Board conditioning factors of firm performance

Roda, Bruno Loïc

http://hdl.handle.net/10400.8/1115

Use this identifier to reference this record.

Name:	Description:	Size:	Format:
Loïc Roda (2013) Board Conditioning Factors of Firm Performance.pdf		1.46 MB	Adobe PDF	Download

Send Feedback

Authors

Roda, Bruno Loïc

Advisor(s)

Canadas, Natália Maria Prudêncio Rafael

Jorge, Maria João da Silva

Abstract(s)

The generous amount of recent empirical works attempting to find a relationship between corporate governance mechanisms and firm performance show that this research field continues to be a matter of interest. Our study analyses the impact of board size, the proportion of independent directors on the board, the presence of both women and foreign directors on the board, and meetings’ frequency, on firm performance, in a sample of 398 companies from eleven European countries, over the fiscal year of 2010. We carried out the statistical analysis through ordinary least squares regressions, where firm performance measure Tobin’s Q is the dependent variable. In all models, we controlled for firm performance, firm size and the level of debt. In order to test for the sensitivity of our results, we alternatively controlled for the industry, country and system effect. We find that our results are more robust when controlling for the system effect. Moreover, when testing for endogeneity, we find that our sample firms do not suffer from this problem for board size, but show suspicions regarding an endogenous relationship between board independence and firm performance. As for the results: our most outstanding outcome is that the presence of foreign directors on the board is significant and positively linked to Tobin’s Q. When controlling for the system effect, the proportion of independent directors exerts a significant positive impact on firm performance. Board meetings exhibit a significant negative impact on Tobin’s Q, also when controlling for the system effect. Regarding our control variables: return-on-assets ratio (positive), the natural logarithm of assets (negative) and debt-to-assets ratio (positive) are found to be significantly related to firm performance.