IDEAS home Printed from https://ideas.repec.org/a/gam/jsusta/v11y2019i13p3529-d243394.html
   My bibliography  Save this article

Board Governance, Sustainable Innovation Capability and Corporate Expansion: Empirical Data from Private Listed Companies in China

Author

Listed:
  • Peng Xu

    (School of Business Administration, Shandong University of Finance and Economics, Jinan 250014, China)

  • Guiyu Bai

    (Business School, University of Jinan, Jinan 250002, China)

Abstract

Within fierce market competition, economic integration acceleration, information technology development, customer demands that are more complex than ever before and product life cycle acceleration have greatly increased the complexity and uncertainty of the operating environment of Chinese private listed companies. Considering the special situation and the current situation of the enterprise development phase in China, the shaping and upgrading of sustainable innovation capability for Chinese private listed companies has become an important issue of common concern in academia and practice. Using 4833 sets of data from private listed companies in China in four consecutive years, we studied the relationship between board governance, sustainable innovation capability and firm expansion empirically based on stewardship theory and principal-agent theory. The results show that centralized leadership structure formed by chief executive officer (CEO) duality has a positive effect on the sustainable innovation capability of Chinese listed companies; director compensation incentive has a positive impact on the sustainable innovation capability of Chinese listed companies; sustainable innovation capability has a positive effect on the firm expansion of Chinese listed companies; and centralized board leadership structure and director compensation incentive have a positive impact on the firm expansion of listed companies partially by improving the sustainable innovation capability.

