Monitoring board committee structure and market valuation in large publicly listed South African corporations

Abstract

We examine the association between the presence of monitoring board committees (i.e., audit, nomination, and remuneration) and market valuation in South Africa using a sample of listed corporations. We find a significant positive connection between the presence of monitoring board committees and market valuation, but only in corporations that have independent monitoring board committees and/or all three monitoring board committees that we have investigated simultaneously. This implies that the market values corporations with independent and/or the three monitoring board committees more highly.Our results provide empirical support for agency theory, which indicates that the presence of independent board committees increases the capacity of corporate boards to effectively advise, monitor and discipline top management, and thereby improving market valuation.

Anglo-American governance adoption in non-Anglo-American settings

“…However, the outcome of such research has often been conflicting empirical results (Kumar and Zattoni, 2015; McNulty et al , 2013). Within emerging economies, the trend of CG research has also taken this route (examples of such studies include, Alnabsha et al , 2018; Agyemang and Castellini, 2015; Ntim, 2013c; Abor and Fiador, 2013; Mangena et al , 2012). Our study however departs from this methodological trend by collecting rich qualitative data through semi-structured interviews and field notes.…”

“…Some evidence from the literature suggests that there is a positive link between CG and firm performance (Gompers et al , 2003; Ntim, 2013c; Ntim, 2013a; Ntim, 2013b). However, as noted in section three, the outcome of such research has also often generated conflicting empirical results (Kumar and Zattoni, 2015; McNulty et al , 2013).…”

Corporate governance and dividend pay-out policy in UK listed SMEs

“…Additionally, it has been suggested that frequent board meetings can improve board independence and effectiveness by allowing directors more time to monitor/evaluate management performance (Conger et al, 1998). Increased managerial monitoring associatd with board meetings can reduce agency problems and increase firm performance, including dividend pay-out (Ntim and Osei, 2011;Ntim, 2013aNtim, , 2013b. On the other hand, the substitute hypothesis suggests that frequent board meetings may not be considered as a good governance mechanism because it can reduce the time outside executives spend effectively in monitoring management (Lipton and Lorsch, 1992), and this may result in increasing agency costs (Vafeas, 1999).…”

Executive pay and performance: the moderating effect of CEO power and governance structure

“…Corporate boards perform important functions, including monitoring, disciplining and compensating management to align their interests with those of shareholders (Beiner et al, 2006;Finkelstein et al, 2009), but their effectiveness is usually influenced by the way they are structured (e.g., size, composition, committees and meetings) (Cornett et al, 2009;Sanchez et al, 2010;Ntim, 2013a). Hence and in this study, we assess the moderating effect of these five board structures (board size, board meetings, proportion of NEDs, independent nomination committee, and independent remuneration committee) on the PPS.…”