The efficiency view of corporate boards: theory and evidence

Abstract

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The Association of Board Composition, Intellectual Capital and Firm Performance in a High Ownership Concentration Context: Evidence from Italy

“…The result also implies NED are generally not effective monitors in a high ownership concentration context like Italy. This result is not in line with the agency theory, but is coherent with the results of Hemalin and Weisback (1991), Agrawal and Knoeber (1996), Bhagat and Black (1999), Erickson et al (2005) and also with the findings of Baglioni and Colombo (2013), focused within the Italian context. From the findings, it appears FP is negatively affected by the NEDs, while being positively affected by the EDs.…”

“…As regards empirical studies addressed to investigate the association of the board of directors with the FP (including the ownership structure variable and effected in high ownership concentration contexts), the evidence is inconclusive: the research of Baglioni and Colombo (2013) in the Italian context shows firm performance is negatively affected by the share of independent members on the board and positively affected by the share of executive members; the research of Jameson et al (2014) finds that controlling shareholders board membership in Indian firms has a statistically significant negative association with the FP measured by Tobin's Q, in contrast to the findings of Anderson and Reeb (2004) in the US context. Some studies deepen the analysis on the outsider membership of the board by differentiating between nominee and independent directors.…”

“…As regards Italy, the researches of Celenza & Rossi (2013) could not provide an unequivocal association of ownership structure, board composition, IC with FP, leaving room to deepen the analysis in a context in which closely held firms are the dominant CG model (Baglioni & Colombo, 2013).…”

“…Compared to the US and the UK, the market, the institutional investors, the financial institutions and the regulators are less active as corrective mechanisms against management entrenchment and corporate failure; this makes the role of internal governance mechanisms, such as the board of directors, relevant in Italy. The Italian stock exchange is characterized by companies with large controlling shareholders, who can influence the board and the committees' agenda, so the agency problem in Italy is not one between ownership and control, rather, it is a problem between majority and minority shareholders, whose interests need to be legally protected (Brealey et al, 2007;Allegrini & Greco 2013;Baglioni & Colombo, 2013;Perrini et al, 2008).…”

“…In this second case, the board of directors is called to broaden the scope of its supervisory function to safeguard the interests of small shareholders (Baglioni & Colombo, 2013).…”