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Are listed firms better governed? Empirical evidence on board structure and financial performance

Are listed firms better governed? Empirical evidence on board structure and financial performance

Mateus, Cesario, Hall, Thomas and Mateus, Irina B. (2015) Are listed firms better governed? Empirical evidence on board structure and financial performance. Corporate Ownership & Control, 13 (1). pp. 736-755. ISSN 1727-9232 (Print), 1810-3057 (Online) (doi:https://doi.org/10.22495/cocv13i1c7p2)

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Abstract

We examine the relationship among board characteristics (network centrality, leadership structure, outsider participation, portion of male directors, director age, and presence of financial experts) and firm-level financial performance (cash holdings, leverage, ROA, risk, and risk-adjusted return). Our data encompass firms from eight countries during 2003-2012. Unlisted firms are smaller and have less leverage. Despite the fact that unlisted firms have prima facie better average governance (they are less likely to have an executive chair (or CEO as chair of the board) and a higher average portion of outside directors), they exhibit worse risk-adjusted returns. Higher levels of director connectedness (centrality) are generally associated with more observable entrenchment (more cash, less leverage), whereas other board characteristics do not show clear relationships with entrenchment. Our findings are consistent with the view that firmly established CEOs are willing and able to pack the board with qualified and connected members, who nevertheless do not act to constrain CEO entrenchment. This is true for both listed and unlisted firms.

Item Type: Article
Uncontrolled Keywords: Directors, Network Centrality, Liquidity, Capital Structure, Firm Performance,
Subjects: H Social Sciences > HD Industries. Land use. Labor
Faculty / Department / Research Group: Faculty of Business
Faculty of Business > Department of Accounting & Finance
Last Modified: 28 Apr 2017 10:45
Selected for GREAT 2016: None
Selected for GREAT 2017: GREAT b
Selected for GREAT 2018: None
Selected for GREAT 2019: None
URI: http://gala.gre.ac.uk/id/eprint/14997

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