Md Hamid Uddin, Khakan Najaf, M. Kabir Hassan, Nor Shaipah Abdul Wahab
{"title":"Dual-board governance and board independence: Conglomerate affiliate versus standalone firms","authors":"Md Hamid Uddin, Khakan Najaf, M. Kabir Hassan, Nor Shaipah Abdul Wahab","doi":"10.1002/ijfe.2906","DOIUrl":null,"url":null,"abstract":"<p>We argue that the corporate board of an exchange-listed firm cannot make an independent business decision if it has an affiliation with a conglomerate group. This is because the corporate board of a conglomerate-affiliated firm (CAF) has high moral hazard exposure due to its accountability to the superior parent board at the apex of the conglomerate structure. Based on a sample of 304 listed firms from 18 countries, we find a CAF board is less independent than a standalone board with no superior reporting body. A firm's affiliation with the conglomerate per se affects its board independence, regardless of the parent shareholding level. The additional analysis finds that the lack of board independence significantly impacts a CAF's financial performance, although the market impact is insignificant.</p>","PeriodicalId":2,"journal":{"name":"ACS Applied Bio Materials","volume":null,"pages":null},"PeriodicalIF":4.6000,"publicationDate":"2023-10-26","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://onlinelibrary.wiley.com/doi/epdf/10.1002/ijfe.2906","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"ACS Applied Bio Materials","FirstCategoryId":"96","ListUrlMain":"https://onlinelibrary.wiley.com/doi/10.1002/ijfe.2906","RegionNum":0,"RegionCategory":null,"ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q2","JCRName":"MATERIALS SCIENCE, BIOMATERIALS","Score":null,"Total":0}
引用次数: 0
Abstract
We argue that the corporate board of an exchange-listed firm cannot make an independent business decision if it has an affiliation with a conglomerate group. This is because the corporate board of a conglomerate-affiliated firm (CAF) has high moral hazard exposure due to its accountability to the superior parent board at the apex of the conglomerate structure. Based on a sample of 304 listed firms from 18 countries, we find a CAF board is less independent than a standalone board with no superior reporting body. A firm's affiliation with the conglomerate per se affects its board independence, regardless of the parent shareholding level. The additional analysis finds that the lack of board independence significantly impacts a CAF's financial performance, although the market impact is insignificant.