Impact of board diversity and audit on firm performance

Khan, Aqil Waqar; Subhan, Qazi Abdul

doi:10.1080/23311975.2019.1611719

Cited by 52 publications

(64 citation statements)

References 40 publications

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“…Similarly, the other studies also confirm a significant increase in the value of firm performance in the results of the good structure of governance [19]. However, the most recent studies recounted that firms in Pakistan try to build a diverse board and compose a good structure of governance at the workplace, but there is no certain evidence to establish the positive relation of good structure with the performance of the firms [20][21]. On the contrary, much of the evidence is overwhelming that poor board governance and corrupt formation have proven to be the root cause of business failures.…”

Section: Introductionmentioning

confidence: 87%

“…At the board level, corporations have now tried to change the rules in different ways because many countries, including Norway, Spain, require listed companies to have at least 40% of BOD female directors [86]. A recent study of Pakistan-listed companies reveals that the presence of female members on the board is good for enhancing financial performance, but the number of female members is not necessarily related to performance [20]. Given that, our fifth hypothesis is H5: There is a positive relationship between female directors with share prices and firms' performance.…”

Section: Female Directorshipmentioning

confidence: 99%

“…Meanwhile, there are six components, including Board size, independent directors, institutional investors, audit committees, female directors, and executive directors were taken as the mechanism of corporate governance structure, and leverage ratio has been used as a proxy for capital structure. All of these measures of our predictors were inspired and adapted from the framework of Detthamronga et al [97] and Khan & Subhan [20]. According to the previous literature, there are several proxy measures for firm performance, but in order to avoid the proxy specific biasness, we used share prices as a proxy for market-based performance and ROA ratio for accounting performance.…”

Section: Sample Variables and Datamentioning

confidence: 99%

“…The VIF test show in Table 4 is the test of multicollinearity assumption of the classical regression model. Multicollinearity is a problem that occurs when explanatory variables of the model share a linear relationship, and it may disturb the results of the regression model [20]. If the value of VIF is less than 10 or 1 / VIF is greater than 0.1, we can say that there is no strong correlation between all predictions.…”

Section: Impact Of Corporate Governance Structure and Capital Structumentioning

confidence: 99%

See 3 more Smart Citations

Do corporate governance structure and capital structure matter for the performance of the firms? An empirical testing with the contemplation of outliers

Wang

Ramzan

2020

PLoS ONE

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A superlative combination of the Board of Directors (BOD) with diverse members is considered a sign of a good governance structure. Meanwhile, the key decision taken by BOD to make organizations profitable is the capital structure with the optimal mix of debt and equity. Unfortunately, previous literature has reported this relationship with a mixed trend, which may be due to research gaps in the statistical analysis. Moreover, it also shows that the relationship between them has not yet been fully predicted and can still be completely understood. This study contains time-variant and time-invariant variables, and these variables usually have an outlier's problem. As we know that the OLS estimators are more sensitive to react adversely to this problem, yet we have not received enough evidence from similar researches that cares about it. Consistent with these arguments, this study focuses primarily on exploring the influence of corporate governance structure and the capital structure on firms' market-oriented and accounting-based performance, especially with the contemplation of outliers. Hypotheses have been evaluated using M-estimators and S-estimators of robust regression for 45 listed firms for the period from 2013 to 2017. The findings reveal that the governance structure of firms with BOD, independent director, institutional investors, audit committee and female directors accelerates its performance. Further, we find that the leverage ratio improves accounting performance, but it has a downward impact on the share prices of listed firms. Our study contributes to the prevailing literature by proving that the kind of governance structure that based on diverse expert members and a capital structure with a high volume of debt is of utmost importance to the performance of firms as a whole.

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Section: Introductionmentioning

confidence: 87%

Section: Female Directorshipmentioning

confidence: 99%

Section: Sample Variables and Datamentioning

confidence: 99%

Section: Impact Of Corporate Governance Structure and Capital Structumentioning

confidence: 99%

See 2 more Smart Citations

Do corporate governance structure and capital structure matter for the performance of the firms? An empirical testing with the contemplation of outliers

Wang

Ramzan

2020

PLoS ONE

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“…In this study, audit fee is taken as a measure of audit risk. Khan and Abdul Subhan (2019) argue that a high audit fee is an indication of high audit quality due to extended audit hours and expert audit staff to conduct more detailed investigation and Shakhatreh et al (2020) find that audit fee has a significant effect on disclosure quality. The audit fee is higher for firms that undertook RPTs and internal audit function have a moderating effect on the relationship between RPTs and audit fee (Al-dhamari et al, 2018).…”

Section: Literature Review and Development Of Hypothesesmentioning

confidence: 99%

Related party transactions and audit risk

Rasheed¹,

Hawaldar²,

Mallikarjunappa

2021

Cogent Business & Management

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Related Party Transactions (RPTs) are perceived as genuine transactions, which fulfill the economic needs of a company. However, the controlling shareholders may use RPTs as a tool for transferring the firm's resources for their private benefit. The dual effect of RPTs, i.e., transaction efficiency and conflict of interest between the controlling shareholders and minority shareholders, increase audit risk and as a result, increases the audit fee. The Companies Act, 2013, and Clause 49 of the SEBI listing agreement mandate arm's length principle of pricing of RPTs. However, there are situations in which the regulations are silent about the method of pricing, and this increases the risk of auditors for auditing RPTs. This study intends to examine the relationship between RPTs and audit risk in India, based on a sample of 1,182 firms covering a period from 31 March 2011 to 31 March 2018. Panel data methodology has been applied for empirical analysis and the results show that higher audit fee is an indication of resource transferring RPTs. The results prove that instead of reducing the complexity associated with RPTs, the new RPTs regulations increase audit fee as a result of the increases in audit risk.

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Board gender diversity and the financial performance of Pakistani non‐financial firms: A fuzzy‐set QCA approach

Naz

Lutfullah

Arshad

et al. 2023

J Corp Accounting Finance

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According to the upper echelon's theory, the decision-making process in regard to competitive strategies by the top management has an enduring impact on firm performance (Hambrick & Mason, 1984). Moreover, the attributes of the individuals in top management may also affect the decision-making process. The purpose of this research is to analyze the board gender diversity impact on the financial performance of the non-financial companies of Pakistan. Qualitative comparative analysis (QCA) is employed which is premised on Boolean algebra that sets foundation for the theoretical framework of complexity theory. The sample comprises of 74 non-financial firms listed on the KSE-100 Index. The results are modelled as a component of the intermediate solutions with board-level variables and gender diversity for the outcome variable (i.e., EVA and Tobin's Q). From board level variables, the impact of gender diversity and foreign directors is identified among most of the combinations whereas leverage is the prominent variable within the firm level variables, the boards of which tend to be small. The results showed a heterogeneous nature of response as board gender diversity exhibited stronger association in some configurations and in some cases it exhibited weaker association similar to that of (Pandey et al., 2022).Originality: This study is an attempt to explore the of board gender diversity role in a firm's performance using board level and firm level variables. Therefore, this work adds to the prior research by adding a complementarity-based methodology for analyzing board gender diversity.

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Impact of board diversity and audit on firm performance

Cited by 52 publications

References 40 publications

Do corporate governance structure and capital structure matter for the performance of the firms? An empirical testing with the contemplation of outliers

Do corporate governance structure and capital structure matter for the performance of the firms? An empirical testing with the contemplation of outliers

Related party transactions and audit risk

Board gender diversity and the financial performance of Pakistani non‐financial firms: A fuzzy‐set QCA approach

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