Board social capital reduces implied cost of capital for private companies but not of state-owned companies

Gonçalves, Alex Ferreira; Rossoni, Luciano; Mendes‐Da‐Silva, Wesley

doi:10.1108/md-11-2017-1205

Cited by 7 publications

(6 citation statements)

References 49 publications

(103 reference statements)

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“…The resource dependence theory suggested that a director who is also a part of the board of other firms can bring resources into the firm (Hillman et al, 2000). It is consistent with the previous studies conducted by Goncalves et al (2019), and Fields et al (2012). Another important component of board activities is board attendance, which reflects efforts and intention of the board of directors to perform their duties, and reduce cost of capital (Lin, 2014).…”

Section: Discussionsupporting

confidence: 86%

Mediating Effects of Accounting Conservatism on The Relationship Between Corporate Governance and Cost of Capital

2022

Central European Management Journal

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The objectives of this research were to find the direct effect of corporate governance on cost of capital, the direct effect of corporate governance on accounting conservatism, and the indirect effect of corporate governance on cost of capital through the mediation role of accounting conservatism for listed companies in Thailand from 2018 to 2019. The corporate governance used in this research was based on the Corporate Governance Code for Listed Companies 2017, specifically principle 3 strengthen board effectiveness: board size, board independence, non-board duality, board expertise, board meeting, board attendance, and board compensation; principle 4 ensure effective CEO and people management: CEO compensation, director ownership, CEO ownership and family ownership; and principle 6 strengthen effectiveness risk management and internal control: audit committee size and audit committee with financial expertise. The samples were 906 firm-year observations. The statistical methods used to analyze the data were five-year rolling regression to calculate the level of accounting conservatism along with multiple linear regression to test the direct and the indirect effects of accounting conservatism on the relationship between corporate governance and cost of capital at a statistically significant level of .05. The results showed that board expertise, board attendance, board compensation, and CEO compensation reduced the company cost of capital. Board expertise, board meeting, board attendance, board compensation, CEO compensation, family ownership, and audit committee size increased the company accounting conservatism. Moreover, it was found that accounting conservatism served to pass the partially negative influence of board expertise, board compensation and CEO compensation on cost of capital. While the accounting conservatism served to pass the completely negative influence of board attendance on cost of capital. These findings are important for investors and regulators by providing a better knowledge of corporate governance and their effect on accounting conservatism and cost of capital of the companies.

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Section: Discussionsupporting

confidence: 86%

Mediating Effects of Accounting Conservatism on The Relationship Between Corporate Governance and Cost of Capital

2022

Central European Management Journal

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“…Studying the composition of directors is very imperative since the policy prescriptions for board structures in emerging markets may need to vary from developed markets due to different systems of governance (Levit & Malenko, 2016;Mbanyele, 2020). The study complements scanty literature on busy directors in emerging countries, China (Chen et al, 2014) India (Sarkar & Sarkar, 2009), Brazil (Goncalves et al, 2019) and some Asian countries (Kutubi et al, 2018). Increased studies on emerging markets enrich policy decision making in institutional environments with weak legal systems.…”

Section: Introductionmentioning

confidence: 81%

Do Busy Directors Impede or Spur Bank Performance and Bank Risks? Event Study Evidence From Brazil

Mbanyele

2020

SAGE Open

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The paper investigates the implications of busy directors on bank performance and bank risks in Brazil. The study employs an event study based on a change in board status as an identification strategy, Heckman’s two-stage model, and the propensity score matching method to account for endogeneity. The study findings show that busy directors contribute to an increase in bank market value. Regarding bank risks, the study shows that multiple directorships contribute to an increase in asset risk and insolvency risk. The study contributes to the existing literature by showing that busy directors are associated with high bank risks in foreign-owned banks while they disproportionately reduce bank risks in state-owned banks. Considering the importance of bank stability in promoting economic growth in Brazil and the positive impact of busy directors on bank risks, there is need for the policymakers to craft clear corporate governance clauses which guide the selection of multiple directors and enforce feedback and accountability mechanisms that govern busy directors who serve in Brazilian banks. Reducing excessive participation for busy directors serving in bank boards ensures that the directors have adequate time and attention to discharge their governance responsibilities efficiently, thus resulting in robust risk monitoring strategies in bank operations.

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“…(4) Control variables. In our analyses, we control of other determinants that have been proven to effectively identify the effect of institutional investors on a firm's cost of capital [10,15,63,64]. These determinants are divided into two categories: financial variables and governance variables.…”

Section: Plos Onementioning

confidence: 99%

“…In 2010, the cost of capital started to be applied to evaluate senior executives of China’s state-owned enterprises by EVA (Economic Value Added), and in 2013, the proportion of EVA in evaluations was increased. Furthermore, an expanding body of academic research is analyzing the specific factors that influence the cost of capital [ 10 ]. However, relatively little is known about the influence on cost of capital by institutional investors in China’s capital market, since the size of institutional investors’ assets are growing fast, and the equity environment is undergoing distinct transformation under the recent reform of mixed ownership in China.…”

Section: Introductionmentioning

confidence: 99%

Institutional investors and cost of capital: The moderating effect of ownership structure

Xiao-ping

Lin

et al. 2021

PLoS ONE

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Guiding institutional investors to actively participate in corporate governance is a hot issue to improve the internal governance of China’s listed companies. This study seeks to provide a comprehensive understanding of the mechanism that underlies the governance effects of the heterogeneity of institutional investors on the cost of capital, and the influence of ownership structure on the relationship between them. Using an unbalanced panel data on A-share listed companies of Shanghai and Shenzhen in China’s capital market during the 2014–2019 period, this study reveals how institutional investors with longer holding period and higher shareholding ratio are negatively associated with the cost of capital in China’s capital market. Furthermore, this study successfully confirms the moderating effect of ownership structure in the relationship between institutional investors and the cost of capital. China’s state-owned enterprises are more likely to introduce improvements at the corporate governance level, and ownership concentration weakens the negative influence of institutional investors on the cost of capital. The research contributes to a deeper understanding of the impacts of institutional investor’s heterogeneity and ownership structure on the cost of capital in China. In the process, the study yields useful implications for the theory and practice of corporate governance.

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Board social capital reduces implied cost of capital for private companies but not of state-owned companies

Cited by 7 publications

References 49 publications

Mediating Effects of Accounting Conservatism on The Relationship Between Corporate Governance and Cost of Capital

Mediating Effects of Accounting Conservatism on The Relationship Between Corporate Governance and Cost of Capital

Do Busy Directors Impede or Spur Bank Performance and Bank Risks? Event Study Evidence From Brazil

Institutional investors and cost of capital: The moderating effect of ownership structure

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