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The Effect of Board's Quality on Performance: a study of Canadian firms

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  • Fodil Adjaoud
  • Daniel Zeghal
  • Syed Andaleeb

Abstract

We investigate the impact of board's quality as defined by a Score published in a Canadian National Newspaper on the performance of the firm. Based on the current literature, we ranked the boards of 219 Canadian firms in terms of four board characteristics: composition of the board, compensation of board members, shareholder rights, and disclosure. Then, we defined firm performance by using traditional accounting‐based measures such as ROI, ROE, EPS, and Market‐to‐book ratio and value creation‐based measures such as EVA(R) and MVA. To test the effects of board's quality on firm performance, we adopted different models of univariate and multivariate statistical analysis. Our results show no significant relationships between corporate governance and performance when using traditional performance measures, such as ROI, ROE, EPS and Market‐to‐book. However, they reveal significant links between board's quality and performance when the latter is captured by value performance measures, such as market value added and economic value added.

Suggested Citation

  • Fodil Adjaoud & Daniel Zeghal & Syed Andaleeb, 2007. "The Effect of Board's Quality on Performance: a study of Canadian firms," Corporate Governance: An International Review, Wiley Blackwell, vol. 15(4), pages 623-635, July.
    • Handle: RePEc:bla:corgov:v:15:y:2007:i:4:p:623-635
    DOI: 10.1111/j.1467-8683.2007.00592.x
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    1. Chenini Hajer & Jarboui Anis, 2018. "Analysis of the Impact of Governance on Bank Performance: Case of Commercial Tunisian Banks," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 9(3), pages 871-895, September.
    2. Jean-Christophe Duhamel & Réda Sefsaf, 2017. "Valeur de la gouvernance d'entreprise et gouvernance des valeurs de l'entreprise. Recherche sur les effets des codes de gouvernance et les stratégies de communication en matière de gouvernance," Working Papers halshs-01633982, HAL.
    3. Younes Belfellah & David Carassus, 2016. "L'Accountability dans l'entreprise publique : Revue de littérature et proposition d'un cadre d'analyse," Post-Print hal-01902221, HAL.
    4. M. Lopez-Perez & Lazaro Rodriguez-Ariza, 2013. "Ownership and trust in the governance structures of Spanish-Moroccan SMEs constituted as international joint ventures," Central European Journal of Operations Research, Springer;Slovak Society for Operations Research;Hungarian Operational Research Society;Czech Society for Operations Research;Österr. Gesellschaft für Operations Research (ÖGOR);Slovenian Society Informatika - Section for Operational Research;Croatian Operational Research Society, vol. 21(3), pages 609-624, September.
    5. Lin, Fengyi & Lin, Li-Jung & Yeh, Chin-Chen & Wang, Teng-Shih, 2018. "Does the board of directors as Fat Cats exert more earnings management? Evidence from Benford’s law," The Quarterly Review of Economics and Finance, Elsevier, vol. 68(C), pages 158-170.
    6. Smirnova, Aleksandra S. & Zavertiaeva, Marina A., 2017. "Which came first, CEO compensation or firm performance? The causality dilemma in European companies," Research in International Business and Finance, Elsevier, vol. 42(C), pages 658-673.
    7. Ramiz ur Rehman & Inayat Ullah Mangla, 2010. "Corporate Governance and Performance of Financial Institutions in Pakistan: A Comparison between Conventional and Islamic Banks in Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 49(4), pages 461-475.
    8. Liyu He & Sue Wright & Elaine Evans, 2021. "The impact of managerial discretion on fair value information in the Australian agricultural sector," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 61(S1), pages 1897-1930, April.
