International Journal of Business Ethics in Developing Economies

Open Access Open Access  Restricted Access Subscription Access
Open Access Open Access Open Access  Restricted Access Restricted Access Subscription Access

Literature Review on the Relationship between Board Structure and Firm Performance


Affiliations
1 Ph.D. Scholar, Dept. of Economics, Meerut College, Ch. Charan Singh University, Meerut, Uttar Pradesh, India
2 Associate Professor, Dept. of Economics, Meerut College, Ch. Charan Singh University, Meerut, Uttar Pradesh, India
     

   Subscribe/Renew Journal


Corporate governance plays a significant role in eliminating agency costs. Corporate boards have the main role of monitoring the management; they help in aligning the interests of principals and agents. Boards are responsible for care and diligence that brings financial control, so that profitability can be ensured in the corporate firms. This paper focuses on reviewing the literature on board structure extensively. This paper reviews many aspects of board structure, i.e. board size, board meeting frequency, board independence, board ownership and composition, board education, audit committee, and so on. Further, this paper furnishes the type of board structure that will contribute towards increasing firm performance, thereby helping in mitigating agency costs. This research study uses a descriptive research design. Random sampling is used while selecting different kinds of literature review of board structure. This study takes the 1991-2019 time period for reviewing of literature. The period is selected based on convenience sampling. The results depict that reasonable frequency of board meetings, the board size, independence of directors, well-educated board members, audit committee, board composition, and ownership make a positive impact on firm performance, thereby reducing agency costs.

Keywords

Agency Cost, Board Structure, Corporate Governance, Firm Performance
Subscription Login to verify subscription
User
Notifications
Font Size


  • Adebiyi, W. K. (2017). Board composition and financial reporting quality of deposit money banks in Nigeria. International Journal of Innovative Finance and Economics Research, 5(4), 97-104.

  • Aduda, J., Kiragu, P., & Ndwiga, J. (2013). The relationship between agency banking and financial performance of commercial banks in Kenya. University of Nairobi.

  • Akpan, E. O. (2015). Corporate board meetings and company performance: Empirical from Nigerian quoted companies. Global Journal of Commerce & Management Perspective, 4(1), 75-82.

  • Amran, N. A. (2011). Corporate governance mechanisms and company performance: Evidence from Malaysia company. International Review of Business Research Papers, 7(6), 101-114.

  • Arosa, B., Iturralde, T., & Maseda, A. (2013). The board structure and firm performance in SMEs: Evidence from Spain. Investigaciones Europeas de Direccion Y Economia de La Empresa, 19(3), 127-135.

  • Azutoru, I. H. C., Obinne, U. G., & Chinelo, O. O. (2017). Effect of corporate governance mechanisms on financial performance of insurance companies in Nigeria. Journal of Finance and Accounting, 5(3), 93-103.

  • Barnhart, S. W., Marr, M. W., & Rosenstein, S. (1994). Firm performance and board composition: Some new evidence. Managerial and Decision Economics, 15(4), 329-340.

  • Bertoni, F., Meoli, M., & Vismara, S. (2014). Board independence, ownership structure, and the valuation of IPOs in continental Europe, Post-Print hal-02313136, HAL.

  • Bhagat, S., & Black, B. (2002). The non-correlation between board independence and long-term firm performance. Journal of Corporation Law, 27(2), 231-274.

  • Drakos, A. A., & Bekiris, F. V. (2010). Endogeneity and the relationship between board structure and firm performance: A simultaneous equation analysis for the Athens stock exchange. Managerial and Decision Economics, 31(6), 387-401.

  • Florackis, C., & Ozkan, A. (2004). Agency costs and corporate governance mechanisms: Evidence for UK firms. Working Paper, University of York, UK.

  • Hanh, L. T. M., Ting, I. W. K., Kweh, Q. L., & Hoanh, L.T. H. (2018). Board meeting frequency and financial performance: A case of listed firms in Vietnam.International Journal of Business and Society, 19(2), 464-472.

  • Haniffa, R. M., & Cooke, T. E. (2002). Culture, corporate governance, and disclosure in Malaysian corporations.Abacus, 38(3), 317-349.

  • Hermalin, B. E., & Weisbach, M. S. (1991). Financial Management, 20(4), 101-112.

  • Hillman, A. J., & Dalziel, T. (2003), Boards of directors and firm performance: Integrating agency and resource dependence perspectives. The Academy of Management Review, 28(3), 383-396.

  • Horvath, R., & Spirollari, P. (2012). Do the board of directors characteristics influence firm’s performance? The U.S.Evidence. Prague Economic Papers, 21(4), 470-486.

  • Irine, H., & Mega, S. I. (2017). The effect of corporate governance on the performance of a company: Some empirical findings from Indonesia. Journal of Management and Business Administration, Central Europe, Sciendo, 25(1), 33-52.

  • Jehu, P., & Ibrahim, M. A. (2018). Accounting regulation and financial reporting quality: Pre-and-Post IFRS Nigeria evidence. Indian-Pacific Journal of Accounting and Finance, 1(3), 24-34.

