Independent Directors, Business Risk, and the Informativeness of Accounting Earnings for Debt Contracting

Chu, Ling; Mbagwu, Chima

doi:10.1002/cjas.1521

Cited by 5 publications

(6 citation statements)

References 80 publications

(129 reference statements)

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“…Those results are rational and explained by the agency theory and resource dependence theory because the decision-making will be more reliable whenever there is a less personal interest which is achieved by the board's independence. The results are consistent with different previous studies such as Al-ahdal et al (2020), Naciti (2019), Uribe-Bohorquez et al (2018), and the Chu, Mathieu, and Mbagwu (2019). The second hypothesis stated that the board size has a significant negative relationship with the firm performance in listed companies in Jordan.…”

Section: Results Discussionsupporting

confidence: 92%

The Effect of Board Independence, Board Size, and Ceo Duality on Jordanian Firm Performance

Jwailes¹

2021

JARBMA

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Board of director characteristics plays a major role in the firms’ performance. From those characteristics, board independence, the board size, and CEO duality were found to be effective in many studies. Therefore, this particular study is an examination of the relationships between three antecedents; board independence, the board size, and CEO duality; and the firms’ performance among the Jordanian listed firms. This study is composing a predictive model of Tobin’s Q based on three BoD antecedents as the independent variables. The regression model has the board independence, board size, and CEO duality as predictors of Tobin’s Q. This article is based on quantitative methods that used regression-based analysis for secondary panel data in the context of the Amman Stock Exchange (ASE). The time span is 10 years from 2008 to 2018 and 180 firms from the non-financial sector are included. The results revealed that the three relationships in the proposed model were found to be significant with board size having the highest negative impact, followed by CEO duality the board independence and both have a positive impact. The study can explain 62.64% of Tobin’s Q variance based on three corporate governance variables that are based on the board of directors' structure. In the future, adding more corporate governance variables such as ownership structure, board meetings, and audit committees will contribute to the proposed conceptual framework.

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Section: Results Discussionsupporting

confidence: 92%

The Effect of Board Independence, Board Size, and Ceo Duality on Jordanian Firm Performance

Jwailes¹

2021

JARBMA

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“…So, the more independent directors connected to politics in the company, the better they are at managing finances, especially in obtaining loans with low interest rates. Therefore, companies need to present independent directors to reduce business risk (Chu et al 2019). When credit conditions are strengthened, independent directors reduce the cost of debt (Bradley and Chen 2015).…”

Section: Ols Regression Resultsmentioning

confidence: 99%

“…In addition to independent commissioners, independent directors also have a very important role in the sustainability of the company because the benefits of the presence of an independent director in the company will reduce the company's business risk (Chu et al 2019). The research of Bradley and Chen (2015) found that the company's independent directors can reduce the cost of debt if credit conditions are strengthened, and with a higher percentage of busy independent directors, the company's cost of debt will decrease (Chakravarty and Rutherford 2017).…”

Section: Hypothesis Developmentmentioning

confidence: 99%

Politically Connected Independent Commissioners and Independent Directors on the Cost of Debt

Junus

Harymawan

Nasih

et al. 2022

IJFS

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This study examines the relationship between politically connected independent commissioners and independent directors regarding the cost of debt. The sample is all companies listed on the Indonesia Stock Exchange for the 2010–2017 period, totaling 327 companies with a total data value of 1722 firm-year observations. We used the ordinary least squares regression model (OLS) and the Heckman 2SLS method to solve the endogeneity problem. We found that politically connected independent commissioners and politically connected independent directors negatively correlate with the cost of debt. These results indicate the importance of politically connected independent commissioners and independent directors in managing companies, especially in obtaining loans with low interest rates. In addition, our results are robust due to the use of the Heckman 2SLS test. Therefore, this research can contribute to the development of the literature related to corporate governance and political connections in public companies, so that politically connected independent commissioners and independent directors have an essential role in decision-making in companies.

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“…The presence of independent directors therefore reduces the propensity to take business risk. In a study on banks, Chu et al (2019) have also established that the benefit of increasing the proportion of independent directors is reduced when we account for business risk.…”

Section: Resultsmentioning

confidence: 99%

Corporate Governance and Risk Bundling: Evidence from Indian Companies

Gupta¹,

Mittal²

2020

EJOBSAT

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Corporate Governance has acquired a significant place in the national economies globally. Quality of governance impacts the business confidence index and resource mobilizations in the global marketplace. In various countries there is a conventional dominance of promoters or majority shareholders on the board of companies which implicates various propensities of risks and forms of risk cultures, making the problem of governance typical and critical for the regulators. Our paper examines the risk behaviour of firms in context of CG practices and creates distinct bundles of companies with specific risk cultures. Using a sample of 10 years' panel data of 84 companies listed on the National Stock Exchange in India (NSE) for selected risk and CG variables, we measure the influence of CG measures on the risk propensity and behaviour and based on combinations of selected CG practices formulated the risk bundles. Based on the derived bundles of risk behaviour, regulators and policymakers can make informed decisions.

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Independent Directors, Business Risk, and the Informativeness of Accounting Earnings for Debt Contracting

Cited by 5 publications

References 80 publications

The Effect of Board Independence, Board Size, and Ceo Duality on Jordanian Firm Performance

The Effect of Board Independence, Board Size, and Ceo Duality on Jordanian Firm Performance

Politically Connected Independent Commissioners and Independent Directors on the Cost of Debt

Corporate Governance and Risk Bundling: Evidence from Indian Companies

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