    9. Tosun, Onur Kemal, 2021. "Changes in corporate governance: Externally dictated vs voluntarily determined," International Review of Financial Analysis, Elsevier, vol. 73(C).
    10. Chidiebele Innocent Onyali & Chinedu Uchenna Okerekeoti, 2018. "Board Heterogeneity and Corporate Performance of Firms in Nigeria," International Journal of Academic Research in Accounting, Finance and Management Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Accounting, Finance and Management Sciences, vol. 8(3), pages 103-117, July.
    11. Jaana Lappalainen & Mervi Niskanen, 2009. "Does Board Composition and Ownership Structure Affect Firm Growth? Evidence from Finnish SMEs," Research in Economics and Business: Central and Eastern Europe, Tallinn School of Economics and Business Administration, Tallinn University of Technology, vol. 1(1).
    12. Ferdaws Ezzi & Mohamed Ali Azouzi & Anis Jarboui, 2015. "Environmental performance indicators of Tunisian companies: Analysis via the decision tree," Asian Journal of Empirical Research, Asian Economic and Social Society, vol. 5(8), pages 114-127, August.
    13. Holm, Claus & Schøler, Finn, 2008. "Reduction of Asymmetric Information through Corporate Governance Mechanisms : The Importance of Ownership Dispersion and International," Accounting Research Center Working Papers A-2008-02, University of Aarhus, Aarhus School of Business, Department of Business Studies.
    14. Manel Kolsi & Hanen Ghorbel, 2011. "Effet des mécanismes de gouvernance sur la performance financière et boursière : Cas des entreprises canadiennes," Post-Print hal-00650537, HAL.
    15. Berezinets Irina & Ilina Yulia & Muravyev Alexander, 2011. "Owners, Boards, Managers and the Private Benefits of Control: A Study of Dual Class Stock Firms in an Emerging Market," EERC Working Paper Series 11/12e, EERC Research Network, Russia and CIS.
    16. Sarfraz Muddassar Zeeshan Fareed Muhammad Ateeq ur Rehman Adnan Maqbool Muhammad Asim Ali Qureshi, 2019. "Whether CEO Succession Via Hierarchical Jumps is Detrimental or Blessing in Disguise? Evidence from Chinese Listed Firms," Zagreb International Review of Economics and Business, Faculty of Economics and Business, University of Zagreb, vol. 22(2), pages 23-41, November.
    17. Pankaj Kumar Gupta & Prabhat Mittal, 2020. "Corporate Governance and Risk Bundling: Evidence from Indian Companies," European Journal of Business Science and Technology, Mendel University in Brno, Faculty of Business and Economics, vol. 6(1), pages 37-52.
    18. Ferdaws Ezzi & Mouhamed Ali Azouzi & Anis Jarboui, 2016. "Does CEO emotional intelligence affect the performance of the diversifiable companies?," Cogent Economics & Finance, Taylor & Francis Journals, vol. 4(1), pages 1230958-123, December.
    19. Fodil Adjaoud & Walid Ben-Amar, 2010. "Corporate Governance and Dividend Policy: Shareholders' Protection or Expropriation?," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 37(5-6), pages 648-667.
    20. Chou, Hsin-I & Chung, Huimin & Yin, Xiangkang, 2013. "Attendance of board meetings and company performance: Evidence from Taiwan," Journal of Banking & Finance, Elsevier, vol. 37(11), pages 4157-4171.
    21. Dulyak, Yulia (Дуляк, Юлия), 2015. "Empirical Analysis of the Boards of Directors’ Impact on the Corporate Performance of Russian Companies [Эмпирический Анализ Влияния Советов Директоров На Финансовые Результаты Деятельности Российс," Ekonomicheskaya Politika / Economic Policy, Russian Presidential Academy of National Economy and Public Administration, vol. 1, pages 126-148, February.
    22. Veysel KULA, & Ender BAYKUT, 2017. "A Comparative Assessment Of Corporate Governance Ratings With Multiple-Criteria Decision Analysis: A Case Of Bist Xkury," EcoForum, "Stefan cel Mare" University of Suceava, Romania, Faculty of Economics and Public Administration - Economy, Business Administration and Tourism Department., vol. 6(1), pages 1-45, January.

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