Board Structure and the Performance of Australian Listed Investment Companies

40 Pages Posted: 22 Jan 2013

See all articles by Matthew Broom

Matthew Broom

Independent

Michael T. Skully

Monash University - Department of Banking and Finance; Financial Research Network (FIRN)

Maria Strydom

Monash University

Date Written: January 21, 2013

Abstract

This study examines the relationship between board structure and performance of Australian listed investment companies (LICs hereafter). With lower fees and simplified taxation over other managed funds, LICs provide a useful investment vehicle. LICs differ from other companies as their customers and investors are the same and fund management functions are often outsourced. LIC boards, in turn, are tasked with monitoring duties and determining service fees for fund managers. Agency problems are likely as fund managers’ desire larger fees (and fund size) whereas LIC shareholders seek higher return. Whilst the nature of agency issues therefore differs from ordinary companies, the prior Australian LIC literature is limited. We document a significant relationship between director tenure and LIC performance. Specifically, we find director tenure to be negatively associated with LIC performance. Board busyness and independence increases LIC expense ratios whilst board size is negatively associated with market to book value.

Keywords: governance, board structure, performance, closed-ended funds

Suggested Citation

Broom, Matthew and Skully, Michael T. and Strydom, Maria, Board Structure and the Performance of Australian Listed Investment Companies (January 21, 2013). 2013 Financial Markets & Corporate Governance Conference, Available at SSRN: https://ssrn.com/abstract=2204855 or http://dx.doi.org/10.2139/ssrn.2204855

Matthew Broom

Independent ( email )

Michael T. Skully

Monash University - Department of Banking and Finance ( email )

900 Dandenong Road
Caulfield East, Victoria 3145
Australia
+61 3 9903 2407 (Phone)
+61 3 9903 1443 (Fax)

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Maria Strydom (Contact Author)

Monash University ( email )

23 Innovation Walk
Wellington Road
Clayton, Victoria 3800
Australia

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