Characteristics of the Board of Directors and Corporate Financial Performance—Empirical Evidence

Abstract

The objectives of the research are to investigate the characteristics of the Board of Directors on the financial performance of the enterprise using sample data from 52 construction and real estate enterprises listed on the Vietnam stock exchange in the period 2006–2020. Using typical regression methods such as pooled OLS, FEM, REM, and assessing the defects of the research model, the FGLS method is selected. At the same time, due to the existence of endogenous phenomena and the nature of interdependence among enterprises in Vietnam, research using the instrumental variables two-step generalized method of moments (IV-GMM) is conducted in order to correct for cross-sectional dependence, autocorrelation, endogeneity, and heteroskedasticity in the analysis. Research results suggest that board size, female board members, meeting frequency, and board members’ education have a positive influence on financial performance. Moreover, as the independence of the Board of Directors increases, the business efficiency decreases. The research also found a positive relationship of tangible fixed assets, and a negative relationship between capital structure choice, firm size, and corporate financial performance. Finally, we propose some implications for enhancing the financial performance of Vietnamese firms.

Does corporate governance spur bank intellectual capital in an emerging economy? A system GMM analysis from Ethiopia

“…Bank size is measured in terms of the Natural logarithm of firm age since incorporation [51,103,179,220,227]. Enterprise size is one of the important factors contributing to the business performance of the enterprise [151]. Firm size has a significant positive relationship with firm performance [29,30,127].…”

Exploring the mediating role of corporate social responsibility in the connection between board competence and corporate financial performance amidst global uncertainties

“…Boards of directors, typically comprising prominent shareholders, hold a pivotal position in joint‐stock companies (Nguyen & Huynh, 2023). A skilled and CSR‐competent board attracts greater investment, subsequently enhancing financial performance.…”

“…The sustained scholarly attention to the subject underscores the board's pivotal role. Boards not only shoulder significant corporate accountability (Banerjee et al, 2020) but also spearhead comprehensive decision-making encompassing the gamut of the firm's operations (Nguyen & Huynh, 2023). Their purview extends from orchestrating board meetings to liaising with stakeholders (Banerjee et al, 2020), as well as selecting and supervising the organization's executives and addressing critical corporate challenges (Hillman & Dalziel, 2003).…”

The effect of the board of directors on financial performance and the existence of risk management as an intervening variable

“…Research on the relationship between board size and corporate performance focuses on large firms located in developed countries and produces inconclusive results. Afrifa and Tauringana (2015), Larmou and Vafeas (2010), Khanchel (2007), Kiel and Nicholson (2003), Sunday (2008), Najjar (2012), Nguimfack and Wamba (2022) and Nguyen and Huynh (2023) found that the effect of board size is positive on company performance. However, Al Manaseer et al (2012), Basu et al (2007), Florackis (2005), Husaini (2017) and Vafeas (2000) reported that the effect of board size is negative on company performance.…”

“…Many studies report that board independence has a positive influence on corporate performance (see, e.g. Gani and Jermias, 2006;Krivogorsky, 2006), whereas others report that board independence has a negative influence on corporate performance (Amran and Ahmad, 2010;Cheng, 2008;Nguimfack and Wamba, 2022;Nguyen and Huynh, 2023).…”