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The Impact of Corporate Board Meetings on Corporate Performance in South Africa

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  • Ntim, Collins G.

Abstract

We investigate the impact of corporate board meetings on corporate performance for a sample of 169 listed corporations from 2002 to 2007 in South Africa (SA). Our findings suggest a statistically significant and positive association between the frequency of corporate board meetings and corporate performance, implying that SA boards that meet more frequently tend to generate higher financial performance. A further investigation indicates a significant non-monotonic link between the frequency of corporate board meetings and corporate performance, suggesting that either a relatively small or large number of corporate board meetings impacts positively on corporate performance. Our findings are consistent across a raft of econometric models that control for different types of endogeneities and corporate performance proxies. Our results provide empirical support for agency theory, which suggests that corporate boards that meet more frequently have increased capacity to effectively advise, monitor and discipline management, and thereby improving corporate financial performance.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 45814.

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Date of creation: 29 Aug 2011
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Publication status: Published in African Review of Economics and Finance 2.2(2011): pp. 83-103
Handle: RePEc:pra:mprapa:45814

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Related research

Keywords: corporate governance; corporate board meetings; corporate performance; King II; South Africa; endogeneity;

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References

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  1. Graham Barr & Jos Gerson & Brian Kantor, 1995. "Shareholders As Agents And Principals: The Case For South Africa'S Corporate Governance System," Journal of Applied Corporate Finance, Morgan Stanley, Morgan Stanley, vol. 8(1), pages 1-32.
  2. Mitchell A. Petersen, 2005. "Estimating Standard Errors in Finance Panel Data Sets: Comparing Approaches," NBER Working Papers 11280, National Bureau of Economic Research, Inc.
  3. Jensen, Michael C, 1986. "Agency Costs of Free Cash Flow, Corporate Finance, and Takeovers," American Economic Review, American Economic Association, American Economic Association, vol. 76(2), pages 323-29, May.
  4. Paul Guest, 2009. "The impact of board size on firm performance: evidence from the UK," The European Journal of Finance, Taylor & Francis Journals, Taylor & Francis Journals, vol. 15(4), pages 385-404.
  5. Yermack, David, 1996. "Higher market valuation of companies with a small board of directors," Journal of Financial Economics, Elsevier, Elsevier, vol. 40(2), pages 185-211, February.
  6. Collins G. Ntim & Kwaku K. Opong & Jo Danbolt & Dennis A. Thomas, 2012. "Voluntary corporate governance disclosures by post-Apartheid South African corporations," Journal of Applied Accounting Research, Emerald Group Publishing, Emerald Group Publishing, vol. 13(2), pages 122-144.
  7. Michael C. Jensen, 1994. "The Modern Industrial Revolution, Exit, And The Failure Of Internal Control Systems," Journal of Applied Corporate Finance, Morgan Stanley, Morgan Stanley, vol. 6(4), pages 4-23.
  8. Irene Karamanou & Nikos Vafeas, 2005. "The Association between Corporate Boards, Audit Committees, and Management Earnings Forecasts: An Empirical Analysis," Journal of Accounting Research, Wiley Blackwell, Wiley Blackwell, vol. 43(3), pages 453-486, 06.
  9. Darren Henry, 2008. "Corporate Governance Structure and the Valuation of Australian Firms: Is There Value in Ticking the Boxes?," Journal of Business Finance & Accounting, Wiley Blackwell, Wiley Blackwell, vol. 35(7-8), pages 912-942.
  10. Stefan Beiner & Wolfgang Drobetz & Markus M. Schmid & Heinz Zimmermann, 2006. "An Integrated Framework of Corporate Governance and Firm Valuation," European Financial Management, European Financial Management Association, European Financial Management Association, vol. 12(2), pages 249-283.
  11. Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, Elsevier, vol. 3(4), pages 305-360, October.
  12. Eliezer M. Fich & Anil Shivdasani, 2006. "Are Busy Boards Effective Monitors?," Journal of Finance, American Finance Association, American Finance Association, vol. 61(2), pages 689-724, 04.
  13. Vafeas, Nikos, 1999. "Board meeting frequency and firm performance," Journal of Financial Economics, Elsevier, Elsevier, vol. 53(1), pages 113-142, July.
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Cited by:
  1. Collins G. Ntim, 2012. "Director shareownership and corporate performance in South Africa," African Journal of Accounting, Auditing and Finance, Inderscience Enterprises Ltd, Inderscience Enterprises Ltd, vol. 1(4), pages 359-373.

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