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Board Characteristics Best Practices and Financial Performance. Evidence from the European Capital Market

Author

Listed:
  • Victor-Octavian Müller

    (Babes-Bolyai University, Cluj-Napoca)

  • Ionel-Alin Ienciu

    (Babes-Bolyai University, Cluj-Napoca)

  • Carmen Giorgiana Bonaci

    (Babes-Bolyai University, Cluj-Napoca)

  • Crina Ioana Filip

    (Babes-Bolyai University, Cluj-Napoca)

Abstract

This study investigates board characteristics best practices in the particular context of European listed companies. The theoretical grounding of the paper is done by discussing board composition and board compensation related studies, mainly belonging to the corporate governance literature. The main objective of the paper is to contribute to the debate on whether certain board characteristics can be documented to represent best practices. In doing so, we investigate if such board characteristics significantly influence companies’ financial performance. We use econometric regression models in order to assess the impact of a series of corporate governance board related characteristics on the performance of companies (constituents of FTSE100) listed on the largest European capital market (London Stock Exchange), for the 2010-2011 period. An accounting measure of operating performance, namely the operating return on assets (ROA), is used. The profoundness of a potential impact of corporate board characteristics on companies’ performance is investigated by considering both contemporaneous and subsequent operating performance. Results document best practices through the existence of several significant associations between considered board characteristics and firm performance.

Suggested Citation

  • Victor-Octavian Müller & Ionel-Alin Ienciu & Carmen Giorgiana Bonaci & Crina Ioana Filip, 2014. "Board Characteristics Best Practices and Financial Performance. Evidence from the European Capital Market," The AMFITEATRU ECONOMIC journal, Academy of Economic Studies - Bucharest, Romania, vol. 16(36), pages 672-672, May.
    • Handle: RePEc:aes:amfeco:v:36:y:2014:i:16:p:672
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    References listed on IDEAS

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    Cited by:

    1. Lucian Belascu & Dan Gabriel Dumitrescu & Alexandra Smedoiu Popoviciu & Alexandra Horobet, 2021. "What Drives Profitability in the Romanian ICT Sector?," The AMFITEATRU ECONOMIC journal, Academy of Economic Studies - Bucharest, Romania, vol. 23(Special15), pages 899-899, November.
    2. María Consuelo Pucheta-Martínez & Isabel Gallego-Álvarez, 2020. "Do board characteristics drive firm performance? An international perspective," Review of Managerial Science, Springer, vol. 14(6), pages 1251-1297, December.
    3. Michel Sayumwe, 2019. "Corporate Governance: An Overview. From Creation of Value for Shareholders by the Board to the Duality Role of Its Chairperson," Journal of Business Administration Research, Journal of Business Administration Research, Sciedu Press, vol. 8(1), pages 40-51, April.
    4. Marta-Christina Suciu & Gratiela Georgiana Noja & Mirela Cristea, 2020. "Diversity, Social Inclusion and Human Capital Development as Fundamentals of Financial Performance and Risk Mitigation," The AMFITEATRU ECONOMIC journal, Academy of Economic Studies - Bucharest, Romania, vol. 22(55), pages 742-742, August.

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    More about this item

    Keywords

    board composition; board compensation; best practices; operating return on assets; corporate governance; FTSE 100; OLS regression.;
    All these keywords.

    JEL classification:

    • M12 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Personnel Management; Executives; Executive Compensation
    • M40 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - General
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General

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