The Impact of Board Structures on Shareholders Returns

International Journal of Science and Research (IJSR), Volume 4 Issue 3, March 2015

6 Pages Posted: 11 Apr 2015

See all articles by Vincent Tawiah

Vincent Tawiah

Griffith University; University of Mysore - Department of Commerce; University of Cape Coast; Dublin City University Business School

Muhaheranwa Benjamin

Maharishi Markendeshwar Group of Institution - Maharishi Markandeshwar University (MMU)

Date Written: April 10, 2015

Abstract

If joint stock companies and agency problem are twins then board of directors will be their after-birth. As opine by Jensen and Meckling (1976) since the separation of ownership from management through joint stock companies, agency problem has never been eliminated. Various approaches such as laws, trustee, auditing, have been used to arrest the agency problem and protect the benefit of shareholders. But board of directors has emerged as an efficient approach to protect shareholders benefit. This paper has revealed the impact of board size, number of promoter directors and independency of the board on the total benefits a shareholder gets for investing. An unbalance panel data was collected from annual reports of 25 companies through purposive sampling for the accounting years 2009 to 2013. The Hussmann’s test was used to check the appropriate regression method to statistically test the impact of board structures on total shareholder’s return. It was found that, the average board size in companies was 12 members out of which half were independent, 3 are promoters/founders and remaining are other executives. Shareholders also get more than 90% of their returns from changes in share prices. The random effect regression method reports that, all the board variables have a positive relationship with shareholders return with the exception of board size but only board independence is significant @ 5%. Promoter directors have an inverse relationship with capital gain whiles board size and independent directors have positive correlation.

Keywords: board structures, independent directors, promoters, shareholders' return

Suggested Citation

Tawiah, Vincent and Benjamin, Muhaheranwa, The Impact of Board Structures on Shareholders Returns (April 10, 2015). International Journal of Science and Research (IJSR), Volume 4 Issue 3, March 2015, Available at SSRN: https://ssrn.com/abstract=2592916

Vincent Tawiah (Contact Author)

Griffith University ( email )

PMB 50
Gold Coast Queensland 9726
Australia

University of Mysore - Department of Commerce ( email )

Mysore
India

University of Cape Coast ( email )

PMB, UCC, GHANA
Department of English
Cape Coast, Central Region
Ghana

HOME PAGE: http://ucc.edu.gh

Dublin City University Business School ( email )

Dublin 9
Ireland

Muhaheranwa Benjamin

Maharishi Markendeshwar Group of Institution - Maharishi Markandeshwar University (MMU)

Mullana
Ambala, Haryana 136119
India

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