Suggested Citation

  • Peng Xu & Guiyu Bai, 2019. "Board Governance, Sustainable Innovation Capability and Corporate Expansion: Empirical Data from Private Listed Companies in China," Sustainability, MDPI, vol. 11(13), pages 1-17, June.
    • Handle: RePEc:gam:jsusta:v:11:y:2019:i:13:p:3529-:d:243394
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/2071-1050/11/13/3529/pdf
    Download Restriction: no
    File URL: https://www.mdpi.com/2071-1050/11/13/3529/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Eugene Kang & Asghar Zardkoohi, 2005. "Board Leadership Structure and Firm Performance," Corporate Governance: An International Review, Wiley Blackwell, vol. 13(6), pages 785-799, November.
    2. Olubunmi Faleye, 2007. "Does one hat fit all? The case of corporate leadership structure," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 11(3), pages 239-259, September.
    3. Lahlou, Ismail & Navatte, Patrick, 2017. "Director compensation incentives and acquisition performance," International Review of Financial Analysis, Elsevier, vol. 53(C), pages 1-11.
    4. Xiaoyan Cheng & David Smith & Paul Tanyi, 2018. "An analysis of proxy statement leadership structure justification disclosures," Review of Quantitative Finance and Accounting, Springer, vol. 51(4), pages 1071-1106, November.
    5. Lin Liao & Teng (Philip) Lin & Yuyu Zhang, 2018. "Corporate Board and Corporate Social Responsibility Assurance: Evidence from China," Journal of Business Ethics, Springer, vol. 150(1), pages 211-225, June.
    6. Michelle Haynes & Steve Thompson & Mike Wright, 2007. "Executive Remuneration and Corporate Divestment: Motivating Managers to Make Unpalatable Decisions," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 34(5‐6), pages 792-818, June.
    7. Hong-Ren Din & Wen-Jung Liang, 2013. "Patent Licensing In A Leadership Structure: Comment," Manchester School, University of Manchester, vol. 81(3), pages 332-339, June.
    8. Si-Hua Chen, 2016. "The Influencing Factors of Enterprise Sustainable Innovation: An Empirical Study," Sustainability, MDPI, vol. 8(5), pages 1-17, April.
    9. David A. Becher & Terry L. Campbell II & Melissa B. Frye, 2005. "Incentive Compensation for Bank Directors: The Impact of Deregulation," The Journal of Business, University of Chicago Press, vol. 78(5), pages 1753-1778, September.
    10. Dongwei Su, 2011. "State Ownership, Corporate Tournament And Executive Compensation: Evidence From Public Listed Firms In China," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 56(03), pages 307-326.
    11. Steve Miller & Tina Yang, 2015. "Board Leadership Structure of Publicly-Traded Insurance Companies," Journal of Insurance Issues, Western Risk and Insurance Association, vol. 38(2), pages 184-232.
    12. Leal-Rodríguez, Antonio Luis & Eldridge, Stephen & Roldán, José Luis & Leal-Millán, Antonio Genaro & Ortega-Gutiérrez, Jaime, 2015. "Organizational unlearning, innovation outcomes, and performance: The moderating effect of firm size," Journal of Business Research, Elsevier, vol. 68(4), pages 803-809.
    13. Ahmed, Shaghil & Coulibaly, Brahima & Zlate, Andrei, 2017. "International financial spillovers to emerging market economies: How important are economic fundamentals?," Journal of International Money and Finance, Elsevier, vol. 76(C), pages 133-152.
    14. Martin, John A. & Butler, Frank C., 2017. "Agent and stewardship behavior: How do they differ?," Journal of Management & Organization, Cambridge University Press, vol. 23(5), pages 633-646, September.
    15. Byungchul Choi & M. V. Shyam Kumar & Fabio Zambuto, 2016. "Capital Structure and Innovation Trajectory: The Role of Debt in Balancing Exploration and Exploitation," Organization Science, INFORMS, vol. 27(5), pages 1183-1201, October.
    16. Stephen Korutaro Nkundabanyanga, 2016. "Board governance, intellectual capital and firm performance," Journal of Economic and Administrative Sciences, Emerald Group Publishing Limited, vol. 32(1), pages 20-45, May.
    17. A. Ashwin & Rishikesha Krishnan & Rejie George, 2015. "Family firms in India: family involvement, innovation and agency and stewardship behaviors," Asia Pacific Journal of Management, Springer, vol. 32(4), pages 869-900, December.
    18. Sang Jun Cho & Chune Young Chung & Jason Young, 2019. "Study on the Relationship between CSR and Financial Performance," Sustainability, MDPI, vol. 11(2), pages 1-26, January.
    19. Lei Cheng & Zhen Lei, 2015. "Does the expansion of Chinese state-owned enterprises affect the innovative behavior of private enterprises?," Asia-Pacific Journal of Accounting & Economics, Taylor & Francis Journals, vol. 22(1), pages 24-54, March.
    20. David Yermack, 2004. "Remuneration, Retention, and Reputation Incentives for Outside Directors," Journal of Finance, American Finance Association, vol. 59(5), pages 2281-2308, October.
