Examining Board Composition and Firm Performance
The International Journal of Business and Finance Research, Vol. 5, No. 3, pp. 15-27, 2011
13 Pages Posted: 6 Jul 2011
Date Written: 2011
Abstract
This paper investigates the relationship between key factors of board composition and firm performance. We find that listed companies in Taiwan suffered from the divergence between stock-control rights and earnings-distribution rights, and the divergence of rights is negatively associated with firm performance, as predicted. Besides, consistent with the viewpoint of Agency Theory that the controlling interests of CEOs may induce them to enhance company performance, we find that CEO internalization is significantly positively associated with firm performance. In addition, the results of the influence of board structure document that the more outside independent directors of a company there are, the better performance the company has. Our findings provide strong support for the notion that corporate ownership structure and board compositions are key factors in determining the corporate governance efficiency and play important roles in enhancing firm performance.
Keywords: Board leadership structure, CEO duality, Independent directors, firm performance
JEL Classification: G34, L25
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