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Board Structure and Corporate Performance

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Author Info

  • Ozgur Arslan

    (Hacettepe University, Turkey)

  • Mehmet Baha Karan

    (Hacettepe University, Turkey)

  • Cihan Eksi

    (Regional Manager in the Halkbank, Turkey.)

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    Abstract

    This paper attempts to analyze the impact of board structure attributes on their accounting and stock market performance. Our analyses are built on an emerging market, Turkey for the period between 1995 and 2006. We conduct our analyses through binary logistic methodology. Our findings show that, while board ownership does not have any impact on the accounting performance, it has a fairly positive influence on the stock market performance of firms during the crisis period. Similarly, the situation when the CEO of a firm is also the chairman of the board is not found to have any impact on the corporate performance of firms, although its negative impact is present during the crisis period. Moreover, board independence is found to not to have an effect on accounting performance, yet the stock market perceives board independence positively, both in general and in the crisis periods. Finally, board size has a positive impact , both on the accounting and on the stock market performance of firms, yet the impact on the corporate performance reverts to adverse during the crisis period.

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    File URL: http://www.fm-kp.si/zalozba/ISSN/1581-6311/8_003-022.pdf
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    Bibliographic Info

    Article provided by University of Primorska, Faculty of Management Koper in its journal Managing Global Transitions.

    Volume (Year): 8 (2010)
    Issue (Month): 1 ()
    Pages: 003-022

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    Handle: RePEc:mgt:youmgt:v:8:y:2010:i:1:p:003-022

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    Related research

    Keywords: board size; board independence; ROA; Tobin’s Q;

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    References

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    1. Anup Agrawal & Charles R. Knoeber, . "Firm Performance and Mechanisms to Control Agency Problems between Managers and Shareholders (Revision of 29-94)," Rodney L. White Center for Financial Research Working Papers 8-96, Wharton School Rodney L. White Center for Financial Research.
    2. Bagnani, Elizabeth Strock, et al, 1994. " Managers, Owners, and the Pricing of Risky Debt: An Empirical Analysis," Journal of Finance, American Finance Association, vol. 49(2), pages 453-77, June.
    3. Michael C. Jensen, 1994. "The Modern Industrial Revolution, Exit, And The Failure Of Internal Control Systems," Journal of Applied Corporate Finance, Morgan Stanley, vol. 6(4), pages 4-23.
    4. Ozgur Arslan & Chrisostomos Florackis & Aydin Ozkan, 2006. "The Role of Cash Holdings in Reducing Investment-Cash Flow Sensitivity: Evidence from a Financial Crisis Period in an Emerging Market," Discussion Papers 06/08, Department of Economics, University of York.
    5. Morck, Randall & Shleifer, Andrei & Vishny, Robert W., 1988. "Management ownership and market valuation : An empirical analysis," Journal of Financial Economics, Elsevier, vol. 20(1-2), pages 293-315, January.
    6. Brickley, James A. & Coles, Jeffrey L. & Terry, Rory L., 1994. "Outside directors and the adoption of poison pills," Journal of Financial Economics, Elsevier, vol. 35(3), pages 371-390, June.
    7. Myers, Stewart C., 1977. "Determinants of corporate borrowing," Journal of Financial Economics, Elsevier, vol. 5(2), pages 147-175, November.
    8. Rosenstein, Stuart & Wyatt, Jeffrey G., 1997. "Inside directors, board effectiveness, and shareholder wealth," Journal of Financial Economics, Elsevier, vol. 44(2), pages 229-250, May.
    9. Cheng, Shijun, 2008. "Board size and the variability of corporate performance," Journal of Financial Economics, Elsevier, vol. 87(1), pages 157-176, January.
    10. Yermack, David, 1996. "Higher market valuation of companies with a small board of directors," Journal of Financial Economics, Elsevier, vol. 40(2), pages 185-211, February.
    11. Coles, Jeffrey L. & Daniel, Naveen D. & Naveen, Lalitha, 2008. "Boards: Does one size fit all," Journal of Financial Economics, Elsevier, vol. 87(2), pages 329-356, February.
    12. Agrawal, Anup & Knoeber, Charles R., 1996. "Firm Performance and Mechanisms to Control Agency Problems between Managers and Shareholders," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 31(03), pages 377-397, September.
    13. 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.
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