    21. Afris Widya-Hasuti & Abbas Mardani & Dalia Streimikiene & Ali Sharifara & Fausto Cavallaro, 2018. "The Role of Process Innovation between Firm-Specific Capabilities and Sustainable Innovation in SMEs: Empirical Evidence from Indonesia," Sustainability, MDPI, vol. 10(7), pages 1-26, June.
    22. Chen, Yi-Min & Liu, Hsin-Hsien & Yang, Yung-Kai & Chen, Wei-Hua, 2016. "CEO succession in family firms: Stewardship perspective in the pre-succession context," Journal of Business Research, Elsevier, vol. 69(11), pages 5111-5116.
    23. Brick, Ivan E. & Palmon, Oded & Wald, John K., 2006. "CEO compensation, director compensation, and firm performance: Evidence of cronyism?," Journal of Corporate Finance, Elsevier, vol. 12(3), pages 403-423, June.
    24. Zona, Fabio, 2014. "Board leadership structure and diversity over CEO time in office: A test of the evolutionary perspective on Italian firms," European Management Journal, Elsevier, vol. 32(4), pages 672-681.
    25. Ertimur, Yonca & Ferri, Fabrizio & Stubben, Stephen R., 2010. "Board of directors' responsiveness to shareholders: Evidence from shareholder proposals," Journal of Corporate Finance, Elsevier, vol. 16(1), pages 53-72, February.
    26. Amama Shaukat & Grzegorz Trojanowski, 2018. "Board governance and corporate performance," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 45(1-2), pages 184-208, January.
    27. Brickley, James A. & Coles, Jeffrey L. & Jarrell, Gregg, 1997. "Leadership structure: Separating the CEO and Chairman of the Board," Journal of Corporate Finance, Elsevier, vol. 3(3), pages 189-220, June.
    28. Kurt A. Desender & Ruth V. Aguilera & Mónica Lópezpuertas-Lamy & Rafel Crespi, 2016. "A clash of governance logics: Foreign ownership and board monitoring," Strategic Management Journal, Wiley Blackwell, vol. 37(2), pages 349-369, February.
    29. James Kai‐sing Kung & Chicheng Ma, 2018. "Friends with Benefits: How Political Connections Help to Sustain Private Enterprise Growth in China," Economica, London School of Economics and Political Science, vol. 85(337), pages 41-74, January.
    30. Baysinger, Barry D & Butler, Henry N, 1985. "Corporate Governance and the Board of Directors: Performance Effects of Changes in Board Composition," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 1(1), pages 101-124, Spring.
    31. Lucian Arye Bebchuk & Jesse M. Fried, 2003. "Executive Compensation as an Agency Problem," Journal of Economic Perspectives, American Economic Association, vol. 17(3), pages 71-92, Summer.
    32. Cenni, Stefano & Monferrà, Stefano & Salotti, Valentina & Sangiorgi, Marco & Torluccio, Giuseppe, 2015. "Credit rationing and relationship lending. Does firm size matter?," Journal of Banking & Finance, Elsevier, vol. 53(C), pages 249-265.
    33. Olubunmi Faleye, 2011. "Ceo Directors, Executive Incentives, And Corporate Strategic Initiatives," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 34(2), pages 241-277, June.
    34. Hristos Doucouliagos & Janto Haman & Saeed Askary, 2007. "Directors' Remuneration and Performance in Australian Banking," Corporate Governance: An International Review, Wiley Blackwell, vol. 15(6), pages 1363-1383, November.
    35. Katalin Takacs Haynes & Amy Hillman, 2010. "The effect of board capital and CEO power on strategic change," Strategic Management Journal, Wiley Blackwell, vol. 31(11), pages 1145-1163, November.
    36. Peter Nyberg & Salla Pöyry, 2014. "Firm Expansion and Stock Price Momentum," Review of Finance, European Finance Association, vol. 18(4), pages 1465-1505.
    37. Michelle Haynes & Steve Thompson & Mike Wright, 2007. "Executive Remuneration and Corporate Divestment: Motivating Managers to Make Unpalatable Decisions," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 34(5-6), pages 792-818.
    38. Pattarin Adithipyangkul & T. Y. Leung, 2018. "Incentive pay for non-executive directors: The direct and interaction effects on firm performance," Asia Pacific Journal of Management, Springer, vol. 35(4), pages 943-964, December.
    39. Bebchuk, Lucian A. & Fried, Jesse M., 2003. "Executive Compensation as an Agency Problem," Berkeley Olin Program in Law & Economics, Working Paper Series qt81q3136r, Berkeley Olin Program in Law & Economics.
    40. Mahmoud M. Migdadi & Mohammed K. Abu Zaid & Mohammed Yousif & Ra’d Almestarihi & Khalil Al-Hyari, 2017. "An Empirical Examination of Knowledge Management Processes and Market Orientation, Innovation Capability, and Organisational Performance: Insights from Jordan," Journal of Information & Knowledge Management (JIKM), World Scientific Publishing Co. Pte. Ltd., vol. 16(01), pages 1-32, March.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Marco Pesce & Ilaria Tamai & Deyan Guo & Andrea Critto & Daniele Brombal & Xiaohui Wang & Hongguang Cheng & Antonio Marcomini, 2020. "Circular Economy in China: Translating Principles into Practice," Sustainability, MDPI, vol. 12(3), pages 1-31, January.
