Firm Performance and Family Related Directors: Empirical Evidence from an Emerging Market

IF 2.4 Q2 ECONOMICS

Contemporary Economics Pub Date : 2019-06-30 DOI:10.5709/ce.1897-9254.307

H. I. Hussain, A. Ali, Hassanudin Mohd Thas Thaker, Mohsin Ali

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引用次数: 21

Abstract

Board composition is central to the worldwide corporate governance reforms that have taken place in recent years. The strong emphasis on director independence and board leadership is now part of all corporate governance regimes, including the regimes which has been introduced in Malaysia. It is the effectiveness of such provisions in the Malaysian business environment that provides the motivation for this paper. The literature shows mixed findings on the issues of board independence and board leadership. Our paper studies the role of directors with family connections and its impact on financial outcomes. We find that firms with a high presence of family related directors exhibit superior accounting profitability. However, such dominance is negatively viewed by the market (firm performance based on market measures), indicating that markets tend to perceive that domination of family members on the board could potentially lead to expropriation of wealth at the expense of other shareholders. Our results are supported by additional robustness tests. The findings provide interesting insights into the governance mechanisms of firms in an emerging market and its consequences for investor perceptions. Further implications are also discussed.

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企业绩效与家族董事:来自新兴市场的经验证据

董事会构成是近年来全球公司治理改革的核心。对董事独立性和董事会领导的强烈强调，现在是所有公司治理制度的一部分，包括马来西亚引入的制度。正是这些规定在马来西亚商业环境中的有效性提供了本文的动机。文献显示，在董事会独立性和董事会领导力问题上，研究结果喜忧参半。本文研究具有家族关系的董事的角色及其对财务结果的影响。研究发现，家族关联董事比例高的公司会计盈利能力更强。然而，市场对这种支配地位的看法是消极的(基于市场指标的公司业绩)，这表明市场倾向于认为，家族成员在董事会中的支配地位可能会以牺牲其他股东的利益为代价，导致财富被剥夺。我们的结果得到了额外的稳健性测试的支持。这些发现为新兴市场公司的治理机制及其对投资者看法的影响提供了有趣的见解。还讨论了进一步的影响。

本文章由计算机程序翻译，如有差异，请以英文原文为准。

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来源期刊

Contemporary Economics ECONOMICS-

CiteScore

3.70

自引率

9.50%

发文量

审稿时长

24 weeks

期刊介绍： The mission of the Contemporary Economics is to publish advanced theoretical and empirical research in economics, finance, accounting and management with the noticeable contribution and impact to the development of those disciplines and preferably with practice relevancies. All entirety of methods is desirable, including a falsification of conventional understanding, theory building through inductive or qualitative research, first empirical testing of a theory, meta-analysis with theoretical implications, constructive replication that clarifies the boundaries or range of a theory for theoretical research as well as qualitative, quantitative, field, laboratory, meta-analytic, and combination for an empirical research. This clear priority for comprehensive manuscripts containing a methodology-based theoretical and empirical research with implications and recommendations for policymaking does not exclude manuscripts entirely focused on theory or methodology. Manuscripts that raise significant, actual topics of international relevance will be highly appreciated. The interdisciplinary approach including – besides economic, financial, accounting or managerial –also other aspects, is welcomed.