Are Listed Firms Better Governed? Empirical Evidence on Board Structure and Financial Performance

Corporate Ownership & Control Volume 13, Issue 1, Autumn 2015

29 Pages Posted: 30 Nov 2015

See all articles by Cesario Mateus

Cesario Mateus

Aalborg University

Thomas W. Hall

Christopher Newport University

Irina B. Mateus

Aalborg University

Date Written: November 29, 2015

Abstract

We examine the relationship among board characteristics (network centrality, leadership structure, outsider participation, portion of male directors, director age, and presence of financial experts) and firm-level financial performance (cash holdings, leverage, ROA, risk, and risk-adjusted return). Our data encompass firms from eight countries during 2003-2012. Unlisted firms are smaller and have less leverage. Despite the fact that unlisted firms have prima facie better average governance (they are less likely to have an executive chair (or CEO as chair of the board) and a higher average portion of outside directors), they exhibit worse risk-adjusted returns. Higher levels of director connectedness (centrality) are generally associated with more observable entrenchment (more cash, less leverage), whereas other board characteristics do not show clear relationships with entrenchment. Our findings are consistent with the view that firmly established CEOs are willing and able to pack the board with qualified and connected members, who nevertheless do not act to constrain CEO entrenchment. This is true for both listed and unlisted firms.

Keywords: Directors, Network Centrality, Liquidity, Capital Structure, Firm Performance

JEL Classification: G32

Suggested Citation

Mateus, Cesario and Hall, Thomas William and B. Mateus, Irina, Are Listed Firms Better Governed? Empirical Evidence on Board Structure and Financial Performance (November 29, 2015). Corporate Ownership & Control Volume 13, Issue 1, Autumn 2015, Available at SSRN: https://ssrn.com/abstract=2696587

Cesario Mateus (Contact Author)

Aalborg University

Fredrik Bajers Vej 7E
Aalborg, DK-9220
Denmark

Thomas William Hall

Christopher Newport University ( email )

United States

Irina B. Mateus

Aalborg University ( email )

Fredrik Bajers Vej 7E
Aalborg, DK-9220
Denmark

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