Changes in Corporate Governance: Externally Dictated vs Organically Determined

54 Pages Posted: 26 Jan 2018

See all articles by Onur Kemal Tosun

Onur Kemal Tosun

Cardiff Business School - Accounting and Finance Section

Date Written: November 1, 2017

Abstract

Using the SEC regulations (following the Sarbanes–Oxley Act) on board independence as an identification for externally imposed governance changes, I compare its influence on firm performance to the effect of voluntarily conducted adjustments. Controlling for companies with voluntary changes, firms forced to modify their governance by increasing board independence experience a decrease in ROA, asset turnover, and sales growth. The findings are robust for other mandated provisions and stronger for bigger changes; small, single-segment firms operating in wholesale, retail, and high-tech industries; and constrained companies with financial distress, high leverage, low cash, high volatility, high growth and R&D expenses.

Keywords: imposed regulations, voluntary governance changes, firm performance, board independence, identification

JEL Classification: G32, G38, C33

Suggested Citation

Tosun, Onur Kemal, Changes in Corporate Governance: Externally Dictated vs Organically Determined (November 1, 2017). WBS Finance Group Research Paper. Available at SSRN: https://ssrn.com/abstract=3105695 or http://dx.doi.org/10.2139/ssrn.3105695

Onur Kemal Tosun (Contact Author)

Cardiff Business School - Accounting and Finance Section ( email )

Aberconway Building
Colum Drive
Cardiff, CF10 3EU
United Kingdom

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