Board Effectiveness: Evidence from Chartered Directors
48 Pages Posted: 16 Apr 2022
This paper examines the relation between director certification and firm performance, innovation and earnings management of companies listed on the Standard & Poor’s/Toronto Stock Exchange (S&P/TSX) Composite Index. Using a panel regression, 2SLS and the Heckman model, we find that the percentage of chartered directors has no significant relationship to financial performance, innovation levels or earnings management. Additionally, industry characteristics does not appear to impact the relationship between chartered directors and firm performance. We argue that on the job director training is as important as chartered director certification. However, there is a weak positive relationship between chartered directors and financial performance in firms with complex operations compared to those that with less complex operations. Overall, our results hold for a variety of robustness checks.
Keywords: Chartered directors, board effectiveness, firm value, Innovation, earnings management
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