the CEO. We shed light on this debate by arguing that CEO outside directorships might reduce CEO's managerial efficiency; however, this effect might be contingent on the characteristics of the host board. Practitioner/Policy Implications Our findings offer insights to practitioners about the value of multiple directorships and the importance of the host board capital while informing policy makers about the potential restrictions on outside board assignments.
Issue Information
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CGIR Special Issues
CGIR Review Issue 2022
Corporate Governance Mechanisms in light of the COVID‐19 Crisis: How Financial Information and Regulation, Managerial Decision‐Making, and Policy Intervention Can Shape the Economic Recovery
Corporate governance and institutions—A review and research agenda
Research Question/Issue Over the last decades, research on the relationship between national institutions, governance mechanisms, and firm outcomes has been increasing. This review aims at (i) analyzing extant research in this area, (ii) identifying influential current trends, and (iii) highlighting future avenues of research. Research Findings/Insights Using a content analysis of 165 articles published in top journals from accounting, finance, management, and organization disciplines, we explore research on institutions, corporate governance, and firm outcomes. Our results show that stronger national institutions aimed at protecting investors are mostly associated with better corporate governance and firm financial outcomes and that these relationships are moderated by some contingency factors. Theoretical/Academic Implications Our findings encourage scholars to further explore the relationship between national institutions, corporate governance, and firm outcomes by using theoretical frameworks and methods allowing them (i) to develop a “thicker” understanding of the national institutional context, (ii) to analyze powerful stakeholders' influence on the above relationships, and (iii) to better understand the role played by informal institutions. Practitioner/Policy Implications Our findings help policymakers and investors to (i) better understand how national institutions impact on both governance mechanisms and firm outcomes and (ii) develop policies or design governance mechanisms taking into consideration country‐, industry‐, and firm‐level contingencies.
Bringing owners back on board: A review of the role of ownership type in board governance
Research Question/Issue In this comprehensive literature review, we synthesize and analyze the current state of academic research regarding the relatively understudied relationship between the type of owners and board governance. Research Findings/Insights Our review of the existing literature at the intersection of ownership and board governance research discusses how six distinct ownership types—pertaining to family, lone founder, corporation, institutional investor, state, and venture capitalist—shape board governance, defined as board structure, composition, and processes. We also uncover the influence of ownership type on board functional performance (i.e., monitoring, resource provision, and strategic involvement) and the implications of these owner–board relationships for a variety of firm outcomes (related to performance and compliance). Theoretical/Academic Implications We present identifiable patterns in board governance and functional performance associated with each ownership type and their respective implications for a wide range of firm outcomes. We then propose seven core emerging themes that deserve further scholarly attention. Practitioner/Policy Implications Our analysis cautions against the application of the “one‐size‐fits‐all” best‐practices approach in board governance advocated by policy makers, scholars, and corporate governance activists and underscores the need to consider the contingent effects of different owners' behaviors and interests in shaping and assessing board governance.