  • Kiel, G. C., & Nicholson, G. J. (2003). Board composition and corporate performance: How the Australian experience informs contrasting theories of corporate governance. Corporate Governance: An International Review, 11, 189-205.

  • Klein, A. (1998). Firm performance and board committee structure. Journal of Law and Economics, 41(1), 275-303.

  • Kumar, N., & Singh, J. P. (2013). Effect of board size and promoter ownership on firm value: Some empirical findings from India. Corporate Governance: The International Journal of Business in Society, 13(1), 88-98.

  • Li, H. X., Wang, Z. J., & Deng, X. L. (2008). Ownership, independent directors, agency cost, and financial distress: Evidence from Chinese listed companies. Corporate Governance, 8(5), 622-636.

  • Mak, Y. T., & Li, Y. (2001). Determinants of corporate ownership and board structure: Evidence from Singapore. Journal of Corporate Finance, 7, 235-256.

  • Mak, Y. T., & Kusnadi, Y. (2005). Size matters?: Further evidence on the negative relationship between board size and firm value. NUS Business School Working Paper.

  • Mishra, C. S., & Nielsen, J. F. (2000). Board independence and compensation policies in large bank holding companies, financial management.Financial Management Association, 29(3).

  • Ntim, C. G., & Osei, K. A. (2011). The impact of corporate board meetings on corporate performance in South Africa. African Review of Economics and Finance, 2(2), 83-103.

  • Prevost, A. K., Rao, R. P., & Hossain, M. (2002). Determinants of board composition in New Zealand: A simultaneous equations approach. Journal of Empirical Finance, 9(4), 373-397.

  • Raheja, C. G. (2005). Determinants of board size and composition: A theory of corporate boards. Journal of Financial and Quantitative Analysis, 40, 283-306.

  • Rashid, A. (2018). Board independence and firm performance: Evidence from Bangladesh. Future Business Journal, 4(1), 34-49.

  • Rus, R. M. (2018). The role of board structure in predicting financial distress in Malaysia. School of Economics, Finance and Banking UUM College of Business Universitiy Utara Malaysia.

  • Sandra, A. (2014). The effect of board independence on the earnings quality: Evidence from Portuguese listed companies. Australasian Accounting, Business, and Finance Journal, 8(3), 23-44.

  • Shaifali, & Mittal, R. K. (2019). Agency problems and corporate governance mechanisms in Indian companies. International Journal of Innovative Technology and Exploring Engineering, 8(8S3), 607-613.

  • Truong, T. (2006). Corporate boards, ownership and agency costs: Evidence from Australia. The Business Review, Cambridge, Summer, 5(2), 163-167.

  • Ujunwa, A. (2012), Board characteristics and financial performance of Nigerian quoted firms. Corporate Governance, 12(5), 656-674.

  • Vafeas, N. (2000). Operating performance around the adoption of director incentive plans. Economics Letters, 68(2), 185-190.

  • Wu, X., & Li, H. (2015). Board independence and the quality of board monitoring: Evidence from China. International Journal of Managerial Finance, 11(3), 308-328.

  • Yermack, D. (1996). Higher market valuation of companies with a small board of directors. Journal of Financial Economics, 40(2), 185-211.

  • Zhou, M., & Panbunyuen, P. (2008). The association between board composition and different types of voluntary disclosure a quantitative study of Chinese and Swedish listed companies, Spring semester.


Abstract Views: 169

PDF Views: 0




  • Literature Review on the Relationship between Board Structure and Firm Performance

Abstract Views: 169  |  PDF Views: 0

Authors

Shubhi Agarwal
Ph.D. Scholar, Dept. of Economics, Meerut College, Ch. Charan Singh University, Meerut, Uttar Pradesh, India
Archna Singh
Associate Professor, Dept. of Economics, Meerut College, Ch. Charan Singh University, Meerut, Uttar Pradesh, India

Abstract


Corporate governance plays a significant role in eliminating agency costs. Corporate boards have the main role of monitoring the management; they help in aligning the interests of principals and agents. Boards are responsible for care and diligence that brings financial control, so that profitability can be ensured in the corporate firms. This paper focuses on reviewing the literature on board structure extensively. This paper reviews many aspects of board structure, i.e. board size, board meeting frequency, board independence, board ownership and composition, board education, audit committee, and so on. Further, this paper furnishes the type of board structure that will contribute towards increasing firm performance, thereby helping in mitigating agency costs. This research study uses a descriptive research design. Random sampling is used while selecting different kinds of literature review of board structure. This study takes the 1991-2019 time period for reviewing of literature. The period is selected based on convenience sampling. The results depict that reasonable frequency of board meetings, the board size, independence of directors, well-educated board members, audit committee, board composition, and ownership make a positive impact on firm performance, thereby reducing agency costs.

Keywords


Agency Cost, Board Structure, Corporate Governance, Firm Performance

References