Board hierarchy, independent directors, and firm value: Evidence from China

Zhu, Jiang; Ye, Kangtao; Tucker, Jennifer Wu; Chan, Kam C.

doi:10.1016/j.jcorpfin.2016.09.009

Cited by 130 publications

(73 citation statements)

References 46 publications

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“…In addition, some studies found a positive relationship between board independence and firm performance (Duru, Iyengar, & Zampelli, 2015;Mashayekhi & Bazaz, 2008;Müller, 2014). In addition, we noted from two research that board independence and number board meeting variables are positive significant to the bank performance (Liang, Xu, & Jiraporn, 2013;Liu, Miletkov, Wei, & Yang, 2015;Zhu, Ye, Tucker, & Chan, 2016) Then, this study tries examining the effect of board independent and board meeting on bank performance in Indonesia.…”

Section: Effects Of Independent Board Of Directors On Bank Performancementioning

confidence: 90%

“…These assumptions related to normally distribution and autocorrelation effect were a notable limitation of this study. It seems the board of directors bring their expertise to enhance the business and also ask the bank to increase the margin on loan (Al-Najjar, 2014; Mashayekhi & Bazaz, 2008;Müller, 2014;Zhu et al, 2016). In addition, the result that indicates the positive impact of the board independence on the market value is found in small bank industry.…”

Section: Descriptive Statisticsmentioning

confidence: 99%

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Independent Board, Audit Committee, Risk Committee, the Meeting Attendance level and Its Impact on the Performance: A Study of Listed Banks in Indonesia

Chou¹,

Buchdadi²

2017

IJBA

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This study determines the effect of good corporate governance on the performance of banks in Indonesia. The variables used are independent board (IB), the annual board meeting (BM), the percentage of annual board of director meeting attendance, the annual board-executive meeting (BEM), the percentage of annual board-executive meeting attendance, audit committee (AC), audit committee meeting (ACM), the percentage of annual audit committee meeting attendance, risk committee (RC), risk committee meeting (RCM), and the percentage of annual risk committee meeting attendance. The analysis technique employed in this study is two-stage least square (2SLS) panel data regression using return on asset (ROA), net interest margin ratio (NIM), and Tobin's Q as the proxies of bank performance. The data used are listed bank in Indonesia Capital Market between 2013 and 2015. The findings reveal that the independent board has a positive impact on net interest margin among the big scale bank. However, among the small scale bank the independent board of directors has the positive impact on the market value, but they will have the lack of information that could obstruct the accounting based profit of the bank. Moreover, the findings of this study also explain the important role of meeting attendance for the accounting based profitability of the bank. This study also found the critical role of the audit committee in the banking industry.

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Section: Effects Of Independent Board Of Directors On Bank Performancementioning

confidence: 90%

Section: Descriptive Statisticsmentioning

confidence: 99%

Independent Board, Audit Committee, Risk Committee, the Meeting Attendance level and Its Impact on the Performance: A Study of Listed Banks in Indonesia

Chou¹,

Buchdadi²

2017

IJBA

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show abstract

“…In addition, because higher status actors in a hierarchy tend to set the tone for group discussions and act as a communication center by providing influential opinions (He & Huang, ; Zhu, Ye, Tucker, & Chan, ), we argue that directors are more likely to coordinate with the CEO on information hoarding activities when the CEO has a higher status. Thus, we propose that a CEO's status can strengthen the positive relationship between informal hierarchy and future crash risk.…”

Section: Introductionmentioning

confidence: 92%

Board informal hierarchy and stock price crash risk: Theory and evidence from China

Jebran

Chen

Zhu

2019

Corporate Governance

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Research Question/Issue: This study examines how the informal hierarchy among directors of a firm influences the risk of stock price crash. We theorize that a clear informal hierarchy among directors increases managerial coordination of activities to hide bad news, which increases the risk of future stock price crash. Research Findings/Insights: Consistent with our theoretical predictions, our findings show that the informal hierarchy among directors, measured based on the number of board appointments they have, is positively associated with the risk of future stock price crash. This association is weaker for firms with larger boards but stronger when the CEO's status is higher than that of the majority of the directors on the board. We also find evidence that information hierarchy increases the degree to which managers hide bad news. Theoretical/Academic Implications: This study advances our understanding by showing that an informal hierarchy that tacitly forms among directors on a board can significantly guide boardroom interactions. Specifically, the findings suggest that a clear informal hierarchy among directors enhances their coordination to hide bad news and thereby increases stock price crash risk. Furthermore, the results provide evidence that CEO's status and board size are important factors influencing the functioning of board informal hierarchy. Practitioner/Policy Implications: The results have important implications for researchers and policymakers. The findings show that the informal hierarchy among directors can shape managerial behavior and guide boardroom interactions. The results also suggest that improving formal governance mechanisms can enhance boardroom interactions by moderating the effects of informal hierarchy in the context of China.

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“…Hence, chairpersons play a significant leadership role in setting corporate policies, including compensation contracts, and selecting, evaluating, and replacing executives (Krause et al, ; Withers & Fitza, ). Furthermore, the chairperson of the board representing the interest of the large controlling shareholder often has great power to set the tone of the meeting and influence major corporate decisions (Jiang & Kim, ; Zhu, Ye, Wu, & Chan, ). Although CEOs and other top managers may influence the pay‐setting process through their negation and/or connections with the board of directors, the ultimate power in most Chinese firms rests in the chairperson.…”

Section: Institutional Background Of Chinamentioning

confidence: 99%

Chairperson collectivism and the compensation gap between managers and employees: Evidence from China

Jiang

Lin

Liu

et al. 2019

Corporate Governance

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Research Question/Issue Few studies have examined the determinants of the compensation gap between managers and workers, despite the significant public attention the issue has received. In particular, few studies have examined how nations' formal systems, such as their institutional and legal arrangements, and informal systems, such as their cultures and traditions, affect the compensation gap. We use the chairperson's native place of origin as a proxy for cultural differences within China and examine how chairperson collectivism affects compensation gaps between managers and average workers. Research Findings/Insights The results show that the compensation gap in a company run by a chairperson from a collectivistic culture tends to be smaller than that of a company run by a chairperson from an individualistic culture. This effect tends to be stronger if a chairperson has a longer tenure and works in a state‐owned enterprise or in a firm located in collectivistic regions. Theoretical/Academic Implications The study provides new insights into the determinants of the compensation gap by incorporating the cultural traits of management. It also broadens the understanding of compensation gaps in emerging markets and shows that cultural differences play an important role in understanding the compensation gap in China. Practitioner/Policy Implications Cultural characteristics should be taken into account when developing compensation contracts. Stakeholders need to consider alternative mechanisms, such as higher pay for performance, to counteract the higher compensation gap due to differences in cultural preferences.

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Board hierarchy, independent directors, and firm value: Evidence from China

Cited by 130 publications

References 46 publications

Independent Board, Audit Committee, Risk Committee, the Meeting Attendance level and Its Impact on the Performance: A Study of Listed Banks in Indonesia

Independent Board, Audit Committee, Risk Committee, the Meeting Attendance level and Its Impact on the Performance: A Study of Listed Banks in Indonesia

Board informal hierarchy and stock price crash risk: Theory and evidence from China

Chairperson collectivism and the compensation gap between managers and employees: Evidence from China

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