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The Influence of the Independent Non-Executive Board Members on the Financial Performance of the Companies Listed in the Bucharest Stock Exchange

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  • Bogdan Aurelian Mihail

    (Doctoral School of Finance, Bucharest University of Economic Studies, 6 Piata Romana, 010374 Bucharest, Romania)

  • Carmen Daniela Micu

    (Department of Masters in Board Practice and Directorship, Henley Business School, University of Reading, Greenlands Campus, Henley-on Thames, Oxfordshire RG9 3AU, UK)

Abstract

This paper studies the impact of independent board members on the financial performance of companies listed on the Bucharest Stock Exchange during the period 2016–2020. Different characteristics of the board of directors have been examined extensively in the literature and board independence was identified as one of the most effective corporate governance tools. In this context, the present study contributes to the relevant literature by examining recent data for Romania and investigating alternative performance indicators such as return on assets (ROA), return on equity (ROE) and Tobin’s Q. The correlation analysis, scatter plots, and regression results document that a higher share of the independent board members was associated with higher returns on equity ratio. Specifically, a 10% rise in the share of independent members was associated with an approximately 0.9%-point increase in ROE.

Suggested Citation

  • Bogdan Aurelian Mihail & Carmen Daniela Micu, 2021. "The Influence of the Independent Non-Executive Board Members on the Financial Performance of the Companies Listed in the Bucharest Stock Exchange," JRFM, MDPI, vol. 14(10), pages 1-14, October.
    • Handle: RePEc:gam:jjrfmx:v:14:y:2021:i:10:p:462-:d:648298
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    References listed on IDEAS

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    4. Aida Maria Ismail & Siti Muliyana Ahmadi & Normahiran Yatim & Puteh Mariam Ismail, 2020. "The Impact of Board Characteristics on Co-operative Reputation From the Lense of Resource-Based View Theory (RBVT)," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 11(3), pages 43-61, June.
    5. Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, vol. 3(4), pages 305-360, October.
    6. Georgeta Vintilă & Mihaela Onofrei & Ştefan Cristian Gherghina, 2015. "The Effects of Corporate Board and CEO Characteristics on Firm Value: Empirical Evidence from Listed Companies on the Bucharest Stock Exchange," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 51(6), pages 1244-1260, November.
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