    2. Indah Fajarini Sri Wahyuningrum & Amin Chegenizadeh & Natasya Ghinna Humaira & Mochamad Arief Budihardjo & Hamid Nikraz, 2023. "Corporate Governance Research in Asian Countries: A Bibliometric and Content Analysis (2001–2021)," Sustainability, MDPI, vol. 15(8), pages 1-20, April.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Pattarin Adithipyangkul & T. Y. Leung, 2018. "Incentive pay for non-executive directors: The direct and interaction effects on firm performance," Asia Pacific Journal of Management, Springer, vol. 35(4), pages 943-964, December.
    2. Naeem Tabassum & Satwinder Singh, 2020. "Corporate Governance and Organisational Performance," Springer Books, Springer, number 978-3-030-48527-6, September.
    3. Sharma, Vineeta, 2011. "Independent directors and the propensity to pay dividends," Journal of Corporate Finance, Elsevier, vol. 17(4), pages 1001-1015, September.
    4. Renee B. Adams & Benjamin E. Hermalin & Michael S. Weisbach, 2010. "The Role of Boards of Directors in Corporate Governance: A Conceptual Framework and Survey," Journal of Economic Literature, American Economic Association, vol. 48(1), pages 58-107, March.
    5. Volonté, Christophe, 2015. "Boards: Independent and committed directors?," International Review of Law and Economics, Elsevier, vol. 41(C), pages 25-37.
    6. Dah, Mustafa A. & Frye, Melissa B., 2017. "Is board compensation excessive?," Journal of Corporate Finance, Elsevier, vol. 45(C), pages 566-585.
    7. Hristos Doucouliagos & Janto Haman & Saeed Askary, 2007. "Directors' Remuneration and Performance in Australian Banking," Corporate Governance: An International Review, Wiley Blackwell, vol. 15(6), pages 1363-1383, November.
    8. Claudine Salgado & Guilherme Schneider & Cristiano M. Costa, 2022. "Does board interlock affect CEO compensation? Evidence from companies listed in the Brazilian stock exchange," International Journal of Disclosure and Governance, Palgrave Macmillan, vol. 19(4), pages 444-465, December.
    9. Mamdouh Abdulaziz Saleh Al-Faryan, 2021. "The effect of board composition and managerial pay on Saudi firm performance," Review of Quantitative Finance and Accounting, Springer, vol. 57(2), pages 693-758, August.
    10. Broye, Géraldine & François, Abel & Moulin, Yves, 2017. "The cost of CEO duality: Evidence from French leadership compensation," European Management Journal, Elsevier, vol. 35(3), pages 336-350.
    11. Chung, Huimin & Judge, William Q. & Li, Yi-Hua, 2015. "Voluntary disclosure, excess executive compensation, and firm value," Journal of Corporate Finance, Elsevier, vol. 32(C), pages 64-90.
    12. Balachandran, Balasingham & Williams, Barry, 2018. "Effective governance, financial markets, financial institutions & crises," Pacific-Basin Finance Journal, Elsevier, vol. 50(C), pages 1-15.
    13. Schmid, Stefan & Altfeld, Frederic & Dauth, Tobias, 2018. "Americanization as a driver of CEO pay in Europe: The moderating role of CEO power," Journal of World Business, Elsevier, vol. 53(4), pages 433-451.
    14. Fedaseyeu, Viktar & Linck, James S. & Wagner, Hannes F., 2018. "Do qualifications matter? New evidence on board functions and director compensation," Journal of Corporate Finance, Elsevier, vol. 48(C), pages 816-839.
    15. Liew, Chee Yoong & Ko, Young Kyung & Song, Bee Lian & Murthy, Saraniah Thechina, 2019. "Directors’ remuneration, expropriation and firm performance in Malaysia: evidence from non-executive directors’ service duration within the remuneration committee," MPRA Paper 99703, University Library of Munich, Germany.
    16. Ralph Sonenshine & Nathan Larson & Michael Cauvel, 2015. "The Effect of Mergers, Divestitures, and Board Composition on CEO Compensation Before and After the Financial Crisis," Working Papers 2015-08, American University, Department of Economics.
    17. Luis Porcuna Enguix, 2021. "The New EU Remuneration Policy as Good but Not Desired Corporate Governance Mechanism and the Role of CSR Disclosing," Sustainability, MDPI, vol. 13(10), pages 1-35, May.
    18. Anup Banerjee & Mattias Nordqvist & Karin Hellerstedt, 2020. "The role of the board chair—A literature review and suggestions for future research," Corporate Governance: An International Review, Wiley Blackwell, vol. 28(6), pages 372-405, November.
    19. Riaqa Mubeen & Dongping Han & Jaffar Abbas & Iftikhar Hussain, 2020. "The Effects of Market Competition, Capital Structure, and CEO Duality on Firm Performance: A Mediation Analysis by Incorporating the GMM Model Technique," Sustainability, MDPI, vol. 12(8), pages 1-18, April.
    20. Yarram, Subba Reddy & Rice, John, 2017. "Executive compensation among Australian mining and non-mining firms: Risk taking, long and short-term incentives," Economic Modelling, Elsevier, vol. 64(C), pages 211-220.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:gam:jsusta:v:11:y:2019:i:13:p:3529-:d:243394. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: MDPI Indexing Manager (email available below). General contact details of provider: https://www.mdpi.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.